Trump threatens credit-card interest caps, but smart money still views him bank-friendly

By Chris Matthews

Trump regulators were bank-friendly during his first term

Former President Trump made headlines Wednesday night, promising a crowd in New York he would put a "temporary cap on credit-card interest rates...at around 10%," if he were elected.

Doing so would require Congress to pass legislation, a move lawmakers on both sides of the aisle have proposed in recent years.

Consumer banks like JPMorgan Chase (JPM) and Citi (C) earn a tidy share of the roughly $120 billion in credit card interest and fees Americans pay each year, and industry groups have fought past efforts to cap fees by arguing that it would make it difficult for Americans to get approved for credit cards.

Meanwhile, the analyst community isn't taking the former president's proposal too seriously, and is instead looking at Trump's bank-friendly first term as a guide for how investors should play a second Trump term, should he win.

Analysts for the investment bank KBW argue in a Thursday client note that "Trump could yield a deregulatory boost" for the financial services sector, while a Harris victory would lead to a "continued overhang" brought on by aggressive regulation.

"The Trump administration could yield significant regulatory leadership change," wrote the analysts, led by Matt Kelly, adding that banks, consumer finance companies, brokers and title insurance firms could be those most poised to benefit.

If Trump were to win, he'd have the opportunity to immediately change the leadership of the Securities and Exchange Administration, Consumer Financial Protection Bureau and Office of the Comptroller of the Currency, to name a few.

While it would take months for new heads of these agencies to be confirmed, they could be run by Trump loyalists on an acting basis as nominations make their way through the Senate, Kelly said.

Kelly said a change in leadership at the CFPB could be the most consequential and could be a boon to credit-card issuers and other consumer-facing companies.

He said that companies like Block, (SQ) PayPal (PYPL), Bread Financial (BFH) Synchrony Financial (SYF) and Fidelity National Financial (FNF) could be poised for a boost during a second Trump term.

Large banks could also be poised for outperformance, as KBW analysts predict a Trump Federal Reserve could abandon new capital regulations currently being debated by regulators, known as Basel III.

"While housing and commercial real estate finance have benefited from market expectations that the Fed will cut rates meaningfully by next summer, we believe these sectors could continue to benefit from a tailwind" as rates continue to fall and Trump pushes forth a deregulatory agenda, he said.

A Trump Fed could be a potential tailwind for Bank of America (BAC), Citi, JPMorgan, Wells Fargo (WFC) and Goldman Sachs. (GS)

-Chris Matthews

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09-19-24 1313ET

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