By Joe Wallace

One big, early winner in markets from the election results: banks.

Shares of the biggest U.S. lenders, JPMorgan, Bank of America, Wells Fargo and Citigroup, all rose 5% or more in premarket trading on the prospects for lighter-touch regulation and higher interest income under a Donald Trump administration.

Shares of investment banks Goldman Sachs and Morgan Stanley also jumped, as did those of regional lenders including PNC Financial Services and credit-card issuer Capital One. Over in Europe, banks with big trading and dealmaking operations on Wall Street, such as Deutsche Bank, Barclays and UBS, surged.

Banks stand to earn more from lending money when government bond yields rise, particularly when rates on longer-term debt rise more than short-term yields. That's exactly what happened Wednesday, as investors responded to the possibility of higher borrowing and inflation in the U.S.

Another potential boost is regulatory.

Early this fall, the Federal Reserve watered down a plan to raise the amount of capital America's biggest banks need to hold, after intense industry lobbying. The proposals could be watered down further, or delayed, under a Republican administration, Citigroup analysts said in a note. That might prompt regulators in Europe to follow suit.

The results aren't an unalloyed boon for the banking industry. HSBC, Standard Chartered and Spain's BBVA could be affected by tariffs on China and Mexico, said the Citigroup analysts.

A shift in foreign policy could also be good for a little-known lender in Austria. Shares of Raiffeisen Bank International, whose Russian business has drawn scrutiny from U.S. and European authorities, rose more than 8% in Vienna.

Trump has said he would seek a quick end to the war in Ukraine, which could lead to a resumption of Western business with Russia.

This item is part of a Wall Street Journal live coverage event. The full stream can be found by searching P/WSJL (WSJ Live Coverage).

(END) Dow Jones Newswires

November 06, 2024 04:50 ET (09:50 GMT)

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