(Yahoo! Finance) - When rates are high the nation's biggest banks win. Under the next president, with less oversight, they can win when rates are lower too.
For all the signals of trepidation the market has sent regarding tariffs and other Trump-related inflationary worries, the big banks, and their record profits, delivered a different, celebratory note this week, showcasing huge profits and optimistic outlooks over the future that promises a policy shakeup and pro-growth agenda from the incoming president.
And what the blockbuster bank earnings hinted at Wednesday wasn't just a long-awaited desire for regime change in Washington but a continuation of a post-COVID run-up.
JPMorgan, the biggest bank, recorded more profits in 2024 than it ever has. Its full-year profit haul of $58 billion is the heftiest in the history of American banking. Goldman's full-year profits jumped 68% to $14.2 billion, logging fourth quarter earnings that more than doubled compared to last year. Wells Fargo, too, finished the year with a bang, reporting quarterly earnings of $5.08 billion compared with $3.45 billion a year earlier.
However more accommodating banking executives believe a Trump White House will be, they did pretty well during the Biden years. But they also believe they are on the cusp of something greater.
While even Trump allies have expressed concerns about where tariff threats and vows of an immigration overhaul will lead the economy and, specifically, inflation, Trump's second go of deregulation and corporate-friendly appointments is expected to be a boon to banks.
"Businesses are more optimistic about the economy, and they are encouraged by expectations for a more pro-growth agenda and improved collaboration between government and business," said JPMorgan CEO Jamie Dimon Wednesday.
Dealmaking is having its moment again after a deep freeze, and there's a potential bonanza on the horizon. Industry executives are hoping a light-touch regulatory environment will flash a green light for corporate mergers. And Trump is also expected to soften or do away with a set of proposed capital rules that would have squeezed industry profits.
Of course, banks will still have to contend with the consequences of boosted public spending and tax cuts if Trump has his way. But the fight against inflation, for now at least, seems to be progressing. Wednesday's encouraging reading signaled that the Fed might be in the sweet spot of not having to yank the rate-changing lever to see pricing pressures continue to ease.
Banks can earn a lot of money at higher rates, as lending margins were supercharged by the Fed's campaign. But they can also rake it in during lower interest rate environments, leaning on their other commercial operations to fill revenue gaps. For the big banks, "higher for longer" under a final Trump term is a recipe for growth. But it's not the only one.
By Hamza Shaban - Senior Reporter
