Wall Street cheers Trump's return, with some trepidation (updated)

Discover Financial Services

07/11/2024 19:08

* 
      Deregulation, lower taxes, softer antitrust stance
expected 
    

        * 
      Some bankers told to get the ball rolling on deals 
    

        * 
      Trade tariffs, national debt and potential for chaotic
policy
are concerns  
    

  
 (Recasts first paragraph; adds share prices, link to story on
banks in paragraph 18)
    By Milana Vinn, Echo Wang and Nupur Anand
       NEW YORK, Nov 7 (Reuters) - Wall Street executives
cheered the prospect of business-friendly regulations and a
burst of deals as they analyzed the implications of Donald
Trump's reelection, although some felt uneasy about his
unpredictability.
    Trump's return to power is likely to significantly ease some
regulatory pressures under the Biden administration, executives
across banks and private equity said.
    Smaller government, broad deregulation and tax breaks for
corporations and the wealthy are widely expected. In particular,
a softer antitrust stance and less regulation in areas such as
banking and cryptocurrencies could boost corporate profits and
spur deal flow, they said. 
    "He is pro-business and anti-regulation," said Euan Rellie,
co-founder and managing partner of investment bank BDA Partners.
"His instincts are to cut taxes. All of that will help the M&A
market."
    "So long as he governs with moderation and not with chaos,
the markets will welcome him," said Rellie. 
    However, some executives said that was not a given.
    Some bankers worried about how to navigate unpredictable
shifts in government policy, the impact of trade tariffs, a
potentially perilous fiscal path that adds trillions of dollars
to the national debt and the potential tightening of visa
programs.
    For now, though, the reaction was euphoric. As U.S. stocks
rallied sharply, one equity capital markets banker who declined
to be named said his colleagues got fresh mandates Wednesday
morning and an opportunity to pitch for an initial public
offering. The message was, "Let's get the ball rolling," the
banker said.
        An investment banker at a global firm in New York also
said his firm had an internal call to discuss deals, including
possibly revisiting some transactions that may have not passed
regulatory scrutiny under Lina Khan's Federal Trade Commission
in the Biden administration.
    
    MORE BUSINESS 
    A more lenient approach to antitrust issues could boost
dealmaking in many sectors. Two sources with knowledge of the
media industry said the sector was in for two years of
consolidation.
    Greg Hertrich, head of U.S. depository strategies at Nomura,
projected more banking mergers. "The current number of 4,700
banks in the U.S. may be reduced to around 2,500 faster," he
said.
    Large financial deals will have more chance of being
greenlighted. Shares of payments firms Capital One  COF.N  and
Discover Financial Services  DFS.N , awaiting approval of a
$35.3 billion deal, surged after Trump was elected.
    "It is expected that the Trump administration will be more
open to sensible M&As than many believe has been the case under
the Biden administration," said Gene Ludwig, a former top bank
regulator who advises financial institutions as CEO of Ludwig
Advisors.
    For banks, one of the biggest questions is how stringent new
Basel capital standards will be.
    Raymond James analyst Ed Mills said the turnover of
regulators as the new administration comes in will "stall the
bank regulatory super cycle that has existed over the last
couple of years."
    "We are unlikely to see any major bank regulation come out
and all of this paints a very favorable picture for the banks,"
said Mills.
    Expectations of an easier regulatory path for banks under
Trump have buoyed their shares. The KBW Banks Index  .BKX ,
which tracks large-cap banks, closed almost 11% higher on
Wednesday but fell back 2% on Thursday.
    
    MANY WORRIES
    Not everyone was celebrating, however. A lawyer who works
with renewable energy companies said he had been on the phone
with despondent clients all day. They were all trying to reach
local Republican politicians in districts where they have
planned projects, seeking assurances that tax credits and
incentives under Biden's push for green energy would continue. 
    At one Wall Street firm, a meeting included discussions
about the risk of deficits rising under a Trump administration,
one source said. One estimate is for his policies to add $7.5
trillion to deficits over 10 years.
    The participants hoped Trump's aides would encourage him not
to go to extremes with tariffs and tax cuts, said the source.
    Other concerns were more personal, such as safeguarding
non-U.S. staff. In Trump's first term, he took steps to tighten
access to some visa programs, including suspending many work
visas during the COVID pandemic.
    A private equity investor in New York said international
employees on H-1B visas were wondering on Wednesday whether they
would have trouble renewing their visas and how their employer
could support them.
    

 (Reporting by Milana Vinn, Echo Wang, Kane Wu, Nupur Anand,
Tatiana Bautzer, Saeed Azhar, Lananh Nguyen, Dawn Chmielewski
and Iain Withers; Writing by Megan Davies; Editing by Edwina
Gibbs and Richard Chang)
 ((megan.davies@thomsonreuters.com; +1 646 357 6565))