president-elect donald trump supposedly doesn<u+2019>t care about wall street . it is ironic then that the world<u+2019>s biggest banks are rallying on his victory . the spur looks to be his promised spending and tax cutting drive, which is beginning to reshape yield curves and monetary policy expectations in the u.s. and beyond. however, investors shouldn<u+2019>t get overexcited: rates have a long way to go before borrowing short and lending long becomes as profitable as even recent years, let alone precrisis times. furthermore, it is far from clear that the tone of deregulation sounded in trump<u+2019>s campaign will benefit big banks at all : his statements about wall street were often derogatory. banks like j.p. morgan , wells fargo , goldman sachs and morgan stanley closed higher wednesday, rising between nearly 5% and more than 7%, even though smaller banks seem more likely to benefit than larger ones from trump<u+2019>s policies. on thursday, japanese banks soared: nomura<u+2019>s stock was up more than 11%. the fall in the yen to its weakest against the dollar since july, which happened after asian markets closed on wednesday, could make the bank of japan <u+2019>s job easier and improve conditions for lenders. a host of european lenders also stormed higher: credit suisse was up 9% early on with ubs not far behind, while barclays and deutsche bank were up more than 5%. steeper yield curves help. banks profit from the difference between what they pay to short term depositors and what they earn on loans. the difference between two-year and 10-year treasury rates<u+2014>a proxy for this profit rule<u+2014>is at its widest since early 2016 in the u.s. and europe after sharp moves on wednesday. but the gap is still much tighter than it was only two years ago in the u.s., when banks had long been complaining about how hard it was to profit from loans. there is a long way to go before the money really rolls in. among european banks, credit suisse and barclays shares did better than those of hsbc and standard chartered , even though the latter two lend lots in dollars. the former pair has large u.s. investment banks and president trump makes changes to the dodd-frank postcrisis reforms more likely. among other things, that legislation banned banks from the most lucrative precrisis activity: making financial bets with their own capital, or prop trading. the president-elect<u+2019>s website says he will dismantle dodd-frank , which was his campaign theme while other republicans focused on breaking up big banks. it isn<u+2019>t clear what will come of such rhetoric, but with a republican-controlled congress, regulatory relief is on the agenda. for foreign banks there is a further wrinkle. mr. trump<u+2019>s general air of protectionism could frustrate their access at a time when rules on foreign banks have already forced them to create separate u.s. holding companies that may need more capital in them. mr. trump<u+2019>s wall street connections are more in the hedge fund world than banking: both could gain from a loosening of trading rules, though foreign banks might not enjoy all the benefits. his business relations with banks were fraught and most stopped dealing with him years ago. investors shouldn<u+2019>t be so sure that president trump will be their friend. write to paul j. davies at paul.davies@wsj.com
banks love trump even if it isn<u+2019>t mutual  - wsj
paul j. davies