Wall Street cheers Trump's return, with some trepidation

By Milana Vinn, Echo Wang and Nupur Anand

NEW YORK (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.

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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 (NYSE:COF ) and Discover Financial Services (NYSE:DFS ), 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 (NS:RYMD ) 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, which tracks large-cap banks, closed almost 11% higher on Wednesday but fell back 2% on Thursday.

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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.

Source: Investing.com