US bank stocks sink as Trump's tariffs cloud dealmaking, loan demand
(Reuters) -Shares of U.S. banks tumbled to multi-month lows on Thursday, after President Donald Trump's sweeping tariffs plan sparked fears of weaker capital markets and a slowdown in consumer spending.
Citigroup fell 11%, while Bank of America, Morgan Stanley, Goldman Sachs and Wells Fargo slipped 9% each. JPMorgan Chase, the biggest U.S. bank, dropped 7%.
The moves mark a sharp reversal of fortunes for the banking industry which until months ago was projecting a bright outlook for 2025 on hopes of M&A deregulation and lower corporate taxes.
But uncertainty fueled by Trump's 10% baseline tariff on all imports crushed the economy-sensitive bank stocks, while raising fears of a global trade war as some countries vowed to retaliate.
"Uncertainty around the indirect impact of broad-based tariff increases on the economy and activity levels are likely to dominate bank stocks in the near term," said Jim Mitchell, senior analyst at Seaport Research Partners.
With companies holding off acquisitions amid tariff uncertainty, investment banking income is likely to remain under pressure. Analysts warned that weakening consumer confidence could dampen spending and curb loan demand.
Regional lenders may be hit harder than major banks, which can offset some pressure with their trading operations that stand to gain from market volatility.
"We are cautious on bank stocks and we prefer GSIBs (Global Systemically Important Banks) to regionals overall," J.P. Morgan analysts wrote in a note, adding that large bank stocks had fallen sharply and valuations seemed "attractive".
The KBW Regional Banking Index fell 8.7% on Thursday, its lowest since August last year.
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