The outcome of the midterm elections isn't likely to boost bank stocks.

Bank stocks, as measured by the SPDR S&P Bank ETF (KBE)  , have declined about 7.5% so far this year. Three interest rate increases this year, which should have increased lending income, haven't inspired investors, said JJ Kinahan, chief market strategist at TD Ameritrade. "The financials have not been able to get going in this anticipated higher rate environment," Kinahan told TheStreet.

In Tuesday's midterm elections, the Democrats won control of the House of Representatives and the Republicans maintained control in the Senate. The split Congress doesn't yield much change for the outlook for banks. Fiscal policy is likely to remain in place, which doesn't bode well for bank lending activity, according to Jeff Mills, co-chief investment strategist at PNC Financial Services Group Inc. 

Loan growth hasn't been stellar and may not increase in the near future as a result of the split result, especially in the business loan category, Mills told TheStreet. "Typically, in order to finance company projects, banks would be able to grow their loan book, but because of fiscal policy companies have been able to finance their own projects without loans," Mills said. He added, "the ability to lend is better," meaning that creditworthiness is better, "but perhaps the demand is not necessarily better." 

"I don't expect loan demand will get better," Mills said, because "I don't think the liquidity situation in corporate America is going to change." With a split Congress, no change in tax policy is expected, as a Republican 'tax plan 2.0' would face opposition from the Democrats, possible resulting in policy gridlock. The Democrats want to move corporate taxes to 25%. The corporate tax rate will likely stay where it is, at 21%, which means there would be no change in the cash companies have on hand.

As for individual taxes, those are likely to remain where they currently are, which yields a similar outcome in personal expenditures. People might borrow less against homes and cars. "The tax cuts aren't going anywhere, even if you don't see additional reduction in tax rates," Mills said. The opposing argument is that wages have increased, as the latest wage reading showed a 3.1% increase in worker pay. "There is an offset in the interest rate environment," Mills said. "Folks are doing better." Still he thinks that personal loan growth won't grow materially, but rather in step with broader economic growth. 

Aside from taxes, further financial deregulation will be hard for the Republicans to pass, which would have been a tailwind for banks, according to Mike Loewengart, vice president of investment strategy at E*Trade, who broke down different scenarios to TheStreet before the results came in. "If Republicans maintain control of the House, we could see a regulatory environment that's accommodative for banks and financials, which could translate into gains in the sector," Loewengart said. That is now unlikely to happen.  

Another issue for banks is that the rising interest rate environment depreciates the value of banks' existing bond holdings. "I don't know that they {banks} do anything in particular," when rates rise, Mills said. 

While banks may not have a promising outlook, bank valuations are now quite low. The average trailing 12 month price-to-earnings multiple for an S&P 500 company is currently around 22. All of the big banks in the U.S. have earnings multiples of well below 20. A Goldman Sachs note in early October pointed out that bank PE ratios are currently very low, and rated Wells Fargo (WFC) , which has a PE ratio of 12.59,  a 'buy.' JPMorgan Chase & Co. (JPM) is trading at a PE multiple of 13.54. Morgan Stanley (MS) is trading at 10.93.  Kinahan said of Morgan Stanley "if you believe that trading [of MS stock] is going to continue to do well, that's a stock with its PE that would be attractive." 

Yet another tailwind for banks that is less likely to fully come to fruition is infrastructure spending. While both parties agree on the issue at large, Democrats would push for much greater spending that Republicans would. That spending would increase the government deficit, force the government to issue slightly higher yielding bonds, and move the yield curve higher. "If Democrats take control, we could see an uptick in infrastructure spending, and the deficit, driving a steepening yield curve, which tends to bode well for financials," Loewengart said pre-results. That too may not happen now that the Democrates have won the House.  

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