Despite the turbulence President Donald Trump inflicted on the stock market this week, bank investors may soon have a reason to thank him: bigger shareholder payouts.
U.S. banks including JPMorgan Chase (JPM) , Bank of America (BAC) and Citigroup (C) are set to pay out as much as 85% of profits to shareholders in the coming year in the form of dividends and stock buybacks, up from 72% last year, predicts brokerage firm KBW. The 2017 level would be the highest since the payouts were slashed in the wake of the financial crisis. In 2011, for example, the payout ratio was a mere 31%.
So far Trump has failed to deliver on promises to rewrite the landmark 2010 Dodd-Frank Act or push through big tax cuts that would deliver a windfall to big firms like JPMorgan Chase or smaller regional banks like SunTrust. Yet Daniel Tarullo, the Fed governor who had led the central bank's push to impose stiff restrictions on U.S. banks, resigned in April as Trump pledged to ease regulations, as part of a plan to spur more lending and bolster economic growth.
Now, that years-long cycle of banks increasing their capital - the extra cushion of assets that firms are supposed to hold to avoid a collapse - is coming to an end, according to Brian Kleinhanzl, an analyst at KBW.
"Higher capital return was coming, but having Tarullo go and a new administration coming in certainly accelerates it," Kleinhanzl said in an interview.
Large U.S. bank stocks tumbled an average 4.1% on Tuesday following revelations that Trump leaked sensitive intelligence to Russian officials and urged former FBI Director James Comey to drop an investigation into his campaign. The news sparked concern that Trump might face impeachment or lose the support of congressional Republicans, endangering his legislative agenda for big tax cuts and an overhaul of banking laws.
While bank stocks had rallied as much as 8% this year on optimism over Trump's agenda, they're now down about 1.3% on the year.