Over the last 10 years, the banking industry hasn’t been viewed in the best light. Since the 2008 recession and subsequent financial bailout, banks have experienced a multitude of ups and downs. This week, however, there appears to be a light at the end of the banking tunnel.
Following President Trump’s Tuesday (Mar. 1) address to Congress, the KBW Nasdaq Bank index, which measures 24 of the largest U.S. bank stocks, saw an increase of over 3 percent to a total of 32 percent. Since the 2016 presidential election, this index has outpaced the S&P 500 by 20 percentage points.
As a result of this stock uptick, many bankers are feeling a bit more optimistic and hope to start reinvesting into their businesses. Morgan Stanley’s finance chief, Jonathan Pruzan, commented on this to analysts after the Q4 earnings call. He said, “We have the capacity to increase our balance sheet if the opportunity presents itself. That’s certainly an opportunity that we haven’t seen in the past.”
While banks’ finances have yet to show gains, two of the six biggest U.S. banks have returns on 2016 equity surpassing investors’ cost of capital for the banks. 2018 earnings per share projections for these banks has increased by 11 percent for the period of October 2016 to February 2017 by analysts.
J.P. Morgan’s chairman and CEO, James Dimon, shared his positive outlook for the banking industry this past Tuesday by expressing his desire for growth. He said, “The most important thing we do, bar none, is investing in our own businesses, and the opportunities are everywhere to do better services, better profit-creating processes and more vision.”