U.S. bank stocks experienced a downturn in morning trading on Tuesday, contributing to a broader market decline. The uncertainty surrounds the Trump administration’s proposal to implement a 10% cap on credit card interest rates by January 20. This has sparked concerns among investors, leading to notable drops in share prices across the banking sector. JPMorgan Chase shares fell 3.2%, Citigroup lost 4.3%, and Wells Fargo was down 2%. Investment banks Morgan Stanley and Goldman Sachs also saw declines of 3.8% and 1.9%, respectively. The S&P 500 Banks index dropped 2.3%.
The proposed cap aims to improve affordability for consumers but faces strong opposition from banks, who argue it could restrict credit availability. Citigroup CEO Jane Fraser stated she does not anticipate Congress approving the caps and highlighted the potential negative impact on the U.S. economy. JPMorgan executives have also voiced concerns, with CEO Jamie Dimon signalling potential legal action. JPMorgan Chase is a global financial services firm and investment bank headquartered in New York City. Citigroup, also based in New York, provides a broad range of financial services to consumers, corporations, and governments.
The American Bankers Association suggests the rate cap could impact approximately 137 to 159 million cardholders. U.S. Bancorp CEO Gunjan Kedia echoed these concerns, predicting a significant detrimental impact on clients. Analysts suggest that card providers might consider offering innovative solutions, such as lower rates for select customers or no-frills cards, to mitigate the situation.
TD Cowen analysts believe a political compromise is possible, potentially preventing the enactment of a 10% cap. White House economic adviser Kevin Hassett mentioned the concept of ‘Trump cards’ as a voluntary alternative for banks. The situation remains fluid, with potential implications for both the financial sector and consumers.
