Skip to Content
Stock Strategist Industry Reports

Bank Bill to Bring More Competition, M&A

The regulatory relief fits our previous outlook and won’t materially change our bank valuations.

Mentioned: , , , , , , , , ,

As expected, President Donald Trump signed regulatory relief for banks into law on May 24. Because the legislation needed the support of both Republicans and Democrats, a middle ground was needed, so the bill made only moderate changes to existing regulations, most notably leaving the Consumer Financial Protection Bureau alone. Overall, the benefits from regulatory relief fit well within our previous projections, and we are not making any material changes to our fair value estimates for the companies we cover.

One of the primary benefits we see of a less stringent regulatory environment will be the ability to shed excess capital and increase leverage. For the traditional banks we cover, over the next five years we project an increase in leverage of roughly 5% on average (as measured by equity/assets) and an increase in returns on equity of more than 20%, with roughly one fourth of this increase coming from the rising leverage. We do not plan to make any changes to our economic moat ratings based on the passing of this bill, as we believe that over the longer term, the economic benefits of the law will be shared and competed away to some degree, and the gains we currently project are already accounted for in our current ratings.

Eric Compton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.