President Trump’s New Law Is a Windfall for Banks

President Trump just gave small banks a big boost…

Last week, the president signed a bill into law that reduces regulations on all but the largest U.S. banks.

The legislation eases oversight of all banks below $250 billion in assets. It also exempts small community banks from a host of strict rules and oversight established by the 2010 Dodd-Frank financial reform law.

Although the new law decreases rules on most U.S. banks, the 12 largest U.S. banks still must comply with the stricter Dodd-Frank regulations.

This is good news for small and mid-sized banks… and their investors.

Longtime readers won’t be shocked by any of this… In December 2017, we told you the Trump administration would roll back regulations on banks.

The new law will give banks more freedom to operate. More freedom translates into greater profits. And greater profits translate into money-making opportunities for us.

Recommended Link

He used to play by Wall Street’s rules… As a former corporate banker, this gentleman was forced to play by Wall Street’s rules. But now he’s left the fold. He’s reverse-engineered a kind of blueprint that’s analyzed the characteristics of stocks that have returned 10,000% or more. And now for the first time he’s inviting everyday investors to join him on something he calls the 100-to-1 Project.  Get all the details here

—

Fewer Regulations Means Greater Profits

We’ve been bullish on banks since President Trump took office. In February 2017 we said, “if Trump is successful in cutting regulations, banks will accelerate their profit growth, and we will see valuations and prices follow suit.”

And as you can see in the chart below, regional banks are up 15% since then.

With the new law easing regulations on small and mid-sized banks, we think the industry will do even better.

Under the new law, small banks (those with less than $10 billion in assets) are freed from the so-called Volcker Rule.

The rule restricts big U.S. banks from making “risky” speculative bets with funds from their own accounts through proprietary trading. The goal was to keep banks from the kind of hedging that endangered customers during the 2008 banking crisis.

Recommended Link

Why Haven’t Americans Been Told These Investment Facts? If you were born before 1969, and have any money in a 401(k), IRA, or a brokerage account, you need to see this now. Silicon Valley insiders are piling millions into this… Early investors may make a fortune. Read this immediately

—

But the definition of “risky” was too restrictive. To avoid penalties, banks erred on the side of caution. This might sound like a good thing, but it’s not.

Because the Volcker Rule is so broad, regulators can view anything but the safest investments as risky. So, all banks crowded into the same lower-yielding investments.

This rule costs the banking industry hundreds of millions of dollars in lost interest.

Now these banks can make reasonable investments with their capital. That gives them the opportunity to make more money with their reserves.

Mid-sized banks also got a huge break under the new law.

Under Dodd-Frank, regulators considered any bank with more than $50 billion in assets a systemically important financial institution (SIFI). These are banks deemed “too big to fail.” And they faced even stiffer rules.

Rumor had it that some banks kept their assets under the $50 billion threshold to avoid SIFI designation. With those rules now rolled back, mid-sized banks can resume growing.

One way they’ll grow is through mergers and acquisitions.

Recommended Link

Rare Refined Powder Can Return 10x More Profits Than Bitcoin? Take a look at this image. Bet you don’t know what it is… It’s a rare commodity that’s no longer produced in the U.S… but it’s 100% essential to nearly every item used by our military today. When Pentagon officials turn to the only company that can supply this powder, shareholders could multiply their money by 10x or more… To learn how to access the name of this company and its ticker… Click here

—

How Banks Will Profit

I predict we’ll start to see a flood of acquisitions in the banking space for two reasons: regulatory rollbacks and tax cuts.

Fewer regulations mean lower compliance costs for banks. Tax cuts mean banks get to keep more of their profits. And that all goes to the bottom line.

With all that extra cash, banks will look for something to do with it. One way to utilize this extra cash is to buy small and mid-sized banks.

As we told you back in December, the SPDR S&P Regional Banking ETF (KRE) is a one-click way to play this trend. The fund holds a basket of small and mid-sized banks.

KRE should outperform the rest of the financial sector as decreasing regulations help to increase profitability… and allow larger banks to acquire smaller ones.

Regards,

Nick Rokke, CFA
Analyst, The Palm Beach Daily

P.S. Financials dropped over 3% on Tuesday on rumors of a banking crisis in Italy. Most regional banks in KRE have little to no European exposure. So the sell-off was just the market acting irrationally. Consider using Tuesday’s dip as a buying opportunity.

This company is tackling one of the biggest problems our country has ever faced. It’s so big that President Trump declared it a national emergency under federal law… and Congress just approved $6 billion to fight it.

In the past, companies in this niche that solved similar problems saw peak gains of 95,800%, 63,400%, even 216,100%.

A former corporate banking insider believes he’s found the next one to ride this unique wave. Get all the details here before it’s too late.