The Financial Post reports in its Friday, Nov. 18, edition that the election of Donald Trump is being hailed as a "game changer" for the U.S. banking sector, as the Republican sweep of the White House and both houses of Congress appears to have shifted investors' expectations about interest rates, regulation and the broader business environment. The Post's Jonathan Ratner writes in the Trading Desk column that RBC Capital Markets says, "Last week's win not only puts the government in Republican hands but also represents the biggest paradigm shift since Ronald Reagan's election in 1980." While it is unclear what sort of regulatory reform is coming, financial analysts at RBC note that any relaxation of current rules, new appointments in key regulatory roles, and a stronger U.S. economy, would go a long way in boosting earnings in the next four years.
RBC says, "As the 'sun, moon, and stars' align under the new Trump administration, the industry's earnings and profitability will likely rise over the next 24 months."
In terms of price-to-earnings valuations, RBC is forecasting a range of 12 times to 16 times -- not far from current levels, as expansion there has already surfaced.
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