U.S. large bank stocks hit the largest increase in five years, analysts say there is still room for growth.

Stocks of large US banks are experiencing their biggest increase in five years. This performance is mainly due to a strong economy, decreasing interest rates, and investors' expectations of relaxed regulation and increased mergers and acquisitions under the leadership of President Trump. Financial industry analysts at D.A. Davidson pointed out in a report this month, "Investor interest in the industry appears to be at multi-year highs, and we believe there is still room for investors to increase their allocation to this sector, supporting our positive outlook for the future." Data shows that the S&P 500 banking index has risen by 35.5% in 2024, marking its best performance since 2019. At the same time, the SPDR S&P Bank ETF has risen by 21%, and the Financial Select Sector SPDR ETF has risen by 30%, both on track to achieve the highest annual increase since 2021. Gerard Cassidy, Co-Head of Global Financial Research at RBC Capital Markets, stated in a report to clients that he expects further improvement in the outlook for banks. This is due to the potential steepening of the yield curve, moderate loan growth driven by commercial loans, increased mergers and acquisitions, and relaxation of regulations. However, Cassidy and other senior banking observers also point out that behind this broad consensus, there are still many risks and uncertainties. The expectations of widespread relaxation of regulation in the banking industry among investors currently remain at the level of "hope and anticipation." Officials nominated by Trump for the US Securities and Exchange Commission (SEC), Treasury Department, and Federal Trade Commission (FTC) are generally seen as having a friendly attitude towards financial firms, but they have not yet disclosed specific plans, and their agendas may not meet investors' expectations. Additionally, various factors such as a resurgence of inflation, new tariff threats, etc., could affect market stability, potentially weakening consumer spending and dragging down the performance of the banking industry. Nevertheless, Wall Street remains optimistic about the health of the banking industry. Stock analysts at Morgan Stanley predict that the recovery of the capital markets will be a positive factor for large banks. They forecast that by 2026, investment banking revenue will surpass the high point of 2021, which was a record-breaking year for trading volume.