By Manya Saini
Jan 20 (Reuters) – U.S. bank stocks fell in morning trading on Tuesday in a broader market decline, as investors awaited clarity on whether the Trump administration’s January 20 deadline to implement a 10% cap on credit card interest rates will take effect.
The administration has said the proposed cap will improve affordability for everyday consumers, while banks have warned that it could reduce credit availability because they would be unable to adequately price for the risk associated with the unsecured credit card loans.
Trump had called on companies to comply by January 20, but it remains unclear whether the move can be implemented unilaterally without legislation.
JPMorgan Chase shares fell 1.6%. Bank of America and Citigroup fell 1.1% and 2.4%, respectively. Wells Fargo was last down 1.3%.
“For now, it’s an overhang, but that overhang could clear quickly if it’s more a call for Congress to do something instead of some specific policy action by the executive office,” Brian Jacobsen, chief economic strategist at Annex Wealth Management, told Reuters.
Investment banks Morgan Stanley and Goldman Sachs also fell 2% and 1.5%, respectively.
JPMorgan executives, including CEO Jamie Dimon, warned last week that the move would harm consumers. The largest U.S. lender also signaled that “everything is on the table” when asked if it would pursue legal action.
The move to cap credit card interest rates comes amid growing pushback by the Trump administration against the banking sector, which the president alleged has restricted financial services for some controversial industries. The administration has also launched a probe into Federal Reserve chair Jerome Powell.
Dimon confirmed on Saturday that he was not asked to be the next Federal Reserve chair, hours after Trump disputed a report that said he had offered Dimon the role.
Trump has said he plans to sue JPMorgan sometime in the next two weeks for allegedly “debanking” him following the January 6, 2021 attack on the U.S. Capitol by his supporters.
POTENTIAL COMPROMISE
Interest income at banks, a major profit engine, would take a substantial hit if the proposal gets implemented in its current form, according to industry experts.
“We believe there is a political compromise in the works to ensure the President does not push Congress to enact a 10% cap on credit card interest rates,” TD Cowen analysts wrote in a note.
Analysts said card providers could instead make conciliatory gestures with innovative offerings, such as lower rates for certain customers or no-frills cards that could charge 10% but have no rewards, or lower credit limits.
White House economic adviser Kevin Hassett earlier floated the idea of “Trump cards” that banks would voluntarily offer instead of being forced by a new law, without providing any details on what the card would offer.
(Reporting by Manya Saini in Bengaluru; Editing by Shinjini Ganguli)
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