The financial landscape is on the brink of significant changes due to various factors, primarily driven by a deregulation environment heralded by the anticipated Trump administration. According to insights from Raymond James, this shift is set to boost earnings per share (EPS) for a number of banks in the upcoming year.
The brokerage maintains a positive outlook on the banking industry, citing potential deregulation that may alleviate capital requirements, stimulate mergers and acquisitions, increase loan growth, and enhance capital returns. Banks that strategically reduce capital to the minimum levels required while reallocating surplus capital towards the repurchase of common stock are expected to experience the most significant EPS growth in 2025.
This assessment stems from Raymond James' comprehensive analysis focused on banks with substantial capital reserves. Among those banks, First Foundation is projected to have the highest potential for earnings upside, estimated at an impressive 258%. Following closely, Hilltop Holdings shows a potential upside of approximately 163%, while Riverview Bancorp stands at about 102%. Additionally, Pacific Premier Bancorp, Customers Bancorp, and PCB Bancorp are highlighted, with their projected upsides clustered in the 70% range.
Conversely, Bank of Marin, OceanFirst Financial, and First Busey are anticipated to see upsides in the 60% range, and First United is listed just below that mark. In terms of banks forecasted to achieve a 50% EPS upside, Raymond James identifies Flushing Financial, ConnectOne Bancorp, South Plains Financial, Chain Bridge Bancorp, and Banc of California. The analysts at Raymond James, including David Long, emphasize that their approach is theoretical.
They clarify that while the model suggests banks might draw capital down to the bare minimum, such a scenario is unlikely as each bank's capital strategy may differ. "This analysis is especially relevant as the regulatory capital levels within the banking sector remain at historically high levels," they noted.
Long added that the recent Republican victories in the U.S. elections are likely to diminish the imposition of stringent new regulatory capital requirements going forward..