Bank stocks climbed on Thursday, following key Senate elections and Congress' confirmation of President-elect Joe Biden's victory. By the close of trading, shares of JPMorgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), and Bank of America (NYSE:BAC) were up 3.3%, 2.3%, and 2.2%, respectively.
Biden's victory combined with effective control of both the Senate and House of Representatives will make it easier for the Democrats to pass sweeping stimulus programs. These measures could help to reinvigorate the economy, which would be a boon for banks.
A stronger economy would likely lead to fewer loan losses for banks, as well as greater demand for loans and other financial services. Additionally, an economic recovery could also drive interest rates higher. Banks' net interest margins tend to improve as rates rise.
Analysts have been ramping up their price forecasts for the major bank stocks in recent days. Jefferies analyst Ken Usdin sees JPMorgan's revenue and earnings increasing steadily as it takes share from smaller competitors. Meanwhile, Barclays analyst Jason Goldberg estimates that Bank of America can grow its per-share profits by more than 50% over the next two years, due in part to lower loan losses and larger stock buybacks.
Lastly, while Wells Fargo remains behind its peers in several key metrics, Usdin expects its cost-cutting initiatives to pay dividends as it progresses with its turnaround strategy.