2026 Has Been Terrible For Banks
2025 was great for banks, but 2026 is shaping up to be very different.
It started after the market closed on Friday, January 9, when President Trump announced a one-year 10% cap on credit card fees.
On average, banks charge around 23% interest on credit cards.
A 10% cap represents a huge drop even for one year, and would hurt banks’ profits, since so many have credit cards.
We couldn’t even get through the weekend before there was more bad news.
On Sunday, January 11, Jerome Powell, Chairman of the Federal Reserve Bank, made a startling announcement.
He is being threatened with an indictment over testimony he gave to Congress over the summer.
In particular, Powell is under fire for cost overruns for the renovation of office buildings for the Fed.
However, many people think the indictment is really about Powell’s lowering interest rates too slowly.
President Trump has been very critical of Powell, and the indictment is viewed as pressure to get Powell in line.
Many investors hated the news, especially banks.
But the week was far from over.
Before the market opened on Tuesday, JPMorgan Chase (ticker: JPM) reported 4th quarter earnings.
JPMorgan beat earnings, which should be good news.
But profit for America’s largest bank fell 7%, which dropped the stock over 4%.
Unfortunately, the hits kept coming.
Wells Fargo (ticker: WFC) reported underwhelming earnings on Wednesday.
Wells Fargo missed estimates for the 4th quarter and management only expects around $50 billion in net interest income in 2026, which is lower than people hoped.
Net interest income is the difference between interest income and interest expense.
It’s a bad sign for Wells Fargo if it isn’t making enough money on the interest it charges.
It sounds like a great time to get out of your bank stocks, but the opposite is true.
I understand the concerns about Powell’s indictment.
It certainly seems like Trump is trying to control the Fed, which could cause long-term problems for the U.S. economy.
But Powell’s term as Fed chair ends in May.
The President is almost certainly going to appoint someone else to take over as Chair of the Fed.
So while Powell’s indictment looks bad, it shouldn’t impact much since he is out in a few months anyway.
And the interest rate cap Trump is proposing will need new legislation from Congress.
It might be possible, but there’s been a lot of pushback, even from Republicans, on Trump’s cap on credit card interest rates.
Despite some of the risks, there are some great buying opportunities right now.
Bank of America (ticker: BAC) looks really interesting right now.
Bank of America is the second largest bank in the U.S., behind JPMorgan.
And even though Bank of America beat earnings last week, the stock still dropped 5%.
Bank of America’s current 13.9x price-to-earnings ratio is a lot lower than the 15x it had just a few weeks ago.
Banks weren’t the only stocks struggling over the last week.
Visa (ticker: V) took a big hit with the news about the cap on credit card interest.
Visa doesn’t make money on interest from credit cards.
But a cap would make it less likely banks issue cards to certain people, which would hurt Visa’s volume.
Visa’s stock is down almost 7% over the last 2 weeks and presents a great buying opportunity.
Visa’s profitability is incredible.
Its profit margin of 51% is one of the highest in the entire stock market.
And Visa’s revenue is averaging almost 14% growth each year over the past decade.
Regional banks are often overlooked, and Bank OZK (ticker: OZK) is no exception.
Bank OZK is a regional bank operating mostly in Texas, Arkansas, and Georgia.
It’s one of the most profitable regional banks with a profit margin around 42%.
And despite its profitability, the stock is incredibly cheap.
Bank OZK’s price-to-earnings ratio of 7.8x is one of the lowest among regional banks.
What stocks are you looking to buy right now?
Coach Parker
Category: Stocks
