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Trump presidency stops investment uncertainty, Intesa CEO says

Republican presidential candidate Donald Trump walks on stage after his daughter, Ivanka Trump, introduced him during the evening session on the fourth day of the Republican National Convention on July 21, 2016 at the Quicken Loans Arena in Cleveland, Ohio.
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Republican presidential candidate Donald Trump walks on stage after his daughter, Ivanka Trump, introduced him during the evening session on the fourth day of the Republican National Convention on July 21, 2016 at the Quicken Loans Arena in Cleveland, Ohio.

Donald Trump has been elected as the 45th president of the United States and while congratulatory messages are pouring in from across the globe, banks and financial institutions across the world are scrambling to understand what it means for them.

"The main point is that this stops uncertainty so now we have a president and we have to deal with the situation and in reality U.S. is a country of big institutional investors, big pension funds," Carlo Messina, CEO of Intesa Sanpaolo told CNBC Wednesday.

"At the end, from a macro point of view, you can have a devaluation of the dollar and the postponement of the U.S. interest rate hike from Federal Reserve."

Intesa's Messina further explained that from a trade point of view there were still some points that need to be checked and markets will be watching if Trump will maintain what he told during the campaign. "In reality it is not in the interest of the U.S. to take a different position on trade. You may force infrastructure, investment within the country but maintaining a fair relation with other countries is also very important."

Meanwhile, the European banking sector has reacted with shock to a Trump win. In morning trading in Europe Stoxx Europe 600 banking index is down nearly 2 percent and a number of banks have warned of uncertain times ahead.

Allianz CEO Oliver Bate has said the global economy will experience a long period of uncertainty until Trump's program crystalizes, Reuters reported.

Banks in Europe are trading in negative territory as uncertainty around Trump's policies grips markets. "A rise in uncertainty is typically associated with falling bond yields – and we would therefore stay cautious under a Trump win," Deutsche Bank said in a research note before the U.S. elections.

Stocks across the board in Europe are trading lower with banks including Natixis and BBVA down more than 6 percent. Spanish-owned BBVA has more than 40 percent of its business in Mexico and hence the stocks are down due to huge amount of uncertainty on Trump's policy in Mexico and Mexican peso tanking nearly 13 percent on Wednesday morning.

Market volatility to continue

Photographer | Collection | Getty Images

Gabirel Solomon, a portfolio manager at T. Rowe Price told CNBC via email that a repeal of Dodd-Frank, as discussed by Trump earlier, would not be good. The Dodd Frank Act, a piece of financial reform placed under President Obama after the aftermath of the 2007-2009 crisis, forced U.S. banks to reduce their reliance on debt for funding and to craft 'living wills,' or blueprints for winding them down in a crisis.

"A blanket repeal of Dodd-Frank would not be good because some of the regulations are good for managing risks that lead to the 2008‒2009 financial crisis," Solomon said. He further added that keeping some banks apart, the sum of the parts may be worth more than the current whole.

"Deficit spending, in the absence of economic growth, could lead to higher interest rates and inflation that could create structural problems similar to the 1970s, which would not be good for financials."

A number of banks – both in Europe and abroad -- have said Trump's victory was a surprise for markets and volatility will continue in the days to come.

"Trump's unpredictability and his lack of political experience are more than enough reason to approach the coming months with some caution," Stefan Kreuzkamp, chief investment officer of Deutsche Asset Management said in a research note.

"Media coverage is likely to remain negative. Even if he were to follow through on only half of his vigorous campaign promises, this could cause considerable unrest. "

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