Market Insider

Bank stocks on pace for best day since November as Trump sets sights on financial deregulation

Analyst: Three issues related to rolling back Dodd-Frank

Bank stocks had a good day Friday.

The SPDR S&P Bank ETF (KBE) and the SPDR S&P Regional Banking ETF (KRE) both rose around 2.5 percent, handily outperforming the broader stock market, with President Donald Trump signing executive orders aimed at rolling back financial regulations, some of which were implemented after the 2008 financial crisis. The Dow Jones industrial average saw its best day of 2017.

Shares of the three largest companies by market cap in the KBE — Wells Fargo, JPMorgan Chase and Bank of America — rose more than 2 percent. The top advancers in the KRE were shares of OFG Bancorp and East West Bancorp.

"This rally is directly related to the executive orders," said Kevin Barker, a bank analyst at Piper Jaffray, noting that interest rates were down on Friday. Higher interest rates are bullish for bank stocks. However, any further upside in bank stocks depends on how much regulation can be rolled back, he said.

"Ultimately, if there is a rollback in financial regulation, there is potential for corporate tax cuts, meaning there is potential for bank stocks to move higher," Barker said.

Banks have been among the best-performing stocks since the U.S. election, as Trump's victory raised hopes for lower corporate taxes and deregulation.

Since Nov. 8, the KBE and KRE have skyrocketed 26 percent and 27 percent, respectively, while the broader S&P 500 has risen more than 7 percent.

KBE, KRE and S&P since Nov. 8

Source: FactSet

— CNBC's Gina Francolla contributed to this report.

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