U.S. financial stocks and UK-listed lenders experienced declines on Monday following President Donald Trump’s proposal to cap credit card interest rates at 10 per cent. This suggestion has sparked worries about a potential blow to a key revenue stream for the financial services industry. The renewed concerns among investors come amid existing uncertainty surrounding interest rates, potentially diminishing the appeal of value stocks.
Trump’s announcement on Friday outlined a plan to impose a 10 per cent cap on credit card interest rates starting January 20, though details on how companies would be compelled to comply were absent. In response, shares of major U.S. lenders such as JPMorgan Chase and Bank of America saw declines in early trading. Similarly, shares of U.S. consumer finance firms like Synchrony Financial, Bread Financial and Capital One also experienced notable drops.
Wall Street analysts have expressed scepticism regarding the feasibility of the proposed cap, with some noting that such a measure would require Congressional approval, which is deemed unlikely. Analysts suggest that lenders might be forced to reduce credit limits or close accounts for borrowers with lower credit scores if the rate cap were to be implemented. Concerns have also been raised that the measure could inadvertently drive consumers towards more expensive forms of debt.
JPMorgan Chase is an American multinational financial services firm. The company is a leader in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing and asset management. Investors will be closely monitoring upcoming commentary from bank executives as the financial industry begins reporting fourth-quarter earnings this week, starting with JPMorgan Chase.
