US bank stocks sink as Trump’s tariffs cloud dealmaking, loan demand

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By Nupur Anand and Niket Nishant

(Reuters) -Shares of U.S. banks tumbled to multi-month lows on Thursday, after President Donald Trump’s sweeping tariffs plan sparked fears of a recession and a slowdown in consumer spending that could hurt earnings.

Citigroup fell nearly 11%, while Bank of America and Morgan Stanley were down 9%. Goldman Sachs and Wells Fargo slipped over 8% each. JPMorgan Chase, the biggest U.S. bank, dropped over 6%.

“There has been a selling spree on banking stocks today due to slower economic growth potential and the credit stress emanating from it for banks,” said Walter Todd, chief investment officer at Greenwood Capital.

Big U.S. banks will start reporting earnings this month, with JPMorgan, Wells Fargo and Morgan Stanley announcing their first quarter earnings on April 11.

Todd said that the banks’ comments on the outlook will be critical to understanding how the coming quarters may look for U.S. banks.

The moves mark a sharp reversal of fortunes for the banking industry, which as recently as a few months ago had projected a bright outlook for 2025 on hopes of M&A deregulation and lower corporate taxes.

But uncertainty fueled by Trump’s 10% baseline tariff on all imports crushed the economy-sensitive bank stocks, while raising fears of a global trade war as some countries vowed to retaliate.

Economists have warned tariffs could slow the global economy, raise the risk of recession, and increase living costs for the average American family by thousands of dollars. None of this bodes well for banks.

“The banking industry is tied very closely to what happens in the macroeconomic environment, so if consumer spending and corporate investment slows down or if the unemployment rate goes up, then all of this has a materially adverse impact on the U.S. banking industry,” said Morningstar senior equity analyst Suryansh Sharma.

With companies holding off acquisitions amid tariff uncertainty, investment banking income is likely to remain under pressure. Analysts warned that weakening consumer confidence could dampen spending and curb loan demand.

“It will impact loan growth and credit quality. We can also see material impact on mergers and acquisition, equity underwriting and investment banking revenue. And, when capital markets correct, they directly impact the asset management fees,” Sharma added.

Regional lenders may be hit harder than major banks, which can offset some pressure with their trading operations that stand to gain from market volatility.

“We are cautious on bank stocks and we prefer GSIBs (Global Systemically Important Banks) to regionals overall,” J.P. Morgan analysts wrote in a note, adding that large bank stocks had fallen sharply and valuations seemed “attractive”.

The KBW Regional Banking Index fell nearly 8% on Thursday, before slipping to its lowest since August last year.

(Reporting by Nupur Anand in New York, Niket Nishant and Arasu Kannagi Basil in Bengaluru; Editing by Arun Koyyur and Deepa Babington)