US bank stocks faced significant pressure in morning trading as investors closely monitored the Trump administration's January 20 deadline for implementing a proposed 10% cap on credit card interest rates. The banking sector decline occurred amid broader market uncertainty about whether the administration can implement such measures unilaterally without legislative action.

Major Bank Stock Performance

The impact on individual banking stocks was substantial, with several major institutions experiencing notable declines:

The S&P 500 Banks index fell 1.2%, reflecting the sector-wide concern over the proposed regulatory changes.

Industry Opposition and Warnings

Banking executives have voiced strong opposition to the proposed rate cap, citing potential negative consequences for consumers and credit markets. JPMorgan CEO Jamie Dimon warned that the move would harm consumers, with the bank signaling that "everything is on the table" regarding potential legal action.

The American Bankers Association released new data indicating the severe potential impact of the proposal. According to their analysis, between 137 million and 159 million cardholders could lose access to their credit cards if the rate cap is implemented as proposed.

U.S. Bancorp CEO Gunjan Kedia provided specific estimates about the impact on her institution's clients. "Our estimate is that 90 plus percent of our clients will see a detrimental impact if there was an across-the-board 10% rate cap on credit cards," she stated.

Market Analysis and Potential Solutions

Financial analysts suggest the uncertainty creates an overhang that could resolve quickly depending on the administration's approach. Brian Jacobsen, chief economic strategist at Annex Wealth Management, noted that the situation could clear if it becomes "more a call for Congress to do something instead of some specific policy action by the executive office."

Industry experts have identified several potential compromise solutions:

• Lower rates for specific customer segments
• No-frills cards charging 10% without rewards programs
• Reduced credit limits to manage risk
• Voluntary "Trump cards" as suggested by White House economic adviser Kevin Hassett

TD Cowen analysts expressed optimism about a potential resolution, stating they "believe there is a political compromise in the works to ensure the President does not push Congress to enact a 10% cap on credit card interest rates."

Broader Banking Sector Tensions

The credit card rate cap proposal represents part of broader tensions between the Trump administration and the banking sector. The administration has alleged that banks have restricted financial services for certain controversial industries. Additionally, Trump has announced plans to sue JPMorgan within the next two weeks for allegedly "debanking" him following the January 6, 2021 Capitol attack.

The administration has also launched an investigation into Federal Reserve Chair Jerome Powell, though Trump recently disputed reports that he had offered JPMorgan's Dimon the Fed chair position.

Wells Fargo & Company missed analysts' profit estimates in the fourth quarter, posting earnings of $1.62 per share against expectations of $1.67 per share. The disappointing results were primarily attributed to $612 million in severance expenses as CEO Charlie Scharf continues his effort to streamline operations. Shares closed down 4.60% at $89.25, marking the bank's biggest one-day percentage loss in six months.

Q4 Financial Performance Details

The fourth-largest US lender reported net income of $5.36 billion for the three months ended December 31, compared with $5.08 billion in the same period last year. Despite the year-over-year growth in absolute terms, the earnings per share fell short of Wall Street expectations due to the significant severance costs.

Net interest income, the difference between what the bank earns on loans and pays on deposits, rose 4.00% to $12.33 billion but missed expectations of $12.46 billion. This marked another disappointment for the bank, which had twice reduced its annual interest income expectations last year.

Workforce Reduction and Operational Streamlining

The substantial severance costs reflect Wells Fargo's ongoing efforts to streamline its workforce under CEO Charlie Scharf's leadership. The bank ended 2025 with 205,198 employees, down from 210,821 as of September 30. The headcount has declined every quarter since late 2020 as the bank focuses on efficiency improvements.

Scharf indicated that the bank will continue trimming its workforce, emphasizing that artificial intelligence presents a major opportunity to boost productivity and fund long-term growth initiatives.

Regulatory Progress and Growth Outlook

Wells Fargo has made significant progress in addressing regulatory issues tied to its fake-accounts scandal. The bank closed seven regulatory punishments known as consent orders last year, with one order from 2018 remaining. Most notably, regulators removed a $1.95 trillion asset cap in June, allowing the bank to grow and push total assets past the $2 trillion mark for the first time.

For 2026, Wells Fargo forecast its net interest income to be approximately $50 billion, slightly below analysts' average expectation of $50.33 billion. The bank expects average loans to increase by a mid-to-single-digit percentage this year, driven by commercial and auto loans, alongside credit cards.

Credit Card Strategy and Regulatory Concerns

Wells Fargo plans to focus on new credit card products in 2026, investing in AI to modernize its services and accelerate the rollout of credit card offers and underwriting services. However, concerns remain about President Trump's proposed 10% cap on credit card interest rates.

CFO Mike Santomassimo warned that such a cap would cause banks to pull back on lending, echoing concerns from peers including JPMorgan Chase. "We would just encourage continued careful consideration of all proposals, including this... to make sure we get to the right outcomes," Santomassimo said during a media call.