US Bank Stocks Decline Up to 4.6% on Mixed Q4 Earnings and Credit Card Rate Cap Concerns

US bank stocks faced significant selling pressure on Wednesday, with major financial institutions declining up to 4.60% as investors processed mixed fourth-quarter earnings results and concerns over proposed regulatory changes. The S&P bank index fell over 1.00%, reflecting broad-based weakness across the sector.

Mixed Earnings Performance Weighs on Sentiment

Wells Fargo emerged as the biggest decliner, with shares sliding 4.60% after the San Francisco-based lender posted weaker-than-expected quarterly profit and revenue. The bank's performance was weighed down by softer trading fees and other non-core items, disappointing investors who had expected stronger results.

Bank of America shares dipped 3.50% despite the lender topping quarterly profit estimates, while Citigroup slipped 0.50% even after reporting higher revenue. The mixed reception highlighted investor sensitivity to earnings quality and forward-looking indicators.

Strong Loan Growth Provides Positive Backdrop

Despite the market reaction, underlying business fundamentals showed encouraging trends across major banks. US banking giants boosted their profits in the fourth quarter, supported by increasing demand from borrowers that could benefit future earnings.

Bank of America reported particularly strong metrics, with average loans growing 8.00% year-over-year and net interest income surging to a record ₹15.90 billion. At JPMorgan Chase, averaged loans climbed 9.00%, while Citigroup's average loans increased 7.00% in the fourth quarter.

"We've seen growth in all of the consumer borrowing categories," Bank of America Chief Financial Officer Alastair Borthwick told reporters. "That's helped us in Q4, but generally, the story in 2025 was more of a commercial borrowing story."

Credit Card Rate Cap Raises Industry Concerns

Banking executives expressed significant concern about President Trump's proposed 10% cap on credit card interest rates, warning it could prompt banks to reduce lending and curb economic growth. The proposal has become a key focus for investors assessing the sector's regulatory outlook.

Citigroup Chief Financial Officer Mark Mason emphasized the potential negative consequences: "An interest rate cap would restrict access to credit to those who need it the most, and frankly, would have a deleterious impact on the economy." Wells Fargo's CFO Mike Santomassimo echoed similar concerns, stating the proposal "would have negative impact on credit availability."

Market Context and Analyst Outlook

The Wednesday decline came after the banking sector had enjoyed a strong 25% gain over the past 12 months, with the sector falling 0.40% on the day. "Banks have had a very strong start to the year and markets are taking a little time to digest the results," said Jake Johnston, deputy CIO at Advisors Asset Management.

Analysts at S&P Global Market Intelligence remain optimistic about continued momentum, driven by macroeconomic stability and favorable lending conditions. They estimated loan growth across US banks accelerated significantly by the end of 2025, growing 5.30% year-on-year, supporting a positive outlook for the sector despite near-term volatility.