Trumped-Up Banks May Still Be Ripe for Breakup

This time last year, big U.S. banks looked ripe for a breakup. Politicians were clamoring to make the system safer and investors were looking for ways to boost sluggish performance. Today, the preference is for doing very little at all, thanks to a deregulation pledge by President Donald Trump that has fueled a share-price rally and could free up as much as $25 billion for the financial sector, according to research firm Opimas.

Yet it might be a mistake to imagine investors have wrung all the value they can out of banks. Fourth-quarter results confirmed what analysts already knew -- rising interest rates and volatility help margins and trading -- but not much else in terms of new ideas for hitting profit targets or lifting revenue. Industry return on equity is still historically low. Moreover, the euphoria building up to Inauguration Day was about events outside of banks' control. There's a risk of disappointment: Already, most bank shares have come off their post-election highs.