US Banks Poised for $2.6 Trillion Boost From Deregulation, Report Says
Alvarez & Marsal study finds relaxed capital rules could unlock $140 billion in capital, fueling lending and shareholder returns amid a wider regulatory debate.
A significant rollback of post-crisis financial regulations is poised to unleash nearly $2.6 trillion in new lending power for America's largest banks, according to a new analysis that highlights a deepening divide over the future of the industry's capital framework.
A report from management consulting firm Alvarez & Marsal finds that a lighter regulatory touch could free up approximately $140 billion in locked capital for major lenders like JPMorgan Chase, Bank of America, and their peers. This capital infusion, the study suggests, could drive a 35% increase in earnings per share and significantly boost returns on equity, potentially heralding a new wave of share buybacks and dividend increases.
The findings come as the financial sector navigates a complex and often contradictory regulatory landscape. On one hand, the analysis from Alvarez & Marsal points to a clear deregulatory trend that could provide substantial firepower for banks to expand their balance sheets and increase shareholder distributions. This aligns with recent administrative actions, such as an executive order aimed at easing rules for mid-sized banks and promoting fair lending practices.
On the other hand, global regulators are finalizing the "Basel III Endgame" reforms, a sweeping set of international standards that could push in the opposite direction. Analysts project these new rules, set for a multi-year transition starting in mid-2025, could collectively increase common equity capital requirements by about 16% for the largest U.S. banks. This push for higher capital buffers serves as a powerful counterweight to the domestic deregulatory momentum.
"The debate over capital is defining the future of banking profitability," said a senior analyst at a leading financial research firm. "The question is whether the tailwind from domestic deregulation will overpower the headwind from international standards like Basel III."
For now, investors are enjoying the benefits of banks' robust capital positions. Major financial firms have been a primary driver of a recent surge in U.S. stock buybacks, which surpassed $1 trillion in August 2025. Bank of America (NYSE: BAC), for instance, recently showcased its capital strength by initiating a new $40 billion share repurchase program and raising its quarterly dividend by 8%.
The nation's largest bank, JPMorgan Chase (NYSE: JPM), currently trades at just under 15 times trailing earnings, with Wall Street analysts setting an average price target of approximately $328. Meanwhile, Goldman Sachs (NYSE: GS) and Wells Fargo (NYSE: WFC) have also demonstrated strong profitability, though analyst ratings show a more divided view on their immediate growth prospects.
The sector's ability to maintain this pace of shareholder returns will largely depend on the outcome of the ongoing regulatory tug-of-war. The Federal Reserve's annual stress tests, which determine individual capital requirements, confirmed in their latest round that the biggest banks are well-capitalized to withstand a severe recession. According to official Fed publications, these tests remain a cornerstone of financial stability.
As the industry awaits final rules on both domestic and international capital standards, the Alvarez & Marsal report provides a bullish framework for what a lighter regulatory burden could mean for bank investors and the broader economy: more capital for lending, higher profits, and bigger returns.