Capital One, Amex shares sink on Trump's credit-card threat

US President Donald Trump

• US bank stocks fell after Trump proposed a 10% cap on credit card interest rates
• Analysts warn the cap could reduce credit access and hurt bank profits
• Buy-now, pay-later firms may benefit if credit card lending declines

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Shares of Capital One Financial Corp., American Express Co. and other US banks sank after President Donald Trump called on credit-card companies to cap interest rates at 10% for a year, a move that could wipe out billions in profits for one of the banking industry’s biggest businesses.

Capital One, the largest US card issuer, tumbled 6.4% in New York, the biggest decline in nine months, after the president surprised the industry with a move he said could go into effect next week. American Express dropped 4.3% and JPMorgan Chase & Co., No. 2 in the card rankings, slid 1.4%.

Card interest rates, which have been hovering above 20% in recent years, have been a target of US lawmakers on both sides of the aisle, with bills popping up proposing similar caps and meeting stiff resistance from the industry. Trump, speaking Sunday to reporters, set a Jan. 20 deadline for companies to comply or risk being “in violation of the law.”

The cap proposed by the president “could wipe out earnings from cards for a year,” Mike Mayo, an analyst at Wells Fargo & Co., said in a note. The idea “would ruin card economics (eliminate most of card earnings today) and incentives would be to stop lending,” Mayo said.

Citigroup Inc. dropped 3%, while Wells Fargo slipped 1% and Synchrony Financial lost 8.4% on Monday.

Visa Inc. and Mastercard Inc. also fell. While those companies aren’t issuers of credit cards, they rely on fees generated when consumers use their products.

Despite the political appeal of Trump’s proposal, several analysts questioned whether approval of a rate cap was likely, given the strength of the banking industry’s pull in Congress and limited legislative momentum.

“Given how severe it is, it is hard to imagine it moving forward,” Brian Foran, an analyst at Truist Financial Corp., wrote in a note.

In response to Trump’s call, industry groups including the Bank Policy Institute and Consumer Bankers Association struck a measured tone.

“We share the president’s goal of helping Americans access more affordable credit,” the groups said in a joint statement late Friday. “At the same time, evidence shows that a 10% interest rate cap would reduce credit availability and be devastating for millions of American families and small-business owners who rely on and value their credit cards, the very consumers this proposal intends to help.”

Should the idea take effect, fallout would probably affect lower-income consumers the most as banks restrict their access to loans, according to several analysts.

“As credit availability is curtailed, consumers will have to rely on alternate sources of consumer lending,” KBW Inc. analyst Sanjay Sakhrani wrote in a note, adding that those alternatives are “significantly more expensive” for borrowers.

Barclays Plc, the British lender that relies on credit cards as a key part of its US consumer banking business, slumped 2.4% in London, the firm’s biggest loss since Nov. 18.

What Bloomberg Intelligence Says:

Any US cap or restriction on credit card rates would hit Barclays hardest among European banks. The lender’s US consumer bank is expected to generate £3.6 billion revenue in 2025 (12% of group total), but 5% of pretax profit, with credit cards a key element. Though President Donald Trump’s demand that credit card interest rates are capped at 10% might not be enforced in full given the strength of US bank lobby groups.

— Phil Richards, BI banking analyst

There could be a few winners as well. Wells Fargo’s Mayo said that if general availability of traditional credit card loans is reduced due to rate caps, the attractiveness of buy-now, pay-later firms such as Klarna Group Plc and Affirm Holdings Inc. could increase.

Shares of Klarna fell 2.7% and Affirm lost 6.6%.

Airlines, which generate substantial profits from credit-card partnerships, also took a hit on Monday. Delta Air Lines Inc. shares fell 1.8%, United Airlines Holdings Inc. dropped 1.7% and Southwest Airlines Co. slipped 1.5%.

Retailers with substantive credit-card portfolios also took a hit. Macy’s Inc. fell 5.4% on Monday and Kohl’s Corp. shares were down 3.9%.

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