No corner of the banking industry has gotten a bigger near-term boost from Donald Trump's election than private student lenders. And that's saying something.
Since Nov. 8, a widely watched index of bank stocks has risen by 21%, to the delight of banking executives and investors. But the celebrations may be particularly boisterous at SLM Corp., the student loan giant known as Sallie Mae.
The Newark, Del.-based firm's stock price has climbed a whopping 59% since Election Day, amid changing perceptions about the regulatory climate for private student lending. "Stocks don't generally move 50% in a month," noted Ed Mills, an analyst at FBR Capital Markets.
U.S. student lending is dominated by the federal government, which accounts for more than 90% of the $1.36 trillion student loan market. But within the private sector, Sallie Mae is considered a bellwether for the industry, since its business focuses heavily on education lending, whereas its main competitors have more diversified banking operations.
Industry analysts said this week that the recent surge in Sallie Mae's stock may be more of a reaction to Hillary Clinton's defeat than it is a reflection of likely policy changes under the Trump administration.
Under a potential Clinton administration, bank lenders might have had to contend with the expansion of federal student loan programs, which are generally where borrowers turn first to finance higher education.
In addition, Clinton campaigned on the idea that community colleges should be free to attend, and that every student should be able to graduate from a public college in their state without taking on debt.
If Democrats had fared better in congressional elections, Sen. Bernie Sanders, a Vermont Independent and a champion of tuition-free college, might have been in line to chair the Senate education committee. And the banking industry's leading nemesis, Sen. Elizabeth Warren, D-Mass., was poised to influence appointments to financial policy posts in a Clinton administration.
But following Trump's victory and with the GOP maintaining control of Congress, all of those scenarios appear to be off the table.
"The outlook for the space looks brighter under President-elect Donald Trump," analysts at Keefe, Bruyette & Woods wrote in a research note this week.
The private side of the industry expanded during the credit boom of the 2000s, but then retreated during the Obama administration. That contraction was partly due to high delinquency rates on pre-crisis loans, though policy changes that were pushed by Democrats also played an important role.
In 2009, Congress ended a program that enabled banks to make federally guaranteed student loans. And the creation of the Consumer Financial Protection Bureau the following year harkened the arrival of a tough new watchdog.
At an industry conference Tuesday, Sallie Mae Chief Financial Officer Steven McGarry noted that Trump has said little about higher education policy. But McGarry raised the possibility that the GOP-led Congress might take steps to reduce the federal government's footprint in student lending, which would provide new opportunities for the private sector.
After the election, he said: "We are in, we think, a low-risk quadrant with some opportunity over the medium term for some upside in our business."
Other private student lenders include Wells Fargo, PNC Financial Services Group, Citizens Financial and Discover Financial Services. Those companies also stand to benefit from the shifting electoral fortunes in Washington, said Sanjay Sakhrani, an analyst at KBW.
"Definitely on the margins, it's positive for everyone in this space," he said.
