"A Republican win would be positive for financial services stocks broadly," writes Janney Capital Markets analyst Sameer Gokhala in a report to clients. "A Republican administration would likely de-emphasize government regulation and reduce the power wielded by certain regulatory agencies." Worst-case scenario for banks isn't that bad, he adds: If Obama is re-elected he's not likely to tighten bank regulation any further.
Two stocks that would get a special boost in a Romney administration: Wilmington, Del.-based student lender Sallie Mae, and national cash-for-stuff chain Cash America Pawn. Both "could appreciate significantly if Mitt Romney were elected," while an Obama victory wouldn't likely hurt them either.
"Romney has indicated that, were he to be elected President, he would bring the [privately-run, taxpayer-funded Federal Family Education Loan Program] back, enabling companies like Sallie Mae to again originate federally guaranteed student loans.
"It is unclear whether there would be enough bipartisan support for this, but the likelihood of this happening would increase in a Republican Administration.
"Furthermore, the likelihood of any change to the bankruptcy law would also decrease if Romney were to win. Senator Durbin (D, Illinois) has proposed a bill that would make private student loans dischargeable in bankruptcy," reversing the 2005 federal bankruptcy law that made it hardest for student and credit card debtors to use bankruptcy to escape their bills. "A Romney victory reduces the likelihood that private student loans would be made dischargeable in bankruptcy, it would be viewed positively by investors.
"Cash America would also potentially benefit if Romney were to win. The company makes pawn and payday loans focused on serving the subprime market. While both the pawn and payday loan markets face the risk of increased regulation by the Consumer Finance Protection Bureau, we believe the payday lending business in particular is more exposed...
"Romney would reduce the power wielded by the Consumer Financial Protection Bureau and other financial regulators. He could accomplish this by appointing Republicans to key positions at these regulatory agencies, which would then be less inclined to make rules that could negatively impact regulated companies. This would reduce the risk posed to the payday lending business from potential changes forced by the CFPB.
"While the Bureau appears to have taken a generally reasonable and measured approach thus far, a Romney victory would reassure investors that further negative regulatory changes from the CFPB or other agencies will be less likely to happen."