US Banking Giants Add $600B in Value as Deregulation Widens Gap with Europe

The market capitalization of the six largest US banks surged by approximately $600 billion in 2025, driven by a dual tailwind of financial deregulation and a resurgence in investment banking. This rally has widened the valuation divergence between American lenders and their European counterparts, reinforcing a theme of US financial exceptionalism that continues to influence global capital flows.

Transatlantic Divergence

According to S&P Global data, the aggregate market capitalization of the “Big Six”—JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley—closed at $2.37 trillion as of December 23. This figure stands in stark contrast to the top six European banks, whose combined value hovers near just $1 trillion.

The outperformance of US financials, which are poised to beat the S&P 500 for the second consecutive year, underscores a structural shift in investor preference toward US assets. For currency markets, this substantial equity premium and the robust health of the US financial system often provide underlying support for the US Dollar (USD) against the Euro (EUR), particularly as capital seeks higher efficiency and shareholder returns.

Drivers: The Deregulation Pivot

Market analysts identify the relaxation of regulatory frameworks as the primary catalyst. Following the restricted era post-2008, the current administration has moved to unwind stringent capital requirements.

RBC banking analyst Gerard Cassidy noted, “The importance of the changing regulatory environment for stock prices cannot be overstated.”

Key regulatory shifts fueling the rally include:

• Proposals to allow increased leverage ratios.
• Reforms to annual bank stress testing protocols.
• Withdrawal of specific guidance on high-risk lending.
• Expectations that the final “Basel III” implementation will be significantly diluted compared to initial proposals.

This regulatory easing has left major banks with “excess capital,” previously ringfenced for compliance, which is now expected to be deployed into share buybacks, dividend hikes, and business expansion.

Stock Performance & Sector Outlook

Among individual performers, Citigroup emerged as a standout, with shares rallying 77% year-to-date, hitting levels not seen since 2009. Goldman Sachs followed with a 62% gain, buoyed by a recovery in trading revenues and dealmaking. Industry forecasts suggest 2025 banking revenues for equity and fixed-income trading will exceed prior peaks, projecting roughly $92 billion and $163 billion respectively.

While the “de-regulation” trade drives optimism, some analysts caution regarding valuation. HSBC's Saul Martinez described the backdrop as “almost too good to be true,” suggesting that while fundamentals are strong, much of the positive news may already be priced in. Nevertheless, with US banks significantly less levered than in pre-2008 cycles, the market appears comfortable absorbing increased risk appetite for now.