Citi needs a white knight. Donald Trump's second term might provide one.

• Citi has spent more than $7.4 billion to make peace with regulators and hasn't succeeded.
• Donald Trump's election and promise of deregulation bode well for the bank.
• CEO Jane Fraser has faced mounting pressure over the bank's data and risk problems.

Donald Trump's presidential victory and his promise of light regulation could help relieve one of Citi's biggest problems. Trump's reelection on Wednesday already boosted the bank's stock by 8.4%.

Citi has been in hot water with regulators since 2020, paying a total of $400 million in fines for poor data management and risk controls. The bank was slapped with $135.6 million in fines in July for failing to make enough progress to satisfy the Federal Reserve and the Office of the Comptroller of the Currency. The delay is despite Citi spending more than $7.4 billion and allocating 13,000 employees to a firmwide "Transformation" initiative to rectify the issues.

Wells Fargo analyst Mike Mayo called Trump's win a "regulatory game changer" in a research note. He told Business Insider that Citi is still in "regulatory purgatory" but that the bank would likely face less scrutiny for its data quality issues.

"With a fresh look with a new set of regulators, I do think it makes a difference that the recent regulatory actions did not involve clients," he said. "This is more about Citi doing what it's supposed to do with its regulators as opposed to fixing any new issues with customers."

Mayo thought it was unlikely for the agencies to rescind their demands altogether but that the new restrictions in July might be unwound. For instance, the OCC has required Citi to submit plans each quarter to ensure they are allocating enough resources to the Transformation effort.

While Trump has not announced a formal policy on how he would regulate Wall Street, he has signaled he would cut down on oversight. In a speech at the Economic Club of New York in September, he pledged if re-elected, he would eliminate 10 rules for each new rule introduced.

A Republican majority in the Senate has also paved the way for new agency appointments. Michael Hsu, the current head of the OCC, has said that large banks that fail to manage risk effectively should be broken up as a last resort. Trump has openly criticized Federal Reserve chair Jerome Powell, accusing him of trying to help the Democrats keep the presidency.

"Having the presidency and the Senate means you can put anybody you want into these positions and get through these secretaries of various bodies and so forth," said Stephen Biggar, managing director of Argus Research. "The Senate will be cooperative and that only helps the cause for banks and all things bank regulation."

Since the July fines, Citi has faced mounting pressure. In October, Sen. Elizabeth Warren urged the OCC to "impose growth restrictions" on Citi, arguing that it has grown "too big to manage." (The regulator and Citi declined to comment.)

A few weeks later, Fraser was dogged by questions in an earnings call about the bank's regulatory fate. She was asked three times for reassurances that Citi did not and would not have an asset cap before answering the question.

"Let me be crystal clear," Fraser said after JPMorgan analyst Vivek Juneja raised the issue. "We do not have an asset cap and there are no additional measures other than what was announced in July in place and not expecting any."

Her odds just got better.

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