Jan 17 (Reuters) - A raft of U.S. banks reported higher

fourth-quarter profits on Friday, extending a winning streak for

the industry as an upswing in capital markets alleviated a hit

from weaker loan demand.

Long believed to be the stronghold of Wall Street heavy

hitters such as JPMorgan Chase ( JPM ) and Goldman Sachs ( GS ),

investment banking and trading have become increasingly vital

for mid-sized banks as a robust dealmaking environment offers

lucrative fee prospects.

"Dealmaking is back with a vengeance," said Danni Hewson,

head of financial analysis at AJ Bell.

The boost from investment banking has helped mid-sized banks

cushion the blow from lower loan demand as elevated interest

rates deter borrowers.

"If the incoming president follows through on promises for

deregulation and lower taxes, the outlook for 2025 will continue

to generate a lot of excitement among banking bosses," Hewson

said.

Citizens Financial, Truist Financial ( TFC ),

Huntington Bancshares ( HBAN ) and Regions Financial ( RF ) all

surpassed expectations for quarterly profits, according to data

compiled by LSEG, mirroring the stellar results of their bigger

peers earlier this week.

Truist shares were last up nearly 3% before the bell, while

Regions Financial ( RF ) traded 0.7% higher and Huntington climbed

1.2%.

On Thursday, U.S. Bancorp ( USB ) and M&T Bank ( MTB ) also

posted higher fourth-quarter profit, driven by higher fee

income.

'TRUMP BUMP'

Analysts predict that the investment banking sector will see

a "Trump bump" under the new administration due to corporate tax

cuts and relaxed regulatory oversight that could increase

executives' confidence to pursue deals.

A series of rate cuts by the Federal Reserve has also

cemented the resilience of the U.S. economy, though some are

worried that President-elect Trump's tariff proposals could lead

to a spike in inflation.

"Questions may abound about how long the run can last and

whether Donald Trump's form of isolationism will be a boon or a

curse, but as a host of Wall Street banks delivered robust and

even record-breaking profits, no one is really thinking about

the answers just yet," Hewson added.

Still, loans and leases at Citizens, Truist and Regions fell

and could remain depressed unless rates are lowered further.

The Fed, however, has projected fewer rate cuts this year

than previously expected. Inflation data released earlier this

week, which showed that U.S. consumer prices increased by the

most in nine months in December, could reinforce that view.