When it comes to a Donald Trump administration, there are plenty of things investors are still in the dark about. One thing is clear: they think it will be good for banks, particularly smaller ones.

After an initial market downturn on news of Mr. Trump’s surprise victory early Wednesday, bank stocks rose sharply on the prospect of stronger growth and less regulation. Both big and small banks notched gains and the KBW Nasdaq Bank Index, up nearly 5%, marked its sharpest one-day rise since February.

“We...