Scant comfort in Congress vote for U.S. bank shares

May 23 (Reuters) - U.S. banks were the biggest drag on the Dow Jones and S&P 500 indexes on Wednesday, as global trade tensions overshadowed a much awaited bill that would roll back rules imposed on them after the 2007-2009 financial crisis.

Wall Street banks have lobbied long and hard for regulatory easing, including reducing scrutiny and lending restrictions, to boost profits.

But the bill passed on Tuesday was a far cry from the repeal that President Donald Trump pledged on the campaign trail, leaving largely untouched the core Dodd-Frank provisions designed to ensure financial stability and other rules most hated by banks and conservative Republicans.

In a market worrying chiefly over U.S.-China trade talks, Bank of America, Citigroup and Morgan Stanley fell nearly 2 percent, while JPMorgan and Goldman Sachs slipped more than 1 percent.

Regional banks, which managed to eke out a better deal for themselves in the overhaul, were also slightly lower, with the KBW Regional Banking Index falling 0.5 percent.

“The disappointment on the part of large banks is palpable...,” said Octavio Marenzi, Chief Executive Officer of markets management consultancy Opimas.

“Clearly, the House felt it needed a win, so proponents of the bill gave ground in some areas that would ensure its passage, but relief for large banks is considerably some time away into the future,” he added.

Financial stocks were also hit by a dip in global bond yields, driven by fear that setbacks to U.S-China trade talks would undermine increasingly fragile-looking world growth.

Investors shed their holdings in equities and moved into safe havens including U.S. and German government bonds, driving prices up and U.S. 10-year Treasury yields to an eight-day low.

Reporting By Aparajita Saxena in Bengaluru; Writing by Patrick Graham; Editing by Bernard Orr