Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

US Regional Banks Set To Erase All Losses Post SVB Fallout: Can They Maintain Momentum In 2024?

Published 21/12/2023, 13:43
© Reuters.  US Regional Banks Set To Erase All Losses Post SVB Fallout: Can They Maintain Momentum In 2024?
KRE
-

Benzinga - by Piero Cingari, Benzinga Staff Writer.

U.S. regional bank stocks have seen a significant uptrend over the recent weeks, reaching levels reminiscent of those during the onset of the Silicon Valley Bank crisis in March.

The SPDR S&P Regional Banking ETF (NYSE:KRE), a pivotal gauge tracking more than a hundred industry players, has surged 35% in the past two months, marking its strongest two-month rally since January 2021.

The rally of regional banks has been bolstered by the gradual improvements in financial conditions in the United States, largely attributed to the Federal Reserve’s recent shift towards a more accommodating monetary policy stance.

Previously, elevated interest rates had placed regional banks in a precarious position. Declining loan demand and rising funding costs had exerted significant pressure on these banks’ net interest margins (NIM).

However, the anticipated decrease in interest rates for 2024 has played a pivotal role in alleviating the strain on regional banks, propelling them to become one of the industries with the most robust performances in the recent market phase.

Key Contributors To Regional Bank Rally

Upon analyzing the KRE ETF constituents, ten regional banks have reported returns exceeding 40% in the last three months:

Name Price Chg. % (3M) Price Chg. % (1M)
Customers Bancorp, Inc. (NYSE:CUBI) 77.42% 25.50%
Metropolitan Bank Holding Corp. (NYSE:MCB) 58.17% 43.82%
Glacier Bancorp, Inc. (NYSE:GBCI) 56.21% 27.52%
Lakeland Financial Corporation (NYSE:LKFN) 47.86% 17.09%
Live Oak Bancshares, Inc. (NYSE:LOB) 46.86% 31.71%
Bank of Hawaii Corporation (NYSE:BOH) 46.20% 28.66%
FB Financial Corporation (NYSE:FBK) 44.83% 20.13%
Cadence Bank (NYSE:CADE) 44.30% 20.42%
Independent Bank Corporation (NYSE:IBCP) 43.95% 18.13%
Premier Financial Corp. (NYSE:PFC) 42.28% 17.05%

2024 Economic Outlook

Regional banks tend to flourish in an environment of solid economic growth, moderate inflation, and decreasing interest rates.

Conversely, stagflation — characterized by stagnant economic growth paired with rising inflation — can be detrimental to the sector due to lower loan growth and potentially higher deposit interest rates.

A recession coupled with low-interest rates could create a complex scenario for the industry, possibly favoring only the larger, more robust banks. While a slow economy reduces loan demand, banks may benefit from decreased costs.

The latest projections from the Fed suggest a moderate US economic growth of 1.4% in 2024, slightly below the trend and well under the 2.6% growth seen in 2023.

Inflation is expected to decrease to 2.4% by the end of 2024, still marginally above the Fed’s 2% target. Additionally, the federal funds rate is projected to be cut by 75 basis points to 4.6%, with market expectations leaning towards even steeper rate reductions.

Read now: 5 ETFs To Keep An Eye On As Market Anticipates Fed’s Preferred Inflation Gauge This Friday

Image: Shutterstock

© 2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

Read the original article on Benzinga

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.