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SPDR S&P Bank ETF

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FTXO

KBWB

US banks defy stress tests &amp; buy back $14B in shares, signaling confidence. JPM &amp; BAC slip, WFC up. Banks consider hypothetical crisis scenarios.

6 Biggest US Banks Ramp Up Buybacks, Undeterred By Stress Tests

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Equities

Large Cap

Mid Cap

Sector ETFs

Small Cap

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Economics

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ALLY

FITB

HBAN

U.S. banking sector anticipates improved capital buffers in 2024 stress test, results to be released on June 26. Bank of America expects manageable surprises, closely monitoring Ally, Goldman Sachs, and Citigroup.

US Bank Stress Tests This Week, Analyst Expects Improvement: 8 Stocks, 3 ETFs To Watch

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Specialty ETFs

Bank stocks have had a successful year with potential for more growth if economic stability is maintained. BofA predicts positive sector performance in US elections and potential regulatory changes.

Goldman Sachs, JPMorgan, And Wells Fargo Lead Bank Stocks Surge As Investors Bet On Soft Landing

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Macro Economic Events

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Broad U.S. Equity ETFs

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AAPL

iShares Dow Jones US Pharmaceuticals Index Fund

NVDA

Rydex ETF Trust Rydex S&P Equal Weight ETF

Bank of America lists 10 market surprises; warns investors to be wary of the bond market&#39;s dovish position compared to the Fed.

Bank Of America Predicts 10 2024 Market Surprises: From Booming IPOs To Japanese Equity Surge

Earnings

Markets

General

The four major US banks are expected to beat or match market forecasts in Q4 earnings, but challenges remain in 2024 due to global economy, tech adoption and more.

Bank Earnings Preview: Cautious Outlook As JPMorgan, Citigroup, BofA And Wells Fargo Report On Friday

Penny Stocks

SBNY

American banks are grappling with a staggering $650 billion in unrealized losses on their bond investments — but there could be a way out.

US Banks Are Struggling With $650 Billion In Unrealized Losses On Bond Holdings — Here&#39;s How They Can Get Out

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EWBC

NTRS

U.S. banking stocks face challenges, but analysts believe a bear market bounce is possible if two conditions are met.

Bank Stocks Hit Historic 80-Year Low Vs. S&amp;P 500: Analyst Sees Bear Market Bounce As Fed Rates Peak

Shares of the biggest banks in the U.S., including JPMorgan Chase &amp; Co. (NYSE: JPM), Bank of America (NYSE: BAC), Citigroup Inc.

Are Major U.S. Banks At Risk Of Credit-Ratings Downgrades?

ETF Winners And Losers: Small-Cap Fund Flows - JMBS And IVOL Up During Rocky Week

IVOL

JMBS

PNFP

We performed a screening of small-cap ETFs - defined as having Assets Under Management (AUM) between $400 million and $2 billion - to determine what funds had the largest change in net assets on the week, according to data from etfdb.com. Only non-leveraged funds were considered. 

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WTFC

3 Financial ETFs To Watch As US Bank Earnings Season Kicks Off Friday

HSBC

Fed Bank Stress Test Results: BMO, Citizens Financial And HSBC Saw Lowest Capital Ratios Under Stress Test; Banks Permitted To Report Capital Plans To Investors Beginning Friday Afternoon After Us Market Close

Fed Bank Stress Test Results: Higher Expenses And Lower Fee Income Also Contributed To Steeper Stress Test Losses; Increases In Bank Credit Card Balances And Higher Delinquency Rates Drove Greater Hypothetical Losses; Charles Schwab, Bank Of New York Mellon, JPMorgan Chase And Morgan Stanley Among Strongest Performing Banks

The six biggest banks in the U.S. have not let this<a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/06/39461418/us-bank-stress-tests-this-week-analyst-expects-improvement-8-stocks-3-etfs-to-watch"> week&#8217;s stress tests</a> on capital levels deter them from returning value to shareholders.
JPMorgan Chase &amp; Co. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/JPM#NYSE">JPM</a>), Bank of America Corporation (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BAC#NYSE">BAC</a>), Wells Fargo &amp; Company (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/WFM#NYSE">WFM</a>), Citigroup Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/C#NYSE">C</a>), U.S. Bancorp (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/USB#NYSE">USB</a>) and The PNC Financial Services Group, Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/PNC#NYSE">PNC</a>) bought back more than $14 billion in shares in the first quarter, registering a 73% leap from the pace set in the last six months of 2023, Bloomberg <a href="https://www.bloomberg.com/news/articles/2024-06-26/wall-street-banks-accelerate-buybacks-ahead-of-fed-stress-tests?srnd=economics-v2&amp;sref=TBDibEcD">reported</a>.
The annual stress test, which came out of the 2008 financial crisis and is set to release the latest results on Wednesday, often determines how eager banks are in returning capital to shareholders through dividends and buybacks.
The yearly exams require banks to consider hypothetical crisis scenarios and estimate the losses they might sustain based on their books of business as a way to determine how much capital they can pay out to investors, based on a minimum requirement known as the stress capital buffer. 
Also read: <a href="https://www.benzinga.com/economics/24/06/39492319/fed-gov-cook-calls-for-lower-interest-rates-at-some-point">Fed Gov. Cook Calls For Lower Interest Rates &#8216;At Some Point&#8217;</a>
They had initially held back on buybacks last year in response to new capital-rule proposals, but the Fed has indicated loosening those measures through &#8220;broad and material changes,&#8221; according to Chairman Jerome Powell.
The proposals, which are called Basel III Endgame and were unveiled in 2023 by The Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of Currency, would require banks to up their capital by 19%. The Fed, however, has shown changes that would result in a capital increase of only 5%, according to Bloomberg.
Price action: JPMorgan Chase and Bank of America both slipped 0.85% in Wednesday&#8217;s early-morning trading, while Wells Fargo ticked up 0.52%. Citigroup declined 1.22% as U.S. Bancorp shed 1.02% and PNC Financial Services dipped 0.52%.
Invesco KBW Bank ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/KBWB#NASDAQ">KBWB</a>) lost 0.80% in the early-morning session, while SPDR S&amp;P Bank ETF ARCA:KBE) and First Trust Nasdaq Bank ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/FTXO#NASDAQ">FTXO</a>) both fell 0.85.
Read now: <a href="https://www.benzinga.com/government/24/06/39470021/janet-yellen-says-inflation-to-come-down-to-feds-2-target-by-2025-dismisses-possibility-of-us-recess">Janet Yellen Says &#8216;Inflation To Come Down&#8217; To &#8216;Fed&#8217;s 2% Target&#8217; By 2025, Dismisses Possibility Of US Recession</a>
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Federal Reserve Proposes Weaker Version Of Bank Capital Overhaul

The U.S. banking sector is bracing for the 2024 stress test results, scheduled to be released Wednesday <a href="https://www.benzinga.com/markets">after the market closes</a>.
Bank of America analyst Ebrahim H. Poonawala expects this year&#8217;s stress test to show overall improved capital buffers compared to 2023, given the moderately better severely adverse scenario outlined by the Federal Reserve.
<h1 class="wp-block-heading">Improved Capital Buffers Expected</h1>
According to Poonawala, banks are entering the 2024 stress test with approximately 300 basis points (bp) of excess Common Equity Tier 1 (CET1) capital above regulatory minimums, a notable increase from around 185 bp last year. 
&#8220;Surprises from the annual stress test results are inevitable given the inherent opacity, but we expect these to be manageable,&#8221; Poonawala stated. 
The improved capital position would imply a better ability to absorb an increase in the stress capital buffer, which is a positive development as banks navigate real-life challenges posed by the current macroeconomic backdrop and changing regulatory attitudes.
<h1 class="wp-block-heading">Bank Stress Test&#8217;s Severely Adverse Scenario</h1>
The 2024 stress test&#8217;s four scenarios, designed to provide the Federal Reserve with insight into the resiliency of the U.S. banking system, focuses on funding stress and the failure of five large hedge funds. 
In the Fed&#8217;s hypothetical severely adverse stress scenario, the Dow Jones Index is expected to fall 55%, the unemployment rate to rise by 6.3 percentage points to 10%, the VIX or fear index to spike to 75, and the residential and commercial real estate (CRE) markets to experience declines of 36% and 40%, respectively.
Poonawala noted, &#8220;We wondered if the Fed would inject a much steeper fall in CRE prices given the heightened focus on this asset class. CRE prices are expected to decline by 40% from start to trough, consistent with prior years (&#8217;18, &#8217;21, and &#8217;23).&#8221;
According to Bank of America, there is sensitivity to the potential for the Fed to emphasize certain issues, such as CRE, which could lead to unexpected outcomes.
<h1 class="wp-block-heading">Bank Stocks And ETFs To Watch</h1>
Bank of America is closely monitoring the performance of several banks, including the five new stress test participants: Ally Financial Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/ALLY#NYSE">ALLY</a>), Fifth Third Bancorp (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FITB#NYSE">FITB</a>), Huntington Bancshares Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/HBAN#NASDAQ">HBAN</a>), KeyCorp (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/KEY#NYSE">KEY</a>), and Regions Financial Corp. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/RF#NYSE">RF</a>).&nbsp;
&#8220;Banks that did not participate in last year&#8217;s stress test could potentially experience harsher loss rates given a worse outlook for GDP, unemployment rate, and CRE values vs. 2022,&#8221; Poonawala stated. 
Other institutions of particular interest according to Bank of America are Goldman Sachs Group Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GS#NYSE">GS</a>), Citigroup Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/C#NYSE">C</a>) and M&amp;T Bank Corporation (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/MTB#NYSE">MTB</a>).
With a 90 bp decline in stress-test capital buffers (SCB) from 2023 to 2021, driven by reduced exposure to private investments, Goldman Sachs may see continued relief and capital optimization. &#8220;Lower CET1 req. should be viewed positively, supportive of stock momentum,&#8221; Bank of America wrote.
Citigroup would also benefit from a lower CET1 requirement since it could facilitate increased share buybacks over the next year.
With the highest exposure to CRE loans and approximately 250 bp of excess capital above regulatory minimums, M&amp;T is managing towards an 11% CET1 target.
Last year, the bank index closed 1.8% higher (compared to 0.4% for the S&amp;P 500) following the stress test results. Banks that saw a decline in their SCBs rose by 2.6%, those with unchanged SCBs increased by 1.1%, and those with higher SCBs gained 0.4%. This year, investors will be keenly watching for similar trends.
&#8220;Last year banks where the SCB declined, outperformed the bank index (BKX) by 80bp on average the following day and by 220bp vs. those that saw their SCBs rise,&#8221; Poonawala wrote. 
Three banking-related ETFs to keep an eye on this week are:
<ul>
<li>Financial Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLF#NYSE">XLF</a>)</li>
<li>SPDR S&amp;P Bank ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/KBE#NYSE">KBE</a>)</li>
<li>SPDR S&amp;P Regional Banking ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/KRE#NYSE">KRE</a>)</li>
</ul>
Read Now: <a href="https://www.benzinga.com/top-stories/24/06/39457749/tesla-leads-2024-us-tech-layoffs-so-far-followed-by-dell-cisco-xerox-paypal-microsoft">Tesla Leads 2024 US Tech Layoffs So Far, Followed By Dell, Cisco, Xerox, PayPal, Microsoft</a>
Photo: Shutterstock

US Federal Reserve Says Regulators Identify Shortcomings In 'Living Wills' Of Bank Of America, Citigroup, Goldman Sachs, And JPMorgan Chase; Banks Must Address Issues In Next Resolution Plan Due July 2025; FDIC Finds 'Deficiency' In Citigroup's Plan; Banks Instructed To Fix Derivatives Unwinding And Contingency Planning, Obtain Necessary Foreign Government Actions

Macro Notification

Treasury Secretary Yellen Expresses Concerns Over Smaller Banks And Sanctions; Big Finance Firms Striving To Comply With Russia Sanctions; Large Chinese Banks Value Correspondent Relationships; Smaller Banks Aim To Maintain Dollar Access

Doubleline Capital's Gundlach Says We Have Seen Peak For This Cycle In Longer-Term Bond Yields And Probably Fed Funds

Doubleline Capital's Gundlach Says Think We'll See Headline CPI Settle In At About 2.5-2.75% For Rest Of Year; Can Expect Very Good Returns From Parts Of Fixed Income Market Like BB Bank Loans

Fed To Release Annual Bank Stress Test Results On June 26

Large bank stocks have had a banner year amid expectations of <a href="https://www.benzinga.com/topic/interest-rates">interest rate policy</a> and optimism for an economic &#8220;soft landing.&#8221; The Invesco KBW Bank ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/KBWB#NASDAQ">KBWB</a>) has appreciated by 31.1% in the past year, while the SPDR S&amp;P Bank ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/KBE#NYSE">KBE</a>) is up 28.7%.
A recent industry report from Bank of America outlined what to look for in the banking sector in the second half of 2024 while offering investment ideas amid today&#8217;s <a href="https://www.benzinga.com/topic/economy">uncertain economic environment</a>.
Key Takeaways: The report indicated that the continuance of the bank stock rally hinges on broader economic performance; if a hard landing or stagflation is avoided, it would maintain financial stocks&#8217; upward trajectory. 
&#8220;We believe investors should maintain exposure to bank stocks given the probability for a wide range of macro-economic outcomes &#8211; outright soft-landing (= bank stocks should outperform the S&amp;P), to a low growth economy (=group unlikely underperforms), to the potential for a hard-landing (= bank stocks could mark a new bottom for this cycle),&#8221; the report said.
The report also pointed to the 2024 U.S. Election as a determinant of sector performance. According to the BofA&#8217;s equity strategy team, financial equities have outperformed the S&amp;P in election years since 1976. The report also foresees a change in Basel III regulations, citing statements by Fed Chair Jay Powell and Vice Chair Michael Barr.
&#8220;We expect bank stocks to remain well bid into the US presidential elections (absent a macro shock on GDP/inflation/rates) given potential for an improved regulatory backdrop, pick-up in bank M&amp;A; while stimulus spending expected to flow through the US economy (fate of Trump consumer tax cuts being watched).&#8221;
The report believes that while future Fed rate cuts will hurt industry EPS, lower rates &#8220;should also provide support to a more constructive outlook on credit quality, funding relief (easing deposit pricing competition), and capital (fading concerns tied to MTM losses on bond books).&#8221; The report expects that lower margins will be largely transitory.
Now Read: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/05/38989066/us-business-activity-resurges-in-may-largest-rise-in-2-years-but-return-to-feds-2-t">US Business Activity Resurges In May, Largest Rise In 2 Years, But Return To &#8216;Fed&#8217;s 2% Target Still Seems Elusive&#8217;</a>
Investment Ratings: In light of its generally positive industry outlook, Bank of America holds Buy ratings for the following large financial institutions.
<ul>
<li>Goldman Sachs Group Inc (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GS#NYSE">GS</a>) with a price target of $525.</li>
<li>Wells Fargo &amp; Co (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/WFC#NYSE">WFC</a>) with a price target of $70.</li>
<li>Citigroup Inc (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/C#NYSE">C</a>) with a price target of $75.</li>
<li>JP Morgan Chase &amp; Co (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/JPM#NYSE">JPM</a>) with a price target of $220.</li>
<li>Bank of New York Mellon Corp (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BK#NYSE">BK</a>) with a price target of $66</li>
<li>Truist Financial Corp (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TFC#NYSE">TFC</a>) with a price target of $45.</li>
<li>US Bancorp (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/USB#NYSE">USB</a>) with a price target of $49.</li>
</ul>
Price Action On Monday:
<ul>
<li>Goldman Sachs traded at $452.80, down 0.81%.</li>
<li>Wells Fargo traded at $59.45, down 0.78%</li>
<li>Citigroup traded at $62.07, down 0.39%.</li>
<li>JPMorgan traded at $201.41, down 0.60%.</li>
<li>BNY Mellon traded at $59.13, down 0.81%.</li>
<li>Truist traded at $37.23, down 1.38%.</li>
<li>US Bancorp traded at $40.09, down 1.13%.</li>
</ul>
(All share prices taken at the time of writing)
Also Read: <a href="https://www.benzinga.com/top-stories/24/05/39115597/inflation-bump-is-over-says-paul-krugman-how-friday-data-proves-him-right">&#8216;Inflation Bump Is Over,&#8217; Says Paul Krugman: How Friday Data Proves Him Right</a>
Photo: Shutterstock

<a href="https://www.bloomberg.com/news/articles/2024-05-29/ecb-to-impose-first-ever-fines-on-banks-for-climate-failures?srnd=homepage-europe&amp;embedded-checkout=true">https://www.bloomberg.com/news/articles/2024-05-29/ecb-to-impose-first-ever-fines-on-banks-for-climate-failures?srnd=homepage-europe&amp;embedded-checkout=true</a>
The <a href="https://www.bloomberg.com/quote/2539Z:GR">European Central Bank</a> is set to take the unprecedented step of imposing fines on several lenders for their protracted failure to address the impact of climate change.
As many as four lenders face penalties after not meeting deadlines set by the ECB for assessing their exposure to climate risks, according to people familiar with the matter. The amounts aren't final yet and may be largely symbolic, the people said, who asked not to be named as the move isn't public.

Eurozone

Global

'ECB To Impose First-Ever Fines On Banks For Climate Failures; Several Lenders Didn't Progress Enough On Risk Assessment; Fines Per Day Can Technically Be Up To 5% Of Daily Revenue' - Bloomberg News

<a href="https://www.fdic.gov/news/speeches/fdic-quarterly-banking-profile-first-quarter-2024">https://www.fdic.gov/news/speeches/fdic-quarterly-banking-profile-first-quarter-2024</a>
&nbsp;
Good morning and welcome to our release of first quarter 2024 performance results for FDIC-insured institutions. &nbsp;
The banking industry continued to show resilience in the first quarter. Net income rebounded from the non-recurring expenses that affected earnings last quarter, asset quality metrics remained generally favorable, and the industry's liquidity was stable. However, the industry's net interest margin declined as competition continued to pressure rates paid on deposits and asset yields declined.&nbsp;
The banking industry's net income of $64.2 billion in the first quarter was an increase of 79.5 percent from the prior quarter, mainly due to lower expense related to the FDIC special assessment and lower goodwill writedowns.&nbsp; Otherwise, net income in the first quarter would have increased 14.3 percent from the prior quarter as higher noninterest income and lower provision expenses more than offset a decline in net interest income.
Community banks reported net income of $6.3 billion, a quarterly increase of 6.1 percent, driven by better results on the sale of securities and lower noninterest and provision expenses.
The industry's net interest margin declined by 10 basis points to 3.17 percent, below the pre-pandemic average of 3.25 percent.<a href="https://www.fdic.gov/news/speeches/fdic-quarterly-banking-profile-first-quarter-2024#footnote1_fML5xYJkbYj0">1</a>&nbsp;Continued deposit competition caused funding costs to increase during the quarter while the yield on earning assets declined. The net interest margin for community banks also declined in the first quarter and remains below its pre-pandemic average.
Unrealized losses on available-for-sale and held-to-maturity securities increased by $39 billion to $517 billion in the first quarter.&nbsp;Higher unrealized losses on residential mortgage-backed securities, resulting from higher mortgage rates in the first quarter, drove the overall increase. This is the ninth straight quarter of unusually high unrealized losses since the Federal Reserve began to raise interest rates in first quarter 2022.&nbsp;
The industry's total loans declined by $35 billion, or 0.3 percent, in the first quarter. Most of the decline was reported by the largest banks, in line with a seasonal decline in credit&nbsp;card loans and lower auto loan balances. The industry's year-over-year loan growth rate of 1.7 percent, the slowest rate of annual growth since third quarter 2021, has steadily declined over the past year. The annual increase was led by credit card loans and CRE loans.&nbsp;Loan growth at community banks was more robust, increasing 0.9 percent from the prior quarter and 7.1 percent from the prior year, led by CRE and residential mortgage loans.
Asset quality metrics were generally favorable with the exception of material deterioration in CRE and credit card portfolios.<a href="https://www.fdic.gov/news/speeches/fdic-quarterly-banking-profile-first-quarter-2024#footnote2_eNxLwunzzaeG">2</a>&nbsp;The industry's noncurrent rate increased five basis points from the prior quarter to 0.91 percent, a level still well below the pre-pandemic average noncurrent rate of 1.28 percent.<a href="https://www.fdic.gov/news/speeches/fdic-quarterly-banking-profile-first-quarter-2024#footnote3_zcVkxQJV8s6o">3</a>
The increase in noncurrent loan balances continued among&nbsp;non-owner occupied CRE loans, driven by office loans at the largest banks, those with assets greater than $250 billion. The next tier of banks, those with total assets between $10 billion and $250 billion in assets, is also showing some stress in non-owner occupied CRE loans. Weak demand for office space is softening property values, and higher interest rates are affecting the credit quality and refinancing ability of office and other types of CRE loans. As a result, the noncurrent rate for non-owner occupied CRE loans is now at its highest level since fourth quarter 2013.&nbsp;
Driven by write-downs on credit cards, the industry's quarterly net charge-off rate remained at 0.65 percent for the second straight quarter, 24 basis points higher than the prior year's rate. The current net charge-off rate is 17 basis points higher than the pre-pandemic average. The credit card net charge-off rate was the highest rate since third quarter 2011.&nbsp;
Domestic deposits increased for a second consecutive quarter, this quarter by $191 billion, driven by growth in transaction accounts. The shift away from noninterest-bearing deposits toward interest-bearing deposits continued, as interest-bearing deposits increased 1.7 percent quarter over quarter and noninterest-bearing deposits declined for the eighth consecutive quarter. Estimated uninsured deposits increased $63 billion in the quarter, representing the first reported increase since fourth quarter 2021.
The number of banks on the Problem Bank List, those with a CAMELS composite rating of "4" or "5," increased from 52 in fourth quarter 2023 to 63 in first quarter 2024. The number of problem banks represented 1.4 percent of total banks, which was within the normal range for non-crisis periods of one to two percent of all banks.&nbsp; Total assets held by problem banks increased $15.8 billion to $82.1 billion during the quarter.&nbsp;
The Deposit Insurance Fund (DIF) balance was $125.3 billion on March 31, up $3.5 billion from the end of the fourth quarter. Insured deposits increased by 1.1 percent, about half of typical growth in the first quarter. The reserve ratio, or the fund balance relative to insured deposits, increased by two basis points to 1.17 percent. The reserve ratio currently remains on track to reach the 1.35 percent minimum reserve ratio by the statutory deadline of September 30, 2028.
In conclusion, the banking industry&nbsp;continued to show resilience in the first quarter. However, the banking industry still faces significant downside risks from the continued effects of inflation, volatility in market interest rates, and geopolitical uncertainty. These issues could cause credit quality, earnings, and liquidity challenges for the industry. In addition, deterioration in certain loan portfolios, particularly office properties and credit card loans, continues to warrant monitoring. These issues, together with funding and margin pressures,&nbsp;will remain matters of ongoing supervisory attention by the FDIC.&nbsp;
Thank you.

FDIC Quarterly Banking Profile First Quarter 2024; Banking Industry's Net Income Of $64.2B In Q1, An Increase Of 79.5% From The Prior Quarter

Fed Releases Discount Rate Meeting Minutes for April 8-May 1; All Reserve Banks Voted to Hold Discount Rate in April

'FDIC Chair Gruenberg Tells Staff He Plans To Resign Once Successor Confirmed, Announcement Comes After Senate Banking Committee Chairman Called For New Leadership' - WSJ

JP Morgan CEO Dimon Says Banks Should Be Allowed To Merge

Senate Banking Committee Chairman Sherrod Brown Calls For New Leadership At Federal Deposit Insurance Corporation; Brown Calls On President Biden To Immediately Nominate New Chair To FDIC

Federal Reserve Says It Denies Bank Industry Trade Group Request To Revise Its Confidential Bank Rating System

<a href="https://www.youtube.com/watch?v=Cn_EBz1ENpk">https://www.youtube.com/watch?v=Cn_EBz1ENpk</a>
&nbsp;

Fed Chair Powell Says Credit Has Been Tight For Some Time; Credit Growth Has Been Modest; Our Large Banks Are Strong, Well Capitalized; U.S. Banking System Overall Is In Good Shape; Lending Activities By Nonbanks Are Growing Very, Very Fast; We Need To Monitor That Very Carefully, We Worry About That Fast Growth

Durbin Writes Fed's Powell On Card Network Interchange Fees

Bank stocks: how the biggest lenders are performing as Jamie Dimon suggests JPM is pricey

These banks are among those most and least exposed to CRE stress - Wedbush

KBE: Regional Banks At Risk For Continued Underperformance

Pete Najarian On AI, Financials And Staying Disciplined

Status Of Banks' Unrealized Losses In Q1 Worsened After Brief Rate Cut Mania Relief

<a href="https://investorplace.com">InvestorPlace - Stock Market News, Stock Advice &amp; Trading Tips</a>
This year has been tough on regional <a href="https://investorplace.com/industries/financial/bank/">bank stocks</a>, with borrowing costs soaring and cutting into net interest income. Additionally, higher yields diminished older bonds&rsquo; value and heightened internal credit risks &mdash; just ask the (now defunct) Silicon Valley Bank. These factors and others contribute to a string of poor regional bank performance indicators that, practically speaking, trickle upward across the entire banking and financial sector. The SPDR S&amp;P Bank ETF (NYSEARCA:<a href="https://investorplace.com/stock-quotes/kbe-stock-quote/">KBE</a>) is down 3% this year, with few signs of recovery moving forward.



Though the broader market shows signs of recovery, bank stocks will likely take longer to adjust. This delay presents a significant opportunity for investors. Smaller and regional banks, often seen as high-yield opportunities, are typically hit hardest by bearish sentiment and tend to sell off more quickly, also taking longer to recover.



All bad news, right? Not so fast. For many of these high-quality regional bank stocks, the bottom is in. Priced well below book value in all cases, these undervalued and cheap regional bank stocks offer upside potential as market forces stabilize, even if slowly, but the kicker is their dividend yield. With low pricing and high yield, you can dollar-cost average into your regional bank stocks on autopilot, and reap rewards when the sector starts recovering.



<h2>Citizens Financial Group (CFG)</h2>



<div><img width="300" height="165" src="https://investorplace.com/wp-content/uploads/2019/03/cfgmsn-300x165.jpg" alt="A magnifying glass zooms in on the website for Citizens Bank (CFG)."><div>Source: Shutterstock</div></div>Citizens Financial Group (NYSE:<a href="https://investorplace.com/stock-quotes/cfg-stock-quote/">CFG</a>) is one of the largest regional banks and arguably the best-value bank stock available today. Based in Rhode Island, <a href="https://www.morningstar.com/stocks/xnys/cfg/quote">Citizens Financial offers</a> a price-to-book ratio of just 0.72 alongside a forward dividend yield just shy of 5%. When including buybacks, its total yield escalates to over 10%.



<a href="https://investor.citizensbank.com/about-us/newsroom/latest-news/2015/2015-11-03-190856894.aspx">Separated from</a> the Royal Bank of Scotland (NYSE:<a href="https://investorplace.com/stock-quotes/rbs-stock-quote/">RBS</a>) in 2015, CFG has successfully navigated away from the financial challenges that followed the 2008 crisis. The bank&rsquo;s strategic realignment has since positioned it on a path of success, with its management drawing on past experiences to navigate current economic challenges effectively.



Additionally, Citizens Financial benefits from a robust economic recovery in its primary market. Rhode Island&rsquo;s 2023 labor market was one of the strongest in the nation, breaking <a href="https://commerceri.com/wp-content/uploads/2023/04/2023-Annual-Overview-of-the-Economy.pdf">below 3% for the first time</a> since 1988. Given its focus on mid-market lending, this economic vitality is particularly advantageous for Citizens Financial. The positive business climate in Rhode Island promises strong support for CFG&rsquo;s operational outlook, making it an top option for investors looking for regional bank stocks.



<h2>KeyCorp (KEY)</h2>



<div><img width="300" height="169" src="https://investorplace.com/wp-content/uploads/2019/09/key-stock-1-300x169.jpg" alt="a Keybank building"><div>Source: Tada Images / Shutterstock.com</div></div>KeyCorp (NYSE:<a href="https://investorplace.com/stock-quotes/key-stock-quote/">KEY</a>) specializes in middle-market commercial banking across Ohio and New York, positioning it as an ideal inexpensive bank stock to leverage a <a href="https://www.middlemarketcenter.org/performance-data-on-the-middle-market">rapidly expanding</a> economic segment. Thanks to the interest income generated from these commercial loans, KeyCorp boasts an impressive <a href="https://www.morningstar.com/stocks/xnys/key/dividends">5.9% dividend yield</a>. Furthermore, after enduring a challenging period earlier in the year, Morningstar currently estimates KeyCorp&rsquo;s fair per-share value to be nearly 40% higher than its present trading price, underscoring its strength among undervalued bank stocks.



Asset management firm Diamond Hill Capital Management recently summarized their bull case on KeyCorp moving forward, <a href="https://imonkey-files.s3-us-west-1.amazonaws.com/Commentary-Large-Cap-Composite-2024-03-31.pdf">saying that</a> the stock will likely &ldquo;generate improved returns and tangible book value growth as net interest margins expand and Treasurys on its balance sheet mature [alongside] positive loan growth following a period of balance sheet optimization.&rdquo; That&rsquo;s a fairly ringing endorsement, considering Diamond Hill identified just two new investment opportunities among large-cap stocks in 2024&rsquo;s first quarter: Sysco Corporation (NYSE:<a href="https://investorplace.com/stock-quotes/syy-stock-quote/">SYY</a>) and KeyCorp.



<h2>Valley National Bancorp (VLY)</h2>



<div><img width="300" height="169" src="https://investorplace.com/wp-content/uploads/2024/04/cannabis-stocks1600-2-300x169.png" alt="Business marijuana leaves cannabis stocks success market price green arrow up profit growth charts graph money display screen up industry trend grow higher quickly / Commercial cannabis medicine money"><div>Source: Bigc Studio / Shutterstock.com</div></div>If you&rsquo;re searching for regional bank stocks with unique growth potential, this bank offers a compelling <a href="https://www.morningstar.com/stocks/xnas/vly/quote">6.7% dividend yield</a> and unique access to the <a href="https://www.retailbrew.com/series/spliff-and-mortar/stories/2023/03/30/dank-of-america-why-getting-dropped-by-a-bank-is-seen-as-a-rite-of-passage-for-cannabis-retailers">burgeoning cannabis market</a>. Better yet, Valley National Bancorp (NYSE:<a href="https://investorplace.com/stock-quotes/vly-stock-quote/">VLY</a>) stands out as one of the most affordable regional bank stocks, <a href="https://www.morningstar.com/stocks/xnas/vly/quote">trading at just</a> 0.57 times book value and 7.75 times earnings, making it both undervalued and frequently overlooked. The bank boasts a robust balance sheet with a low debt-to-equity ratio of 0.56, well below the industry average of 1.2, underscoring its minimal leverage compared to its peers. Its recent stock <a href="https://finance.yahoo.com/news/valley-national-vly-announces-share-161100413.html">buyback program</a> and a dividend yield that surpasses Treasury Bills further underscore its financial stability.



Analysts <a href="https://equityset.com/stocks/nasdaq-vly">largely view</a> Valley National as undervalued, setting an average price target of $9.44&mdash;approximately 31% above its current share price. Additionally, the sentiment around the bank&rsquo;s stock is improving significantly, with 44% of analysts now recommending a &ldquo;hold,&rdquo; reflecting a 300% positive shift in sentiment from the previous evaluation period. This makes Valley National a promising candidate for those seeking stable retirement investments.



On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the <a href="http://InvestorPlace.com">InvestorPlace.com</a> <a href="https://investorplace.com/corporate/investorplace-publishing-guidelines/">Publishing Guidelines</a>.
<div>Jeremy Flint, an MBA graduate and skilled finance writer, excels in content strategy for wealth managers and investment funds. Passionate about simplifying complex market concepts, he focuses on fixed-income investing, alternative investments, economic analysis, and the oil, gas, and utilities sectors. Jeremy&rsquo;s work can also be found at <a href="https://jeremyflint.work/">www.jeremyflint.work</a>.</div><h3>More From InvestorPlace</h3>
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The post <a href="https://investorplace.com/2024/06/hometown-heroes-3-regional-banks-offering-outsized-potential/">Hometown Heroes: 3 Regional Banks Offering Outsized Potential</a> appeared first on <a href="https://investorplace.com">InvestorPlace</a>.

Hometown Heroes: 3 Regional Banks Offering Outsized Potential

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