U.S. regional banks are experiencing sessions of significant gains, as growing expectations for interest rate cuts fueled an investor rotation from large-cap to small-cap stocks.

The SPDR S&P Regional Banking ETF KRE — a widely followed gauge for the industry — rallied as much as 4.5% on Tuesday, marking the strongest session since December 2023.

Notably, the recent five-day rally of nearly 15% was the strongest for regional banks since November 2020.

With Tuesday’s move, regional banks have effectively recouped all losses suffered after March 9, 2023, characterized by the failure of Silicon Valley Bank and Signature Bank.

“Lending conditions for commercial and industrial loans have eased substantially since last year's regional bank crisis. The net percentage of lenders reporting tightening lending standards has declined from the peak of 50% at the end of 2023 to 20% today for both small and large firms,” Goldman Sachs wrote in a recent note on regional banks.

Chart: Regional Banks Rebound To Pre-Silicon Valley Bank Collapse Levels

Image: Benzinga pro

Tuesday’s Top Performers Within Regional Banks

Name	1-Day %
ServisFirst Bancshares, Inc. SFBS	12.53%
Mercantile Bank Corporation MBWM	12.06%
First Foundation Inc. FFWM	10.35%
Metropolitan Bank Holding Corp. MCB	10.00%
CrossFirst Bankshares, Inc. CFB	9.66%
FB Financial Corporation FBK	8.04%
Peapack-Gladstone Financial Corp. PGC	7.88%

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