Regional banks in the S&P 500 have surged 11 per cent since the beginning of the year, beating out the gains in larger, more diversified banks by about a percentage point over the same period. — AFP pic
Both regional and diversified banks are running well ahead of the benchmark S&P 500, buoyed by a rise in Treasury yields to their highest levels since the pandemic began on expectations that additional fiscal stimulus will spur economic growth. “The large banks with the large customers are in better shape across the board” because of their greater access to credit markets and investment banking income, he said. This year “is going to be a challenging year for regional banks. Interest rates have moved up but they’re still very low and unemployment is still high and won’t recover quickly even with the vaccine.”
Overall, larger banks will grow earnings by an average of 112 per cent in the coming year while regional banks will grow their earnings by an average of 33 per cent, said Dick Manuel, an equity research analyst at Columbia Threadneedle Investments. David Ellison, a portfolio manager who runs two financial funds at Hennessy Funds, sees little value in regional banks at a time when online lenders such as SoFi, PayPal and Square are poised to eat into their customer base for personal and small business loans.