The outlook for U.S. regional bank stocks took a dismal turn this week when the share price of First Republic Bank plummeted and dragged down other small lenders, suggesting the crisis that has ensnared the sector over the past month may not be over.Rebounds are certainly possible. But smaller lenders are facing tougher regulatory scrutiny that will likely weigh on the sector, offering a reason to look beyond the allure of low valuations and perhaps focus on the risks.
At the same time, the fund’s price-to-book ratio has fallen to just one, compared with a loftier ratio of 3.8 for the S&P 500, suggesting bank stocks are trading at beaten-up valuations.
Over the second half of the month, though, average daily trading volumes spiked to more than 1.8 million – 18 times the previous level of trading – and remained elevated in April.