As regional bank stock rally regains steam, investors should watch out for these spoilers

by | Jun 13, 2023 | Financial

With the Federal Reserve expected to pause its rate-hiking campaign at this week’s meeting, regional banks stocks have made a comeback, but that doesn’t mean all the trouble is in the rearview mirror. “This banking situation was certainly, in large part, caused by the Fed and their aggressive rate-hiking policy,” said Jack Ablin, chief investment officer at Cresset Capital. With a likely pause ahead, it “takes one of those big challenges off the table.” Ablin said he expects the central bank to keep rates high for the moment, which means there will still be “a fair amount” of rate pressure on banks trying to keep deposits. Heading into this week, bank shares had logged a four-week-long advance. But the stocks swooned on Monday after several banks warned that net interest income would come in lower than expected. Still, the upward march resumed on Tuesday, begging the question of what’s ahead for bank stocks. The group is still far below from where it traded in March, when a banking crisis was set off by the collapse of Silvergate Capital, Silicon Valley Bank and Signature Bank in quick succession. The KBW Regional Banking Index has gained about 20% over the past month, but it remains down more than 18% since the year began. Over the past month, PacWest Bancorp , the gauge’s worst performer, has gained 88%. But its …

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