Regional Banks Take a Beating With Investors Expecting More Pain
Regional Banks Take a Beating With Investors Expecting More Pain
(Bloomberg) -- Investors are staying bearish on U.S. regional bank stocks, predicting the worst is yet to come.
The KBW Regional Banking Index slid 5.5% Wednesday to its lowest level since early April, bringing it to a 44% drop for the year. It is trading near the biggest discount to the broader market since at least 2005.
Often seen as barometers for the health of economies they serve, banks have been warning of unprecedented hardship from the pandemic-induced slowdown. Low rates have crimped revenues just as they’ve had to set aside massive amounts for loan losses.
Appaloosa Management LP’s David Tepper added to the chorus of cautious voices on Wednesday, telling CNBC that banks are “tough” investments. Earlier this week, Odeon Capital’s Dick Bove said he’s holding off on bank stocks because the economy needs “some time to repair.”
The impact on regional lenders is already showing up. The 49 lenders in the KBW Regional Banking Index posted a collective $2.19 billion loss in the first three months of 2020, after generating at least $3.6 billion of profit in every quarter of 2019.
Regional banks are poised for a long-awaited wave of consolidation if winners and losers emerge from this crisis as they did in the last. PNC Financial Services Group Inc., one of the largest regional lenders, is among firms readying itself in case that happens. The Pittsburgh-based bank announced Monday that it is cashing out roughly $14 billion in BlackRock Inc. shares to prepare for any such opportunities.
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