Zacks Industry Outlook U.S. Bancorp, The Bank of New York Mellon, Truist Financial and Northern Trust

Core Viewpoint - The Zacks Major Regional Banks industry is currently facing challenges related to poor asset quality and modest economic expansion, but potential improvements in net interest income (NII) and margins are anticipated once tariff uncertainties are resolved [1][5][7]. Industry Overview - The Zacks Major Regional Banks industry includes the largest banks in the U.S. by assets, with operations primarily on a global scale. Their financial performance is closely tied to the overall economic health of the nation [3]. - These banks offer a wide range of financial services beyond traditional banking, including credit and debit cards, mortgage banking, wealth management, and investment banking, which contribute significantly to their revenue through fees and commissions [4]. Key Themes Influencing the Industry - Modest Rise in Loan Demand: Economic concerns and the Federal Reserve's monetary policy have led to a modest rise in loan demand, with expectations for a slight increase in NII and net interest margin (NIM) [5][6]. - Impact of Tariffs on Interest Rates: The Fed's interest rate cuts and the anticipated rise in inflation to 2.8% for 2025 are expected to affect NII, but banks may benefit from lower deposit costs and improved lending conditions once tariff issues are resolved [6][7]. - Restructuring Initiatives: Major regional banks are focusing on business restructuring and digitization to enhance profitability and reduce reliance on spread income, with investments in technology and expansion into new markets [8][9]. Asset Quality Concerns - The industry is experiencing weak asset quality due to economic uncertainties and rising prices affecting clients' repayment abilities. Banks are building reserves to mitigate potential defaults [10][11]. Industry Performance and Valuation - The Zacks Major Regional Banks industry has outperformed the S&P 500, with a collective stock increase of 14.1% over the past year, compared to 9.1% for the S&P 500 [16]. - The industry currently has a trailing 12-month price-to-tangible book ratio (P/TBV) of 2.24X, significantly lower than the S&P 500's 12.95X, indicating a discount relative to the broader market [18][19]. Notable Companies in the Industry - U.S. Bancorp: With a market cap of $66.7 billion, it has shown solid growth in loans and deposits, with a Zacks Consensus Estimate indicating earnings growth of 9.1$60 billion and is expected to see earnings growth of 15.4% for 2025, driven by new service launches and strategic acquisitions [25][28]. - Truist Financial: With a market cap of $54.1 billion, it is focusing on improving fee income and has a Zacks Consensus Estimate for earnings growth of 8.4$19.3 billion and is expected to see earnings growth of 7.1% for 2025, supported by organic growth and effective expense management [35][38].