3 Major Regional Banks to Watch as Industry Prospects Remain Robust

Industry Overview - The Zacks Major Regional Banks industry includes the largest banks in the U.S. by assets, operating globally and heavily influenced by the nation's economic health [3] - The industry is subject to stringent regulations and provides a wide array of financial services, generating revenue from net interest income (NII) and fees from various services [3] Economic Environment - The Federal Reserve is expected to lower interest rates due to a weakening labor market and rising inflation from tariffs, which will benefit major regional banks by stabilizing deposit costs and improving lending scenarios [4] - Modest loan demand is anticipated as the Fed's aggressive monetary policy has previously hurt demand, but lower interest rates may lead to a slight increase in NII and net interest margins [5] Asset Quality Concerns - Weak asset quality is a concern as economic health and trade policies impact borrowers' repayment abilities, prompting banks to build additional reserves for potential defaults [7] - Several metrics indicating asset quality have crossed pre-pandemic levels, signaling gradual deterioration [7] Growth Initiatives - Major regional banks are focusing on business restructuring and digitization to expand and reduce reliance on spread income, investing in technology and partnerships [6] - Specific banks like BNY Mellon, Truist Financial, and Northern Trust are undertaking various growth initiatives, including acquisitions and expansion into new markets [19][25][32] Performance Metrics - The Zacks Major Regional Banks industry has a Zacks Industry Rank of 48, placing it in the top 20% of over 250 Zacks industries, indicating a positive outlook [8] - The industry has outperformed the S&P 500 and the broader finance sector, with a collective stock increase of 18.8% over the past year [12] Valuation Insights - The industry has a trailing 12-month price-to-tangible book ratio (P/TBV) of 2.46X, significantly lower than the S&P 500's 13.28X, indicating a discount compared to the broader market [15][17] Company Highlights - BNY Mellon: With a market cap of $73.3 billion, it has seen a stock increase of 30.8% in the past six months, with earnings growth estimates of 18.4% for 2025 [23] - Truist Financial: This company has a market cap of $58.2 billion and has risen 13.7% in the past six months, with earnings growth estimates of 4.3% for 2025 [30] - Northern Trust: With a market cap of $24.3 billion, it has experienced a stock increase of 31.8% in the past six months, with earnings growth estimates of 10.9% for 2025 [36]