UBS’ Erika Najarian on her expectations for regionals in 2026

Regional Banks Outlook - Regional banks have suffered from market share loss and direct lending to non-banks [2] - Federal agencies pulled back the leverage limit standard, which is expected to be good news for loan growth for regional banks [2][3] - A steepening yield curve could further benefit regional banks [3][11] - Expectation that regional banks may start to join money center banks in terms of rally in 2026 [4] - The removal of leverage lending limits could be a factor for regional banks' direct lending to catch up next year [10] Money Center Banks Performance - Capital markets are expected to impress even more in 2026, with some gains already priced into the stocks [5] - Continued deregulation is anticipated for money center banks [6] - Money center banks have seen outperformance in loan growth due to indirect lending or non-depository financial institution lending [9] - Consumer strength has translated into credit card growth, benefiting money center banks [9][10] Bank of America Recommendation - Bank of America is favored, as it has underperformed other money center banks by 250 basis points since its investor day [7] - Bank of America offers capital markets activity, margin expansion, and buybacks at a cheaper valuation [7][8]