Core Viewpoint - The Zacks Major Regional Banks industry is expected to face weak asset quality due to higher inflation from tariffs, but will benefit from lower interest rates, improving net interest income (NII) and margins, and modest economic growth, which should lift loan demand [1][4][5]. Industry Overview - The Zacks Major Regional Banks industry consists of the largest banks in the U.S. by assets, operating globally and heavily influenced by the nation's economic health. These banks provide a wide range of financial services, including traditional banking, credit and debit cards, mortgage banking, wealth management, and investment banking, generating significant revenue from fees and commissions [3]. Key Trends - **Lower Interest Rates**: The Federal Reserve has begun cutting interest rates, which is expected to stabilize and eventually lower deposit costs, benefiting major regional banks despite initial lower NII and margins [4]. - **Modest Rise in Loan Demand**: As borrowing costs decline, loan demand is anticipated to improve, with NII and net interest margins expected to rise slightly [5]. - **Restructuring Initiatives**: Major regional banks are restructuring to reduce dependence on spread income, investing in technology and expanding both domestically and internationally to enhance profitability [6]. Asset Quality Concerns - Economic health concerns and trade policies have raised prices, impacting borrowers' repayment abilities. Banks are building reserves to mitigate potential defaults, although conservative lending strategies have helped maintain manageable asset quality [7]. Industry Ranking and Performance - The Zacks Major Regional Banks industry ranks 52, placing it in the top 22% of over 250 Zacks industries, indicating improving prospects and an encouraging earnings outlook [8][10]. - The industry has underperformed the S&P 500, gaining 9.6% over the past year compared to the S&P 500's 14.6% increase [11]. Valuation Metrics - The industry has a trailing 12-month price-to-tangible book ratio (P/TBV) of 2.50X, significantly lower than the S&P 500's 12.87X, indicating an attractive valuation compared to the broader market [14][16]. Company Highlights - **BNY Mellon**: Operates in 35 countries, focusing on various financial services. The company has a market cap of $79.8 billion, with a projected earnings growth of 22.1% for 2025. It has been expanding its digital capabilities and launching new services, including a Stablecoin reserves fund [18][22]. - **U.S. Bancorp**: Headquartered in Minneapolis, it has a market cap of $79.5 billion and is expected to see earnings growth of 14.1% for 2025. The company has been expanding through acquisitions and partnerships, enhancing its fee-based businesses and maintaining a strong capital distribution strategy [24][28].

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] - These banks provide a wide array of financial services, including traditional banking, credit and debit cards, mortgage banking, wealth management, and investment banking, generating revenue from fees and commissions [3] Current Challenges - Weak asset quality is anticipated due to higher inflation from tariffs and modest economic expansion, leading to a marginal rise in loan demand [1][7] - Concerns over economic health and policy impacts are causing banks to build additional reserves to counter potential defaults and payment delays [7] Future Outlook - Once tariff-related uncertainties are resolved, net interest income (NII) and margins are expected to improve, benefiting the industry [1][4] - The Federal Reserve's cautious stance on interest rates may lead to lower deposit costs and a gradual improvement in lending scenarios [4] Growth Initiatives - Major banks are focusing on business restructuring and digitization to enhance profitability and reduce dependence on spread income [2][6] - Investments in artificial intelligence and partnerships with tech providers are part of the strategy to expand operations domestically and globally [6] Performance Metrics - The Zacks Major Regional Banks industry currently holds a Zacks Industry Rank of 98, placing it in the top 40% of over 250 Zacks industries, indicating an optimistic outlook [8][10] - The industry has outperformed the S&P 500, with a collective stock increase of 17.4% over the past year compared to the S&P 500's 9.1% [12] Valuation Insights - The industry has a trailing 12-month price-to-tangible book ratio (P/TBV) of 2.18X, significantly lower than the S&P 500's 12.74X, indicating a discount compared to the broader market [15][17] Key Players - **U.S. Bancorp (USB)**: Market cap of $67 billion, with an expected earnings growth of 8.3% for 2025 and 8.8% for 2026, driven by solid loan and deposit growth [23][20] - **BNY Mellon (BK)**: Market cap of $63.4 billion, with anticipated earnings growth of 12.8% for 2025 and 13.1% for 2026, supported by strategic acquisitions and digitization efforts [29][26] - **Truist Financial (TFC)**: Market cap of $51 billion, with expected earnings growth of 5.7% and 12.9% for 2025 and 2026, respectively, aided by loan growth and strategic restructuring [35][32] - **Northern Trust (NTRS)**: Market cap of $21 billion, with projected earnings growth of 5.2% and 8.3% for 2025 and 2026, focusing on organic growth and expense management [41][38]