jpmorgan's regional bank picks surge after solid q3 earnings
- Several U.S. regional banks posted stronger-than-expected earnings results in Q3 2024.
- Key performance metrics showed positive trends, including increases in deposits and loans, alongside robust net interest income.
- The outlook for regional banks remains bullish as they are still trading below historical valuations, indicating significant potential for future growth.
In the United States, regional banks have demonstrated resilience in the third quarter of 2024, with numerous mid- and small-cap institutions surpassing earnings expectations. Analyst Anthony Elian from JPMorgan reported on the sector's earnings season, noting that five of the seven regional banks under his coverage achieved earnings-per-share (EPS) beats, primarily driven by higher net interest margins (NIM) and net interest income (NII). As a result, regional bank stocks have outperformed the broader market to date in October. Several positive trends emerged during the quarter, including a 7% annualized increase in average deposits and a 2% annual growth in loans. By period-end, deposits grew at an even higher rate of 11%, signaling a solid financial performance. Despite expected near-term challenges, most banks express optimism regarding NII projections as the Federal Reserve plans to implement further interest rate reductions. Looking forward, regional banks are positioning themselves for modest growth in key metrics such as loan volume and fee income. This outlook is supported by controlled expense growth and an anticipated rebound in commercial loan demand, suggesting a positive trajectory through 2025. The current valuation of regional banks remains below historical averages, which experts assert indicates significant potential for upward re-rating. Investors are expected to begin recognizing the improved financial health and earnings prospects of regional banks, leading to increased interest in these stocks in the coming months.