Regional Bank Roundup: Industry Near All-Time Highs as Earnings Unfold

Regional banks often take a back seat to their bigger counterparts when earnings season kicks off.

While behemoths JPMorgan Chase (JPM), Bank of America (BAC), Citigroup (C), and Goldman Sachs (GS) dominate earnings headlines this week, at least 448 financial sector companies report earnings in July and more than half (252 companies) fall within the Regional Banks subindustry. The State Street S&P Regional Banking ETF (KRE) is only about 3.8% below its all-time high of $78.81 reached in January 2022 and some of the biggest regional institutions are still due to report earnings this week.

The Global Industry Classification Standard (GICS) defines the Regional Bank subindustry as companies that cater to a specific domestic or geographic locale, and provide localized consumer, retail, and banking services. The Federal Reserve specifies that a Regional Bank is a financial institution with total consolidated assets between $10 billion and $100 billion, which puts them between local community banks and larger entities that typically operate on a national or global scale.

Here are three things to consider about Regional Banks during earnings season.

• Notable Names on the Horizon: The biggest Regional Banking stocks in terms of market cap with earnings this week include U.S. Bancorp (USB), Citizens Financial Group (CFG), Commerce Bancshares (CBSH), and F.N.B. (FNB) reporting Thursday; and Truist Financial (TFC), Fifth Third Bancorp (FITB), and Regions Financial in Friday's premarket. Many other regional bank names report earnings later this month include Huntington Bancshares (HBAN), Prosperity Bancshares (EWBC), Wintrust Financial (WTFC), Zions Bancorporation (ZION), and Synchrony Financial (SYF).
• Outlook: Generally speaking, banks are benefitting from relatively high interest rates as of late, which affects net interest margin (NIM). This refers to the difference between what a bank generates on its various interest-earning assets like loans and what it pays out in terms of its interest liabilities such as client deposits. This is particularly important for regional banks, which typically lack large trading or investment operations, so this is one of the best gauges of how a regional bank is performing. As such, the major question mark for this industry is if inflation causes the Federal Reserve to hike interest rates, which initially raises NIM as assets reprice faster than deposits but eventually increases credit risk on loans.
• Broad Technical Overview: The State Street regional bank ETF is only about -1.4% below its 52-week high of $76.84, which puts it within striking distance of the aforementioned all-time high of $78.81. Price has been moving upward in a channel-type shape since hitting lows in early June, with notable supportive horizontal levels near $73 based on recent relative lows and $70.50, which represents old highs from late May and subsequent lows from mid-June. Price this week touched its 5-day Exponential Moving Average several times, which closed at $75.20 yesterday, and bounced off the monthly 21-day EMA on July 8 before rebounding. The 21-EMA now comes in near $74 and represents another potentially supportive area.

Economic Calendar, Thursday, July 16

• 08:30 AM: Retail Sales
• 08:30 AM: Jobless Claims
• 08:30 AM: Philadelphia Fed Manufacturing Index
• 08:30 AM: New York Fed Services Activity Index
• 10:00 AM: Business Inventories
• 10:00 AM: NAHB Housing Market Index

Earnings Calendar, Thursday, July 16

• Premarket: Taiwan Semiconductor (TSM), UnitedHealth Group (UNH), GE Aerospace (GE), Abbott Laboratories (ABT), Prologis (PLD), U.S. Bancorp (USB)
• Postmarket: Netflix (NFLX), Alcoa (AA)

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