KRE - IAT: Caution Still Warranted On Regional Banks
2024-04-08 03:37:47 ET
Summary
- Regional banks have seen a strong relief rally in recent months.
- At current levels, valuations are higher, and future earnings expectations are more optimistic.
- With more potential headwinds than tailwinds ahead, I would exercise caution on low-cost regional ETFs.
I've been very cautious about banks as a whole (the exception being Citigroup ( C )), which trades at a much steeper discount than its peers) and, in particular, the regional banks for a while now. Though the group has rallied alongside the rest of the market following the Fed's Q4 pivot , it's worth noting that regional bank ETFs like iShares U.S. Regional Banks ETF ( IAT ) haven't quite clawed back pre-Silicon Valley Bank (SVB) levels. Ongoing troubles at New York Community ( NYCB ), this time due to commercial real estate ('CRE'), a very real risk for most other regionals as well, aren't helping either. Given we're also still in the initial stages of a CRE cycle (and already seeing delinquency rates ticking up), there's a high likelihood we see more downside surprises on the horizon for the group....
IAT: Caution Still Warranted On Regional Banks