US regional banks are still under pressure. That’s likely to continue

Despite overcoming a crisis in 2023, the pain isn’t over for regional banks. Higher-for-longer interest rates are hurting.

A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link. Despite overcoming a crisis in 2023, the pain isn’t over for America’s regional banks. The SPDR S&P Regional Banking exchange-traded fund has fallen roughly 13% this year. Shares of New York Community Bank have tumbled 71%, Bank OZK shares have slid 16% and Webster Financial shares have lost 11%. Regional banks reported wide losses on their profits during the first quarter. Net income fell about 22% at PNC Financial from the prior year, 25% at M&T Bank and 24% at US Bancorp. Citizens Financial saw a 38% drop. They also saw declines in their net interest income, an important profitability measure for financial institutions. PNC projects that its net interest income will fall between 4% to 5% in 2024 from last year. US Bancorp lowered its guidance and Citizens Financial “broadly reaffirmed” its expectations for net interest income to decline between 6% to 9%. Elevated interest rates have been a drag on regional lenders, since they mean banks have to pay more interest on deposits. While that’s also been a pressure on big banks, their larger size has allowed them to weather the storm better. After the collapses of Silicon Valley Bank, Signature Bank and First Republic Bank last year, big banks also reaped benefits as customers yanked cash out of small lenders in favor of larger institutions.