J.P. Morgan cautious on US regional banks despite solid Q2 outlook

Banc of California

01/07/2025 14:26

** J.P. Morgan expects U.S. regional banks to report solid loan and deposit growth in Q2, but remains cautious on the sector amid ongoing uncertainty over tariffs

** Brokerage raises price targets across banks and says the global economy appears to have avoided the worst-case scenario from Middle East tensions and notes progress in trade discussions

** But cautions: "we do not view the recent absolute level of performance in regional banks as sustainable, particularly with there not yet being a full resolution around tariffs"

** Analysts have said tariff uncertainty could weigh on regional banks by dampening business sentiment, slowing loan demand and increasing credit risk for trade-exposed clients

** J.P. Morgan says it has most confidence in Banc of California BANC.N, Webster Financial WBS.N and Pinnacle Financial Partners PNFP.O being able to maintain their FY25 outlooks

** BANC down ~9% YTD, while WBS and PNFP have lost ~1% and ~3.5% respectively

** Brokerage flags risks for Comerica CMA.N due to soft loan growth trends, and for Flagstar FLG.N citing credit quality concerns, in its rent-regulated loan book

** Also sees Texas Capital Bancshares TCBI.O being potentially hit in Q2 from limited mortgage finance loan activity

** CMA down ~3.6% YTD, FLG has gained ~13.6% and TCBI has added 1.5%

 (Reporting by Manya Saini in Bengaluru)

 ((Manya.Saini@thomsonreuters.com))