The turbulence affecting regional banks like New York Community Bancorp isn’t negatively impacting the nation’s largest financial institutions, quite the opposite.
Major banks like JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo are thriving, with shares trading near record highs or hitting 52-week highs. The Financial Select Sector SPDR ETF, which includes these mega banks along with other financial giants like Berkshire Hathaway and credit card companies, is up 8% this year. In contrast, the SPDR S&P Regional Banking ETF is down over 5% in 2024.
Experts believe this trend will continue, noting that the issues faced by regional banks are not indicative of systemic problems across the banking sector. With big banks better capitalized than before the 2008 financial crisis, they should be able to weather any financial stress that arises.
Additionally, the likelihood of a Federal Reserve interest rate cut has diminished, which could maintain high net interest margins on bank loans. Favorable stock market conditions may lead to increased mergers and IPOs, boosting fee income for Wall Street giants and lifting asset management revenue.
To capitalize on this trend, investors may consider owning shares of major banks like JPMorgan, Bank of America, Wells Fargo, and Morgan Stanley. Larger regional banks may also benefit, potentially acquiring smaller underperforming banks at attractive valuations. Bank stocks, in general, appear attractive compared to the broader market, with reasonable valuations and healthy dividends making them compelling buys.