JPMorgan sees bank headwinds turning to tailwinds with rate cut

JPMorgan analyst Steven Alexopoulos says the 50 basis point rate cut by the Federal Reserve “represents a key turning point for the regional bank sector.” With the first Federal Reserve cut now in the rear-view mirror and many more on the way, bank headwinds such as surging deposit costs and anemic industry loan growth “are now poised to change direction and ultimately turn into tailwinds,” the analyst tells investors in a research note. The firm says that in addition with short-term rates falling, the yield curve has also de-inverted, which represents a path towards improved net interest margin and earnings while singalong a “widening runway for a soft landing.” In terms of the specific names JPMorgan finds attractive at current levels, it points to its top picks among larger regional banks including First Citizens (FCNCA), Huntington Bancshares (HBAN) and M&T Bank (M&T), mid-sized banks including Western Alliance (WAL), Pinnacle Financial (PNFP), Cullen/Frost (CFR), Webster Financial (WBS) and Synovus (SNV), and small cap banks including Live Oak Bancshares (LOB), MVB Financial (MVBF), Metropolitan Bank (MCB) and Amalgamated Financial (AMAL).