Challenges and Opportunities for Regional Banks in the US

Several regional banks, including Zions, Discover Financial, and Truist, reported significant drops in profit during the third quarter due to higher deposit costs and rising loan losses. While regional banks have stabilized since the spring, profitability remains a challenge as high interest rates increase deposit expenses and make it harder for borrowers to repay loans. New capital requirements proposed by US regulators also threaten future profits. Regional bank stocks have underperformed the S&P 500 this year. Net interest income, a key measure of profitability, is being squeezed by higher interest on deposits.