Industry Voice: What Does the Stress in Regional Banking Mean for US Smaller Companies?

For smaller company investors, the stress in the US banking sector is acutely relevant given that regional banks represent a key component of the investment universe.

clock • 3 min read
Industry Voice: What Does the Stress in Regional Banking Mean for US Smaller Companies?

Key points

  • The impact of recent failures in the U.S. banking sector, and the rapid withdrawal of deposits across some regional U.S. banks, has been profound.
  • For smaller company investors, the stress in the U.S. banking sector is acutely relevant given that regional banks represent a key component of the investment universe.
  • While the recent crisis has been destabilizing, at this stage, few regional banks appear to be exposed to similarly severe liquidity and/or concentration risk.

The impact of recent failures in the US banking sector, and the rapid withdrawal of deposits across some other regional US banks, has certainly been destabilising—not only for the industry, but also for the broader US equity market. Nowhere has this been more acutely relevant than for US small‑ and mid‑cap company investors, given that regional banks represent such a major component of the investment universe.

However, based on our detailed analysis, we are comfortable, at this stage, that few regional banks are exposed to the kind of severe liquidity and concentration risk as experienced by SVB and, latterly, FRC. Accordingly, we are finding attractive opportunities where better‑quality banking stocks have been oversold relative to their idiosyncratic risks. We continue to maintain a broad exposure to small‑ and mid‑cap US banks, diversifying both the risk and reward potential offered by this attractive subset of the US equity market.

 

 

This post was funded by T. Rowe Price

Important Information

For professional clients only. Not for further distribution.

This material is being furnished for general informational purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, and prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a reliable indicator of future performance. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.

The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction.

Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources' accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date noted on the material and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.

The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request.

It is not intended for distribution to retail investors in any jurisdiction.

This material is issued and approved by T. Rowe Price International Ltd, 60 Queen Victoria Street, London, EC4N 4TZ which is authorised and regulated by the UK Financial Conduct Authority. For Professional Clients only.

© 2023 T. Rowe Price. All rights reserved. T. ROWE PRICE, INVEST WITH CONFIDENCE, and the bighorn sheep design are, collectively and/or apart, trademarks or registered trademarks of T. Rowe Price Group, Inc.

Key points

  • The impact of recent failures in the U.S. banking sector, and the rapid withdrawal of deposits across some regional U.S. banks, has been profound.
  • For smaller company investors, the stress in the U.S. banking sector is acutely relevant given that regional banks represent a key component of the investment universe.
  • While the recent crisis has been destabilizing, at this stage, few regional banks appear to be exposed to similarly severe liquidity and/or concentration risk.

More on Investment

Stories of the Week: UK wage growth cools less than expected; Reeves planning pension 'megafunds'; US inflation rises

Stories of the Week: UK wage growth cools less than expected; Reeves planning pension 'megafunds'; US inflation rises

Wage growth, pension 'megafunds' and US inflation: The biggest stories from the world of investment and asset management this week

clock 15 November 2024 • 1 min read
Partner Insight:  Bonds look as attractive as ever. Being nimble will be key

Partner Insight: Bonds look as attractive as ever. Being nimble will be key

Aegon Asset Management
clock 13 November 2024 • 2 min read
Partner Insight: Niches - Searching for roads less travelled

Partner Insight: Niches - Searching for roads less travelled

In this article, Richard Perrott from the MSIM’s International Equity Team, explains the team’s approach to finding potential investment opportunities within unexpected areas.

Richard Perrott, Executive Director International Equity Team @ MSIM
clock 12 November 2024 • 4 min read
Trustpilot