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3 Major Regional Banks to Watch as Industry Prospects Remain Robust
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The Zacks Major Regional Banks are expected to continue witnessing weak asset quality as Trump’s tariffs result in higher inflation in the near term. This, along with modest economic growth, will lead to a slight rise in loan demand. Yet, as the Federal Reserve resumes rate cuts, industry players’ net interest income (NII) and margins will benefit as funding costs stabilize.
Business restructuring/expansion initiatives and digitization will also offer support. So, major regional banks like The Bank of New York Mellon Corporation (BK - Free Report) , Truist Financial Corporation (TFC - Free Report) and Northern Trust Corporation (NTRS - Free Report) are likely to gain.
About the Industry
The Zacks Major Regional Banks industry includes the nation’s largest banks in terms of assets, with most operating globally. The financial performance of these banks largely depends on the nation’s economic health. As banks are involved in numerous complex financial activities, they are required to comply with stringent regulations set by the Federal Reserve and other regulatory agencies. Apart from traditional banking services, which are the source of net interest income (NII), major regional banks provide a wide array of other financial services and products to retail, corporate and institutional clients, both domestic and global. These include credit and debit cards, mortgage banking, wealth management and investment banking, among others. Therefore, a large revenue source for these banks is fees and commissions earned from these services.
4 Themes Driving the Future of the Major Regional Banks Industry
Fed to Lower Interest Rates: The Federal Reserve will pivot from its hawkish stance as the weakening labor market and other macroeconomic data indicate slowing growth. Meanwhile, inflation numbers have started climbing as tariffs lead to higher prices. To maintain the balance between the labor market and inflation numbers, the central bank is expected to lower rates. As the rates come down, major regional banks will likely benefit from further fall/stabilization of deposit costs and a gradual improvement in the lending scenario. Though there will likely be near-term pain in the form of lower NII and margins, the industry players are expected to benefit from reduced interest rates once the ambiguity related to tariffs is resolved.
Modest Rise in Loan Demand: The central bank’s aggressive monetary policy hurt loan demand amid the risk of a severe economic downturn/recession. While the Fed’s Summary of Economic Projections (SEP) released in June 2025 indicated that U.S. economic growth is expected to slow down this year on account of rising inflation because of tariffs, demand for loans is likely to be modest at relatively lower interest rates. As such, major regional banks’ NII and net interest margin are expected to rise slightly.
Restructuring Initiatives: Major regional banks are undertaking initiatives to expand into new avenues and lower their dependence on spread income. The business restructuring is essential for technological advancement and further domestic/global expansion to continue improving profitability. Industry players are investing in artificial intelligence and other digital platforms and even partnering/acquiring providers of such services. Major regional banks are also aggressively expanding their footprint outside the United States. Several industry players are re-evaluating their business structure to simplify operations and do away with less profitable ones.
Weak Asset Quality: Mounting concerns about the economic health and the impacts of trade policies being pursued by the Trump administration have pushed prices up. This will take a toll on borrowers’ ability to repay loans. Thus, industry players are building additional reserves to counter any fallout from unexpected defaults and payment delays. While conservative lending strategy and the resilience of borrowers helped major regional banks keep their asset quality manageable, several metrics have crossed the pre-pandemic levels. This signals the gradual deterioration of the industry players’ asset quality.
Zacks Industry Rank Reflects Positive Outlook
The Zacks Major Regional Banks industry is a 10-stock group within the broader Zacks Finance sector. The industry currently carries a Zacks Industry Rank #48, which places it in the top 20% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates outperformance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of an encouraging earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gaining confidence in this group’s earnings growth potential. In the past year, the industry’s earnings estimates for 2025 have been revised 1.5% upward.
Before we present some major bank stocks to keep on your radar, let’s take a look at the industry’s recent stock market performance and valuation picture.
Industry Outperforms the S&P 500 & the Sector
The Zacks Major Regional Banks industry outperformed the S&P 500 composite and the sector in the past year.
Stocks in this industry have collectively soared 18.8% in the past year. In the same time frame, the Zacks S&P 500 composite has jumped 18.2% and the Zacks Finance sector rallied 17.6%.
One-Year Price Performance
Industry's Valuation
One might get a good sense of the industry’s relative valuation by looking at its price-to-tangible book ratio (P/TBV), which is commonly used for valuing banks because of large variations in their earnings from one quarter to the next.
The industry currently has a trailing 12-month P/TBV of 2.46X. This compares with the highest level of 3.23X, the lowest of 1.49X and the median of 2.34X over the past five years. The industry is trading at a huge discount compared with the market at large, as the trailing 12-month P/TBV for the S&P 500 composite is 13.28X, as the chart below shows.
Price-to-Tangible Book Ratio (TTM)
As finance stocks typically have a lower P/TBV ratio, comparing major regional banks with the S&P 500 may not make sense to many investors. However, comparing the group’s P/TBV ratio with that of the broader sector ensures that the group is trading at a solid discount. The Zacks Finance sector’s trailing 12-month P/TBV came in at 5.62X. This is above the Zacks Major Regional Banks industry’s ratio, as the chart below shows.
Price-to-Tangible Book Ratio (TTM)
3 Major Regional Banks to Keep an Eye on
BNY Mellon: Operating in 35 countries, BNY Mellon provides various products and services to individuals and institutions. Its global client base consists of financial institutions, corporations, government agencies, endowments and foundations, and high-net-worth individuals.
Higher interest rates continue to support BNY Mellon’s top-line growth. While the company’s NII and NIM declined in 2020 and 2021, both rebounded solidly thereafter. Though higher funding costs will likely weigh on NII, the metric is anticipated to keep improving in the quarters ahead, driven by lower rates. BNY Mellon’s growth initiatives are impressive. The company has been launching several new services and products, digitizing operations and making strategic acquisitions.
In 2024, BK acquired Berwyn, PA-based Archer Holdco, LLC, a leading technology-enabled service provider of managed account solutions to the asset and wealth management industry. This will bolster the company’s retail wealth presence. The company also announced plans to launch Alts Bridge, an extensive data, software and services solution.
This Zacks Rank #2 (Buy) company has been trying to gain a foothold in foreign markets and is undertaking several growth initiatives (including launching new services, digitizing operations and making strategic buyouts). Its international revenues are expected to continue improving as the demand for personalized services rises globally. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
BNY Mellon has a market cap of $73.3 billion. The Zacks Consensus Estimate for earnings indicates growth of 18.4% for 2025 and 10.8% for 2026. In the past six months, the stock has jumped 30.8%.
Price and Consensus: BK
Truist Financial: Formed following the ‘merger of equals’ deal between BB&T Corp and SunTrust Banks, Truist Financial has become one of the largest commercial banks in the United States. The company, based in Charlotte, NC, conducts business operations primarily through its bank subsidiary, Truist Bank, and a few other non-bank subsidiaries.
In August, Truist announced a multi-year growth plan in high-growth markets, which include traditional branch expansion and a focus on digital banking. In sync with this, in the next five years, the company intends to open 100 new branches and renovate more than 300 existing locations in high-growth opportunity cities.
Moreover, growth in loans, relatively higher interest rates and Truist Financial’s efforts to improve fee income are likely to keep aiding financials. Management remains open to strategic business restructuring initiatives to bolster fee income. Hence, in 2024, the company sold its stake in its insurance subsidiary, Truist Insurance Holdings. Subsequently, the bank undertook a balance sheet repositioning to support NII in the quarters ahead. These measures bolstered its capitalization and liquidity profile.
Further, last year, the company divested its asset management subsidiary, Sterling Capital Management LLC. Earlier, this Zacks Rank #3 (Hold) company had acquired Service Finance Company, which augmented its point-of-sale lending business. Driven by these restructuring efforts, Truist Financial is expected to witness growth in the top line.
TFC has a market cap of $58.2 billion. The Zacks Consensus Estimate for earnings implies growth of 4.3% and 14.1% for 2025 and 2026, respectively. The stock has risen 13.7% in the past six months.
Price and Consensus: TFC
Northern Trust: Headquartered in Chicago, Northern Trust provides services to various clients, from sovereign wealth funds to the wealthiest families. The company is a leading provider of wealth management, asset servicing, asset management and banking solutions to corporations, institutions, families and individuals.
Organic growth is the company’s key strength. Its revenues witnessed a CAGR of 7.8% over the last four years (2020-2024), driven by rising non-interest income and NII. As the client base expands, the company is likely to see a rebound in loan activity. This focus on wealth management is expected to drive growth in the lending portfolio in the near term. Also, robust pipelines in the Asset Servicing segment will likely drive top-line growth.
NTRS is undertaking expense management efforts to tackle expense growth and reinstate its operating leverage. It focused on disciplined headcount management, vendor consolidation, rationalization of its real estate footprint and process automation. Through such efforts, it will likely improve productivity and meet financial targets.
The company’s capital distributions seem impressive. In 2022, Northern Trust hiked its quarterly dividend by 7% to 75 cents per share. In 2021, the company announced a 25-million share repurchase program with no expiration date. Its debt/equity ratio, which compares favorably with the broader industry, and decent liquidity highlight the fact that such capital-distribution activities are sustainable in the future.
NTRS, which carries a Zacks Rank of 2, has a market cap of $24.3 billion. The Zacks Consensus Estimate for earnings indicates growth of 10.9% and 9.7% for 2025 and 2026, respectively. The stock has soared 31.8% in the past six months.
Price and Consensus: NTRS
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3 Major Regional Banks to Watch as Industry Prospects Remain Robust
The Zacks Major Regional Banks are expected to continue witnessing weak asset quality as Trump’s tariffs result in higher inflation in the near term. This, along with modest economic growth, will lead to a slight rise in loan demand. Yet, as the Federal Reserve resumes rate cuts, industry players’ net interest income (NII) and margins will benefit as funding costs stabilize.
Business restructuring/expansion initiatives and digitization will also offer support. So, major regional banks like The Bank of New York Mellon Corporation (BK - Free Report) , Truist Financial Corporation (TFC - Free Report) and Northern Trust Corporation (NTRS - Free Report) are likely to gain.
About the Industry
The Zacks Major Regional Banks industry includes the nation’s largest banks in terms of assets, with most operating globally. The financial performance of these banks largely depends on the nation’s economic health. As banks are involved in numerous complex financial activities, they are required to comply with stringent regulations set by the Federal Reserve and other regulatory agencies. Apart from traditional banking services, which are the source of net interest income (NII), major regional banks provide a wide array of other financial services and products to retail, corporate and institutional clients, both domestic and global. These include credit and debit cards, mortgage banking, wealth management and investment banking, among others. Therefore, a large revenue source for these banks is fees and commissions earned from these services.
4 Themes Driving the Future of the Major Regional Banks Industry
Fed to Lower Interest Rates: The Federal Reserve will pivot from its hawkish stance as the weakening labor market and other macroeconomic data indicate slowing growth. Meanwhile, inflation numbers have started climbing as tariffs lead to higher prices. To maintain the balance between the labor market and inflation numbers, the central bank is expected to lower rates. As the rates come down, major regional banks will likely benefit from further fall/stabilization of deposit costs and a gradual improvement in the lending scenario. Though there will likely be near-term pain in the form of lower NII and margins, the industry players are expected to benefit from reduced interest rates once the ambiguity related to tariffs is resolved.
Modest Rise in Loan Demand: The central bank’s aggressive monetary policy hurt loan demand amid the risk of a severe economic downturn/recession. While the Fed’s Summary of Economic Projections (SEP) released in June 2025 indicated that U.S. economic growth is expected to slow down this year on account of rising inflation because of tariffs, demand for loans is likely to be modest at relatively lower interest rates. As such, major regional banks’ NII and net interest margin are expected to rise slightly.
Restructuring Initiatives: Major regional banks are undertaking initiatives to expand into new avenues and lower their dependence on spread income. The business restructuring is essential for technological advancement and further domestic/global expansion to continue improving profitability. Industry players are investing in artificial intelligence and other digital platforms and even partnering/acquiring providers of such services. Major regional banks are also aggressively expanding their footprint outside the United States. Several industry players are re-evaluating their business structure to simplify operations and do away with less profitable ones.
Weak Asset Quality: Mounting concerns about the economic health and the impacts of trade policies being pursued by the Trump administration have pushed prices up. This will take a toll on borrowers’ ability to repay loans. Thus, industry players are building additional reserves to counter any fallout from unexpected defaults and payment delays. While conservative lending strategy and the resilience of borrowers helped major regional banks keep their asset quality manageable, several metrics have crossed the pre-pandemic levels. This signals the gradual deterioration of the industry players’ asset quality.
Zacks Industry Rank Reflects Positive Outlook
The Zacks Major Regional Banks industry is a 10-stock group within the broader Zacks Finance sector. The industry currently carries a Zacks Industry Rank #48, which places it in the top 20% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates outperformance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of an encouraging earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gaining confidence in this group’s earnings growth potential. In the past year, the industry’s earnings estimates for 2025 have been revised 1.5% upward.
Before we present some major bank stocks to keep on your radar, let’s take a look at the industry’s recent stock market performance and valuation picture.
Industry Outperforms the S&P 500 & the Sector
The Zacks Major Regional Banks industry outperformed the S&P 500 composite and the sector in the past year.
Stocks in this industry have collectively soared 18.8% in the past year. In the same time frame, the Zacks S&P 500 composite has jumped 18.2% and the Zacks Finance sector rallied 17.6%.
One-Year Price Performance
Industry's Valuation
One might get a good sense of the industry’s relative valuation by looking at its price-to-tangible book ratio (P/TBV), which is commonly used for valuing banks because of large variations in their earnings from one quarter to the next.
The industry currently has a trailing 12-month P/TBV of 2.46X. This compares with the highest level of 3.23X, the lowest of 1.49X and the median of 2.34X over the past five years. The industry is trading at a huge discount compared with the market at large, as the trailing 12-month P/TBV for the S&P 500 composite is 13.28X, as the chart below shows.
Price-to-Tangible Book Ratio (TTM)
As finance stocks typically have a lower P/TBV ratio, comparing major regional banks with the S&P 500 may not make sense to many investors. However, comparing the group’s P/TBV ratio with that of the broader sector ensures that the group is trading at a solid discount. The Zacks Finance sector’s trailing 12-month P/TBV came in at 5.62X. This is above the Zacks Major Regional Banks industry’s ratio, as the chart below shows.
Price-to-Tangible Book Ratio (TTM)
3 Major Regional Banks to Keep an Eye on
BNY Mellon: Operating in 35 countries, BNY Mellon provides various products and services to individuals and institutions. Its global client base consists of financial institutions, corporations, government agencies, endowments and foundations, and high-net-worth individuals.
Higher interest rates continue to support BNY Mellon’s top-line growth. While the company’s NII and NIM declined in 2020 and 2021, both rebounded solidly thereafter. Though higher funding costs will likely weigh on NII, the metric is anticipated to keep improving in the quarters ahead, driven by lower rates. BNY Mellon’s growth initiatives are impressive. The company has been launching several new services and products, digitizing operations and making strategic acquisitions.
In 2024, BK acquired Berwyn, PA-based Archer Holdco, LLC, a leading technology-enabled service provider of managed account solutions to the asset and wealth management industry. This will bolster the company’s retail wealth presence. The company also announced plans to launch Alts Bridge, an extensive data, software and services solution.
This Zacks Rank #2 (Buy) company has been trying to gain a foothold in foreign markets and is undertaking several growth initiatives (including launching new services, digitizing operations and making strategic buyouts). Its international revenues are expected to continue improving as the demand for personalized services rises globally. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
BNY Mellon has a market cap of $73.3 billion. The Zacks Consensus Estimate for earnings indicates growth of 18.4% for 2025 and 10.8% for 2026. In the past six months, the stock has jumped 30.8%.
Price and Consensus: BK
Truist Financial: Formed following the ‘merger of equals’ deal between BB&T Corp and SunTrust Banks, Truist Financial has become one of the largest commercial banks in the United States. The company, based in Charlotte, NC, conducts business operations primarily through its bank subsidiary, Truist Bank, and a few other non-bank subsidiaries.
In August, Truist announced a multi-year growth plan in high-growth markets, which include traditional branch expansion and a focus on digital banking. In sync with this, in the next five years, the company intends to open 100 new branches and renovate more than 300 existing locations in high-growth opportunity cities.
Moreover, growth in loans, relatively higher interest rates and Truist Financial’s efforts to improve fee income are likely to keep aiding financials. Management remains open to strategic business restructuring initiatives to bolster fee income. Hence, in 2024, the company sold its stake in its insurance subsidiary, Truist Insurance Holdings. Subsequently, the bank undertook a balance sheet repositioning to support NII in the quarters ahead. These measures bolstered its capitalization and liquidity profile.
Further, last year, the company divested its asset management subsidiary, Sterling Capital Management LLC. Earlier, this Zacks Rank #3 (Hold) company had acquired Service Finance Company, which augmented its point-of-sale lending business. Driven by these restructuring efforts, Truist Financial is expected to witness growth in the top line.
TFC has a market cap of $58.2 billion. The Zacks Consensus Estimate for earnings implies growth of 4.3% and 14.1% for 2025 and 2026, respectively. The stock has risen 13.7% in the past six months.
Northern Trust: Headquartered in Chicago, Northern Trust provides services to various clients, from sovereign wealth funds to the wealthiest families. The company is a leading provider of wealth management, asset servicing, asset management and banking solutions to corporations, institutions, families and individuals.
Organic growth is the company’s key strength. Its revenues witnessed a CAGR of 7.8% over the last four years (2020-2024), driven by rising non-interest income and NII. As the client base expands, the company is likely to see a rebound in loan activity. This focus on wealth management is expected to drive growth in the lending portfolio in the near term. Also, robust pipelines in the Asset Servicing segment will likely drive top-line growth.
NTRS is undertaking expense management efforts to tackle expense growth and reinstate its operating leverage. It focused on disciplined headcount management, vendor consolidation, rationalization of its real estate footprint and process automation. Through such efforts, it will likely improve productivity and meet financial targets.
The company’s capital distributions seem impressive. In 2022, Northern Trust hiked its quarterly dividend by 7% to 75 cents per share. In 2021, the company announced a 25-million share repurchase program with no expiration date. Its debt/equity ratio, which compares favorably with the broader industry, and decent liquidity highlight the fact that such capital-distribution activities are sustainable in the future.
NTRS, which carries a Zacks Rank of 2, has a market cap of $24.3 billion. The Zacks Consensus Estimate for earnings indicates growth of 10.9% and 9.7% for 2025 and 2026, respectively. The stock has soared 31.8% in the past six months.
Price and Consensus: NTRS
