J.P. Morgan cautious on US regional banks despite solid Q2 outlook

J.P. Morgan expects U.S. regional banks to report solid loan and deposit growth in Q2, but remains cautious on the sector amid ongoing uncertainty over tariffs

Brokerage raises price targets across banks and says the global economy appears to have avoided the worst-case scenario from Middle East tensions and notes progress in trade discussions

But cautions: "we do not view the recent absolute level of performance in regional banks as sustainable, particularly with there not yet being a full resolution around tariffs"

Analysts have said tariff uncertainty could weigh on regional banks by dampening business sentiment, slowing loan demand and increasing credit risk for trade-exposed clients

J.P. Morgan says it has most confidence in Banc of California BANC.N, Webster Financial WBS.N and Pinnacle Financial Partners PNFP.O being able to maintain their FY25 outlooks

BANC down ~9% YTD, while WBS and PNFP have lost ~1% and ~3.5% respectively

Brokerage flags risks for Comerica CMA.N due to soft loan growth trends, and for Flagstar FLG.N citing credit quality concerns, in its rent-regulated loan book

Also sees Texas Capital Bancshares TCBI.O being potentially hit in Q2 from limited mortgage finance loan activity

CMA down ~3.6% YTD, FLG has gained ~13.6% and TCBI has added 1.5%