18 July 2023
US regional banks are struggling to compete for deposits, and the situation is getting worse. Larger banks like JPMorgan Chase, Wells Fargo, and Citigroup have acknowledged the mounting pressures they are facing, which spells trouble for their smaller counterparts. Rising interest rates have forced regional banks to pay more on customer funds, while the value of their bond assets has plummeted. Some regional banks have already failed, while others are desperately trying to secure funding as depositors withdraw their cash. The prospect of further rate hikes and stricter regulations only adds to their woes. Deposits are dwindling, deposit costs are skyrocketing, and the shift away from non-interest-bearing accounts is intensifying. Additionally, regional banks are highly exposed to the struggling commercial real estate sector, which further compounds their challenges. The future looks grim for regional banks, as profitability and earnings continue to suffer.