The S&P Regional Banks have gotten battered once again today, down 3.01%. But that is purely a continuation of what has been a rough Fall. The index has fallen 16.58% from its high back in early June and has fallen 7.05% since the start of October. The stocks in the index are down an average of 8.31% MTD. As shown below, the chart for regional banks has completely rolled over.
Of all 126 regional banks included in the index, only 6 have managed to see any gains MTD. Two of these, Independent Bank Corp (INDB) and Eagle Bancorp (EGBN), have not even edged out a full percentage point gain. OFG Bancorp (OFG) is an anomaly managing to rise 13.09% on the month (and 89% on the year). But again, these are outliers and not the norm for the industry.
On the other end of the spectrum, the worst performers for October are a much scarier picture. As shown below, some of the worst performers of the index so far this month are down double digits for both this month and this year. Leading the charge downward is one of the country’s most aggressive lenders, Bank OZK (OZK) — formerly known as Bank of the Ozarks. This bank was mentioned Sunday morning in our Brunch Reads in an article out of Bloomberg from Friday. The article highlighted investors moving away from the stock following a horrific earnings report. Earnings dropped 23% versus estimates of a rise of 20%. The reason behind this poor earnings report is the changing interest rate environment. Just three months ago things looked much different.
The names behind OZK are not much better. Opus Bank (OPB) is down just over 25% YTD, and 23.51% MTD. Third worst in the industry is Texas Capital Bancshares which has fallen 20.7% MTD and 27.66% YTD.
We’ll be watching the performance of regional banks closely from here given their extreme weakness recently. The rise in mortgage rates and weakening housing indicators put them at significant risk if things start to get worse.
OZK collapse is the canary in the coal mine