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Regional bank stocks rebounded Friday, clawing back part of the previous day's steep losses as a round of better-than-expected earnings helped ease—but not erase—credit fears that had roiled the sector.
The SPDR S&P Regional Banking ETF (NYSE:KRE) rose 1.1% by 2 p.m. ET, after plunging 6.2% on Thursday, its worst single-day drop since April.
The bounce was led by upbeat results from several small and mid-sized lenders, which offered reassurance on earnings quality and credit trends.
Several regional banks posted stronger earnings per share (EPS) and revenue than analysts had forecast.
According to Benzinga Pro platform, Huntington Bancshares Inc. (NASDAQ:HBAN) reported EPS of $0.41, beating the $0.37 estimate, with year-over-year growth of 24.2%. Revenue came in at $2.13 billion, a 13.9% increase from last year and 4.6% above forecasts.
Fifth Third Bancorp (NASDAQ:FITB) earned $0.93 per share, ahead of the $0.87 estimate, up 9.4% from the prior year. Revenue reached $2.31 billion, growing 7.9% year-over-year.
Ally Financial Inc. (NYSE:ALLY) posted a standout 14.1% EPS surprise, reporting $1.15 versus $1.01 expected. Revenue of $2.16 billion rose 4.8% from a year ago.
Truist Financial Corp. (NYSE:TFC) gained 3.4% after topping estimates with EPS of $1.04 versus $1.00 and revenue of $5.24 billion.
Other notable results included Comerica Inc. (NYSE:CMA), which posted $1.35 EPS versus $1.31 expected, and Webster Financial Corp. (NYSE:WBS) with $1.54 in EPS, slightly beating forecasts.
Despite the strong reports, stock price reactions were mixed. TFC rose 3.4%, FITB added 1.1%, and HBAN gained 0.7%, while WBS and Regions Financial Corp. (NYSE:RF) were slightly lower on the day.
While Friday's rebound offered relief, analysts say the underlying issues that rattled the sector earlier in the week remain unresolved.
Bill Hebel, analyst at 22V Research, said the market’s sharp sell-off on Thursday—triggered by a surprise charge-off from Zions Bancorporation (NASDAQ:ZIONS) and a lawsuit disclosure from Western Alliance Bancorporation (NYSE:WAL)—overwhelmed investor positioning.
"When that happens, especially during earnings, individual commentary tends to take a back seat until things settle down," he said.
Hebel added that while broad credit problems aren’t expected, investor confidence has clearly been shaken.
"Barring any new negative news, we think it's going to be a slow build back. This earnings season has actually been quite solid—delinquencies are drifting lower and some banks are even releasing reserves."
However, Nigel Green, CEO of deVere Group, cautioned against assuming the worst is over.
"Markets are quick to move on," Green said. "But when you see early signs of strain in credit quality, it rarely stops there. The backdrop is one of tighter lending conditions, rising defaults, and increasing stress across consumer and corporate balance sheets."
He warned that this week's volatility "is unlikely to be the last."
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Image created using artificial intelligence via Midjourney.
