Five charts to start your day

Larger banks have thrived while regional banks survived

An interesting trend was reported in last week's Financial Times Unhedged newsletter: there is a growing divergence between big banks and their regional counterparts.

The story unfolds as follows: larger banks have thrived, benefitting from lower deposit costs. Their perceived safety in the face of rising interest rates has cushioned the impact on their balance sheets. By contrast, regional banks have had to grapple with significant challenges, burdened by their commercial real estate exposure and higher funding costs. The higher-for-longer interest rate environment has hit these smaller institutions particularly hard.

This divergence stems from their fundamentally different business models and risk profiles. Big banks, with their diversified portfolios and perceived stability, have shown resilience. Regional banks, often more dependent on local economic conditions and specific sectors like commercial real estate, have found themselves more vulnerable to market shifts.

The chart below shows how these contrasting fortunes have played out since the beginning of the year, reflecting the factors we've discussed.

Source: Financial Times

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