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While the prolonged low-interest-rate environment has negatively affected the interest income of regional banks, to a significant degree, the Fed’s latest projection of two potential interest hikes by late 2023 has rejuvenated investor interest in banks. Also, to the positive, banks’ lower interest income owing to the dovish monetary policies has been partially offset by the higher lending volumes.
On account of rising inflation concerns, St. Louis Federal Reserve President James Bullard and Boston Fed President Eric Rosenberg expect a benchmark interest rate hike in the second half of 2022. Regional banking companies FHN and UMPQ are poised to benefit substantially from such projected rate hikes.
