A Golden Opportunity In Small and Mid-Sized Banks

Dec 6, 2024

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John Palmer delves into his extensive career in banking, and highlights the golden opportunity that lies in small and mid-sized banks. He highlights trends like consolidation, regulatory evolution, and technological advancements. Looking ahead, he is optimistic about the banking sector’s recovery cycle and its capacity for sustained growth, even amid challenges like commercial real estate pressures and emerging fintech innovations.

Today we discuss...

John Palmer shared his extensive experience in the banking industry, including his career start at KPMG and his transition to founding a banking-focused investment fund in 1996.
How the banking industry has undergone massive consolidation since the 1990s driven largely by efficiency and cost-saving opportunities.
Key trends like stricter regulations, higher capital requirements, improved loan underwriting, and the transformative impact of technology on banking operations.
The causes of the recent crises at Silicon Valley Bank, Signature Bank, and First Republic, emphasizing asset-liability mismanagement during rapid rate hikes.
Blockchain technology acknowledged as a potential long-term asset for banks and skepticism about the role of cryptocurrency in traditional banking.
The current banking stock cycle entering an upward phase, with profitability projected to grow steadily through 2026.
Bank earnings and stock performance are rising, driven by factors like margin expansion and easing deposit costs.
Banks with $1-$10 billion in assets are attractive targets for M&A due to cost savings and growth opportunities.
Major banks are expanding branch networks in rural areas, targeting low-cost deposits, while smaller banks focus more on digital channels.
The Midwest and Mideast regions show the most M&A activity, though the Southeast and California are also of interest.
Investments focus on public banks with shareholder lists amenable to proxy support for structural changes.
Banking regulation relief under a new administration could lower compliance costs and ease capital requirements.
A normalized yield curve is boosting loan repricing and margins, contributing to earnings growth.
Bank valuations remain attractive compared to broader markets, with banking stocks trading at significant discounts to earnings.

For more information, visit the show notes at https://moneytreepodcast.com/golden-opportunity-john-palmer-666