According to a report from FTI Consulting, regional banks have seen a decrease in their vulnerability to activist campaigns. The analysis took into account various factors, including governance, total shareholder return, balance sheet health, and operating performance. As a result, regional banks moved down 20 spots to number 29 on the activism-vulnerability screen.
The mid-year saw three major regional banks collapse, leading to increased scrutiny on the industry. The SPDR S&P Regional Banking exchange-traded fund (ticker: KRE) suffered a significant drop of 40%. Additionally, rising interest rates negatively impacted the value of financial institutions’ bond holdings, affecting their balance sheets. FTI reported that the financial sector was targeted in 23% of the 233 campaigns launched in the U.S. and Canada from January to June.
Although the sector still faces challenges due to regulatory pressure, the overall vulnerability has decreased. FTI noted that there has been a slight improvement in short-term total shareholder return (TSR) and operating-performance metrics. However, TSR remains a concern for the sector, albeit with a reduced underperformance.
Despite the ongoing pressure, the regional bank ETF has experienced a modest recovery, currently down 25% year-to-date. In comparison, the S&P 500 has advanced by 17%.