Q1 2026 Outlook for U.S. Commercial Bank Performance: Examining the Disconnect Between Valuations and Fundamentals

US bank earnings have continued to grow, buoyed by margin expansion and benign credit quality, save for a few, notable losses that emerged in the third quarter. Additional margin expansion should continue heading into 2026 as lower-yielding assets purchased or originated when rates were low, mature and are reinvested at higher yields, while additional rate cuts by the Federal Reserve allow for greater relief in funding costs. Credit quality is expected to sour and serve as a greater headwind to earnings but should not slip as much as some fear.

That disconnect is evident in current bank stock valuations. Despite the banking industry's earnings growing more than 21% year over year, bank stocks are trading at their cheapest levels relative to the broader market in a decade. The S&P 500 Index has jumped more than 16% in 2025, while the regional bank index has risen just 3.5% this year. Over the last three years, S&P 500 Index has increased more than 70%, while the regional bank index has only climbed 6%.

During this discussion, FIG Research Director Nathan Stovall will review his proprietary projections for commercial bank performance and discuss with Endeavor Capital Partner Jonah Marcus catalysts for bank stocks and how they might more closely align with bank overall fundamental performance in 2026.

Speakers

Jonah Marcus, CFA

Partner and Portfolio Manager
Endeavour Capital Advisors

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Nathan Stovall

Director, FIG Research
S&P Global Market Intelligence

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Maureen McKenna (Moderator)

Head of Partnerships and Business Development
S&P Global Market Intelligence

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