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Regional Banks: Smaller than you think

Fear-inducing headlines are likely painting too grim of a picture.

Silicon Valley Bank. Signature. First Republic. PacWest. Comerica. The list of regional banks that have either failed or are rumored to be in financial trouble grows by the week. That’s putting plenty of investors on edge—fueled by fear-inducing media headlines like “The Regional Banking Crisis is Expanding” and “How Bad Will It Get?”.

We think it’s a good time for some big-picture perspective on the issue.

Consider this: When we add up all 144 regional banks found in the S&P Regional Banks Select Industry Index, we find that collectively they’re about the same size in key metrics as just two of the largest banks, Wells Fargo and Bank of America, which happen to be headquartered in Horizon Investment’s hometown of Charlotte, North Carolina.

As the chart above shows, that’s the case regardless of whether the metric used is market cap (which reflects broad passive index total exposure), customer deposits (which reflects the total amount of funds individuals and businesses keep at these banks), or total assets (which effectively measures the aggregate amount of lending done by the banks).

The message to investors: Take a deep breath. While regional bank-related headlines may weigh on market sentiment and make for a challenging environment in the short term, it should take far more than the failure of some of these smaller banks to upend the health of the U.S. or global financial system.


This commentary is written by Horizon Investments’ asset management team.

 Past performance is not indicative of future results.

The S&P Regional Banks Select Industry Index comprises stocks in the S&P Total Market Index classified in the GICS regional banks sub-industry.

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