Regional Bank Update: Looking For Opportunities

Summary

• Banks have been well-represented across the value indices. The midcap value index tracks about 30 super regionals. But smaller regional and community banks - more than 300 of them - dominate the small-cap value index.
• The sheer number of banks in the small-cap value index tells us that U.S. banking is still a regional, relationship-based network serving local communities.
• As patient, long-term value investors, we don’t believe all regional and smaller banks should be tarnished. While some of these banks in the crosshairs have similar profiles, in general we believe regional banks’ troubles are earnings issues rather than liquidity issues.

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When any turmoil arises, as it has in the banking sector this year, we begin our analysis with a deep risk assessment. Our conclusion: While we are not actively increasing the overall exposure to banks in our U.S. value equity portfolios, we continue to