Small Banks Primed for Big Gains on Curve Steepening

Regional banks have been buoyed by a broadening out of the bull-market rally — and investors see the momentum continuing even if the overall rotation fizzles out.

The S&P Regional Bank Select Index, home to lenders like Pathward Financial Inc. and Metropolitan Bank Holding Corp., is on track to outperform the S&P 500 Index for a third consecutive month, the longest winning streak since 2022. The group’s valuation multiples are still sitting below their long-term average, leaving the door open to more gains if profits come in strong. Some 10% of the members of the regional bank index are set to disclose their results in the next two days.