Regional Banks Slump Faster Than S&P 500 After Tariff Impacts

Regional banks that were looking to grow after dealing with the banking crisis that began in the spring of 2023 are reportedly now being challenged by the economic uncertainty driven by the new U.S. tariffs.

The KBW Regional Banking Index has dipped 13% since the tariffs were announced April 2, Bloomberg reported Monday (April 7).

The index dropped more than the S&P 500, according to the report.

Regional banks have been hard hit because they rely on lending, and the tariffs have raised fears of a possible recession, credit concerns and lower demand for loans, the report said.

The larger banks face similar pressure but, unlike the regional banks, they have greater access to trading revenue and other ways to offset a decline in lending, per the report.

At the same time, regional banks are in a stronger position than they had during the banking crisis, the report said. In response to the lessons from the crisis, the banks expanded their retail deposits, restructured their bond portfolios and set aside capital.

JPMorgan Chase Chairman and CEO Jamie Dimon said in a shareholder letter released Monday that America’s latest tariffs could dampen an economy that was “already weakening.”

Dimon said the tariff policy has created uncertainties around the effect on confidence, investments, corporate profits, the U.S. dollar, and retaliation by other countries. He added that these pressures add to the “considerable turbulence” the economy already faces from geopolitical issues, inflation, high fiscal deficits, high asset prices and volatility.

It was reported Saturday (April 5) that investors are choosing to keep their cash close to home rather than buying shares at lower prices after the rough week the stock market had.

During the first few days of the month, investors pumped upwards of $60 billion into money market funds, pushing the assets in those funds to the highest level since at least 1972.

On Sunday (April 6), it was reported that tariffs have added to the pressures already being felt by American small businesses. Business owners are unclear on how to move forward after already dealing with the challenges of COVID, inflation and higher interest rates.