In the episode, Jeff Davis, managing director at Mercer Capital, said the real risk facing the U.S. banking sector is that interest rates do not increase materially from current levels and that excess liquidity remains on balance sheets longer than many expect. Banks' traditional revenue streams have also come under pressure at a time when digital adoption has accelerated considerably due to the pandemic. Davis believes banks have little maneuvering room and expect more institutions to look to M&A to cut costs associated with branches to offset revenue headwinds.

M&A and fundraising activity in the fintech sector has started a torrid pace in 2021 and shows no signs of slowing. In the episode, Greg Smith, managing director at fintech-focused investment bank FT Partners, discussed recent M&A and fundraising trends in the fintech sector and activity from special purpose acquisition companies in the space. He also offered his view of fintech valuations, which subsectors have garnered the most interest and his outlook for dealmaking activity, including between banks and fintechs.

Banks should not fall victim to focusing on short-term results and should instead work to deliver long-term shareholder value, particularly in a world increasingly focused on ESG, according to a veteran of the investment community. In the episode, Fred Cannon, the former director of research and head of equity strategy at KBW, who will soon join the FASB, shares his views on bank stocks, how bankers should talk to investors and the threat from fintech.  

Bank stocks have surged in recent months as the outlook for credit quality and the broader economy has improved but community bank valuations might have even further room to run, according to GenOpp Capital Management CIO Joe Fenech. In the episode, Fenech discusses his outlook for bank credit quality and why he expects performance to continue to exceed previous expectations. He also highlighted other tailwinds for bank stocks, including the beginning of a M&A wave, which he expects to kick off this year. 

Banks will face greater regulatory scrutiny under the Biden administration but could also see the playing field leveled some with their nonbank counterparts. In the episode, Isaac Boltansky, director of policy research at Compass Point Research & Trading, discusses financial regulation under the Biden administration, what the new, key agency heads – Treasury, CFPB and OCC – will focus on in their early days on the job and how the positive change in banks' standing in Washington D.C. could allow them to lobby for regulation of nonbanks, fintechs and possibly even big tech's encroachment into finance. 

The current environment is highlighting the value of scale and should encourage more bank M&A activity, including larger transactions, according to KBW CEO Tom Michaud. In the episode, Michaud, whose firm just advised TCF on its $6 billion merger with Huntington, said that more institutions are looking to gain scale to invest in digital channels, become more efficient and close branches and effectively compete with the megabanks. The executive also discussed what has driven banks stock recently and argued that valuations will be higher a year from now. 

Banks' credit quality remained quite strong through the third quarter but industries more exposed to the COVID-19 pandemic, like the hospitality sector, have caused a headache for many institutions and performance is unlikely to rebound soon. The episode features third-quarter earnings commentary from banks like F.N.B. Corp and Synovus as well as the outlook for the lodging sector, including when it is expected to recover from the COVID-19 led downturn, provided by members of the S&P Global Ratings team.

As deposits have flooded into the system and loan growth has been hard to come by, many banks find themselves drenched with excess liquidity. The dynamic has put considerable pressure on net interest margins but might not prove short-term in nature like many banks hope, according to Greg Hertrich, head of U.S. depository strategies at Nomura Securities. In the episode, Hertrich said those earnings pressures could remain in place for many banks, prompting them to consolidate branches — particularly in light of increased digital adoption — and pursue M&A activity.

Deposits have flooded into the banking system, leaving institutions sodden with excess liquidity and few attractive options to put the cash to work. In the episode, Scott Hildenbrand, head of balance sheet analysis and strategy in the financial services group at Piper Sandler, discussed the unprecedented inflow of deposits and how to measure whether the funds are short term in nature. He also talked about how banks should approach investing in the current low rate environment and what opportunities to consider.

While many investors have soured on bank stocks, Johnny Guerry, former managing partner and portfolio manager at Clover Partners, and Brad Rinschler, former director of institutional equities at Boenning & Scattergood, are launching a new fund to capitalize on the group's underperformance. In the episode, Guerry and Rinschler talk about the strategy for the new fund – Down Range Capital Management – and the investment opportunity they see as superior to the one that was available at the bottom of the Great Recession. They also discussed what they think the market is missing, why they have comfort over bank balance sheets and the eventual boost some bank stocks could receive when M&A activity resumes.