UBS analyst says it’s time to ‘rotate’ into some regional banks
Speakers
Erica Najarian
— UBS Financials Analyst
Summary
UBS analyst Erika Najarian says bank stocks can keep outperforming, though the bar is high. She argues it is still too early to leave money-center banks and favors rotating into regional banks. She cites expected loan growth, a steeper yield curve, and a return of M&A as key regional bank catalysts.
- Erika Najarian of UBS discusses bank stocks ahead of earnings season.
- She expects banks may outperform the S&P for a third straight year if favorable conditions persist.
- She remains positive on money-center banks, saying it is too early to get off that train.
- She favors rotating into regional banks.
- Regional bank catalysts include recovering loan growth, lifted leveraged-lending limits, a steeper curve, and M&A.
- She mentions a risk that excessive Fed/market support could lead to a crash.
Ideas
Banks can extend S&P outperformance
She thinks bank stocks can continue to outperform the S&P, although the bar is high, because 2026 may have the same favorable preconditions as prior cyclical bank outperformance: better loan growth, a steep yield curve, and a vigorous M&A cycle. She notes this would be a third straight year of bank outperformance, something not seen outside a cyclical recovery since the mid-1990s.
Rotate into regionals as loan growth returns
She says it is time to rotate into regional banks because loan growth is likely to return, helped by provisions from the 'big beautiful bill' and regulators lifting leveraged lending limits in December 2025. A steeper yield curve is more beneficial to regional bank margins than to money-center banks, and a return of M&A would ignite interest in regionals.
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This CNBC video, published January 06, 2026, features Erica Najarian discussing KBE, KRE. 2 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Erica Najarian · Tickers: KBE, KRE