After years of trading at the steepest discount in the broader market—dead last among all major sectors—the banking industry is finally positioned to narrow that gap, according to KBW CEO Tom Michaud.
In the episode, Michaud said that the best fundamental environment in years, historic levels of excess capital, a once in generational change in the regulatory environment and rebounding M&A activity should support stronger valuations for regional banks in 2026. The executive also shared his takeaways from the annual Acquire or Be Acquire conference and his outlook for bank deal activity. He further discussed why scale matters and the impact of shareholder activism in the banking sector.

While large bank stocks have significantly outperformed their smaller counterparts over the last few years, the tide could finally be turning, according to Jonah Marcus, partner and portfolio manager at Endeavour Capital Advisors, Inc.

In the episode, Marcus said there are positive tailwinds for the banking sector, including increasing bank M&A activity, net interest margin expansion and deregulation, that will serve as a greater benefit for small and mid-cap banks. The veteran investor also discussed the valuation disparity between large and small banks; his outlook for credit quality and bank M&A activity, and the importance of technology and a bank's data strategy.

Bank stocks are trading at their cheapest levels relative to the broader market in a decade, but a confluence of catalysts, including rebounding M&A activity, deregulation and rate cuts by the Federal Reserve could finally unlock value for the sector, according to Mendon Capital's Anton Schutz Sr. and Anton Schutz Jr. In the episode, the father-son investment team discuss the current state of bank stocks and what lies ahead for the sector. The Schutz team addresses the frustration many long-term bank investors feel— strong fundamental performance hasn't translated to higher stock prices. They downplayed recent concerns over losses related to loans to nondepository financial institutions and expressed confidence in the sector's credit fundamentals, contrasting the conservative lending practices of regulated banks with the riskier positions being taken in private credit markets. They also see several potential drivers for bank stock performance, including renewed M&A activity, regulatory changes favoring deregulation and the potential for interest rate normalization to benefit margins. The investors further discussed how AI and technology could dramatically improve bank cost structures, with particular emphasis on back-office operations rather than revenue generation.