Shares of major U.S. banks and regional lenders outperformed broader markets in morning trading on Tuesday with the KBW Regional Banking index (.KRX) hitting its highest since late April.
The tenuous relief rally comes at a difficult time for the banking sector that has been grappling with worries around deposit flight, rising interest rates and exposure to commercial real estate since March.
The S&P 500 Banks index (.SPXBK) advanced about 2.3%. In comparison, the benchmark S&P 500 index (.SPX) was last up 0.2%.
Big banks such as JPMorgan Chase & Co (JPM.N), Wells Fargo & Co (WFC.N), Goldman Sachs Group Inc (GS.N), Morgan Stanley (MS.N), Citigroup (C.N), and Bank of America Corp (BAC.N) rose between 0.7% and 2.9%.
Regional lenders were also higher, with PacWest Bancorp (PACW.O), Western Alliance (WAL.N), Zions Bancorp (ZION.O), Comerica (CMA.N), M&T Bank Corp (MTB.N) and KeyCorp (KEY.N) rising between 4.9% and 8.5%.
The volatility in shares of regional lenders has underscored ongoing investor uncertainty over the health of the sector, with the KBW Regional Banking index losing roughly 22% so far this year.
Bank stocks fell on Monday, with some investors pointing to worries that a flood of Treasury bill issuance following the raising of the U.S. debt ceiling would drain liquidity from lenders.
U.S. banks could also face capital hikes of as much as 20% under new rules being prepared by U.S. regulators as part of a global effort to harmonize capital requirements, Reuters reported on Monday, citing a person familiar with the matter.
