The regional banking sector has spent much of the last two years making headlines for all the wrong reasons. Bank failures like Silicon Valley, Signature Bank, and First Republic Bank rocked the sector, and the SPDR Regional Banking ETF (NYSE:KRE) dropped more than 40% at the end of 2023.

• Beneficiary of Relaxed Deregulation – Several banking rules involving capital requirements (like Basel III) and liquidity standards could be relaxed during a second Trump admin, in addition to a more friendly M&A environment. Regional banks can't meet these requirements as efficiently as larger national banks, so deregulation often benefits smaller banks.
• Valuation Metrics – The banks on our list have affordable stocks compared to their sector peers based on metrics like Price-to-Earnings (P/E), Price-to-Sales (P/S), and Price-to-Book (P/B) rates.
• Dividend Yield – If you own bank stocks, you want to be compensated with stock price appreciation and dividend income. These regional banks all pay higher dividend yields than the industry average.

US Bancorp’s roots date back to the Civil War when it was awarded the 24th national bank charter of the United States. Today, it’s one of the largest regional banks in the United States, with a market cap of over $83 billion and 68,000 employees. USB shares have lagged in 2024, with a 23% year-to-date gain compared to 30% from KRE, but looser regulations could be a tailwind as the bank acquired MUFG Union Bank in 2022 to expand operations into California, Oregon, and Washington. The stock has reasonable fundamental metrics like a 16.5 P/E ratio and 1.97 P/S ratio and pays a 3.73% dividend yield.

KeyCorp has a market cap under $20 billion and less reach than bigger regional banks like US Bancorp, but the stock makes our list thanks to a combination of good value, high dividend yield, and potential growth from deregulation. The bank has two segments: Consumer Banking and Commercial Banking, with the commercial wing focused on small and mid-size business services. KeyBanc Capital Markets is the company's M/A wheelhouse, having negotiated more than 500 clients on mergers in the mid-size business space. KEY stock has the highest P/E ratio of banks on our list at 19.4 but rewards shareholders with a 4.17% dividend yield, and its P/B rate is bottom third in the sector at 1.3.

Regions Financial doesn't have a hundred-plus-year history like US Bancorp or KeyCorp, but it does offer a variety of banking and wealth management services to clients across the southern region. RF shares have actually outperformed KRE so far in 2024 (42% vs 30%), and its debt/equity level of 0.35 is the lowest of our selections, indicating a well-capitalized bank poised to benefit from more risk-taking. The stock pays a 3.66% dividend yield with a 13.4 P/E ratio and 1.48 P/B ratio.

Formed during the merger of SunTrust Bank and BB&T Corp, Truist Financial is the second-largest regional bank on our list, and one of the reasons is that KRE is up more than 30% this year. TFC shares have matched the regional banking ETF performance almost penny for penny in 2024, but the stock remains well below its 2022 all-time high. Truist has the lowest P/B ratio on our list at 1.08, pays a 4.36% dividend yield, and recently sold off its insurance and asset management subsidiaries to improve its liquidity and capitalization situation. Truist mainly serves states east of the Mississippi River but plans to expand operations in the Sun Belt. These plans could benefit from increased M/A activity and deregulation in the next few years.

M&T Bank (which stands for Manufacturers and Traders) is one of the nation’s oldest banks, with predecessors tracing back as far as 1856. MTB has a $36 billion market cap and pays a 2.45% dividend, the lowest on our list but easily sustained by the company's income. The stock has been one of 2024's biggest success stories, posting an astonishing 60% gain in 2024, which doubled the regional banking ETF. Following the bank's strong October earnings report, more gains could be on the horizon, causing many analysts to upgrade their ratings and price targets. M&T Bank has a 16.3 P/E ratio and a 1.4 P/B ratio, and its net profit margin of 18.7 is bested only by Regions Financial.

Discover Financial has been linked with Capital One since the latter announced intentions to purchase the former for $35 billion in February. However, the deal has been in limbo since New York regulators began investigating the acquisition for possible antitrust violations. DFS shares traded in a tight range from July until the week of the election, but both DFS and COF stocks immediately gapped up on the Wednesday following Trump's victory. Investors anticipate the deal going through in a less harsh regulatory environment, so DFS shares could continue to rally in the weeks ahead.