Bank sector outlook

Investment volume and cap rates for banks in the last 12 months have increased compared to the previous period. In 2024, average cap rates have generally increased since the beginning of the year but are still lower than those of other net lease sectors. The Federal Reserve’s previous rate hikes for its long battle against inflation have been a major factor pushing cap rates higher. However, growing signs of a cooling economy have led the Fed to signal imminent rate cuts, which will release pressure on investors and allow cap rates to gradually fall. Demand for banks has remained relatively steady. Interest has shifted from regional banks to larger national bank branches for several reasons including relatively recent failures of regional banks such as Silicon Valley Bank and Signature Bank. Customers and investors have shifted their preferences towards larger players including: JPMorgan Chase, Bank of America and Wells Fargo. This trend is due to national bank chains having more capital reserves and higher creditworthiness, which creates the perception that they are less risky and less likely to default.