04:28 PM EDT, 04/09/2024 (MT Newswires) -- Regional bank checks point to consistent first-quarter trends and a likely trough on margins in the first half of 2024, while investor focus seems to have shifted to when the Federal Reserve will cut rates and by how much, RBC Capital Markets said on Tuesday.

In a client note previewing earnings across 24 regional banks in RBC's coverage area, including First Commonwealth Financial ( FCF ) , New York Community Bancorp ( NYCB/PU ) and Valley National Bancorp ( VLY ) , RBC predicted "consistent fundamental trends similar to recent quarters" but said "we are much closer to the bottom on margins."

The brokerage said a margin trough should be a positive for revenue outlooks. "We believe margins are very close to stabilizing, and confirmation of that along with a stronger (net interest income) outlook would be favorable," RBC Associate Director of US Research Jon Arfstrom said.

Credit quality remains a recurring topic but metrics seem well-contained in the near term and on track to gradually normalize higher at a controlled pace, according to RBC. Management commentary suggests tepid loan growth and some seasonal headwinds impacting deposit balances during the quarter, the report showed.

Regional banks saw volatility exiting the fourth-quarter earnings season related to New York Community Bancorp ( NYCB/PU ), which announced at the end of February that it found material weakness within its internal controls and disclosed a $2.4 billion goodwill impairment charge to its December quarter net income from transactions that occurred in 2007 and earlier.

However, investors have generally regained comfort and don't view those issues as "indicative of systemic problems for the industry," Arfstrom said.

"Instead, investor attention has generally been on assessing the potential impacts of fewer Fed rate cuts on the margin and spread revenue trajectories for the banks, as well as what different rate scenarios might mean from a credit quality standpoint," he said.

While bank valuations have broadly improved since last fall as the market has regained confidence in the rate and macro outlook, RBC continues to see value in regional banks. The brokerage highlighted Huntington Bancshares ( HBAN ) , Webster Financial ( WBS ) , and Wintrust Financial ( WTFC ) as "particularly well positioned and attractively valued names."

Price: 3.25, Change: -0.05, Percent Change: -1.37