Structural reset time for US regional banks

Entering 2026, United States (US) regional banks are starting with stable credit performance and healthy balance sheets. However, several structural forces are reshaping how these banks run their businesses. Ongoing consolidation across the sector, with more than 120¹ bank mergers and acquisitions (M&As) announced in recent years, evolving regulatory expectations, and shifts in deposit behavior are prompting banks to rethink balance sheets and operating models well before stress appears in traditional credit metrics.

Many institutions are increasing investments in artificial intelligence (AI) and related technology as a central part of how they work. In some cases, this is accompanied by broader capability builds, including global capability centers (GCCs) that complement their investments—the latest examples being Citizens Financial Group and Truist Financial expanding presence in India to support engineering analytics and digital delivery.

These developments suggest that early balance-sheet and cost signals—such as portfolio mix, technology spend and liquidity positioning—are becoming more informative than headline non-performing loan (NPL) ratios when assessing how banks are repositioning for the future.

Against this backdrop, we analyzed a curated sample of 35 regional banks to understand how balance sheets, cost structures and risk postures are evolving. The sample was a mixed bag across small, mid and upper-mid tiers, covering a broad mix of balance-sheet profiles—from commercial real estate (CRE)-heavy and community-focused lenders to diversified, fee-generating franchises. We tested tech and AI spend, fee mix, risk-weighted assets (RWAs) and cost architecture, and concentration discipline and liquidity.

¹ More than 120 M&As announced by US regional banks since 2023 (source: S&P Global Market Intelligence)