The future of regional banking

June 3, 2009 | By Jim Kim

This is what Morningstar has to say about regional banks: "In our opinion, regional banking is very much a commodity industry. Competition is generally intense, and there are few barriers to entry, aside from the approval of regulators." The disastrous situations will likely end up a temporary, profit-sapping phenomena.

Once the industry has worked things out, what then? We could see the emergence of a newly staid industry. Some have used the word utility. "As in all commodity industries, companies that excel at controlling costs--operating, credit and funding--should be able to continue earning excess profits." Not all will survive of course, and those that do will have to grapple with a whole new regulatory structure.

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