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As regional bank stocks rally, analyst voices concerns

  • Regional bank stocks hit all-time highs on Wednesday, but analyst Jack Micenko told CNBC he has concerns about the sector.
  • Hopes about deregulation and tax reform spurred the SPDR S&P Regional Banking ETF (KRE) to surge 3.1 percent.
  • "The core drivers of earnings growth are not there," Micenko said.

Regional bank stocks hit all-time highs on Wednesday, but analyst Jack Micenko told CNBC on Wednesday he has concerns about the sector.

"One, loan growth has been very anemic. Loan growth has actually decelerated since the election. And second, as the Fed continues to raise rates, the impact from rising deposit costs has risen exponentially as well," the associate director of research at Susquehanna Financial Group said in an interview with "Power Lunch."

Hopes about deregulation and tax reform spurred the sector higher on Wednesday, with the SPDR S&P Regional Banking ETF (KRE) surging 3.1 percent.

On Tuesday, Federal Reserve chairman nominee Jerome Powell said he favors "tailoring" regulations to alleviate the burden on smaller banks.

"We want regulations to be the most intense, the most stringent for the very largest, most complex institutions and want it to decrease in intensity and stringency as we move down through the regional banks and the community banks," Powell said at his confirmation hearing in the Senate Banking Committee.

Meanwhile, the Senate Budget Committee approved its tax plan on Tuesday, sending it to the chamber for a full vote.

However, Micenko said he believes regional bank stocks fully reflect the anticipated tax and regulatory reform.

"The core drivers of earnings growth are not there. We took our estimates down on 90 percent of our coverage coming out of the third quarter. We need to see some loan growth … to get more constructive," he said.

However, Barclays senior equity analyst Jason Goldberg doesn't think the potential of tax reform is fully priced into big bank stocks.

The Financial Select Sector SPDR Fund (XLF) also rallied on Wednesday, trading up 1.7 percent.

"While the group has had a run, if you look at relative multiples, today versus where we are prior to the election, they really haven't gone up too much despite the fact that this group is levered to higher rates, lower corporate tax rates as well as this regulatory rollback theme," he told "Power Lunch."

— CNBC's Jeff Cox contributed to this report.