US banks underperform, but a survey shows positive investor outlook

US bank stocks slightly underperformed the broader market in the first week of June, but banker and investor sentiment on the industry remains positive, according to a recent survey conducted by D.A. Davidson.

The S&P 500 rose 0.5% from the market's close on May 29 to the close on June 5 while the KBW Nasdaq Bank index finished the week at the same price it started.

Best performers

Only 31 banks of 290 in an S&P Global Market Intelligence analysis posted positive returns for the week. Bank of Marin Bancorp. was the top-performing bank of the week with a total return of 3.1% while Colony Bankcorp Inc. was the second-best performer with a total return of 2.0% and Seacoast Banking Corp. of Florida, which announced an agreement to acquire Villages Bancorp Inc. on May 29, rounded out the top three with a total return of 1.7%.

Worst performers

First Capital Inc. was the worst-performing bank of the week with a total return of negative 12.2%, while Hingham Institution for Savings was the second-worst performer of the week with a total return of negative 9.4% and SB Financial Group Inc. was the third-worst performing bank with a total return of negative 8.0%.

Survey says

Bank stocks have faced some challenges in 2025, and 67% of investors who responded to a D.A. Davidson survey of more than 100 bank executives and investors said they view the sector's valuation as an attractive entry point, according to a June 4 research note. Investors ranked profitability and a strong funding profile as the two most important investment attributes for banks.

"Sentiment appears more positive, and is evident in less of a defensive focus on both business models and valuation," D.A. Davidson analysts wrote.

And while President Donald Trump's tariff and trade policy has driven greater economic uncertainty in recent months, 68% of bank executive respondents said they view it as the right policy in the long term, in contrast to 68% of investors who said they view it negatively or as poorly executed.

"Bank executives maintain high expectations to benefit from the Trump administration in terms of deregulation and tariff and trade policy wins with investors more keen on just deregulation," D.A. Davidson analysts wrote in a note on the survey.

The majority of respondents also expect additional Federal Reserve rate cuts and flat to improving net interest margins this year, the analysts wrote. The analysts also noted a "pullback" in recession fears, with roughly 50% of respondents saying they see only a 25% chance of a recession in the next year. Furthermore, respondents listed M&A as the most important capital deployment priority followed by stock.

"This highlights how banks view current conditions as ripe for more offensive expansion, especially with loan growth below-trend and capital levels high," the analysts wrote. As such, most respondents expect the pace of M&A to pick up, "which would be welcome given unsteady YTD trends on tariff uncertainty," they added.

Based on the survey results, the analysts listed Banc of California Inc., Huntington Bancshares Inc., WesBanco Inc. and Wintrust Financial Corp. as their top investment picks.