Cramer examines why bank stocks performed poorly this year (2024)

CNBC's Jim Cramer on Tuesday explained why the regional and national banking sector has performed poorly this year.

"When we look back at this era of stagnant bank stock prices, I think we may have to conclude that unless something changes, they've become an anchor to leeward in a market desperate for a broader firmament," he said.

Cramer said part of traditional banks' issues stem from fear of regulators, who have become more aggressive. Banks also ran into problems when they made investments in longer-term bonds while interest rates were lower, with these assets now worth less in a higher rate environment, he said. He added that regional banks should consider mergers to cut costs.

But Cramer also stressed many banks' inability to modernize, saying they "simply missed an entire generation of customers."

Banks should have tried to get in on fintech businesses with newer modes of money lending and management, he said, mentioning enterprises like PayPal or Affirm, which offers customers "buy now, pay later" services. Cramer also wondered why banks "ceded" point-of-sale business to companies like Toast, a cloud-based restaurant management outfit.

"I don't want to hear that they aren't allowed to innovate," Cramer said. "These banks could figure out a way to do more — they could do it — if they were more creative, and they would have got permission. Heck, the government should want them to do it, then they could regulate these financial technology businesses."

Sign up nowfor the CNBC Investing Club to follow Jim Cramer's every move in the market.

Disclaimer