According to Nomura analyst Greg Hertrich, nearly 50 U.S. lenders could face collapse in the coming years due to various factors such as higher interest rates and operational issues. Last year, the failures of three U.S. banks—Silicon Valley, Signature, and First Republic—raised concerns about the financial stability of regional lenders.

One of the main concerns is that smaller banks may struggle to maintain profitability if U.S. interest rates decline, as they would need to offer higher rates to customers to retain their deposits. This could result in increased expenses for these institutions, especially if they are unable to retain those deposits once rates start decreasing.

Additionally, geographic concentrations could expose lenders to local economic downturns, while operational challenges such as taking excessive risks or allowing expenses to escalate could further strain their financial health.

Hertrich emphasized that declining interest rates could trigger outflows from these banks, potentially leading to their failure, although he did not specify a timeframe for this scenario.

The recent seizure of Philadelphia-based Republic First by regulators and its subsequent sale to Fulton Bank highlights the pressures faced by smaller banks, including higher costs and sluggish earnings.

Nomura's projection aligns with the Federal Deposit Insurance Corp's list of "problem banks," which numbered 52 at the end of December—the highest level since the first quarter of 2021, when there were 55 lenders on the list.