'Shark Tank' star Kevin O'Leary says regional bank stocks are dead and 'going to zero for sure'

Regional bank stocks are headed to zero, according to Shark Tank's Kevin O'Leary.
O'Leary speculated US banking would go through a "metamorphosis," and most US banks would be unprofitable.
He previously said he would never own a bank stock again following the rescue of SVB and Signature Bank.

Kevin O'Leary thinks regional banks and their shares are doomed.

The "Shark Tank" star has been a loud critic of the government's rescue of Silicon Valley Bank and Signature bank, which both failed earlier this month, arguing that it is a reason investors should steer clear of shares of small and mid-sized lenders.

"Let's have a moment of silence for small regional banks. They're dead. It's over," the Shark Tank investor said in an interview with Yahoo Finance on Wednesday, predicting that the industry would soon go through a "metamorphosis," wherein small regional banks will consolidate into "super-regionals." That would take the number of banks to just a few hundred, down from several thousand currently in business.

Amid the volatility stemming from the collapse of SVB, O'Leary said he would never own another bank stock again, as regulation spawned from the crisis will make most banks unprofitable. He also slammed the rescues as protecting what he described as incompetent bank management, which he thinks set a bad precedent.

Tighter regulation will turn banks in general into a "highly-regulated utility," and a trade rather than a long-term investment option, O'Leary said on Wednesday. The shift is also certain to kill off smaller banks, as those are a relic from the past when regional banks were needed to support the local economy and community activities, but digital banking has rendered that function obsolete, he said.

"Stop kumbaya-ing all these tiny banks that are going to zero for sure," he said.

President Biden has called for stronger banking rules since the implosions this month. The Fed is also investigating its supervision of Silicon Valley Bank, as officials reportedly spotted red flags years before it collapsed, per the New York Times.

But regional bank stocks have staged a recovery as fears of a wider crisis reced. Last week, US Treasury Secretary Janet Yellen communicated the government's willingness to protect bank deposits, spurring a brief rally in regional bank stocks, and reports last weekend of more government support for banks allowed some beaten-down names to stabilize.

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