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Hidden strengths of the U.S. banking system

Amid economic uncertainty, when headlines often focus on capital market risk and volatility, Fidelity's Pierre Sorel is seeing green in the health of the U.S. financial system.

Despite rising government debt and fluctuating interest rates, U.S. banks have maintained conservative lending practices and robust underwriting standards since the regional banking crisis in 2023, according to Fidelity Portfolio Manager Pierre Sorel, who thinks this discipline has not only kept loan-related losses in check but also helped pave the way for growth.

“I believe domestic banks represent a foundation of strength within the financial system right now, thanks to ample capital and high liquidity, which should enable lenders to better weather economic turbulence,” says Sorel, who manages the financials holdings for Fidelity® Stock Selector Fund (FDSSX) and several other portfolios.

What’s more, he notes, regular stress tests conducted by government regulators continue to confirm the health of the banking system, while the Trump administration’s emphasis on deregulation within the industry may enable banks to contribute to broader U.S. economic growth.

“Operating under carefully considered looser restrictions, these institutions would have the ability to deploy capital into incremental areas that generate more fees and interest income,” he explains.

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Regional banks could benefit from a shorter regulatory review cycle, which may accelerate merger-and-acquisition approvals, helping to create cost-saving synergies and expansion potential, according to Sorel.

As an example, he cites Popular (BPOP), the leading depository bank in Puerto Rico and a non-benchmark fund position as of September 30. The company holds a unique position in a market with limited competition, according to Sorel, who also likes its significant excess capital and potential for accelerated growth.

Turning to large lenders, Sorel has favored Wells Fargo (WFC), a top holding that he believes is on the brink of a transformative moment following years of mismanagement and navigating regulatory hurdles.

He highlights that the anticipated lifting of the cap on assets imposed by federal regulators could allow Wells Fargo to deploy capital into new growth avenues, helping to unlock fresh revenue streams and strengthening its competitive edge.

“Banks are not just the backbone of the financial system, they are evolving, adapting and thriving in ways that present compelling investment opportunities,” concludes Sorel.

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Pierre Sorel
Pierre Sorel
Portfolio Manager

Pierre Sorel s a sector leader and portfolio manager in the Equity division at Fidelity Investments.

In this role, Mr. Sorel is responsible for covering the financial sector and is a member of the Stock Selector Large Cap Group where he manages the financials and real estate sleeves for various diversified sector-based portfolios. Additionally, he manages Fidelity Financial Services Central Fund and co-manages Fidelity and Fidelity Advisor Balanced Fund, VIP Balance Portfolio, Fidelity Series All-Sector Equity Fund, FIAM Strategic Advisor Core Research Fund, FIAM U.S. Total Stock Fund, Fidelity Advisor Stock Selector Mid Cap Fund, and Fidelity Disruptive Finance ETF. Mr. Sorel also co-manages the financials sleeve of the FIAM Global Sector Strategies: FIAM Small/Mid Cap Core, FIAM Large Cap Core, and FIAM Global Core

Prior to assuming his current position, Mr. Sorel managed Fidelity Funds Global Financial Services Fund, a financial services sector fund available exclusively to investors outside of the U.S and co-managed Fidelity Advisor Stock Selector All Cap Fund. Previously, he worked as an analyst covering the leisure, automobile, and banking industries in Europe at Fidelity International Limited (FIL).

Before joining FIL in 1998, Mr. Sorel was a financial services consultant at Oliver Wyman. He has been in the financial industry since 1993.

Mr. Sorel earned his Bachelor of Arts in economics and his Bachelor of Science in electrical engineering from Brown University; his Master of Science in computer engineering from Princeton University; and his Master of Business Administration from INSEAD. He is also a CFA® charterholder.

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