Rating agency Fitch said on Wednesday that U.S. regional banks will face continued challenges in 2024, with banks focused on commercial loan growth disproportionately disadvantaged.

"All U.S. banks will need to take defensive measures to conserve capital and provision for higher expected losses," Fitch analysts said in a report. Fitch cited scarcer opportunities for revenue growth "amid a restrictive rate environment, rising regulatory requirements and capital costs, and less benign credit quality."

The regional banking sector was in turmoil in the spring as Silicon Valley Bank (SVB) abruptly collapsed after grappling with large amounts of unrealized losses spurred by rapidly rising interest rates. Depositors fled SVB within days after it appeared the firm was in trouble, precipitating its abrupt closure.

(Reporting by Pritam Biswas in Bengaluru and Megan Davies in New York; Editing by Shounak Dasgupta and Jonathan Oatis)