Big U.S. banks have signaled that they expect net interest income to bottom out in the next few quarters as they keep an eye on whether the cost of consumer deposits will come down, a bank analyst said in a research note on Monday.
Fifth Third Bancorp FITB, -1.80% is a pick among larger regional banks, with Western Alliance Bancorp. WAL, -2.79% and First Horizon Corp. FHN, -2.11% among mid-sized banks. The potential for lower interest rates from the U.S. Federal Reserve as well as a soft jobs report and a drop in Treasury yields in recent days bode well for banks, he said.
“It is not clear how far past the last rate hike deposit costs will continue to rise, but there is an expectation that demand-deposit account balances will continue to grind lower and remix into interest-bearing in a higher-for-longer rate backdrop,” Usdin said. Outside of office commercial real estate, Usdin said the banks see no other big credit concerns right now.