Regional Banks Report Stable or Higher Deposits

Regional banks are still facing a variety of pressures, but in terms of deposits they are doing better than they were three months ago.

Second-quarter results released this week showed that many regional lenders’ deposits were stable or higher than they were in the first quarter, The Wall Street Journal (WSJ) reported Friday (July 21).

Among those reporting stable or higher deposits were Citizens Financial Group, KeyCorp, M&T, Western Alliance Bancorp and Zions Bancorp, according to the report.

Three months earlier, at the end of the first quarter, regional banks’ reports showed that customers had been pulling their deposits, the report said.

Relieved investors have welcomed the news, and the shares of Citizens, Keycorp and U.S. Bancorp are all up at least 10% this week, and those of Zions are up more than 20%, per the report.

Further demonstrating the rising stock prices in the banking sector, both the KBW Nasdaq Bank Index and the KBW Nasdaq Regional Banking Index have risen by 8% or more this week, making for their best week in more than a year, according to the report.

Citizens CEO Bruce Van Saun told the WSJ, “I think confidence in the system has been restored somewhat. I still think we’re in a challenging environment.”

Banks had to offer their customers more interest during the quarter in order to retain those deposits, according to the report. For that reason and others, profits at many regional banks were lower than Wall Street’s expectations.

While regional banks’ deposits were stable or higher compared to the previous quarter, their deposits — and those of banks of all sizes — are lower than they were a year ago, the report said.

Heading into the week, before these regional banks reported their earnings, some of these smaller lenders had already warned that revenues could be down as they face a variety of pressures.

Morgan Stanley analyst Manan Gosalia told Bloomberg in a report published Monday (July 17): “As we go through the earnings season, the attention is going to shift back from deposit levels to deposit costs, and the attention is going to shift back to net interest income. These things are heading the wrong way.”