Most US regional banks posted sequential deposit declines during the second quarter as deposit competition reignited.

All but two of the nine US banks with total assets between $100 billion and $1 trillion saw their quarter-over-quarter deposit balances fall, a stark contrast from the first quarter when six of the nine posted deposit growth.

Net interest margin (NIM) pressure was mitigated though, with five of the nine banks in the analysis reporting quarterly NIM expansion, compared with none last quarter, according to an S&P Global Market Intelligence analysis.

Deposits back under pressure

Among the seven banks in the analysis that reported quarter-over-quarter total deposit declines, five also reported year-over-year decreases.

M&T Bank Corp. reported the largest quarterly deposit decline at 4.4%. The decline was largely due to a $1.2 billion drop in brokered deposits as the company looked to reduce its reliance on non-customer funding, CFO Daryl Bible said during the company's second-quarter earnings presentation.

Meanwhile, the company's NIM expanded by 7 basis points, the second most among banks in the analysis, as deposit pricing in its footprint tempered. M&T expects that dynamic and the runoff of broker deposits to continue through 2024.

"Broker fees will continue to run off. We have another big chunk coming off in the third and fourth quarter," Bible said. "We continue to just see more rational pricing in the marketplace, and we're able to maybe offer specials, but the specials that we're offering just aren't as high as what they were before."

Truist Financial Corp. and PNC Financial Services Group Inc. tied for second place with deposits down 2.2%. Truist expects that pressure to continue into the third quarter.

"Actually, deposits a little lower perhaps in the third," Truist CFO Michael Maguire said. "We probably expect a little bit of pressure in the third quarter as well."

Only two banks in the analysis — Huntington Bancshares Inc. and KeyCorp — reported both quarter-over-quarter and year-over-year increases in total deposits.

Huntington's deposit growth came from various avenues such as new customer acquisition and growth in primary household consumer and business banking, as well as "a couple of the new verticals we've got very much focused on deposit gathering," CFO Zachary Wasserman said during the company's second-quarter earnings call. Sustained deposit growth is expected through the rest of the year, which the CFO said will in turn support future loan growth acceleration.

"It sets up that ability to fund with core deposits, the accelerating loan growth that we expect," Wasserman said.

As Huntington grew deposits, the company's NIM shrank by 2 basis points quarter over quarter and 13 basis points year over year.

Meanwhile, growth across both consumer and commercial deposits also drove KeyCorp's average deposits up, CFO Clark Khayat said during the company's second-quarter earnings presentation. As such, KeyCorp increased its average deposit guidance to relatively stable, from flat to down 2%.

At the same time, KeyCorp's NIM expanded by 2 basis points during the quarter to 2.11% but was still down 8 basis points year over year. KeyCorp maintained its NIM expectations between 2.40% and 2.50% by the end of this year, even as it reduced its total loan guidance.

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EPS improves again in Q2 2024, but still down year over year

Year-over-year earnings per share trends were negative in the second quarter, with all but two banks in the analysis reporting declines. However, sequential EPS trends fared better, with eight of the nine banks reporting increases sequentially.

U.S. Bancorp and PNC were the only banks in the analysis to report both sequential and year-over-year EPS increases, while Truist Financial Corp. was the only bank to report both sequential and year-over-year decreases.