2Q26 Preview: Looking for upbeat message on loan growth; focused on path of deposit costs, consumer credit from here

Research evidence excerpt

2Q26 Preview: Looking for upbeat message on loan growth; focused on path of deposit costs, consumer credit from here

re improving

and capital returns remain plentiful. Given this backdrop, into the quarter we are upbeat

on COF and AXP, have a positive bias on ALLY and BFH and are slightly concerned on SYF

given margin risk for 2026. For the mortgage stocks, while there has been some

near-term strength on rates coming in slightly recently, we think things appear to be

settling down and if we get LT rates coming in, along with some positive guides /

catalysts, the stocks could be poised for a pop.

Key areas of focus / areas worth watching: Over the past few weeks, we’ve moved

back from a macro market (oil price / AI risk) to a micro market; we therefore expect key

catalysts to be more company specific than about the broader market. More

specifically, the areas that we think will be of greatest focus include: 1) updated views on

spend across all cohorts, whether there was any impact from elevated oil prices during

2Q and what forward expectations are; 2) what the changing rate backdrop could mean

for deposit pricing and margins given the uptick in competition for new promo offers; 3)

what issuers choose to do with their allowance ratios, as many have held onto qualitative

reserves and, with some clarity on macro / oil, we could see sizable reserve releases and

4) near-term credit performance, where DQs continue to come in better than expected,

losses are tracking below expectations, and we could see some adjust full-year loss

expectations. While the past 2 quarters have been about macro drivers, this feels like

the first time in a while that the micro is the dominant theme and we could see sizable

differentiation based on operating performance.