U.S. Large-Cap & Mid-Cap Banks "Deposits in the spotlight: the near- and..."

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U.S. Large-Cap & Mid-Cap Banks "Deposits in the spotlight: the near- and..."

ere will raise eyebrows, but deposit dynamics appear to be fully priced into shares vs. andrew.gorczyca@ubs.com

peers, and we think mgt. will clarify its NII path for the rest of the year during an early +1-212-649 8017

June financials conference. SMID Top Picks are PNFP and BPOP, both with higher levels Chintan Prakash

of indexed deposits and idiosyncratic near-term catalysts. Associate Analyst

chintan.prakash@ubs.com

Looking back: deposit growth & rate trends during a prolonged pause +1-212-713 3061

In general, when looking at five periods where there's been a prolonged Fed pause, we

think it will be tough to keep deposit costs flat -- which was the stock answer for most

banks during earnings season. To this end, we think CFG and FHN are de-risked among

regionals, as guidance called for deposit costs to essentially rise from 1Q levels.

Assessing deposit defensibility: FITB, PNC look solid among the regionals

We looked at 11 metrics for large-cap banks (given lack of funding comparability, we

excluded MS, GS and the cards in this analysis) that look at: 1) deposit "stickiness"; 2)

"quality growth"; and 3) vulnerability to upward pressure in deposit rates. In our

coverage, FITB and PNC consistently looked defensive across metrics. In mid-cap banks,

we break risk into 3 buckets, 1) greatest risk for those with CD reliance and faster loan

growth (OZK, EWBC), 2) second is lowest costs with accelerating growth (FIBK, COLB),

and 3) least at-risk those with highest levels of indexed deposits (BPOP, PNFP).

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