US Banks: 2Q Earnings Preview, Rating Changes (BKU, TCBI, TFC), and Our Preferred Banks ST and LT

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US Banks: 2Q Earnings Preview, Rating Changes (BKU, TCBI, TFC), and Our Preferred Banks ST and LT

Viewpoint |

30 Jun 2026 05:00:00 ET │ 42 pages

US Banks

2Q Earnings Preview, Rating Changes (BKU, TCBI, TFC), and Our

Preferred Banks ST and LT

Benjamin Gerlinger AC

CITI'S TAKE +1-212-816-3538

The key debate over the last 3 months has been - “What is more important: benjamin.gerlinger@citi.com

NIM or NII?” While most investors would agree that NII drives EPS while NIM Mikhail Mrotchek

is just an output on an income statement, the spirit of the quarter digs into

a deeper focus of how banks manage their deposit franchises as growth +1-212-816-2345

continues to prove stronger than expected. While we view NII as being the misha.mrotchek@citi.com

key driver to not only EPS growth but also the valuation multiple, leveraging Kaili Wang, CFA

the balance sheet (and weighing on NIM) is unlikely to be rewarded near- +1-716-730-7408

term as incremental NIMs weigh on back-book profitability. We believe the

best-positioned banks check the boxes of commercially focused (both kaili.wang@citi.com

loans and deposits), healthy capital bases, and limited credit concerns.

Rating Changes — We are downgrading our rating on BKU from Neutral to Sell (TP

from $50 to $45) as the set-up for NIB deposit is likely to weigh on core operating

metrics, with a potential guide down on 2026 NIM trends. We are upgrading our

rating on TCBI from Sell to Neutral (TP from $96 to $105) as the bank has continued

to show material success on its investment banking strategy, and downgrading TFC

from Buy to Neutral (TP from $63 to $54) with the looming mgmt change. More

details on the following page.

Shorter-Term Opportunities — If we are using earnings prospects, considering both