US Banks: Reading the Tea Leaves: Losing steam...but some engines still firing

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US Banks: Reading the Tea Leaves: Losing steam...but some engines still firing

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US Banks: Reading the Tea Leaves

Losing steam…but some engines still firing

Industry Overview

Regional bank updates validate peak NIM concerns… 26 July 2026

2Q results from the regional banks were uninspiring. While most regional banks beat Equity

EPS (94% of our coverage), the drivers were less exciting (mostly higher fees or lower United States

credit costs). Importantly, management updates confirmed growing concerns that Banks

regional banks are close to peak net interest margins (NIM), with average NIM flat QoQ Ebrahim H. Poonawala

and 54% of regionals reporting sequential compression (Exhibits 1-2). We also believe Research Analyst

the best of ROTCE targets have been outlined. From here certain banks will meet vs. BofAS+1 646 743 0490

miss targets. Other than the potential to unlock excess capital (on the back of regulatory ebrahim.poonawala@bofa.com

changes), we see few non-macro catalysts to drive a broad re-rating higher in the group. Brandon Berman

Research Analyst

BofAS

+1 646 855 3933…and the Street isn't buying the NII > NIM defense

brandon.berman@bofa.com

Management teams were at pains to highlight the importance of net interest income

Gabriel Angelini

(NII) vs. an overly narrow focus on margins (we sympathize a bit). However, we sense a Research Analyst

lack of conviction among investors that the profitability hit from lower margins—which BofAS +1 646 855 3081

feels more permanent absent a change in the rate backdrop—can be offset via fees (less gabriel.angelini@bofa.com

predictable) or expenses. Credit/capital leverage offsets are less appealing. Moreover, Michael Campos

it's not as though NII growth is crushing it, with reported 2Q in-line vs.