S&P Global Market Intelligence

If you are a client of S&P Capital IQ Pro, you can access the complete 2023 US Bank Market Report here.

Swift rate increases and a liquidity crisis at a handful of banks, including several major failures and shutdowns late in the first quarter of 2023, have placed a far greater premium on deposits at US banks. The search for deposits will cause already increasing deposit costs to accelerate at a quicker pace in the first half of 2023. Banks will also respond to the liquidity crunch by building reserves for loan losses, slowing loan growth and building cash on their balance sheets. Those actions in conjunction with higher funding costs will put pressure on margins and earnings.

Key findings include:

US bank earnings are expected to fall 18.3% in 2023 as deposit outflows and notably higher deposit costs weigh on net interest margins.
Higher interest rates have boosted loan yields but have also led to growing pressures on bank liquidity. Funding costs will rise at a quicker pace than earning-asset yields in 2023, causing net interest margins to contract by 10 basis points in 2023 and another 7 basis points in 2024.
Deposit betas, or the percentage of rate changes banks pass on to customers, will more than double in 2023 from year-ago levels.

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2023 US Bank Market Report

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