US banks funding costs rose at a far quicker pace in the first quarter as the impact of the Federal Reserve’s swift pace of rate hikes and the fallout from several large bank failures led to notable increases in deposit costs in the period. Those failures occurred with just a few weeks left in the quarter, however, suggesting that banks will feel more stress from the liquidity crunch that occurred mid-March in the coming quarters. Those liquidity pressures will weigh on margins as banks prepare for slippage in credit quality by building reserves for loan losses, resulting in a double-digit hit to earnings.
