Investors and analysts will be interested in hearing about the economic trends that banks are seeing in their particular markets, now that they have had more time to see how the tariffs are impacting loan demand, consumer spending, and asset quality. The interest will be higher for banks whose markets have a significant amount of manufacturing and agricultural activity where tariffs are having a greater impact.
Industry data and mid-quarter updates from banks has indicated that there is modest loan growth occurring in the second quarter with both C&I and CRE loan growth improving from the prior quarter, although many banks are also indicating they are seeing elevated payoffs and paydowns. Along with loan growth in the second quarter, investors and analysts will be interested in hearing how loan pipelines are trending and how that is impacting expectations for the level of loan growth in the second half of the year, and which areas of lending are expected to drive most of the loan growth.
Many banks were able to successfully reduce deposit costs in the first quarter, so there will be interest in seeing if they have continued to reduce rates and to what extent that has impacted deposit flows and deposit growth. There will be interest in hearing about the competitive environment in markets and if some banks are still being aggressive in pricing to win deposits.
Many banks saw expansion in their net interest margins in the first quarter due to a combination of being able to reduce deposit costs and new loans coming on the books at higher rates than the loans that paid off. There will be interest in seeing if that trend continued in the second quarter, as well as how banks are expecting their net interest margin to trend over the remainder of the year given that the Fed hasn’t cut rates yet, but that two 25 bp cuts are still projected for the second half of the year.
During the first quarter, there were negative trends in particular categories such as multifamily, construction, and agriculture, although these trends were more pronounced in certain geographic markets than others. Broadly speaking, C&I asset quality was stable and CRE improved a bit. There will be interest in seeing if the areas that saw negative trends in the first quarter continued to decline in the second quarter. In addition, corporate bankruptcy filings have been increasing in recent months, so there will be interest in seeing which banks are being impacted by these bankruptcies and seeing an increase in net charge-offs as a result.
Investors will be interested in getting an update on priorities for capital utilization, including if M&A and stock buybacks are becoming a greater possibility, particularly since banks may not feel they need as much capital to support organic loan growth with their expectation for the level of loan growth this year now being lower.
Given the uncertain outlook for the economy as well as the first half of the year now being recorded, investors and analysts will be interested in hearing if banks have made any change to the guidance that was previously provided for expected loan and deposit growth, NIM trends, fee income, expenses, and asset quality.
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