Deposit Costs Fell in Q1, but Funding Competition Is Reemerging

U.S. bank funding costs fell more than expected in the first quarter, with the industrywide cost of funds declining 11 basis points to 2.07% following Fed rate cuts late last year, according to S&P Global Market Intelligence. Deposits also grew 5.0% year over year to $18.828 trillion.

However, another S&P article suggested the relief may not last. Banks are facing renewed competition for deposits as inflation concerns and a possible pause in rate cuts keep CD pricing elevated, while early second-quarter data showed industry deposits beginning to decline again.