U.S. banks reported lower-than-expected interest-bearing deposit costs in the first quarter, but executives and analysts increasingly expect that improvement to stall as the Fed appears less likely to cut rates and competition for funding remains intense, S&P Global Market Intelligence wrote. Several banks also suggested that stronger loan growth and renewed promotional pricing could push deposit costs higher later this year.
Separately, S&P reported that federal banking regulators continue to sharply reduce severe enforcement activity, terminating far more actions than they have issued in 2026 as supervisory priorities shift toward material financial risk. Nearly all new severe actions since the start of 2025 have involved community banks, even as agencies narrow their interpretation of unsafe or unsound practices and limit the use of formal supervisory actions.