Tariffs Stand To Spoil Favorable Outlook For U.S. Banks

Summary

• US banks' net interest margins are poised to expand as funding costs move lower, while earning assets mature and are replaced with higher-yielding loans and securities.
• Margins are still expected to expand, but waning consumer sentiment and heightened tariff-related anxiety in the business community are likely to slow growth, reduce investment activity and increase delinquencies.
• We expect deposit costs to decline throughout 2025 as higher-cost CDs roll off banks' books.

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US banks' net interest margins are poised to expand as funding costs move lower, while earning assets mature and are replaced with higher-yielding loans and securities. But the Trump administration's broad suite of tariffs will serve as an overhang on the