Americas Regional Banks & Consumer Finance 3Q26 Preview Focus on deposit competition, rates, continued loan growth and a le...

Equity Research 5 October 2026 | 7:26AM EDT

AMERICAS REGIONAL BANKS & CONSUMER FINANCE

3Q26 Preview: Focus on deposit competition, rates, continued loan growth and a less certain macro

Thoughts on Regional Banks into 3Q26 EPS Ryan M. Nash, CFA | We are upbeat on the regional banks headed into 3Q26 EPS as the stocks are coming Goldman Sachs & Co. LLC

in on the lows (down ~12% since last reporting and 11% since 8/1, UP market by Lucas Haimes | >1,000bps over those timeframes) given a handful of macro and micro concerns that Goldman Sachs & Co. LLC are weighing on the stocks. While there are a handful of issues, including 1) the impact on the economy from rate hikes (1 in September, marketing pricing in ~3 Charlie Driscoll | more hikes by mid-2027) and higher LT rates (~5.20% today; peak of ~5.3% and up Goldman Sachs & Co. LLC ~70bps QoQ), 2) deposit competition in a higher rate environment and 3) what Gaurav Chandak agentic AI could mean for profitability over time (deposit costs, loan pricing etc.), we | expect earnings to be solid with continued loan growth, deposit costs rising at a Goldman Sachs India SPL

lower level than is being priced into the stocks and 4Q outlooks to be relatively upbeat as banks benefit from lagged deposit re-pricing, loan growth remains solid and capital markets support higher fees. So while the stocks are now on the lows and trading at <10x 2027E, we think many of these risks will prove to be less impactful in the near-term and could drive a relief rally in the group.

Key areas of focus / areas worth watching: 1) The path of deposit costs in a more competitive environment along with how betas will respond to rate hikes, where we look for most to point to the 50-55% incremental betas experienced during the rising rate cycle, 2) the durability of loan growth in a higher rate environment, 3) combining these, whether asset sensitivity will help support higher NII growth into 4Q and 2027, 4) updated thoughts on credit where most updates were positive (reserve releases?) although with the move in rates we will be looking for any early indicators on stress, particularly areas like multifamily, 5) capital, where we estimate adj. CET1 ratios will fall 23bps in 3Q26 and wonder if any additional banks point to a pause in buybacks if capital ratios fall below their targeted levels, 6) expectations for capital markets, where results were solid but the move up in rates could potentially weigh on activity, 7) any early 2027 guides (historically have got some color at 3Q but nothing too formal) as some may point to levels of operating leverage and 8) the view on the impacts of agentic AI and whether deposit cost fears are realistic or overblown.

Views on the stocks: Heading into 3Q26 EPS, the stocks trade at ~9.8x 2027E (down from ~10.5x at end of 2Q26 and a peak of 11x early in 3Q) and 1.55x P/TBV (down from ~1.80x, although TBV could be headed lower given the move in rates), which is

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Goldman Sachs Americas Regional Banks & Consumer Finance

relatively in-line with where they started the year and have round-tripped. Given the return improvement we are expecting over the next 12-24 months, we think the market is discounting an overly onerous outcome on some of the items outlined above. We think one of the main issues is that interest in the regionals has dried up a bit given the views (based on conversations) that 1) if the economy slows, loan growth is likely to follow and credit issues could start to emerge (CRE?) while AOCI risk could continue to be part of the dialogue, 2) the curve feels like it’s destined to flatten and 3) deposit competition is elevated and the path for funding costs is…