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

We are upbeat on the regional banks headed into 3Q26 EPS as the stocks are coming in on the lows (down ~12% since last reporting and 11% since 8/1) given a handful of macro and micro concerns. While there are issues including 1) the impact on the economy from rate hikes and higher LT rates (~5.20% today; up ~70bps QoQ), 2) deposit competition in a higher rate environment and 3) what agentic AI could mean for profitability over time, we expect earnings to be solid with continued loan growth, deposit costs rising at a lower level than priced into the stocks and 4Q outlooks to be relatively upbeat as banks benefit from lagged deposit re-pricing, solid loan growth and capital markets support for fees. Key focus areas include the path of deposit costs and betas, durability of loan growth, asset sensitivity supporting NII growth into 4Q and 2027, credit (particularly multifamily), capital (adj. CET1 down 23bps in 3Q26), capital markets, early 2027 guides and the impact of agentic AI. We rema