So far, 180 publicly traded banks have reported interest expense for 2Q23. While many bank investors are focused strictly on deposit betas, it’s more telling to focus on a banks total funding cost, which increasingly include secured borrowings or other expensive purchased funding. Adjusting funding mix can buy time for banks to hold deposits rates; but it still raises funding cost since borrowings incur significantly higher cost than deposits for most banks.
At the trough of the Fed Funds rate, the median bank’s total cost to fund earnings assets sat at 0.27%. That median cost has risen 118bps since 2Q21 to 1.46%. 38bps of that increase occurred during 2Q23. This curve will change some as more banks report; but this is a wide sample.
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