Net interest margins shrink as loans contract, deposit costs rise.

U.S. banks reported negative loan growth in the first quarter, according to S&P Global Market Intelligence.

Aggregate loans and leases held by U.S banks and savings and loan associations declined by 0.3% in the first three months of 2024 compared with the previous quarter, the firm said — marking just the second time in the past 12 quarters that loan growth has been negative.

“Banks reduced credit card loans by US$35.7 billion and other consumer loans by $14.3 billion,” S&P noted.

These declines were partly offset by growth in certain commercial and industrial loan segments, it said.

The big four U.S. banks — JP Morgan, Citi, Bank of America and Wells Fargo — all saw quarterly loan contraction, S&P noted.

“The loan growth trend at smaller institutions was mixed, but sentiment may be improving,” it said, noting that its latest survey of community bank executives found the share of respondents expecting loan growth in the next 12 months had increased from previous surveys.

Banks’ funding costs continued to rise in the first quarter, which put “downward pressure on the industry’s aggregate net interest margin in the quarter,” S&P said. “The aggregate bank net interest margin on a fully taxable equivalent basis took a hit from both sides of the income statement, falling to 3.10% from 3.19% in the last quarter of 2023.”