Major U.S. banks are nearing third-quarter earnings announcements, with the cost of attracting deposits emerging as a key variable that could determine profitability. A September interest rate increase by the Federal Reserve is expected to expand loan interest income, but it could also raise the burden of interest payments to keep deposits.

American Banker reported that JPMorgan Chase, Goldman Sachs, Wells Fargo and Citigroup will report third-quarter results on Oct. 13, local time. Bank of America, Morgan Stanley and State Street follow on Oct. 14.

The Fed last month raised its benchmark rate by 0.25 percentage point to 3.75 to 4.00 percent. Higher loan rates can help bank earnings, but banks may need to offer customers higher rates to prevent deposit outflows. Steven Scouten (스티븐 스카우튼), an analyst at Piper Sandler, pointed to strong deposit growth at mid-sized banks but said the cost paid to secure deposits is key.

Markets are watching the direction of net interest income and net interest margin. Net interest income is the amount of interest income minus interest expense, and net interest margin is a profitability indicator that compares that figure with interest-earning assets. BofA Securities forecast that regional banks' deposit funding costs could be higher than expected.

Loan growth is a positive factor. Experts analysing Fed data said bank lending rose about 7.5 percent from a year earlier. Corporate lending in particular is leading growth, helped by AI data centre and infrastructure investment. The outlook for commercial real estate lending is mixed.

Falling values of bonds held due to higher rates are also a burden on share buybacks. Citigroup bought back $10.3 billion worth of its own shares in the first half, but some observers say the pace of buybacks across the banking sector could be adjusted going forward.

AI investment is also a focus. Attention is on how banks use AI not only to cut costs but also to win customers and strengthen relationships.