Key Highlights

• Truist and Fifth Third both paid about 2.1% on interest-bearing deposits, yet Fifth Third's net interest Margin widened to 3.36% while Truist's fell to 2.98%.

• Truist cut its 2026 net interest income growth guidance to 1-1.5% from 2-3%, citing lower Loan spreads and a less favourable deposit mix.

• Fifth Third's Comerica acquisition, completed February 1, 2026, drove a 48% rise in net interest income, with systems conversion finishing in September.

Funding costs matter for Truist Financial (NYSE:TFC) and Fifth Third Bancorp (NASDAQ:FITB) because what each bank pays for deposits and borrowings is doing more to separate their Earnings paths than loan Demand is. In the three months to June 30, 2026, both paid almost the same rate on interest-bearing deposits, about 2.1%. Yet Fifth Third's net interest margin widened while Truist's narrowed, and Truist lowered its full-year net interest income outlook. The difference lies in deposit mix, Acquisition effects and how quickly each bank's liabilities reprice. Both companies are S&P 500 constituents.

Why Funding Is the Swing Factor

A bank's net interest income is the gap between what it earns on loans and securities and what it pays depositors and bondholders. The net interest margin expresses that gap as a percentage of earning assets. When the Federal Reserve cuts rates, asset yields usually fall first, so margins hold up only if funding costs follow.

The speed of that pass-through is summarised by the deposit beta, the share of a policy-rate change a bank passes on to depositors. Noninterest-bearing deposits, such as Business current accounts, cost nothing and cushion the margin. A shrinking share of them therefore raises the average cost of funding even when headline deposit rates are steady.

Wholesale funding matters too. Banks supplement deposits with long-term Debt and short-term borrowings, which usually cost more than core deposits. When bonds issued at lower rates mature and are refinanced at current levels, interest expense rises even if deposit pricing is unchanged, a process known as fixed-rate debt repricing.

Truist (NYSE:TFC): Cheaper Than a Year Ago, but the Mix Is Slipping

Truist reported second-quarter results on July 17, 2026. The cost of total deposits was 1.56%, against 1.55% in the first quarter and 1.85% a year earlier. Interest-bearing deposit costs were 2.10%, down from 2.52% in the second quarter of 2025. Average deposits rose 1.5% on the quarter to $404.9 billion, led by interest checking and time deposits.

The margin moved the other way. Taxable-equivalent net interest margin fell four basis points to 2.98%, which the bank attributed to slightly higher funding costs, lower loan spreads, and a larger balance sheet. Noninterest-bearing deposits slipped to 25.6% of the total from 25.9%, and average long-term debt rose $3.5 billion, at an average cost of 4.77%. Taxable-equivalent net interest income rose only 0.9% year on year to $3.67 billion.

Truist cut its 2026 net interest income growth guidance to 1-1.5% from 2-3%. It cited lower loan spreads, a less favourable deposit mix and the deliberate run-off of lower-return lending, including some auto, marine and recreational-vehicle portfolios.

Group profitability still improved. Diluted Earnings per Share rose 37% to $1.23, the efficiency ratio improved to 58.0% from 59.9%, and Truist repurchased $1.2 billion of shares in the quarter. Funding pressure is narrowing one earnings engine rather than stalling the whole bank, with fees and lower Credit losses doing more of the work.

Fifth Third (NASDAQ:FITB): Comerica Reshapes the Funding Base

Fifth Third's story is dominated by its acquisition of Comerica, which completed on February 1, 2026, and created a bank with more than $300 billion in assets. The technology and Brand conversion, announced September 8, 2026, moved about 600,000 customer accounts and 293 banking centres onto Fifth Third systems over the Labor Day weekend.

Because Comerica has been consolidated since February, year-on-year comparisons are not like-for-like. The second-quarter release showed taxable-equivalent net interest income of $2.22 billion, up 48% on a year earlier and 14% on the first quarter, with average deposits up 42% to $231.5 billion. Those jumps are largely acquisition-driven.

The cleaner funding signal is pricing. Interest-bearing deposit costs fell two basis points on the quarter to 2.13%, from 2.39% a year earlier, and net interest margin rose six basis points to 3.36%. Management cited higher asset yields, Merger effects and improved deposit pricing. Chief executive Tim Spence said the Balance Sheet was well-positioned, supporting net interest margin expansion.

Fifth Third also reported $4.6 billion of consumer deposit growth, described as a re-mix towards a more granular deposit base, including $2.5 billion from a campaign in Comerica's southwestern markets. Retail balances spread across many households tend to be stickier and cheaper than large corporate balances. Fifth Third raised its 2026 net interest income guidance to $8.74-8.80 billion and reaffirmed $850 million of annualised expense synergies by the fourth quarter.

Side-by-Side Funding Picture

Truist lowered interest-bearing deposit costs by 42 basis points over the year, against 26 for Fifth Third, yet Truist's margin still narrowed. That points to asset yields and debt repricing, not deposit rates alone, as the pressure on Truist. Fifth Third benefits from acquired Comerica Assets and a slightly richer noninterest-bearing mix: demand deposits averaged about 28% of total deposits.

The funding gap also feeds Capital allocation. Extra net interest income from cheaper funding adds to retained earnings, which supports Buybacks and dividends. Truist's common Equity tier 1 ratio was 10.9% at the end of June, against 9.93% at Fifth Third, which is still absorbing its acquisition.

What Could Weaken This Reading

Fifth Third's improvement is partly an acquisition effect, and the systems conversion only finished in September, so deposit attrition in former Comerica markets remains possible. Integration also costs money: pre-tax merger charges of $203 million meant reported EPS of $0.83 sat below the $1.02 adjusted figure and the prior year's $0.88.

For Truist, the guidance cut shows that a steady deposit rate does not guarantee a steady margin if cheaper balances migrate into interest-bearing accounts. More broadly, a pause or Reversal in rate cuts would change deposit competition for both. Credit is currently benign, with net charge-off ratios of 0.50% at Truist and 0.30% at Fifth Third, but a deterioration would absorb any funding gains.

Funding-Cost Indicators to Track

Fifth Third's third-quarter results, the first period to include the September Comerica conversion, particularly deposit retention and the interest-bearing cost trend from 2.13%, will be an important test. Delivery of the $850 million expense-synergy target by the fourth quarter is another marker.

Truist's noninterest-bearing deposit share, cost of total deposits and net interest income against its revised 1-1.5% guidance will show whether the mix pressure is stabilising. Long-term debt costs at both banks as maturities are refinanced deserve attention too.