Bankers, trying to figure out how tariffs will affect the economy and their financial positions, are taking their best guesses on how they could be hit by any fallout.
Regions Financial, a bank focused on the Southeast, cut its forecast for loan growth and income from lending. Cincinnati-based Fifth Third Bancorp reduced its estimate for fee income. And Truist Financial, based in Charlotte, North Carolina, but with operations from New Jersey to Texas, said revenue will grow at a slower pace than previously estimated.
Banks are taking varied estimates, disclosed in reporting on their first-quarter earnings, because their business clients — including a significant amount of commercial property borrowers — have said they just don't know where the economy is heading. Those banking customers said they are taking a break in the meantime from making major financial decisions until the Trump administration provides more clarity on its trade policy.
Regions' clients want to invest in their business or make acquisitions, but they're holding off for now, CEO John Turner said during a conference call.
"The issue is primarily an understanding of what the impact of tariffs will be on cost of projects and other things," Turner said on Wednesday. "We're not seeing any borrowings to facilitate increasing inventories. Customers are still carrying a tremendous amount of liquidity on their balance sheets."
Regions cut its forecast for net interest income — or profit from loans — to grow in 2025 between 1% and 4% compared to 2024, down from a previous estimate of 2% to 5%. Regions also lowered its guidance for loan growth, saying that average loan balances will remain little changed in 2025 from 2024, down from an earlier estimate of 1% growth.
Though the tariffs do not directly affect banks, the trade war’s effect on the economy is top of mind for banking executives, Laurent Birade, banking industry practice lead at Moody’s, said in a Thursday research report.
“The dominant negative theme is pervasive caution: management commentary is flagging significant headwinds from geopolitical tensions, trade uncertainty and persistent inflation,” Birade said.
Commercial customers are split
Executives at Fifth Third said there is a 50-50 split of its commercial customers that view tariffs as a negotiating tactic and those that fear long-term effects. A number of businesses are adjusting prices to cover higher tariffs, and Fifth Third is planning to focus on expense management to navigate any potential slowdown.
Tim Spence, CEO of Fifth Third, said he's had meetings with 50 business owners during travel across the country, from a variety of industries including materials, manufacturing, transportation, logistics, energy, automotive, healthcare and other sectors.
“I would say that the magnitude of the tariff announcement caught them all by surprise,” Spence said during a conference call. “I would say, universally, their belief is that the only way they really have to respond in the near-to-medium term is to push prices.”
Most businesses aren't waiting for tariff rates to be finalized to increase prices, Spence said. Contracts with distribution partners require at least 60 days' notice about price changes, and they need to move sooner rather than later, business owners told Spence.
“What was maybe a little bit interesting to me is that the folks that have domestic supply chains were also saying they have to move prices in the U.S. because they're expecting that if the tariffs hold, they're going to experience volume losses in foreign markets," Spence said.
They will need to raise prices "just to be able to cover overheads and run their businesses."
Fifth Third lowered its estimate for 2025 fee income growth to a range between 1% to 3% compared to 2024, down from its earlier estimate of growth between 3% to 6%.
KeyCorp, based in Cleveland, resisted making adjustments to 2025 guidance that were too negative.
“The economy is in a period of great uncertainty,” CEO Christopher Gorman said during a conference call. “We're 15 days into these tariffs. The reality is our credit book is in good shape; our clients are in good shape; our backlogs are in good shape; our business is doing well.”
Fifth Third also declined to lower its guidance for loan growth.
“From my point of view, we have to go with what we know,” Spence said. “With the expectations on loan growth, you start from where you are, and then you work forward. So, if we had zero additional loan growth from March 31 forward through the rest of the year, we would already be in what was the low end of our loan guidance range previously. And we have the pipelines to be able to support what we're projecting here with customers.”
Other bankers felt more comfortable saying publicly that the tariffs are causing a slowdown.
Revenue for Truist Financial will grow at a slower rate in 2025 than previously forecast due to reduced activity in its investment banking unit and lower income from wealth management services, Mike Maguire, the company's chief financial officer, said during a conference call. Truist now expects full-year 2025 revenue to increase between 1.5% and 2.5% compared to 2024, lower than the 3% and 3.5% growth the bank estimated only three months ago.
During the call, Truist CEO Bill Rogers cited the effects of “volatility and uncertainty and tariffs” on the bank’s clients, causing them to slow down or postpone some business decisions.
Truist kept its estimate for year-over-year 2025 loan growth in “low single digit” percentage points, with Maguire citing “our current loan pipeline and a solid start to the year.”
Bill Demchak, CEO of PNC Financial Services Group, encapsulated the issue that all bank executives are facing when the Pittsburgh company reported earnings on Tuesday.
"Everyone's trying to figure out what the steady state will be with tariffs and how they need to, if at all, change the business model to succeed inside of the world with tariffs,” Demchak said during a conference call.