Competition for deposits picks up a bit in Q2: Citigroup

(Reuters) - The battle for deposits among U.S. banks intensified modestly in the second-quarter, with lenders aggressively cutting rates, even as they see investors moving away from money market deposits because of improved pricing, said analysts at Citigroup.

Banks, looking to grab share from the U.S. money market mutual fund assets, currently tipped at $3.8 trillion, are aggressively cutting deposit rates, with Comerica Inc (CMA.N), U.S. Bancorp (USB.N) and Huntington Bancshares Inc (HBAN.O) leading the pack, analysts said.

Analyst Keith Horowitz said he sees net interest margins for banks bottomed in first-quarter, and said it will be flat to up slightly in second-quarter.

At least six lenders including KeyCorp (KEY.N), Fifth Third Bancorp (FITB.O) and Huntington Bancshares Inc (HBAN.O), who were most aggressive with deposit pricing a year ago, will likely see a benefit in second-quarter as high cost deposits roll off, Horowitz said.

However, banks may see stiff competition from companies, which were previously operating in the securitization market which seized up during credit crunch, as they are offering highly competitive rates to attract deposits quickly, Horowitz noted.

(Reporting by Archana Shankar in Bangalore, Editing by Dinesh Nair)