Bank of America's NII Momentum Builds: Can it Maintain the Pace?

Bank of America BAC, among the most rate-sensitive U.S. banks, saw its net interest income (NII) gain momentum after the Federal Reserve cut rates in 2024 after nearly five years. Fixed-rate asset repricing, higher loan and deposit balances and a gradual decline in funding costs drove the sequential increase in Bank of America’s NII since the second quarter of 2024. 

BAC’s NII Trend
 

BAC’s net interest yield has started showing signs of improvement. While the metric declined to 1.97% in 2024 from 2.08% in 2023, it was up from 1.96% in 2022 and 1.66% in 2021. The uptrend persisted in the first half of 2025, with net interest yield remaining stable year over year at 1.96%.

Though the Fed kept interest rates unchanged this year amid tariff and inflation-related headwinds, the chances of a 25-basis point (bp) cut during the next FOMC meeting in September have increased, given the signs of labor market softness and the inflationary effects of tariffs. Despite this, Bank of America is seeing an upside in NII this year.

Management expects NII to be in the range of $15.5-$15.7 billion for the fourth quarter of 2025. This is likely to be driven by fixed-rate asset repricing, higher day count, a rise in Global Banking NII, low single-digit deposit growth and a mid-single-digit increase in loan balance. On the other hand, the 25 bp cut in rates in September and October will likely be an undermining factor. For 2025, NII is projected to rise 6-7%.

With the central bank lowering interest rates, Bank of America is poised to benefit in the near term, even though reduced rates may slow NII growth. However, a softer rate environment is expected to boost lending activity as economic growth remains decent.

How are BAC’s Peers Faring in Terms of NII?

Citigroup C is demonstrating resilience and steady growth in NII. In the first half of 2025, the company’s NII rose 8% year over year to $29.2 million, primarily driven by an increase in average deposit and loan balances, as well as higher deposit spreads.

Going forward, Citigroup’s NII outlook remains favorable and it raised its 2025 NII guidance (excluding Markets). The bank now expects NII to grow 4%, up from the previously mentioned 2-3% rise. In 2024, Citigroup’s NII was $54.9 billion.

Meanwhile, JPMorgan’s JPM NII performance has been subdued compared with BAC and Citigroup. In the first six months of 2025, its NII rose 1% to $46.5 billion, driven by solid loan and deposit growth and higher revolving balances in Card Services. 
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As the Fed begins cutting rates this year, JPMorgan’s NII is likely to face some headwind on an exit rate going into next year as its balance sheet is highly asset-sensitive. Nonetheless, like Citigroup, JPMorgan’s management has raised 2025 NII guidance to $95.5 billion, suggesting an increase of more than 3% year over year. As the central bank is less likely to lower rates substantially, and with decent loan demand, JPMorgan’s NII is expected to keep growing in the near term.

BAC’s Price Performance, Valuation and Estimates

Shares of Bank of America have risen 8% this year. In the same time frame, JPMorgan has gained 22.1% and Citigroup soared 36%.

YTD Price Performance
 

From a valuation standpoint, Bank of America trades at a 12-month trailing price-to-tangible book (P/TB) of 1.76X, below the industry. 

P/TB Ratio
 

Moreover, the Zacks Consensus Estimate for Bank of America’s 2025 and 2026 earnings implies year-over-year growth of 12.2% and 16.1%, respectively. In the past month, earnings estimates for 2025 have moved marginally upward, while 2026 estimates have been revised slightly lower.

Earnings Estimates Trend
 

Bank of America currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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