Time to Buy JPMorgan & Citigroup Stock for Potential Rate Cuts

Following July’s optimistic headline inflation data from the Consumer Price Index (CPI), investor sentiment has continued to peak in anticipation that the Fed could cut interest rates in September.

Among the sectors that could potentially benefit the most from lower rates is the financials, specifically banks, with JPMorgan JPM and Citigroup C being of interest in particular.    

To that point, JPMorgan and Citigroup may be prime beneficiaries of a steepening yield curve, where they can finance their operations at lower short-term rates and boost their margins by lending at higher long-term rates.

Keeping this scenario in mind, let’s see why now appears to be an ideal time to buy JPMorgan and Citigroup stock.

Strong Capital Positions

Adding to the notion that investing in JPMorgan and Citigroup stock may be lucrative, especially if rate cuts are ahead, is that both banks performed well in the 2025 Dodd-Frank Act stress tests, an annual evaluation by the Federal Reserve to assess whether large banks have enough capital to withstand economic downturns.

Regarding core capital versus risk-weighted assets, JPMorgan and Citigroup both had a standardized CET1 Capital Ratio well above their minimum required percentage of 4.5% at 15% and 13.5%, respectively.

As the largest domestic bank in the U.S., JPMorgan stood out with more than $4 trillion in total assets and over $350 billion in shareholders’ equity. Being well-positioned to continue capital distributions, JPMorgan has authorized a new $50 billion share repurchase plan and announced it will be increasing its quarterly dividend by 7% to $1.50 per share during the third quarter.

Similarly, Citigroup has illustrated its good financial health by raising its quarterly dividend by 7% as well to $0.60 per share in July. Citigroup also authorized a $20 billion share repurchase plan and has a strong cushion for any future challenges with a net cash position of over $400 billion.

Positive EPS Revisions

Making JPMorgan and Citigroup stock more attractive ahead of potential rate cuts is that they are already benefiting from a very positive trend of earnings estimate revisions.

In the last 30 days, JPMorgan’s FY25 EPS estimates have risen 5% from $18.53 to $19.50. Plus, FY26 EPS estimates are up 3% in the last month from $19.75 to $20.38.

As for Citigroup, its FY25 and FY26 EPS estimates are up roughly 4% in the last 30 days, with it noteworthy that these projections now call for more than 27% annual earnings growth for the foreseeable future.  

Bottom Line

With investors starting to clamor for a September rate cut, the outlook for JPMorgan and Citigroup may become even more appealing. Thanks to strong capital positions, these banks have continued to reward their shareholders with dividends and buybacks, and their stocks look poised to move higher when considering the rising EPS revisions.

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

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