Yesterday, at the end of a two-day FOMC meeting, the Federal Reserve reduced its benchmark interest rate by 25 basis points to 4.00-4.25%, marking the first interest rate reduction since December 2024. The Fed also signaled two more rate cuts by the end of 2025, citing a softening labor market rather than inflation pressures as the key reason behind the easing.
Hence, several U.S. banking stocks, including Citigroup, Inc. C, Bank of America BAC, and Citizens Financial Group CFG, touched a new 52-week high during yesterday’s trading session.
Lower rate will support net interest income (NII) growth, a critical earnings driver for banks, as funding pressure eases. While lower benchmark rates can compress yields on loans and securities, improving the lending backdrop and higher refinancing will help offset this. Also, relatively lower rates will increase borrowing and boost market liquidity, driving higher deal volumes and trading opportunities. This will support investment banking (IB) and trading businesses.
Also, as rates come down, borrowers will be able to service their debt. This, in turn, will likely help banks improve credit quality and limit the need for higher loan-loss provisions.
Bank Stocks Touch 52-Week High: More Upside to Continue
Citigroup: NII has been supporting Citigroup’s top-line growth over the years. The metric witnessed a three-year CAGR of 8.4% (ended 2024), with momentum continuing in the first six months of 2025. Going forward, NII will continue expanding on the back of strong loans and deposit balances, and relatively higher rates. Management projects NII to rise 4% year over year in 2025.
Citigroup continues to emphasize growth in core businesses through streamlining consumer banking operations globally. The company has successfully exited from consumer banking businesses in nine countries. These initiatives will free up capital and help the company pursue investments in wealth management and investment banking (IB) operations, which will stoke fee income growth.
The company expects revenues to see a compounded annual growth rate (CAGR) of 4-5% by the end of 2026 and expects to achieve $2-2.5 billion in annualized run rate savings by 2026.
The Zacks Consensus Estimate for 2025 and 2026 earnings implies year-over-year growth of 27.6% and 27.8%, respectively. The Zacks Consensus Estimate for 2025 and 2026 sales indicates year-over-year rallies of 4.5% and 2.9%, respectively.
Yesterday, Citigroup shares touched a 52-week high of $102.21 before closing the session at $101.76. It currently carries a Zacks Rank 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Bank of America: The company’s NII has been witnessing a rise over the last three years (ended 2024), and NII witnessed a CAGR of 9.3%, with the uptrend continuing in the first half of 2025. The company is seeing an upside in NII this year, driven by decent loan demand, relatively lower interest rates and robust deposit balances. Management expects NII (FTE basis) to grow 6-7% year over year in 2025.
Moreover, the bank has embarked on an ambitious expansion plan to open financial centers in new and existing markets. By 2027, it plans to expand its financial center network and open more than 150 centers. Of these, 40 are expected to be opened this year, and 70 more in 2026. Thus, the initiative will likely support Bank of America’s NII and help cross-sell other product suites like credit cards, and auto and mortgage loans.
Management expects loans to grow in the mid-single digit and deposits to grow in the low-single-digit range in 2025, while expense growth is expected to be flattish in the back half of 2025.
The Zacks Consensus Estimate for BAC’s 2025 and 2026 earnings implies year-over-year rallies of 12.2% and 16.1%, respectively. The Zacks Consensus Estimate for 2025 and 2026 sales suggests year-over-year increases of 5.9% and 5.7%, respectively.
Bank of America hit a 52-week high of $51.63 before closing the session at $51.40 yesterday. It currently carries a Zacks Rank 3.
Citizens Financial: Organic growth is the company’s key strength, as reflected by its rising revenue trend. The company’s total revenues witnessed a CAGR of 3% over the last four years (2020-2024), driven by strength in NII and fee income.
In 2025, Citizens Financial expects NII to grow 3-5% and non-interest income to rise 8-10% year over year. Decent loan growth and the Fed’s rate cuts, along with increasing fee income, will keep supporting top-line growth.
CFG’s long-term strategy involves growth in wealth management offerings, improved capabilities in the high-net-worth segment and expansion into key markets. The company is also investing in its payments platform and solidifying commercial middle market coverage with investments in key expansion markets that complement private banking business success.
Management expects a return on average tangible common shareholders’ equity of 16-18% and a net interest margin (NIM) of 3.25-3.50% by 2027.
The Zacks Consensus Estimate for CFG’s 2025 and 2026 earnings implies year-over-year increases of 17.6% and 29.7%, respectively. The Zacks Consensus Estimate for 2025 and 2026 sales suggests year-over-year rallies of 5.1% and 8%, respectively.
During yesterday’s trading session, Citizens Financial touched a 52-week high of $53 and closed the day at $52.27. It currently carries a Zacks Rank 3.
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Bank of America Corporation (BAC): Free Stock Analysis Report Citigroup Inc. (C): Free Stock Analysis Report Citizens Financial Group, Inc. (CFG): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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