Which Big Bank Stock is Set to Gain More From Rate Cuts: BAC or WFC?

By Swayta Shah | November 25, 2025, 7:04 AM

Falling interest rates are reshaping the outlook for major U.S. lenders, with investors looking closely at which banks stand to benefit the most. Bank of America BAC and Wells Fargo WFC, both highly sensitive to rate movements, are now under the spotlight as markets price in the next phase of monetary easing.

Though both move with the same macroeconomic tides, WFC now enjoys strategic freedom following the lifting of its asset cap in June 2025, whereas BAC is using its vast scale to deepen efficiency and broaden its growth initiatives. Let’s dig deeper and assess how rate cuts will shape the growth prospects of each bank to determine which one presents a better investment opportunity.

The Case for Bank of America

Bank of America, one of the most rate-sensitive banks in the country, is prioritizing organic, domestic growth through the expansion of its physical and digital presence. The company, recently, laid out an ambitious medium-term plan centered on sustainable growth, digital scale, cost discipline and capital efficiency.

Over the next three to five years, BAC aims to deliver more than 12% of earnings growth and a return on tangible common equity (ROTCE) between 16% and 18%, while maintaining a Common Equity Tier 1 ratio of 10.5%.

With the Federal Reserve starting the next rate cut cycle, Bank of America is poised to benefit from fixed-rate asset repricing, higher loan and deposit balances and a gradual fall in funding costs. As rates come down, it will boost lending activity. Also, easing regulatory capital requirements will help channel excess capital into loan growth, particularly within resilient commercial and consumer segments. Hence, the bank’s net interest income (NII) is projected to grow 5-7% in 2026, after similar growth this year.

Additionally, as part of a broader strategy to solidify customer relationships and tap into new markets, BAC plans to expand its financial center network and open more than 150 centers by 2027. This, along with the growing adoption of digital tools, will support NII growth and expand cross-sell opportunities.

Moreover, BAC’s investment banking (IB) business is well-positioned to expand as deal-making activities have regained momentum after the initial setback due to President Trump’s tariff policies. Many deals that were put on hold are resuming as there is more clarity about the direction of the economy, interest rates and tariff plans, with capital remaining available. Bank of America targets mid-single-digit CAGR in IB fees over the medium term.

The Case for Wells Fargo

Wells Fargo is moving to expand across multiple business lines now that the Fed has lifted the asset cap that limited its growth since 2018. The company’s expansion strategy is closely aligned with expectations for more rate cuts, emphasizing deposit growth, targeted loan expansion and product investment as funding costs trend downward.

The bank is positioning itself to benefit from a softer rate environment, which will likely drive increased lending activity, stabilize net interest margins (NIM) and help further market share gains across fee-generating businesses.

Wells Fargo has signaled that interest rate cuts will help stabilize funding costs, making deposit growth a central pillar of its balance sheet strategy. Lower rates typically spur loan demand, and freed from its asset cap, the bank aims to aggressively grow both consumer and corporate loan assets.

Management expects 2025 NII to be roughly stable year over year, as lower rates support a rebound in loan origination and reduce deposit pricing pressures. WFC plans to leverage its expanded balance sheet to grow fee-rich franchises (IB, trading, wealth management, payments). This diversification is essential in a rate-cutting cycle, when NIM and NII may face pressure.

Wells Fargo's approach in a declining rate environment is to prioritize organic growth, compete more aggressively for deposits and selectively increase lending while remaining cautious during periods of heightened economic uncertainty. Thus, the bank is expected to see improved profitability and margin resilience as monetary conditions ease. This will enable it to invest in expanded commercial and consumer franchises and enhance its competitive standing now that regulatory constraints are removed.

BAC & WFC: Price Performance, Valuation & Other Comparisons

While 2025 started on a positive note, Trump’s tariff plans and geopolitical tension resulted in massive volatility, upending bullish investor sentiments. This year, shares of Bank of America and Wells Fargo have gained 18.2% and 20.4%, respectively.