Fed Cuts Rates, Signals Caution Ahead: 5 Bank Stocks Set to Benefit

Federal Reserve Interest Rate Cut - The Federal Reserve announced its third interest rate cut of 25 basis points, lowering the Fed funds rates to the 3.5%-3.75% range amid persistent inflation and a softening job market [1] - The Fed signaled one additional cut in 2026, projecting rates to be close to 3.4% by the end of that year, and a terminal rate of 3.1% in 2027 [4] Impact on Financial Services Sector - Rate-sensitive sectors, including Financial Services, were top performers in the S&P 500 Index following the rate cut [2] - Major banks saw notable stock price increases, with the KBW Nasdaq Regional Banking Index and the S&P Banks Select Industry Index both rising by 3.3% [3] Bank Performance and Projections - Citigroup's net interest income (NII) is projected to rise 5.5% year over year in 2025, with total revenues expected to exceed $84 billion [12][13] - Bank of America anticipates NII to be $15.6-$15.7 billion in Q4 2025, up 8% year over year, with a CAGR of 9.3% over the last three years [15][17] - KeyCorp expects adjusted total revenues to increase by 15% in 2025, supported by decent loan demand and fee income [19][20] - Wells Fargo aims to stabilize funding costs and grow both consumer and corporate loan assets, with NII expected to remain stable year over year [21][22] - Citizens Financial anticipates NII growth of 3-5% and non-interest income growth of 8-10% in 2025, driven by loan growth and fee income [23][24]