Banks Poised to Benefit from Fed Rate Cuts
- Evercore ISI predicts that banks like Comerica and Fifth Third Bancorp will outperform after Fed rate cuts.
- These banks are well-positioned to benefit from the reduction in rates, especially in terms of net interest income.
- Overall, banks are expected to see positive impacts from the Fed's decision to cut rates.
A recent analysis by Evercore ISI indicates that several regional banks are well-positioned to benefit from anticipated interest rate cuts by the Federal Reserve. Key players such as Comerica, Truist Financial, U.S. Bancorp, and Fifth Third Bancorp have strategically reinvested cash into securities, reduced high-cost debt, and allowed expensive certificates of deposit to mature. These actions have made them less sensitive to asset fluctuations and more responsive to liability changes, enhancing their net interest income (NII) outlook as rates decline. Comerica, U.S. Bancorp, and Fifth Third are forecasting two interest rate cuts this year, with Comerica's shares rising 3% year-to-date and 12.6% in the last quarter. Despite this positive trend, analysts predict a potential downside of 4.6% for Comerica following a significant drop in share value after its second-quarter results, which highlighted challenges from high interest rates affecting deposits. In contrast, Wall Street analysts are optimistic about U.S. Bancorp and Fifth Third, projecting potential upsides of 8.8% and 3.9%, respectively. U.S. Bancorp has seen a 4.9% increase in shares this year, while Fifth Third has surged over 22%. Truist Financial has also performed well, with an 18.7% gain this year, although it has experienced a slight decline of 1.9% in the past month. Analysts remain hopeful, suggesting a 12-month price target that could see Truist shares rise by 6.7%.