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Fed Rate Cuts Loom: What It Means for Bank of America's NII

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Key Takeaways

  • Bank of America expects Q3 NII of $15.2B, up 2.5% sequentially, with Q4 at $15.5-$15.7B.
  • BAC projects 2025 NII to grow 6-7% assuming two 25-basis-point rate cuts.
  • Loan growth, deposit inflows and asset repricing are set to support BAC's NII despite Fed easing.

Bank of America (BAC - Free Report) remains one of the most rate-sensitive U.S. banks, and with the Federal Reserve expected to resume interest rate cuts later this month, its net interest income (NII) could face near-term headwinds.

Speaking at the Barclays 23rd Annual Global Financial Services Conference, Chief Financial Officer Alastair Borthwick cautioned that multiple rate cuts over the next four months could alter the bank’s NII growth trajectory. Still, management’s guidance reflects resilience. 

For 2025, BAC projects a 6-7% increase in NII, assuming two 25-basis-point cuts, with fourth-quarter NII estimated at $15.5-$15.7 billion. For the current quarter, the bank expects NII to be approximately $15.2 billion, a 2.5% sequential rise.

Meanwhile, with regulatory capital requirements easing, Bank of America plans to channel excess capital into loan growth, particularly within resilient commercial and consumer segments. Borthwick also noted that as lower-yielding fixed-rate assets roll off, the bank will replace them with higher-yielding ones, supporting NII growth alongside healthy loan and deposit trends.

Management remains constructive on the outlook. Despite the Fed monetary policy easing, BAC expects to finish 2025 with record-high NII, underpinned by a strong credit environment, steady deposit inflows and disciplined capital deployment.

How BAC’s Competitors Are Expected to Fare in Terms of NII

Citigroup (C - Free Report) has demonstrated resilience and steady growth in NII. In the first half of 2025, the company’s NII rose 8% year over year to $29.2 million, primarily driven by an increase in average deposit and loan balances, as well as higher deposit spreads.

Going forward, Citigroup’s NII outlook remains favorable, and it raised its 2025 NII guidance (excluding Markets). The bank now expects NII to grow 4%, up from the previously mentioned 2-3% rise. In 2024, Citigroup’s NII was $54.9 billion.

Meanwhile, JPMorgan’s (JPM - Free Report) NII performance has been subdued compared with BAC and Citigroup. In the first six months of 2025, its NII rose 1% to $46.5 billion, driven by solid loan and deposit growth and higher revolving balances in Card Services. 
 
As the Fed begins cutting rates this year, JPMorgan’s NII is likely to face some headwind on an exit rate going into next year as its balance sheet is highly asset-sensitive. Nonetheless, like Citigroup, JPMorgan’s management has raised 2025 NII guidance to $95.5 billion, suggesting an increase of more than 3% year over year. As the central bank is less likely to lower rates substantially, and with decent loan demand, JPMorgan’s NII is expected to keep growing in the near term.

BAC Stock’s Price Performance, Valuation & Estimates

Shares of Bank of America have risen 9.7% in the past three months. In the same time frame, JPMorgan has gained 9.1%, and Citigroup soared 22.9%.

Three-Month Price Performance
 

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From a valuation standpoint, Bank of America trades at a 12-month trailing price-to-tangible book (P/TB) of 1.83X, below the industry

P/TB Ratio
 

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Moreover, the Zacks Consensus Estimate for Bank of America’s 2025 and 2026 earnings implies year-over-year growth of 12.2% and 16.1%, respectively. In the past month, earnings estimates for 2025 and 2026 have remained unchanged at $3.68 and $4.27, respectively.

Earnings Estimates Trend
 

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Bank of America currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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