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Fed Rate Hike: What it Means for Wells Fargo's NII Outlook
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Key Takeaways
WFC's NII rose 5.2% y/y in H1'26, supported by lower deposit costs and loan growth.
WFC expects 2026 NII of $50B, with rate moves and deposit pricing key to results.
WFC has more balance-sheet flexibility after the Fed lifted its asset cap in June 2025.
The Federal Reserve’s latest interest-rate hike has brought the earnings prospects of rate-sensitive banks, including Wells Fargo & Company (WFC - Free Report) , back into focus. On Sept. 16, 2026, the Fed raised the federal funds target range by 25 basis points to 3.75-4%, marking the Fed’s first rate increase since July 2023. Meanwhile, the Fed’s updated “dot plot,” which reflects policymakers’ expectations for the future path of interest rates, pointed to the possibility of another rate hike this year. The move comes as inflation remains above the Fed’s long-term 2% target.
For Wells Fargo, a higher-rate environment could provide some support to net interest income (NII), one of the bank’s key revenue sources. Higher interest rates generally allow banks to earn greater yields on loans and other interest-earning assets. Consequently, the Fed’s latest move could provide an incremental tailwind to Wells Fargo’s NII, particularly if asset yields reprice faster than funding costs.
Wells Fargo entered the second half of 2026 with positive NII momentum. In the first half, NII increased 5.2% year over year, supported by lower deposit costs, higher loan and investment securities balances, deposit growth, and stronger Markets NII. The company also has greater flexibility to expand after the Federal Reserve lifted its asset cap in June 2025. This gives Wells Fargo more scope to expand loans and other earning assets. Reflecting the improving backdrop, the Zacks Consensus Estimate for WFC’s 2026 earnings is pegged at $7.25 per share, indicating 15.5% year-over-year growth.
Earnings Estimates
Image Source: Zacks Investment Research
However, the benefit from higher rates is unlikely to be one-sided. Deposit pricing remains a key variable because banks like WFC may have to pay more to retain interest-bearing deposits. Further, persistently elevated borrowing costs could pressure demand for mortgages, commercial loans and consumer credit, while rising delinquencies may force WFC to build reserves and increase provisions for credit losses and pressure on earnings growth.
Wells Fargo expects 2026 NII of $50 billion. However, the actual outcome will depend on rate movements, deposit balances and pricing, and loan demand. Overall, the Fed’s latest hike could offer a modest tailwind to WFC’s NII, particularly given its improving loan growth and greater balance-sheet flexibility. However, the extent of the upside will depend on whether higher asset yields can outpace rising deposit costs and any slowdown in credit demand.
How Other Banks Are Likely to Be Affected by High Rates
Similar to WFC, other large banks such as JPMorgan (JPM - Free Report) and Bank of America (BAC - Free Report) are better-positioned in a higher-for-longer rate environment because they have broader revenue streams, stronger liquidity buffers and more diversified loan books.
Both JPMorgan and Bank of America have projected higher net interest income for 2026. With the latest rate hike, their NII outlooks could get additional lifts. JPMorgan expects 2026 NII of $105.5 billion, indicating year-over-year growth of 10.5%, while Bank of America expects NII on a fully taxable-equivalent basis to grow 8%. Still, the benefit may be partly offset by rising funding costs, higher credit risks and balance-sheet pressures.
WFC Price Performance & Zacks Rank
Wells Fargo shares have gained 2.6% in the past year compared with the industry’s growth of 14.4%.
View the Zacks #1 Rank List
Image: Bigstock
Fed Rate Hike: What it Means for Wells Fargo's NII Outlook
Key Takeaways
The Federal Reserve’s latest interest-rate hike has brought the earnings prospects of rate-sensitive banks, including Wells Fargo & Company (WFC - Free Report) , back into focus. On Sept. 16, 2026, the Fed raised the federal funds target range by 25 basis points to 3.75-4%, marking the Fed’s first rate increase since July 2023. Meanwhile, the Fed’s updated “dot plot,” which reflects policymakers’ expectations for the future path of interest rates, pointed to the possibility of another rate hike this year. The move comes as inflation remains above the Fed’s long-term 2% target.
For Wells Fargo, a higher-rate environment could provide some support to net interest income (NII), one of the bank’s key revenue sources. Higher interest rates generally allow banks to earn greater yields on loans and other interest-earning assets. Consequently, the Fed’s latest move could provide an incremental tailwind to Wells Fargo’s NII, particularly if asset yields reprice faster than funding costs.
Wells Fargo entered the second half of 2026 with positive NII momentum. In the first half, NII increased 5.2% year over year, supported by lower deposit costs, higher loan and investment securities balances, deposit growth, and stronger Markets NII. The company also has greater flexibility to expand after the Federal Reserve lifted its asset cap in June 2025. This gives Wells Fargo more scope to expand loans and other earning assets. Reflecting the improving backdrop, the Zacks Consensus Estimate for WFC’s 2026 earnings is pegged at $7.25 per share, indicating 15.5% year-over-year growth.
Earnings Estimates
Image Source: Zacks Investment Research
However, the benefit from higher rates is unlikely to be one-sided. Deposit pricing remains a key variable because banks like WFC may have to pay more to retain interest-bearing deposits. Further, persistently elevated borrowing costs could pressure demand for mortgages, commercial loans and consumer credit, while rising delinquencies may force WFC to build reserves and increase provisions for credit losses and pressure on earnings growth.
Wells Fargo expects 2026 NII of $50 billion. However, the actual outcome will depend on rate movements, deposit balances and pricing, and loan demand. Overall, the Fed’s latest hike could offer a modest tailwind to WFC’s NII, particularly given its improving loan growth and greater balance-sheet flexibility. However, the extent of the upside will depend on whether higher asset yields can outpace rising deposit costs and any slowdown in credit demand.
How Other Banks Are Likely to Be Affected by High Rates
Similar to WFC, other large banks such as JPMorgan (JPM - Free Report) and Bank of America (BAC - Free Report) are better-positioned in a higher-for-longer rate environment because they have broader revenue streams, stronger liquidity buffers and more diversified loan books.
Both JPMorgan and Bank of America have projected higher net interest income for 2026. With the latest rate hike, their NII outlooks could get additional lifts. JPMorgan expects 2026 NII of $105.5 billion, indicating year-over-year growth of 10.5%, while Bank of America expects NII on a fully taxable-equivalent basis to grow 8%. Still, the benefit may be partly offset by rising funding costs, higher credit risks and balance-sheet pressures.
WFC Price Performance & Zacks Rank
Wells Fargo shares have gained 2.6% in the past year compared with the industry’s growth of 14.4%.
Price Performance
Image Source: Zacks Investment Research
WFC currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.