Evercore ISI said these banks could play a role when interest rates fall. – Today

Evercore ISI says some well-known regional banks will benefit from the Federal Reserve’s upcoming rate cuts. Federal Reserve Chairman Jerome Powell said Friday that the central bank is ready to cut interest rates, but he declined to specify the date or size of the cut. As investors await the Fed’s decision, Evercore ISI used its latest asset-liability committee scenarios and comments on each bank’s net interest income to find out which banks will perform best in a lower interest rate environment. “As the Federal Reserve works to achieve a turnaround through balance sheet restructuring, securities restructuring and hedging, banks have become less asset-sensitive,” analyst John Pancari said in a recent note to investors. He added that the banks have taken measures such as reinvesting cash in securities to lock in higher interest rates, paying down more costly debt and allowing more expensive certificates of deposit to mature. Pancari said that Comerica, Truist Financial, US Bancorp and Fifth Third Bancorp are the best-positioned banks from a net interest income (NII) perspective as the Fed begins to cut rates. The analysts added that these companies outperformed the sector last month because they are least sensitive to assets and most sensitive to liabilities, and said that their sensitivity to NII has so far overshadowed concerns about credit conditions or market-driven fee-based income. According to the report, Comerica, US Bancorp and Fifth Third expect two rate cuts this year. Comerica shares are up 3% this year and 12.6% this quarter. However, after the stellar performance, analysts polled by FactSet expect downside potential of 4.6% for the region’s banks. Comerica shares fell more than 10% after the company reported its second-quarter results on July 19. CEO Curtis Farmer noted at the time that “persistently high interest rates” had put pressure on the bank’s deposits. For its part, Wall Street is more optimistic about US Bancorp and Fifth Third. According to consensus price targets on FactSet, analysts expect upside potential of 8.8% and 3.9%, respectively, for the stocks. U.S. Bancorp shares are up 4.9% this year, while Fifth Third has gained more than 22%. Truist is up 18.7% this year, but has fallen 1.9% over the past month. However, 12-month price targets from analysts polled by FactSet suggest the stock could rise 6.7%.