Fed Raises Rates 25 Basis Points, Lifting Wells Fargo's NII Outlook

Zacks Investment Research··US·Read original
3▲3 ▼0Impact / 5
Summary · why it matters

The Federal Reserve raised the federal funds target range by 25 basis points to 3.75-4% on Sept. 16, 2026, its first rate increase since July 2023, with an updated dot plot pointing to the possibility of another hike this year as inflation remains above the Fed's long-term 2% target. For Wells Fargo & Company, the move could provide an incremental tailwind to net interest income, one of the bank's key revenue sources, particularly if asset yields reprice faster than funding costs. Wells Fargo entered the second half of 2026 with positive NII momentum, as NII rose 5.2% year over year in the first half on lower deposit costs, higher loan and investment securities balances, deposit growth and stronger Markets NII, and the company has greater flexibility to expand after the Federal Reserve lifted its asset cap in June 2025. The Zacks Consensus Estimate for Wells Fargo's 2026 earnings is $7.25 per share, indicating 15.5% year-over-year growth, and the bank expects 2026 NII of $50 billion, though the actual outcome will depend on rate movements, deposit balances and pricing, and loan demand. The benefit is unlikely to be one-sided, since deposit pricing remains a key variable and persistently elevated borrowing costs could pressure demand for mortgages, commercial loans and consumer credit while rising delinquencies may force the bank to build reserves. Other large banks such as JPMorgan and Bank of America are better-positioned in a higher-for-longer rate environment, with JPMorgan expecting 2026 NII of $105.5 billion, indicating year-over-year growth of 10.5%, and Bank of America expecting NII on a fully taxable-equivalent basis to grow 8%.

Impact on assets 5

Financials▲ · 2 stocks
Wells Fargo & Company
WFC
▲ PositiveMonetaryrelevance

Fed's 25bp rate hike could provide an incremental tailwind to Wells Fargo's net interest income if asset yields reprice faster than funding costs.

Bank of America Corp
BAC
± MixedMonetaryrelevance

Mentioned as better-positioned in a higher-for-longer rate environment with 8% NII growth expected, but no new company-specific development.

Digital Finance & Tokenization▲ · 1 stocks
JPMorgan Chase & Co
JPM
± MixedMonetaryrelevance

Cited as better-positioned in a higher-for-longer rate environment with 2026 NII of $105.5B, but only as context/comparison.

Others▲ · 2 stocks
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