![Evercore ISI says these banks could outperform as interest rates fall](https://news7g.com/wp-content/uploads/2024/08/103571846-GettyImages-92862178-1-780x470.jpg)
Several prominent regional banks are poised to benefit from the Federal Reserve’s upcoming rate cuts, according to Evercore ISI. Fed Chairman Jerome Powell indicated on Friday that the central bank is prepared to cut rates in the future, although he declined to provide an exact timing or magnitude. While investors await the Fed’s move, Evercore ISI used updated scenarios from the asset/liability committee and commentary on net interest income from several banks to find the names that look strongest in a lower-rate environment. “Banks are becoming less asset-sensitive as the Fed pivots through balance sheet restructuring, securities restructuring and hedging efforts,” analyst John Pancari said in a recent note to clients. The steps these banks have taken include reinvesting cash in securities to lock in higher interest rates, paying down higher-cost debt and allowing more expensive certificates of deposit to mature, he added. Comerica, Truist Financial, U.S. Bancorp and Fifth Third Bancorp are among the banks best positioned for net interest income, or NII, as the Fed begins to cut rates, Pancari said. These names have outperformed the industry by the widest margin over the past month because they are the least asset-sensitive and most liability-sensitive, the analyst added, saying their NII sensitivity has so far overshadowed concerns about credit or market-driven fee income sensitivity. Comerica, U.S. Bancorp and Fifth Third all forecast two rate cuts this year, according to the note. Comerica shares are up 3% this year and 12.6% this quarter. Still, analysts polled by FactSet are expecting a potential 4.6% decline for the regional bank after that outperformance. Comerica shares fell more than 10% on July 19 after the company reported its second-quarter results. At the time, CEO Curtis Farmer noted that “continued high interest rates” were pressuring the bank’s deposits. Meanwhile, Wall Street is more bullish on U.S. Bancorp and Fifth Third. Analysts are predicting potential gains of 8.8% and 3.9% for the stocks, respectively, according to their consensus price targets on FactSet. U.S. Bancorp shares are up 4.9% this year, and Fifth Third is up more than 22%. Truist is up 18.7% this year, but the stock is down 1.9% over the past month. However, analysts polled by FactSet have a 12-month price target that suggests the stock could rise 6.7%.