By Pritam Biswas and Arasu Kannagi Basil
Jan 23 (Reuters) - First Citizens BancShares projected full-year interest income below Wall Street expectations on Friday, sending shares of the regional lender down more than 9%.
Rate cuts by the Federal Reserve in the second half of 2025 are expected to pressure regional banks' interest income in the near term as loan yields fall faster than deposit costs, pressuring margins and earnings growth.
The bank expects annual net interest income — the difference between
what it earns on loans and pays out on deposits — between $6.5 billion and $6.9 billion in 2026, compared with analysts' expectations of $6.92 billion, according to estimates provided by LSEG.
"Given continued rate cuts, we expect loan interest income to decline, driven by a declining yield despite asset growth levels," Chief Financial Officer Craig Nix told analysts.
The forecast assumes zero to four rate cuts of 25 basis points in 2026. The bank expects NII to trough in the first quarter.
"It has clearly been a difficult adjustment to lower rates and the debate will be whether this is the final cut," Truist analyst Brian Foran said.
The results also weighed on other bank stocks. The KBW Nasdaq Regional Banking Index was down about 3% in afternoon trading.
"Little good news from the financials today," said Macrae Sykes, portfolio manager at Gabelli Funds, pointing to First Citizens BancShares' weaker-than-expected 2026 NII forecast.
The bank reported a rise in fourth-quarter profit, helped by marginally higher NII in the last three months of 2025 and provisions that fell over 65% from last year.
First Citizens' adjusted profit available to common shareholders came in at $634 million in the three months ended December 31, compared with $628 million a year earlier.
The bank's stock gained just 1.6% in 2025 after two strong years with a growth of nearly 49% and 87% in 2024 and 2023, respectively.
(Reporting by Pritam Biswas and Arasu Kannagi Basil in Bengaluru; Editing by Alan Barona)
