Raymond James Sees Potential Upside for Select U.S. Banks as Fed Cut Expectations Recede

Shift in market pricing linked to higher energy costs could lift earnings forecasts at asset-sensitive lenders if rate cuts wane

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Raymond James identified ten regional and specialty banks that stand to gain if markets see fewer Federal Reserve rate reductions in 2026 than previously priced. The change in expectations follows rising energy prices tied to the conflict in Iran and a revised Fed outlook showing fewer cuts than anticipated. The firm quantified potential upside by combining cuts embedded in banks' guidance with modeled net interest income impacts under a -100 basis point scenario.

Key Points

Raymond James named ten asset-sensitive banks that could see upward estimate and guidance revisions if the Fed implements fewer rate cuts in 2026.
Market pricing moved from expecting 50-75 basis points of additional cuts to nearly zero cuts by year-end; Fed projections now show roughly one 25 basis point cut versus the two to three cuts previously anticipated.
Rising energy prices tied to the ongoing conflict in Iran are cited as a driver of the change in market expectations, affecting interest-rate outlooks and bank earnings projections.

Raymond James has singled out a group of ten banks that may benefit if the market's view of Federal Reserve easing for 2026 continues to soften. The firm's analysis points to asset-sensitive lenders as the most likely candidates for upward estimate revisions and improved guidance should the Federal Reserve reduce rates less than previously expected.

Market pricing entered 2026 anticipating between 50 and 75 basis points of additional easing by year-end, following a cumulative 175 basis points of cuts that began in September 2024. That outlook has shifted: current market pricing now implies nearly zero cuts through the remainder of 2026, and it leaves open the possibility that the Fed could raise rates if inflation accelerates again.

The Federal Reserve's latest Summary of Economic Projections shows participants projecting roughly one 25 basis point rate cut for 2026, compared with the two to three cuts that had been priced in at the start of the year. Raymond James links this moderation in expected easing to rising energy prices stemming from the ongoing conflict in Iran.

In assessing which banks could see upside, Raymond James focused on firms whose internal planning assumes multiple rate cuts. The firm estimated potential benefit by multiplying the number of cuts embedded in each bank's guidance by an estimated net interest income effect derived from a hypothetical negative 100 basis point scenario.

The banks named by Raymond James as asset-sensitive and potentially advantaged if the Fed delivers fewer cuts are Live Oak Bancshares, Origin Bancorp (NYSE:OBNK), Hilltop Holdings (NYSE:HTH), HBT Financial (NASDAQ:HBT), Trustmark (NASDAQ:TRMK), First Financial Bancorp (NASDAQ:FFBC), SouthState (NYSE:SSB), Renasant (NYSE:RNST), Atlantic Union Bankshares (NYSE:AUB), and Red River Bancshares.

Raymond James emphasized that banks with multiple cuts embedded in their outlooks are the most likely to see analyst estimate upgrades and the potential for positive revisions to corporate guidance should a more stable rate path materialize.

Summary

Raymond James identified ten banks that could benefit if market expectations shift toward fewer Federal Reserve rate cuts in 2026. The change in expectations follows higher energy prices and a leaner Fed projection for cuts, and the firm quantified potential net interest income upside using a -100 basis point scenario applied to cuts embedded in bank guidance.

Risks

The Federal Reserve could raise rates again if inflation reaccelerates, which would alter the interest-rate outlook for banks and markets.
Shifts in energy prices driven by the ongoing conflict in Iran have already changed market pricing for Fed policy and add geopolitical uncertainty to economic forecasts.
Banks that have multiple cuts embedded in their guidance face uncertainty if those embedded assumptions prove incorrect, which could affect net interest income projections and analyst estimates.

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Raymond James Sees Potential Upside for Select U.S. Banks as Fed Cut Expectations Recede

Key Points

Risks

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