First Citizens BancShares projected its full-year net interest income (NII) for 2026 to fall short of market expectations, prompting a greater than 9% drop in its share price. The bank anticipates annual NII to range between $6.5 billion and $6.9 billion next year, compared to analyst forecasts averaging $6.92 billion, according to data compiled by LSEG.
This outlook is underpinned by expectations of Federal Reserve interest rate cuts scheduled for the second half of 2025. The regional lender expects these monetary policy adjustments to exert downward pressure on loan yields, which are projected to decline faster than deposit costs. Such a dynamic is expected to squeeze net interest margins and constrain earnings growth in the near term.
Chief Financial Officer Craig Nix communicated that the forecast assumes zero to four quarter-point rate reductions in 2026 and anticipates NII to bottom out in the first quarter of the year. He noted, "Given continued rate cuts, we expect loan interest income to decline, driven by a declining yield despite asset growth levels."
Market analysts echoed the challenges posed by the forecast. Brian Foran of Truist highlighted the bank's difficult adjustment to lower rates and observed that the question remains whether the coming cuts will be the final ones.
The market reaction extended beyond First Citizens, with the KBW Nasdaq Regional Banking Index falling approximately 3% during afternoon trading. Macrae Sykes, portfolio manager at Gabelli Funds, remarked on the lack of positive developments within the financial sector, referencing the disappointing 2026 NII forecast from First Citizens BancShares.
Despite the subdued outlook, the bank reported improved profitability for the fourth quarter ending December 31, 2025. Adjusted profit available to common shareholders rose to $634 million, marginally higher than the $628 million recorded a year earlier.
The slight profit gain was supported by a modest increase in net interest income during the last three months of 2025 and a significant reduction of over 65% in provisions compared to the previous year. However, the bank’s stock performance in 2025 was comparatively modest with a 1.6% increase following two years of substantial appreciation of nearly 49% and 87% in 2024 and 2023, respectively.