First Citizens BancShares Stock Tumbles Following Disappointing 2026 Interest Income Projection
First Citizens BancShares experienced a significant stock decline of more than 9% on Friday after the regional lender issued a full-year interest income forecast that fell short of Wall Street expectations. The downward revision reflects mounting pressures from anticipated Federal Reserve rate cuts, which are expected to squeeze bank margins throughout 2026.
Forecast Details and Market Reaction
The bank projected its annual net interest income (NII) – the critical difference between earnings from loans and payments on deposits – to range between $6.5 billion and $6.9 billion for 2026. This guidance came in below the $6.92 billion that analysts had anticipated, according to LSEG estimates. The disappointing outlook immediately weighed on investor sentiment, dragging down the broader regional banking sector as well.
The KBW Nasdaq Regional Banking Index dropped approximately 3% in afternoon trading, indicating that concerns about interest income are not isolated to First Citizens alone. Macrae Sykes, portfolio manager at Gabelli Funds, noted the lack of positive financial news, specifically highlighting First Citizens' weaker-than-expected NII forecast as a key market dampener.
Impact of Federal Reserve Policy on Regional Banks
Chief Financial Officer Craig Nix explained to analysts that continued rate cuts by the Federal Reserve are expected to drive down loan interest income, despite some asset growth. "Given continued rate cuts, we expect loan interest income to decline, driven by a declining yield despite asset growth levels," Nix stated. The bank's forecast assumes between zero and four rate cuts of 25 basis points each during 2026, with NII anticipated to reach its lowest point in the first quarter.
Truist analyst Brian Foran commented on the challenging adjustment to lower interest rates, questioning whether the current cycle represents the final cut. "It has clearly been a difficult adjustment to lower rates and the debate will be whether this is the final cut," Foran said. This sentiment underscores the broader uncertainty facing regional banks as they navigate a shifting monetary policy landscape.
Fourth-Quarter Performance and Annual Stock Trends
Despite the gloomy forward-looking statements, First Citizens reported a rise in fourth-quarter profit. Adjusted profit available to common shareholders reached $634 million for the three months ending December 31, compared to $628 million a year earlier. This improvement was supported by marginally higher NII in the final quarter of 2025 and a substantial reduction in provisions, which fell over 65% from the previous year.
However, the bank's stock performance in 2025 was relatively muted, with only a 1.6% gain. This marks a sharp contrast to the previous two years, where the stock surged nearly 49% in 2024 and 87% in 2023. The dramatic slowdown highlights how changing interest rate environments can rapidly alter investor expectations and bank profitability trajectories.
The combination of near-term margin pressures from Fed actions and the specific guidance miss has created a perfect storm for First Citizens BancShares, illustrating the delicate balance regional banks must maintain in forecasting and communicating their financial health to the market.
