Big Banks See Record Lending Haul as Low Yield Assets Roll Off

Wall Street’s great rate reset on its securities portfolios has finally arrived.

Even with the Federal Reserve expected to slash rates further this year, net interest income at the four biggest US banks is on track to climb 6% this year after surpassing a quarter of a trillion dollars in 2025.

The higher hauls come as some of the low-yielding bonds banks hoovered up in the midst of the pandemic have begun to mature, allowing executives across the industry to put that money to work into higher-returning assets. At Citigroup Inc., for instance, nearly a third of the securities portfolio will mature this year, giving incoming Chief Financial Officer Gonzalo Luchetti a chance to plow that into new loans, cash, securities and other instruments.

“We think that is an important tailwind that we have going into 2026,” outgoing CFO Mark Mason told journalists on a conference call. “Those securities will be maturing at lower rates than current rates and that will give us the opportunity to redeploy that.” loomberg's Herman Chan joins to discuss Well Fargo, Bank of America and Citi bank earnings on Bloomberg Intelligence.

Nowhere has the issue of older, lower-yielding assets weighing on returns been more apparent than Bank of America Corp., whose stock has lagged behind peers ever since the company plowed hundreds of billions of dollars into long-dated Treasuries and mortgage bonds that carried ultra-low interest rates that prevailed during the pandemic. That’s hurt the firm’s performance, as those investments earn less than those at rivals that waited to jump in until interest rates were higher.

Now, the firm is seeing a benefit from fixed-asset repricing which is contributing to net interest income growth, Bank of America Chief Financial Officer Alastair Borthwick said on a call with analysts. Bank of America expects between $12 billion to $15 billion in combined mortgage-backed securities and mortgage loans rolling off on a quarterly basis, which will be replaced by new assets with higher yields, or used to pay down expensive short-term debt, he said.

Another reason executives are optimistic about net interest income for the year: They’re finally starting to see signs of life in their loan book again. At JPMorgan Chase & Co., loan growth from credit cards is expected to be at least 6% for the year and the lender is hopeful for an uptick in commercial and investment banking as well.

“We have what I would describe as a moderately optimistic outlook for loan growth,” Chief Financial Officer Jeremy Barnum said on a conference call with analysts. “As we acquire new clients, while we don’t acquire them for the sake of lending, the new clients often come with loans, and that’s very much part of the strategy.”

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