November 6, 2025 – The Federal Reserve today maintained the federal funds rate at 4.75-5.00%, signaling the end of cuts and a “higher-for-longer” regime that supercharges bank earnings.
Rate Decision Snapshot
- Target range unchanged at 4.75-5.00%
- Dot plot now shows zero cuts in 2026
- Powell: “Inflation remains sticky; labor market too strong for easing”
Why Banks Win Big
Net Interest Margins Explode
With 10-year Treasury yielding 4.65% and Fed funds at 4.75%, the yield curve is steeply positive for the first time since 2021. JPMorgan’s NIM guidance jumps to 3.1% for 2026 (+45 bps YoY).
Loan Growth Accelerates
Deregulation under Trump 2.0 removes Basel III Endgame constraints. Commercial loans up 8% YoY industry-wide; C&I bookings hit highest since 2022.
Fee Income Surge
- M&A pipeline: $680 bn announced deals pending
- Equity underwriting fees +62% QoQ
- Wealth management AUM crosses $22 tn
Top Performers
| Bank | 2026 EPS Estimate | P/E | Price Target |
|---|---|---|---|
| JPM | $21.40 | 11.2x | $285 |
| BAC | $4.65 | 12.5x | $58 |
| WFC | $6.80 | 10.8x | $78 |
| MS | $11.20 | 13.4x | $145 |
| GS | $52.00 | 11.9x | $680 |
Investment Strategies
Core Position
Overweight XLF (currently $52.40) – analysts see $65 by Q3 2026 (+24%).
Tactical Trades
- Long KBE (regional banks) vs short high-growth tech
- Buy 2-year bank CDS for convexity
- Pair trade: long BAC, short COF (card exposure)
Dividend Monsters
JPM yields 2.4% + 15% buyback yield → 17.4% total shareholder yield.
Hedge Ideas
Add 10% allocation to TLT calls if recession fears resurface.
Risks to Monitor
- Commercial real estate losses peak Q1 2026
- Tariff retaliation hits export-heavy borrowers
- Regulatory rollback delay in Senate
Bottom line: Financials enter a multi-year golden era. Load up before Q4 earnings catapult valuations.
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