Bank of America Drops 0.41% as Fed Rate Cuts Spark Uncertainty Over Net Interest Income

The share price fell to its lowest level so far this month, with an intraday decline of 0.41%.

Bank of America’s stock underperformed on Dec. 27 amid a mix of macroeconomic and strategic headwinds. The Federal Reserve’s recent rate cuts to 3.50%-3.75% have created uncertainty around the bank’s net interest income, as prolonged high-rate environments could dampen loan growth. Meanwhile, the bank’s $40 billion share repurchase program and $0.28 quarterly dividend, announced earlier in December, aim to bolster returns but remain contingent on capital allocation discipline. Analysts highlighted that the effectiveness of these initiatives will hinge on balancing shareholder distributions with operational priorities.

Looking ahead, Q4 earnings due on Jan. 14, 2026, are a key near-term catalyst. Recent results showed strong performance in investment banking and markets revenue, with net interest income rising 9% year-over-year. However, potential moderation in net interest income growth if rate cuts pause could temper upside. Strategic investments in AI and digital assets, including a $4 billion tech budget and crypto ETF offerings for wealth clients, signal long-term positioning but require execution to justify valuation optimism. Analysts remain divided, with price targets ranging from $44 to $68, reflecting divergent views on the Fed’s policy path and the bank’s ability to narrow gaps with peers.