Why BK & USB Stocks Could Outperform as Funding Costs Ease and Rates Fall

The Zacks / TradingView report places BK and USB at the forefront of regional banking opportunities in late 2025, based on several evolving macro and micro trends. From a macro perspective, the expectation that the Federal Reserve will be able to lower interest rates in the coming quarters is central. As rates decline, funding costs—particularly for deposits—should ease, lifting net interest margin (NIM) across regional banks. Although NII is under pressure in the near term, this positive tailwind looks set to improve as the rate environment becomes more favorable. [1][2]

At the industry level, valuation looks compelling. The Major Regional Banks industry’s trailing twelve-month Price-to-Tangible Book (P/TBV) ratio is around 2.50×—above its lowest recent point (≈1.84×), but below the highest (≈3.23×), suggesting the current multiple is attractive relative to historical norms. Furthermore, the broader finance sector is trading at a much higher P/TBV (~5.94×), making regional banks relatively inexpensive. [1][2]

For the individual names: BK is being rewarded for strategic moves in wealth and asset management, global expansion, the launch of new services like Stablecoin reserves fund, and technology-driven product digitization. It sports strong year-over-year earnings growth forecasts: ~+22.1% for 2025 and ~+10.2% for 2026. USB is benefiting from acquisitions (e.g by strengthening its credit card and fintech platforms via partners like Fiserv), deposit growth, and capital return via dividend hikes and buybacks. Forecasted growth is more modest: ~+14.1% (2025) and ~+7.1% (2026). [1][2]

However, caveats are substantial. First, asset quality issues: inflation and trade/tariff policy risk weakening borrowers, which may drive higher loan loss provisions. [1] Second, although rate cuts help margins via lower funding costs, they may also reduce yield on existing assets, creating a lag. Third, competition in fee businesses and margin erosion from digitization cost investments may pressure net revenues. Lastly, investor sentiment remains fragile: earnings surprises or credit missteps could trigger sharp repricing. [4][3]

Strategically, banks that combine strong balance sheets, disciplined expansion, diversified revenue streams (fee income, wealth, asset servicing), and efficient cost control will likely outperform. Key monitoring points include interest rate path from the Fed, asset quality data (non-performing loans, reserves), deposit trends especially in light of rate competition, and regulatory developments.

Open questions remain: At what pace will the Fed cut rates and how quickly will funding costs fall as a result? Can USB and BK execute on acquisition and technology-platform integration without undue cost or risk? Where will the next stress in asset quality show up—geographic, sectoral, or borrower class? And finally, do macro risks (inflation, global trade tensions) have upside surprises for revenues but downside risks for credit?