Rate Hikes Could Boost US Banks' Net Interest Income by $1 Billion

The biggest US commercial banks are facing the prospect of Federal Reserve rate hikes, which could lead to an additional $1 billion or more in net interest income over the next 12 months. This calculation is based on conditions as of June 30 and a rise of 100 basis points across the whole interest rate curve.

The fine print, however, suggests that there are other moving parts at play, including the possibility of a flattened yield curve, which could diminish the windfall from interest income. Higher rates could also have a negative impact on lower-yielding assets held by banks.

Banks such as Bank of America and Goldman Sachs have already been under pressure after giving subdued forecasts for trading revenue. JPMorgan was more upbeat, however, signaling third-quarter gains in those areas.

Another area that is gaining attention is AI financing, particularly in Europe where the industry is trying to catch up with the US. US banks like JPMorgan and Goldman Sachs may even lead the continent's AI lending efforts.