Newsletter · · Ashutosh Agarwal

Stress Tests Clear a $50B JPMorgan Buyback as the Rate-Cut Cycle Evaporates - Banks & the Rate-Cut Cycle - Week of June 26, 2026

Banks newsletter for the week of June 26, 2026. All 32 banks passed the stress test and JPMorgan authorized a fresh $50B buyback, while Kevin Warsh's first meeting as Fed chair put rate hikes back on the table and turned a cut-cycle sector into a flattener trade. Citi remains the cleanest self-help single name.

Banks & the Rate-Cut Cycle

Week of June 26, 2026: Stress Tests Clear a $50B JPMorgan Buyback as the Rate-Cut Cycle Evaporates

Banks & the Rate-Cut Cycle, Weekly, Friday June 26, 2026

This issue draws on bank coverage across the roughly two weeks to June 26 (Jun 13 to 26); episodes from before the latest seven days are flagged inline.

TL;DR

  • The "rate-cut" trade flipped. Kevin Warsh's first meeting as Fed chair put rate hikes back on the table, futures now price ~60% odds of a September hike. For a sector everyone owns as a cut-cycle beneficiary, the resulting curve flattening is the real story.
  • Capital came roaring back. All 32 banks passed the stress test; JPMorgan authorized a fresh $50B buyback and a 10% dividend bump, with Goldman and Morgan Stanley lifting payouts double digits.
  • The cleanest single name is still Citi, where a sell-side bank analyst laid out a self-help thesis (cards, global wealth, DTAs) with room to run.

What's new

1. The stress test cleared a wall of capital return, JPM leads with a $50B buyback. On Fast Money (Jun 24), CNBC's Leslie Picker ran the tape: "Morgan Stanley raising its dividend by 15 percent to $1.15 per share. Goldman Sachs intends to boost its dividend by 11 percent to $5 per share. And J.P. Morgan bumping its dividend up by 10 percent to $1.65 per share and authorizing a new $50 billion buyback program beginning July 1." The system absorbed "more than $708 billion in total losses and capital declined only about 1.6 percentage points in aggregate," the lowest draw in years, and with required capital frozen until 2027, the payouts are real and immediate. Guy Adami: "I think they're as well capitalized as probably they've been in 25 or 30 years." CNBC's "Fast Money", Jun 24

2. Warsh's Fed pivots hawkish, the cut cycle is being priced out. The thesis-defining macro shift, from the Jun 18 Fast Money (just before the latest seven-day window). Steve Liesman on the dot plot: "Nine Fed officials are now projecting at least one rate hike this year... Futures market now, 60% probability for September. Had been that first hike priced in for December." His read on the bond reaction: "That's a real flattener." A newsletter named for the cut cycle now has to underwrite a flattener, short rates up, long rates anchored, squeezing both securities-book reinvestment yields and the deposit-cost relief banks expected. CNBC's "Fast Money", Jun 18

3. The operator voice is constructive on Citi. On the Jun 18 episode, Gerard Cassidy of RBC Capital Markets, a sell-side bank analyst, reframed the hawkish turn as not-yet-bearish: "the first couple of rate increases, should we get them, are actually positive for the banks... The negative is the rate increases continue for an extended period of time." His pick is Citi, on self-help: "Can they deliver on the expansion of the U.S. card business and the global wealth management business? And if they do, then the upside will be still much more to go." CNBC's "Fast Money", Jun 18

4. Capital-markets pipelines look strong into July prints. Cassidy again: "we're going to hear when they report results, which are going to be good in July, I expect them to report robust pipelines as well." Fee income, advisory, ECM, DCM, is the offset to NIM pressure if the curve stays flat. CNBC's "Fast Money", Jun 18

5. CRE office marks keep bleeding, but banks have a new capital-relief tool. On The TreppWire Podcast (Jun 19), the hosts flagged a downtown LA office trade where "the loss on this liquidation is likely going to exceed 50%," then detailed how credit risk transfers free capital: on a stylized $500M multifamily book, "the required CET capital drops to about $6 million. That frees up $34 million in capital." CRT and credit-linked-note structures, easier under the reworked Basel proposal, let banks defend CET1 without shrinking the loan book. The TreppWire Podcast, Jun 19

The debate

Bull NII case. Deposit repricing lags the curve; if the Fed hikes, asset yields reset higher before deposit costs catch up, exactly Cassidy's point that the first couple of increases tend to help banks. Add a securities book rolling off low-coupon paper at par, and NII can grind higher even as the cut narrative dies.

Bear NIM case. A flattener is the worst of both worlds: short rates climb (deposit and CD costs sticky-high) while long rates stay pinned, so reinvestment yields don't expand and loan demand stays soft. And the stress test's hypothetical "roughly $200 billion in credit card losses and $75 billion in commercial real estate losses" (Rob Chrisman) are a reminder that the next leg of the cycle is credit, not rates. Chrisman Commentary, Jun 25

"Those are always dangerous." Chris Verrone (Strategas), on bank analysts shifting from price-to-book to earnings multiples to justify valuations On The Tape, Jun 17

Stocks in play

JPMorgan (JPM). Bull: fortress capital, the $50B buyback, and a dividend "good at double-digit rates," per Mike Santoli Squawk on the Street, Jun 25. Bear: it's expensive, Verrone flags stretched price-to-book and "even Diamond won't buy it here"; the co-president reshuffle reopens succession questions On The Tape, Jun 17. Next catalyst: Q2 earnings in July; buyback starts July 1.

Bank of America (BAC). Bull: technical breakout, Verrone: "Bank of America broke out this week." Bear: most asset-sensitive of the money-centers, so a flattener that stalls long rates is a direct headwind to NII recovery. Next catalyst: Q2 NII trajectory commentary. On The Tape, Jun 17

Wells Fargo (WFC). Bull: rides the same capital-return tailwind clearing the system after the stress test. Bear: the open question into the July print is the NIM, deposit and credit setup under a flattener, where it screens as more rate-levered than the diversified money-centers. Next catalyst: Q2 earnings and capital-return cadence.

Citigroup (C). Bull: the highest-conviction call this week, Cassidy sees "much more to go" if cards and global wealth deliver, and PM Tim Seymour called it his "favorite and biggest position." Bear: a show-me story, "they've got to deliver," and a 45% run since March prices in much of it. Next catalyst: Q2 card growth and the Banamex separation. CNBC's "Fast Money", Jun 18

Read-throughs

  • Super-regionals (USB, PNC, TFC). Verrone called out PNC among the regional breakouts: "These regional banks are all starting to break out. Fifth Third, East West, PNC, BPOP." Regionals ride the same capital-return tailwind but are more NIM-levered, so a sustained flattener bites them harder, with USB and TFC the names to watch into their own July prints. On The Tape, Jun 17
  • Deposit competition. With hikes back in play, the assumption that deposit costs roll down into 2026 is now in question; deposit betas, CD repricing and DDA runoff are the swing variable for NII into the July prints.
  • Capital-markets fee tailwinds. Cassidy's "robust pipelines" call is the cleanest positive read for JPM and C into July, fee income is the hedge against a flat curve.
  • CRE and consumer credit. Office marks keep deteriorating (50%+ loss on the LA trade), and the $200B hypothetical card-loss figure keeps consumer credit on the watch list.