Jefferies sees Q2 interest income boost for mid-cap, regional US banks

Jefferies expects mid-cap and regional U.S. banks to be well-positioned to report both sequential and year-over-year growth in net interest margin and net interest income in Q2

NII and NIM are key measures of lending profitability that reflect how much banks earn from the difference between interest collected on loans and interest paid on deposits

Brokerage adds that it also sees potential for modest upward revisions in FY NIM and NII forecasts for banks with greater asset sensitivity

"That said, lingering economic and geopolitical uncertainty may prompt banks to maintain a cautious stance with their loan growth outlooks for the second half of 2025" - brokerage

Adds that fee-income in Q2 will likely be mixed as capital markets revenue remains soft, but could be partially offset by seasonal strength in mortgage activity

Jefferies says it remains "constructive" on U.S. bank stocks despite geopolitical tensions and lingering tariff/economic uncertainty

Its top picks in the sector are: Huntington Bancshares HBAN.O, M&T Bank MTB.N, Fifth Third FITB.O, Flagstar Financial FLG.N, Western Alliance WAL.N, Axos Financial AX.N

U.S. banks will kick-off the Q2 reporting season for Wall Street next month