These 3 Big Banks Are Set to Gain as Consumers Stash More Cash

Key Points

• The United States consumer has spiked savings recently as discretionary spending slows, allowing banks to see higher deposits.
• Based on EPS forecasts, analysts think these deposits will eventually boost earnings at these banks.
• Valuation targets followed as double-digit upside potential is present across all three of these banks.

While the recent volatility breakouts in the S&P 500 have scared some investors out of the consumer discretionary space, as cyclical stocks tend to underperform during times of uncertainty, a few positive developments have emerged. Today, macroeconomic data in the United States economy will pay dividends for investors who are willing to look where most won’t.

Consumers worried about the stability of their personal finances have slowed down their spending, as seen in the first decline in consumer spending since 2021 for February 2025’s report. The lack of spending also drove the personal savings rate higher, leaving more cash on the sidelines, likely looking for investment opportunities.

This is where investors might look to bonds or dividend stocks to anticipate the demand for this capital to be reinvested into the market. However, not everyone looks at money – or the market – in this way, which is why most of the new savings will end up sitting in banks, and that’s why earnings per share (EPS) could rise for commercial names in the financial sector like Bank of America Co. NYSE: BAC, Citigroup Inc. NYSE: C, and also Wells Fargo & Co. NYSE: WFC.

Understanding the Consumer’s Mind Today Can Pay Off

Now that the average consumer in the United States is experiencing the feeling of having more cash on hand due to the recent spike in the savings rate, a couple of things will happen with that money, and that’s where banking stocks in today’s list come into play.

Since most consumers are falling behind on credit payments, as seen through rising delinquencies on cards and other loans, this money will either be used to repay some of these debts or simply be left to sit idly in the bank. This dynamic has always been true, and that is why these banks might see better financial results in the near future.

When a bank has idle deposits on its balance sheet, this capital is typically used to collateralize new products and generate net interest income (NII). NII makes up for most of the momentum behind a bank’s earnings per share (EPS), which is also why investors should be aware of the upside inherent in these commercial banks.

Earnings Per Share Forecasts: All Point to Upside

For Bank of America, for example, Wall Street analysts today forecast up to $0.96 in EPS for the fourth quarter of 2025, a significant boost from today’s net earnings of $0.82 per share.

Considering that EPS typically drives stock price performance, investors can see how this will cause a potential new run in his stock coming up.

This also speaks for the fate of these new savings headed to the banks, as analysts already recognize that the bullish drivers are present enough to deliver investors the upside they are looking for in the sector.

The story rhymes for these other two commercial banks.

Analysts see Citigroup delivering up to $1.85 in EPS for the fourth quarter in 2025 as well, which would mean a net growth rate of up to 38% from today’s reported $1.34 in EPS.

Then, for Wells Fargo, these analysts forecast EPS of $1.60 for the fourth quarter of 2025, a significant boost of 12% from today’s net $1.43 in EPS.

Now that investors know what Wall Street expectations are, it’s time to consider where the upside potential lies.

The Market’s Take on These Banks

When it comes to sentiment, price action is typically the first indicator investors should consider when figuring out what the market is thinking about a specific stock or group of stocks.

Looking at these three banks and how they all trade at or near 90% of their 52-week highs, it becomes evident there is some optimism.

This optimism can be founded and justified on the EPS forecasts already covered and the broader theme of rising deposits from personal savings rates. Just how optimistic can investors be, though? Well, price targets might be helpful in this case.

Bank of America stock’s valuation lands at $56 per share according to Morgan Stanley analysts, who, as of January 2025, decided to call for up to 32% upside from where the stock trades today. With Citigroup, the story rhymes as these same analysts have decided to reiterate their Overweight targets on the bank while also keeping a $109 valuation on it for a 50.8% upside.

Barclays analysts also decided to keep an Overweight rating on Wells Fargo stock, this time valuing it at a high of $92 per share to call for as much as 26% upside from where it trades today. Now, investors can see how the fundamentals align with the themes in these savings rates and banking deposits.