Bank of America Could Benefit From Interest Rate Increases!

  Bank of America Could Benefit From Interest Rate Increases! All Bank Stocks Are Prepared to Benefit from a Increase in Interest Rates and Will Continue to Make Huge Gains. While the Fed has announced that it will not raise rates until 2023 or 2024, Morgan Stanley CEO James Gorman said, “An interest rate hike could be in early 2022. "Even if the Fed doesn't approve rates in the near future, banks could benefit from escalating longer-term interest rates for most of this year." While almost all banks will enjoy these benefits, some will benefit far more than others.

Bank of America

Bank of America  BAC (NYSE) $41,69 -0,63 (-%1,49), the second largest bank in the United States by assets, probably won't wait for the Fed's rate hike. The bank has more than $900 billion in loans at the end of the first quarter, a securities portfolio of approximately $850 billion. It is clear that both departments will benefit tremendously from the rate hike.

All Bank Stocks Are Prepared to Benefit from a Increase in Interest Rates and Will Continue to Make Huge Gains.

According to the BAC, if the Fed increased the fed funds rate by 1 percentage point, BAC would have net interest income of $8,3 billion over the next 12 months. This would result in a significant increase in the net income of the bank compared to previous years. But in a scenario where the Fed does not raise the interest rate, it could push the 10-year long-term interest rates up. If that happens, BAC would be able to increase its treasury bond net interest income of approximately $2,1 billion by year-end. “BAC could see an increase in net interest income if long-term interest rates continue to rise and there is some modest loan growth for the remainder of the year,” Bank of America CEO Brian Moynihan said in a statement on the bank's recent earnings. All Bank Stocks Are Prepared to Benefit from a Increase in Interest Rates and Will Continue to Make Huge Gains.    

Source: The Motley Fool

 

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