Bank of America ( NYSE: BAC) is placed well to gain from increasing rates of interest and market volatility. In this clip from “The Rank” on Motley Fool Live, tape-recorded on April 25, Motley Fool factor Matt Frankel goes over why Bank of America is his No. 1 choice.
10 stocks we like much better than Bank of America
When our acclaimed expert group has a stock suggestion, it can pay to listen. After all, the newsletter they have actually run for over a years, Motley Fool Stock Consultant, has actually tripled the marketplace. *
They simply exposed what they think are the 10 finest stocks for financiers to purchase today … and Bank of America wasn’t among them! That’s right– they believe these 10 stocks are even much better purchases.
* Stock Consultant returns since April 7, 2022
Matt Frankel: It’s the most significant bank by deposits. Over $3 trillion in properties on its balance sheet. Substantial operation. Really established to be a great recipient of rates of interest. Now, so is United States Bancorp ( NYSE: USB) Bank of America, they have approximately $2 trillion in organization deposits on their balance sheet. Out of those, $815 billion worth pays no interest. So, as Bank of America’s rates of interest grow, as it can charge more for vehicle loans, home mortgages, things like that, it’s not paying anything on those deposits. So, its margin simply grows like that. Let me reveal you genuine fast and after that we’ll go on to our last concern. In this slide, the important things to take note of is on that chart, the net interest yield. That’s the bank’s earnings margin on that bottom chart. The last thing because gray box, where it states rate of interest level of sensitivity, a 100 basis point, which indicates a 1% shift in the rate of interest yield curve, is anticipated to lead to $5.4 billion of extra net interest earnings over 12 months. Now, envision if rates of interest increase by 2%, 3%, 4%. You can see how this might be a huge advantage to the bank’s bottom line. It’s a bank that’s well established to benefit from increasing rates of interest, increasing inflation, and it has that financial investment banking arm that benefits from market volatility, which is a huge factor that I ranked it No. 1 in mine. And it came out to No. 1 for everyone.
Bank of America is a marketing partner of The Climb, a Motley Fool business. Matthew Frankel, CFP ® has positions in Bank of America. The Motley Fool has no position in any of the stocks pointed out. The Motley Fool has a disclosure policy