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Bank of America's NII Momentum Builds: Can it Maintain the Pace?
Bank of AmericaBank of America(US:BAC) ZACKSยท2025-08-13 14:21

Core Insights - Bank of America (BAC) has experienced a significant increase in net interest income (NII) following the Federal Reserve's rate cuts in 2024, driven by fixed-rate asset repricing, higher loan and deposit balances, and declining funding costs [1][4][8] NII Performance - BAC's net interest yield improved slightly to 1.97% in 2024 from 2.08% in 2023, while it was up from 1.96% in 2022 and 1.66% in 2021. The yield remained stable at 1.96% in the first half of 2025 [3] - Management anticipates NII to be between $15.5 billion and $15.7 billion for Q4 2025, with a projected growth of 6-7% for the year [5][8] Market Context - Despite the Fed maintaining interest rates amid inflation and tariff challenges, the likelihood of a 25-basis point cut in the upcoming FOMC meeting has increased due to signs of labor market softness [4] - The central bank's rate cuts are expected to benefit BAC in the near term, although they may slow NII growth [6] Peer Comparison - Citigroup's NII rose 8% year over year to $29.2 million in the first half of 2025, driven by increased deposit and loan balances [7] - JPMorgan's NII increased by 1% to $46.5 billion in the first half of 2025, with management raising its 2025 NII guidance to $95.5 billion, indicating over 3% growth year over year [9][10] Stock Performance and Valuation - BAC shares have increased by 8% year to date, trading at a price-to-tangible book (P/TB) ratio of 1.76, which is below the industry average [8][11][14] - The Zacks Consensus Estimate projects year-over-year earnings growth of 12.2% for 2025 and 16.1% for 2026, with recent estimates for 2025 slightly upward and 2026 slightly downward [15]