5 of the Smartest Bank Stocks to Buy in the Rising Rate Environment
After a sharp reversal in the final few months of 2021, the Federal Reserve looks poised to raise the federal funds rate -- the benchmark overnight borrowing rate -- multiple times this year. This should bode well for bank stocks, most of which will benefit in a rising-rate environment. With this in mind, here are five of the smartest bank stocks to buy in 2022.
The second-largest bank by assets in the U.S., Bank of America (NYSE: BAC) is a popular pick among investors thinking about rising rates. As one of the largest commercial lenders, Bank of America is very asset-sensitive, meaning that when rates rise, the yields on more of its assets, like loans, reprice higher than those on its liabilities, like deposits. The bank disclosed after its last earnings report that a 1% parallel move in short- and long-term interest rates would result in $7.2 billion of additional net interest income (profits on loans and securities after covering the cost of funding those assets) over the next year. Loan growth should also continue to bounce back this year.
Bank of America is one of the largest banks in the country, it's not going anywhere, it does not have any big regulatory issues right now, and it has strong levels of capital, making it a very low-risk stock.
Source Fool.com
