Here's Why Bank of America Wants Interest Rates to Rise

Here's Why Bank of America Wants Interest Rates to Rise

Bank of America (NYSE: BAC) is set to earn a lot more money if interest rates continue to climb. Just how much more? According to the bank's latest quarterly regulatory filing, it will generate an additional $3.2 billion in net interest income over 12 months if short- and long-term rates increase by 100 basis points, or one full percentage point.

To understand why this is the case, it's helpful to analogize a bank to a retail store. Holding all else equal, if the prices that a retail store can attract for goods increase, then so too will the store's revenue.

The same is true for banks, though they sell money as opposed to, say, lawnmowers and shovels. The higher the price of money, in turn, the higher a bank's revenue will climb, with the price of money being denominated in interest rates.

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Source: Fool.com