Bank of America’s profit rose 19% to $7.4 billion as it cashed in on the Federal Reserve’s relentless interest rate hikes – a week after regulators fined the firm $250 million.
Bank of America’s profit rose 19 percent in the second quarter of the year due to relentless interest rate hikes by the Federal Reserve.
The country’s second largest bank was bolstered by a stream of wealthy clients fleeing to so-called ‘too big to fail’ firms following the collapse of Silicon Valley Bank (SVB).
It comes just a week after Bank of America was fined $250 million after it was found to have illegally charged customers junk fees, withheld promised rewards and opened fake credit card accounts without holders’ consent.
In all, the firm earned $7.4 billion between April and June, up from $6.25 billion a year earlier. It also beat analysts’ estimates of $6.9 billion.
Like other big banks, Bank of America has benefited from the Fed’s campaign to reduce inflation by raising interest rates ten times in 15 consecutive months.
Bank of America’s profit rose 19 percent to $7.4 billion in the second quarter of the year
The Fed funds rate is currently between 5 and 5.25 percent – after it decided to avoid another hike in June. It is expected to raise rates again at its next meeting on July 26.
As a result, banks have been able to charge borrowers more money to borrow, with mortgage rates now below 7 percent.
Bank of America’s net interest income — the gap between what banks pay customers and what they earn from loans and investments — rose 14 percent to $14.2 billion in the second quarter.
But it fell behind rival JPMorgan Chase, which earned $21.9 billion in interest income in the same period, up 44 percent from last year.
Bank of America CEO Brian Moynihan said the firm’s profits are a positive reflection of the broader economy.
“We see a healthy US economy that is growing at a slower pace with a resilient job market,” he said in a statement.
But the bank had to set aside about $602 million to cover potential bad loans during the quarter.
Many banks have been increasing their so-called loan loss reserves in the past few quarters as customers resume borrowing after not doing so during the pandemic and inflation begins to stretch household budgets.
Bank of America made headlines last week after becoming the subject of a nasty regulatory row with the Consumer Financial Protection Bureau (CFBP).
The regulator accused the bank of systematically doubling fees for account holders with insufficient funds, harming tens of thousands of customers.
It has now ordered the bank to return $100 million to customers. According to ABC-affiliate WTHR, all refunds will be processed by December.
Bank of America CEO Brian Moynihan, pictured, said the firm’s profits were a positive reflection of the broader economy.
The Fed said in June it would hold steady between 5 and 5.25 percent, after ten consecutive hikes since March 2022.
Bank of America was fined another $150 billion.
Some of the allegations are reminiscent of the Wells Fargo scandal last decade when the bank was ordered to pay $190 million after staff were seen signing up customers for additional bank accounts and credit cards without their knowledge.
CFPB Director Rohit Chopra said at the time: ‘Bank of America improperly froze credit card rewards, doubled down on fees and opened accounts without consent.
‘These practices are illegal and undermine consumer confidence. The CFPB will end this practice across the banking system.’
Bank of America told Newstimesuk.com that the $35 overdraft fee was eliminated last year.
‘We have voluntarily reduced overdraft fees and eliminated all non-sufficient funds fees in the first half of 2022. As a result of this industry leading change, revenue from these fees has fallen by more than 90 per cent,’ said a spokesperson.
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