Bank of America profits jump 19% to $7.4BILLION as it cashes in on relentless Federal Reserve interest rate hikes, a week after the firm was fined $250 million in a dispute with the regulator
Bank of America’s profits soared 19 percent in the second quarter of the year as it took advantage of the Federal Reserve’s relentless interest rate hikes.
The country’s second-biggest bank was buoyed by an influx of wealthy clients who fled to the so-called “too big to fail” company after 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 the consent of the holders.
In total, the company earned $7.4 billion between April and June, up from $6.25 billion a year earlier. It also beat analyst projections of $6.9 billion.
Like other major banks, Bank of America has benefited from the Fed’s campaign to curb inflation by raising interest rates ten times in a row in 15 months.
Bank of America’s profit soared 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 made the decision to skip 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 raked in $21.9 billion in interest income in the same period, up 44 percent from last year.
Bank of America CEO Brian Moynihan said the company’s earnings were a positive reflection of the broader economy.
“We continue to see a healthy US economy growing at a slower pace with a resilient job market,” he said in a statement.
However, the bank also had to set aside approximately $602 million to cover potentially bad loans in the quarter.
Many banks have been increasing their so-called loan loss reserves in recent quarters as customers start to borrow again after not doing so during the pandemic, and inflation begins to stretch household budgets.
Last week, Bank of America hit the headlines after it became the subject of a nasty regulatory dispute with the Consumer Financial Protection Bureau (CFBP).
The regulator accused the bank of harming hundreds of thousands of customers by systematically doubling fees for account holders with insufficient funds.
Now he has ordered the bank to refund customers $100 million. All refunds will be processed in December, according to the ABC affiliate. WTHR.
Bank of America CEO Brian Moynihan, pictured, said the company’s earnings were a positive reflection of the broader economy.
The Fed said in June that it would keep rates stable between 5 and 5.25 percent, after ten consecutive increases since March 2022.
An additional $150 billion fine was imposed on Bank of America.
Some of the allegations were reminiscent of the Wells Fargo scandal of the past decade, when the bank was ordered to pay $190 million after staff were found to be 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 withheld credit card rewards, doubled fees and opened accounts without consent.
‘These practices are illegal and undermine customer trust. The CFPB will end these practices throughout the banking system.’
Bank of America told DailyMail.com that the $35 overdraft fee was removed last year.
“We voluntarily reduced overdraft fees and eliminated all non-sufficient funds fees in the first half of 2022. As a result of these industry-leading changes, revenue from these fees has been reduced by more than 90 percent,” a spokesperson said. .