According to the financial disclosures provided by the banks, PNC Financial Services (NYSE:PNC)’s net interest income is not expected to move significantly if the rates go up 100 bps, while Bank of America’s projected interest income is expected to go up by 8.9%.
Looking at the fixed income portfolio durations of the aforementioned banks, it’s clearl that Wells Fargo & Co (NYSE:WFC) will experience the most book value decline due to the rising interest rates. However, all is not bad for Wells Fargo, its investors can expect an increase in its interest income.
Other banks that might experience declines in their book values include PNC Financial and Bank of America Corp (NYSE:BAC). I would recommend investors stay away from these last two banks until rates stabilize.
Red Chip has no position in any stocks mentioned. The Motley Fool recommends Bank of America and Wells Fargo. The Motley Fool owns shares of Bank of America, PNC Financial Services, and Wells Fargo. Red is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Book Value Erosion a Concern for These Banking Stocks originally appeared on Fool.com and is written by Red Chip.
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