Why Bank of America Corp (BAC) Stock Is Tanking Again

But there’s a counteracting influence at work, here, that the market seems to be missing. That is, as long-term interest rates go higher, banks like Wells Fargo & Co (NYSE:WFC) and Bank of America Corp (NYSE:BAC) will make more from their massive portfolios of loans and other interest-earning securities. And this is particularly true in Bank of America Corp (NYSE:BAC)’s case, since it relies to a much lesser extent than Wells Fargo on income from mortgage banking activities. This is the reason Bank of America Corp (NYSE:BAC)’s CEO Brian Moynihan recently said that “the interest rate risk is all upside.”

In the event you missed the significance of that last quote, I encourage you to reread it. If true, that means there’s essentially only one direction for Bank of America’s bottom line to go: up. This is assuming that its legal risk stays within anticipated limits. My point is that, at least when it comes to Bank of America’s stock, I think the market is overreacting to its concern about the Fed.

The article Why Bank of America Stock Is Tanking Again originally appeared on Fool.com.

John Maxfield owns shares of Bank of America. The Motley Fool recommends Bank of America and Wells Fargo. The Motley Fool owns shares of Bank of America and Wells Fargo.

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