Brian Moynihan, chief executive officer of Bank of America Corp., listens during a House Financial Services Committee hearing in Washington, D.C., U.S., on Wednesday, April 10, 2019.
Andrew Harrer | Bloomberg | Getty Images
Bank of America is the latest lender to warn how falling interest rates will diminish a main engine of bank profits.
The firm said in April that growth in net interest income would slow from 6% last year to 3% for 2019. However, that measure may slow further to about 1% this year if the Federal Reserve cuts interest rates twice, Chief Financial Officer Paul Donofrio told analysts Wednesday during a conference call.
Despite posting a record profit that exceeded analysts’ estimates, the bank’s shares fell 0.4% at 9:09 am after earlier dropping more than 1%.
“From here, if we were to assume stable rates, we think our NII for 2019 would now be up approximately 2% compared to 2018,” Donofrio said.
“The forward curve anticipates two Fed fund rate cuts in 2018, and another in 2020,” Donofrio continued. “If rates follow the forward curve, and the Fed funds rate were indeed to be cut twice this year starting this month, we think it would likely shave another 1 percent off NII growth for 2019.”
Global economic conditions have worsened in recent months amid the U.S.-China trade dispute, and the Fed has signaled it is likely to cut its benchmark interest rate later this month.
This is a developing story. Check back for updates.
