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Some rough news for banks could be nice news for those who keep their money in banks.
Bank of America stock took a beating early on Wednesday after announcing its second quarter earnings.
Its earnings beat expectations but the bank fell short of expectations on what’s known as net interest income.
“Simply put, it’s the difference between the interest that a bank earns on its loans, mortgages, etc., and the interest a bank has to pay out on consumer deposits,” explained KTRH money man Pat Shinn. “Banks are having to pay out more to keep customer deposits.”
And Bank of America isn’t the only big financial name to fall short on net interest income.
In the current financial environment, with the Federal Reserve keeping interest rates up, Pat says it’s challenging for the banks to compete, because the interest you could earn by investing your money outside a bank in, say, government bonds, is still relatively high.
“It’s just that area of the market that still looks okay right now, before we see Fed rate cuts.Remember you can loan your money out, right now, to the U.S. government earning 4 percent. And, with no risk, that’s not too bad.”