Bank of America Earnings Are Tuesday. What to Expect.

Net interest income, which has been a savior for banks in this shaky economy, is expected to climb 2%, to $14.1 billion.

In contrast, JPMorgan had a 30% year-over-year jump in net interest income because of its acquisition of
First Republic Bank
in May. And Wells Fargo’s net interest income climbed 8%.

Yet even with the jump in net interest income, bank executives have cautioned that the boom days could be ending soon. JPMorgan chief executive Jamie Dimon cautioned last week that the bank may be “over-earning.”

With Wall Street tempering its expectations on more net interest income gains, investors will be looking to other parts of Bank of America’s business as it posts results—and that means the balance sheet. 

Barron’s has reported that Bank of America has emerged as the “problem child” of the big banks. 

Its holdings of low-yielding mortgage securities and government debt had it sitting on unrealized losses of $105.8 billion as of the close of the second quarter—nearly a fifth of the industrywide unrealized losses on bondholdings due to the Federal Reserve rapidly hiking interest rates.

Even worse, those paper losses are forecast to have climbed another $10 billion to $15 billion in the third quarter—driven by the spike in bond yields, according to a Barron’s estimate.

Because of Bank of America’s “too big to fail” status, few expect the lender to suffer anything near the same fate that led to the collapse of Silicon Valley Bank, but the paper losses are a gigantic drag.

It’s a problem that Bank of America is well-aware of.

“You know that we’re taking the portfolio and just making it smaller,” Chief Financial Officer Alastair Borthwick told analysts on the bank’s first-quarter earnings call in April. “We’re taking all of that and plowing it into cash and loans.”

Bank of America shares are down 18% this year; the
KBW Nasdaq Bank Index
(BKX) is off by 23%.

Write to Carleton English at [email protected]