Update: Bank of America

January 23, 2023 | Premium Service | As we navigate through bank earnings, one trend clearly visible through the fog of QT is that bank funding costs are rising faster than asset returns, an arithmetic relationship that defies spin. In the case of Bank of America (BAC), for example, interest expense rose over 400% in 2022 vs the previous year. Interest income, on the other hand, rose just 52% vs 2021.

Overall, BAC saw net income fall 14% YOY vs 2021. Although net interest income rose, non-interest income fell almost $4 billion. Notice that credit loss provisions shown below swung from a $4.6 billion GAAP benefit in 2021 to a $2.5 billion expense in 2022, a stark illustration of the income statement volatility caused by the FOMC’s open market operations .

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