⚠ Falling Rates Cost Twice as MuchModerate threat

Bank of America (BAC) — threat to the moat

A two-point fall in rates would cost Bank of America nearly three times what a two-point rise would earn it.

Bank of America's rate sensitivity is not symmetrical. In June 2026 a 100 basis point fall would have cut net interest income by about $2.2 billion, against a gain of $1.0 billion for a rise; a 200 basis point fall would cost about $5.5 billion, against $1.9 billion for a rise1.

NII change by rate shock, June 2026 ($bn)-5.5-200bp-2.2-100bp+1.0+100bp+1.9+200bpBank of America Form 10-Q Q2 2026, banking-book sensitivity
The downside is larger than the upside.

The reason is the deposit franchise. When rates fall, asset yields fall with them, but the bank cannot cut the rate it pays on its cheapest deposits much below where it already is. Consumer deposits were paying 0.48% in the second quarter of 20262.

So the same low-cost deposits that are the moat also limit how much the bank can protect itself in a downturn with lower rates. A recession that brought rate cuts would squeeze income from both directions, through lower yields and through credit losses.

The asymmetry has been consistent. A 200 basis point fall was worth a loss of about $5.4 billion at the end of 2024 and $4.9 billion at the end of 20253, against $5.5 billion in June 20264. The downside has not been hedged away as the rate cycle turned.

The −200 basis point figure in the quarterly sensitivity table is the one to follow. A loss larger than $5.5 billion would mean the exposure to falling rates was growing, not shrinking.

References
  1. ReportedIn June 2026 a 100 basis point fall would have cut net interest income by about $2.2 billion, against a gain of $1.0 billion for a rise; a 200 basis point fall would cost about $5.5 billion, against $1.9 billion for a rise.
    Bank of America Form 10-Q for the quarter ended 30 June 2026 - held-to-maturity securities, interest-rate sensitivity, capital requirements and the OCC consent order. — Q2 2026 · publ. 31 July 2026 · source ↗
  2. ReportedConsumer deposits were paying 0.48% in the second quarter of 2026.
    Bank of America second-quarter 2026 earnings presentation, Form 8-K exhibit 99.2 - Consumer Banking rate paid and cost of deposits. — Q2 2026 · publ. 14 July 2026 · source ↗
  3. ReportedA 200 basis point fall was worth a loss of about $5.4 billion at the end of 2024 and $4.9 billion at the end of 2025, against $5.5 billion in June 2026.
    Bank of America Form 10-K for fiscal 2025 - average balance sheet, deposits, net interest income and rate sensitivity. — FY2025 · publ. 25 February 2026 · source ↗
  4. ReportedA 200 basis point fall was worth a loss of about $5.4 billion at the end of 2024 and $4.9 billion at the end of 2025, against $5.5 billion in June 2026.
    Bank of America Form 10-Q for the quarter ended 30 June 2026 - held-to-maturity securities, interest-rate sensitivity, capital requirements and the OCC consent order. — Q2 2026 · publ. 31 July 2026 · source ↗
Sources
Generated September 25, 2026