Fixed-Rate Asset RepricingNarrow moat

Bank of America (BAC) — moat facet

The bonds that cost Bank of America $108 billion on paper now give it a scheduled pay rise as they mature.

The same securities that produced the loss are now producing Bank of America's income growth. As low-yielding assets mature and are replaced at current rates, net interest income rises. Management names fixed-rate asset repricing as a driver of net interest income1.

Net interest income ($M)56,931202356,060202460,096202529,113H1 202531,742H1 2026Bank of America Form 10-K FY2025; Q2 2026 supplemental information
The repricing tailwind in the numbers.

The effect is visible. Net interest income was $56,060 million in 2024 and $60,096 million in 20252, and $15,997 million in the second quarter of 2026, up 9% on a year earlier3. The net interest yield rose six basis points to 2.01% in 20254. In the first half of 2026 net interest income was $31,742 million, against $29,113 million a year earlier5, an increase of about 9.0%6.

Management has raised its guidance twice. In January it expected 2026 net interest income on a fully taxable-equivalent basis to grow 5% to 7%7; by July it expected growth at the upper end of a 6% to 8% range8.

This is the upside of the decision that caused the loss. A bank that locked in low yields in 2021 has, in effect, a scheduled pay rise as those assets roll off, provided its deposit costs do not rise to meet it.

Loan growth adds to the effect. Loans and leases rose from $1,095,835 million at the end of 2024 to $1,185,700 million at the end of 2025 and $1,217.6 billion in June 2026910. New loans are written at current rates, so every dollar of loan growth also lifts the yield on the balance sheet.

Net interest income growth is the number that turns this into value. Growth near the top of the 6% to 8% range in 2026 would confirm the repricing is working; growth falling below 5% would say the book had repriced and the deposit side had taken the gain back.

Moat trajectory: Widening

NII +9% in Q2 2026; 2026 guidance raised to the upper end of 6-8%.

The number that tests this moat
Reported
Net interest income growth, latest quarter
+9% to $15,997M (Q2 2026)

The repricing tailwind at work; growth below 5% would mean deposit costs are taking the gain back.

Source: Bank of America Q2 2026 earnings release ↗
⚠ Threats to the moat
⚠ THREAT 01
A Guide Built on the Forward Curve
Bank of America's 2026 income guidance assumes a September rate hike, which makes it partly a forecast about the Federal Reserve.
References
  1. ReportedManagement names fixed-rate asset repricing as a driver of net interest income.
    Bank of America second-quarter 2026 earnings release, Form 8-K exhibit 99.1 - consolidated results, credit quality, capital and forward-looking risks. — Q2 2026 · publ. 14 July 2026 · source ↗
  2. ReportedNet interest income was $56,060 million in 2024 and $60,096 million in 2025, and $15,997 million in the second quarter of 2026, up 9% on a year earlier.
    Bank of America Form 10-K for fiscal 2025 - financial highlights, income statement, capital and shareholders' equity. — FY2025 · publ. 25 February 2026 · source ↗
  3. ReportedNet interest income was $56,060 million in 2024 and $60,096 million in 2025, and $15,997 million in the second quarter of 2026, up 9% on a year earlier.
    Bank of America second-quarter 2026 earnings release, Form 8-K exhibit 99.1 - consolidated results, credit quality, capital and forward-looking risks. — Q2 2026 · publ. 14 July 2026 · source ↗
  4. ReportedThe net interest yield rose six basis points to 2.01% in 2025.
    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 ↗
  5. ReportedIn the first half of 2026 net interest income was $31,742 million, against $29,113 million a year earlier, an increase of about 9.0%.
    Bank of America second-quarter 2026 supplemental information, Form 8-K exhibit 99.3 - quarterly and half-year financial highlights and ROTCE. — Q2 2026 · publ. 14 July 2026 · source ↗
  6. Moat Explorer calcIn the first half of 2026 net interest income was $31,742 million, against $29,113 million a year earlier, an increase of about 9.0%.
    Moat Explorer calculation from Bank of America's reported figures ($ millions unless stated). Deposits: cost of total deposits = interest on interest-bearing deposits / (average interest-bearing + average noninterest-bearing deposits): 2019 7,188 / 1,380,326 = 0.52%; 2021 537 / 1,914,286 = 0.03%; 2022 4,718 / 1,986,158 = 0.24%; 2023 26,163 / 1,887,541 = 1.39%; 2024 38,442 / 1,924,106 = 2.00%; 2025 34,513 / 1,984,182 = 1.74% (1,469,705 + 514,477 = 1,984,182, about $1.98 trillion). Average total deposits 2015 1,155,860; 2021 1,914,286; 2022 1,986,158 (about $1.99 trillion); 2015 to 2025 1,984,182 / 1,155,860 - 1 = 72%. Noninterest-bearing share 744,035 / 1,914,286 = 38.9% (2021); 514,477 / 1,984,182 = 25.9% (2025). Noninterest-bearing decline 751,470 - 514,477 = 236,993 (about $237 billion). JPMorgan comparison: deposit cost gap 1.80% - 1.74% = 0.06 points; 0.0006 x 1,984,182 = about 1,190 (about $1.2 billion). JPMorgan revenue per dollar of average deposits 182,447 / 2,506,565 = 7.3 cents; Bank of America 113,097 / 1,984,182 = 5.7 cents. JPMorgan year-end deposits 2,559,320 / 2,018,729 - 1 = 27%; revenue 182,447 / 113,097 - 1 = 61%; market value 935.79 / 391.80 = 2.4 times. Net income margin JPMorgan 57,048 / 182,447 = 31.3%; Bank of America 30,509 / 113,097 = 27.0%. Efficiency gap 61.65% - 52% = 9.65 points x 113,097 = about 10,914 (about $10.9 billion). Loans to deposits 1,185,700 / 2,018,729 = 58.7%. Uninsured deposits 723.0 + 134.9 = 857.9 billion; 857.9 / 2,018.7 = 42.5%; insured and other 2,018.7 - 857.9 = 1,160.8 billion. Consumer deposits per checking account 957.0 billion / 38.7 million = about $24,700. Securities: held-to-maturity unrealised loss as a share of common equity 108,596 / 244,800 = 44% (2022); 82,094 / 276,100 = 30% (June 2026). Held-to-maturity amortised cost 2021 674,591 - 2025 522,685 = 151,906 (about $152 billion); 2020 438,279 to 2021 674,591 = +236,312 (about $236 billion); 2021 fair value 665,890 - cost 674,591 = -8,701. Runoff time 505,828 / 34,794 = 14.5 years. Agency MBS share of loss 67,309 / 80,257 = 84%. Net interest income H1 31,742 / 29,113 - 1 = 9.0%. Capital: CET1 headroom (11.2% - 10.0%) x 1,792 billion = about 21.5 billion; 2027 minimum 4.5% + 3.5% + 2.5% = 10.5%. Capital returned 2025 (8.1 + 21.433) / 29.055 = 101% of net income to common. Average diluted shares 7,680.9 / 11,236.2 - 1 = -31.6%. EPS growth (3.81 / 1.31)^(1/10) - 1 = 11.3% a year. Price to tangible book 56.03 / 29.37 = 1.91. Revenue 2023 102,769 to 2025 113,097 = +10%. Compensation 42,346 / 69,727 = 61% of noninterest expense. Financial centers 3,530 / 3,664 - 1 = -3.7%. Noninterest expense Q2 2026 18,627 / 17,183 - 1 = 8.4%. Berkshire holding 483,394,015 / 1,032,852,006 - 1 = -53%. Investment banking fees Q2 2025 implied 2.1 / 1.5 = 1.4 billion. Segments (FTE, 2025): segment revenue 43,673 + 24,883 + 24,108 + 24,096 = 116,760; less All Other 3,054 = 113,706; less FTE adjustment 609 = 113,097. Shares of total FTE revenue: Consumer 43,673 / 113,706 = 38.4%; GWIM 24,883 / 113,706 = 21.9%. Shares of net income 30,509: Consumer 12,245 = 40.1%; Global Banking 7,793 = 25.5%; Global Markets 6,111 = 20.0%; GWIM 4,670 = 15.3%. Net income margins: Consumer 12,245 / 43,673 = 28.0%; GWIM 4,670 / 24,883 = 18.8% (2024 4,263 / 22,929 = 18.6%; 2023 3,947 / 21,105 = 18.7%); Global Banking 7,793 / 24,108 = 32.3%; Global Markets 6,111 / 24,096 = 25.4%. Consumer net interest income 35,309 / 43,673 = 81%; Consumer provision 4,649 / 5,675 = 82%. Growth 2023-2025: Consumer 43,673 / 42,031 - 1 = 3.9%; GWIM 24,883 / 21,105 - 1 = 17.9%; Global Markets 24,096 / 19,533 - 1 = 23.4%; Global Banking net income 7,793 / 10,072 - 1 = -23%. Consumer H1 2026 revenue 11,336 + 11,049 = 22,385. GWIM net interest income 7,197 / 24,883 = 29%. Revenue per dollar of year-end assets: Global Markets 24,096 / 1,032,858 = 2.3 cents; Consumer 43,673 / 1,039,346 = 4.2 cents. GWIM client balances 4,751,394 / 4,252,106 - 1 = 11.7%, increase 499,288; net flows 81,997 / 4,252,106 = 1.9%; consumer investment assets 639.5 / 599.1 - 1 = 6.7%. Revenue per dollar of balances: Private Bank 4,167 / 759,082 = 0.55%; Merrill 20,716 / 3,992,312 = 0.52%; Private Bank share of GWIM balances 759,082 / 4,751,394 = 16% and revenue 4,167 / 24,883 = 17%. Investment and brokerage services 19,956 / 17,766 - 1 = 12.3%. Common equity 277,251 / total assets 3,411,738 = 8.1%. AUM net flows 81,997 / 2,177,708 = 3.8%. Held-to-maturity loss 2023 97,994 / 263,249 = 37%. Share price 56.03 / 52-week high 65.23 - 1 = -14%. First half 2026 (Q1 + Q2): Consumer Banking revenue 11,049 + 11,336 = 22,385 and net income 3,060 + 3,281 = 6,341; Global Banking net income 2,087 + 2,046 = 4,133; Global Markets revenue 7,109 + 8,022 = 15,131 - deposits, deposit cost and the securities book. — 2015-2026 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in Bank of America's Forms 10-K and 10-Q, earnings releases, JPMorgan's 10-K, Berkshire 13F tables and market data; operands shown in the source line.
  7. ReportedIn January it expected 2026 net interest income on a fully taxable-equivalent basis to grow 5% to 7%; by July it expected growth at the upper end of a 6% to 8% range.
    Bank of America fourth-quarter 2025 earnings presentation, Form 8-K exhibit 99.2 - the 2026 outlook. — Q4 2025 · publ. 14 January 2026 · source ↗
  8. ReportedIn January it expected 2026 net interest income on a fully taxable-equivalent basis to grow 5% to 7%; by July it expected growth at the upper end of a 6% to 8% range.
    Bank of America second-quarter 2026 earnings call transcript. — Q2 2026 · publ. 14 July 2026 · source ↗
  9. ReportedLoans and leases rose from $1,095,835 million at the end of 2024 to $1,185,700 million at the end of 2025 and $1,217.6 billion in June 2026.
    Bank of America Form 10-K for fiscal 2025 - financial highlights, income statement, capital and shareholders' equity. — FY2025 · publ. 25 February 2026 · source ↗
  10. ReportedLoans and leases rose from $1,095,835 million at the end of 2024 to $1,185,700 million at the end of 2025 and $1,217.6 billion in June 2026.
    Bank of America second-quarter 2026 earnings release, Form 8-K exhibit 99.1 - consolidated results, credit quality, capital and forward-looking risks. — Q2 2026 · publ. 14 July 2026 · source ↗
Sources
Generated September 25, 2026