In the following video, Fool analyst David Hanson interviews Motley Fool financial analyst Matt Kopenheffer regarding Bank of America (NYSE: BAC) as an example of a large bank facing the potential for a sudden rise in interest rates.
Matt describes an environment in which a jump in interest rates could cause the bank's cost of funds to rise faster than income from assets on the balance sheet. He also discusses three reasons large banks may be positioned to mitigate the potential decrease in earnings: core deposits, loan-to-deposit ratios, and shorter duration assets and hedging activities.
Bank of America's stock doubled in 2012. Is there more yet to come? With significant challenges still ahead, it's critical to have a solid understanding of this megabank before adding it to your portfolio. In The Motley Fool's premium research report on B of A, Matt joins analyst Anand Chokkavelu, CFA, to lift the veil on the bank's operations, including detailing three reasons to buy and three reasons to sell. Click here now to claim your copy.