Shares of Bank of America (BAC 2.33%) traded nearly 5.5% higher as of 12:05 p.m. ET today after several large banks reported earnings this morning and as stocks in general traded higher.
Bank of America peers Wells Fargo (WFC 1.36%) and Citigroup (C 0.97%) reported earnings this morning, and the one most pertinent to Bank of America is Wells Fargo, given they are both large commercial lenders.
Wells Fargo saw net interest income (NII), the profits banks make on loans, securities, and cash after funding those assets, jump nearly 11% in the second quarter from the first quarter, as interest rates continued to rise. Average loans grew roughly 3% from the first quarter, driven by a surge in commercial balances. Average commercial loans in Q2 were up more than 4%.
"Utilization rates continue to increase, but they are still not back to historical levels. Clients have increased borrowings to rebuild inventory and to support working capital growth, both of which have been impacted by higher inflation," Wells Fargo CFO Mike Santomassimo said on the bank's earnings call earlier today.
Wells Fargo also boosted its NII outlook for the full year, guiding for NII to grow 20% in 2022 from 2021.
Given that Bank of America has a large commercial banking business and benefits tremendously from rising rates, investors assume that the strong NII seen at Wells Fargo in Q2 will also show up in Bank of America's upcoming earnings report Monday. I would assume the same and do recommend Bank of America stock.