Bank of America (BofA) finds itself in a tight spot as interest rates soar, and among the giants in the U.S. banking realm, it’s the slowest off the starting block. Currently holding the title for the worst-performing stock in the group, BofA’s investments are earning less than its closest rivals.
The story behind this financial fumble dates back to the pandemic era when BofA decided to channel hundreds of billions of dollars into long-dated Treasuries and mortgage bonds at the prevailing low rates. Now, as the tides of interest rates rise, these once seemingly prudent investments are causing significant headaches within the bank’s walls.
Insiders reveal that there’s some finger-pointing within the bank regarding this strategic decision. The holdings, made during the pandemic, are now displaying hefty paper losses and missing out on the best rates seen since 2007.
As BofA’s stock flirted with a three-year low recently, its chief executive, Brian Moynihan, took the matter head-on during a meeting with top managers. According to insiders not authorized to comment publicly, Moynihan explained that during the pandemic, the bank faced a deluge of extra deposits that needed a prudent destination. The decisions made back then are now under scrutiny as BofA grapples with the aftermath of its investment choices in a changing interest rate landscape.
