Bank of America: NII Trough Signals Potential Turning Point

Bank of America’s net interest income (NII) may have passed its low point, signaling a potential inflection for the bank’s revenue outlook. After a period of margin compression driven by deposit mix shifts, competition for loans, and a changing rate environment, several factors suggest NII could stabilize and gradually improve.

Higher short-term interest rates historically lift loan yields faster than deposit costs reprice. As the Federal Reserve signals lingering rate levels and markets recalibrate expectations, banks like Bank of America stand to benefit from improved loan margins and more favorable asset yields. At the same time, deposit re-pricing is a double-edged sword: while some expensive time deposits have rolled off, core deposit growth and stable checking balances can moderate funding cost increases.

Loan growth and mix will be central to whether NII recovers. Commercial and consumer lending momentum, particularly in middle-market and credit card portfolios where spreads tend to be wider, would amplify the upside. Conversely, prolonged pressure on deposit betas or an unexpected slowdown in loan demand would limit gains. Fee income trends and expense control will also affect overall revenue and profitability, though NII remains the primary driver for bank earnings in this cycle.

Investors should watch metrics such as loan yield, cost of funds, deposit beta, and the slope of the yield curve for early signs of sustainable NII recovery. Management commentary, quarterly guidance, and the pace of loan originations will provide additional color. For Bank of America specifically, balance-sheet composition and capital allocation choices — including buybacks and dividends — will reflect management confidence in durable NII improvement.

While risks remain, including macroeconomic softness or shifts in monetary policy, the evidence points to the possibility that the trough in net interest income represents a turning point rather than an extended trough. If trends in loan pricing and deposit composition continue to tilt favorably, NII could be a tailwind for Bank of America’s next earnings cycle.