Fed Holds Rates, Signals Hike: Bank of America NII to Gain but Funding Costs Rise
BAC•Federal Reserve held its benchmark rate and signaled a future hike, potentially boosting Bank of America’s net interest income but increasing funding costs, credit risk, and securities pressure. Bank of America’s research team reiterated a 'buy' rating and 720p price target on Melrose Industries, highlighting an 11% revenue rise, 20% engine growth, and £150m–£200m full-year free cash flow guidance.
1. Fed Decision and Bank of America Impact
The Federal Reserve kept its policy rate unchanged and indicated a future rate increase, a move that could lift Bank of America’s net interest income by widening lending spreads. However, funding costs are likely to rise alongside higher deposit rates, while credit risk and valuation pressure on its securities portfolio may intensify as borrowers and markets adjust.
2. Research Division Reiterates Melrose Rating
Bank of America’s equity research team maintained a 'buy' recommendation on Melrose Industries with a 720p price target, citing the stock’s proximity to 12-month lows. The analysts pointed to an April update showing 11% group revenue growth, 20% first-quarter engine business expansion, a roughly 7% airframes margin in H1, and a forecast of £150 million to £200 million in full-year free cash flow.
