Bank of America's Deposit Strategy in High-Rate Environment

Bank of America (NYSE: BAC) maintained average deposits of $957 billion in the second quarter of 2026, securing its position as the leading holder of U.S. consumer deposits. This substantial capital base provides the bank with a critical advantage over mortgage real estate investment trusts (mREITs) like AGNC Investment, which face dual pressures from rising funding costs and falling asset values. By controlling the interest rates paid on checking accounts, BAC preserves its net interest margin even as the broader interest rate environment shifts upward.

The structural difference lies in the flexibility of the banking model. While mREITs are exposed to market-driven yield fluctuations on their mortgage-backed securities portfolios, Bank of America actively manages the spread between loan yields and deposit costs. Checking accounts, which offer essential transaction services, typically carry the lowest interest rates among deposit products. This allows the bank to utilize these funds as its lowest-cost source of capital, ensuring that earnings remain supported despite the end of the near-zero rate era.

Deposit Stickiness Reduces Capital Risk

Customer retention serves as a buffer against rate volatility. Most consumers do not switch banks solely for marginal increases in interest rates, as checking accounts are often intertwined with other financial relationships. This stickiness means that Bank of America’s deposit base remains stable, providing a reliable funding source for lending activities. The bank has reported an increase in its checking account count for 30 consecutive quarters, reinforcing the long-term value of these low-cost relationships.

Rate Control Differentiates From REITs

Unlike mREITs, which must refinance debt at prevailing market rates, Bank of America can adjust deposit rates more gradually due to its extensive branch network and brand strength. This controlled approach prevents sudden spikes in funding costs that could erode profitability. As rates rise, the bank’s ability to maintain a favorable spread between assets and liabilities ensures that the core banking business model remains resilient, distinguishing it from entities more directly exposed to market rate swings.