Bank profits are soaring.

For example, Bank of America’s (BoA) interest income was up 52% in 2022 compared to the previous year.

Mainstream media was quick to jump on this trend and accuse banks of profiteering.

They accuse banks of keeping savings rates artificially low while making billions on loans that have become more expensive because of rising interest rates.

Here’s one headline from Bloomberg:


As always, politicians are getting trigger-happy. They want to earn political capital by targeting the industries that profited from the post-COVID economic recovery and global volatility.

(Oil companies are in the same group. Whenever oil prices rise, they have a target on their backs.)

I have two problems with this argument.

Bank Profits Aren’t Extraordinarily High

It always helps to get some perspective… as I’ve mentioned in these pages, economic experts are unbelievably short-sighted.

BoA, for example, had seen its interest income drop steadily after the Great Recession of 2008-2009.

It didn’t start to recover until 2016, and it did so from low levels.

In 2016, BoA recorded an interest income of $49.5 billion. It was almost 44% lower than what it had made back in 2007.

During the pandemic, the bank’s interest income collapsed again. It dropped by about 33%.


In 2022, the bank’s interest income was still below its 2007 levels.

This tells me that there’s nothing extraordinary about it.

Yes, it’s much higher than in 2021… but with rising interest rates, it’s to be expected.

However, the bigger story here has nothing to do with the interest-rate environment.

The Bigger Story: Banks Support the Real Estate Cycle

When banks get flushed with profits, they have more money to lend.

And a lot of that money will go into mortgages.

When banks have plenty of capital, they start to compete on rates. So at the end of the day, it’s the banks’ clients who benefit from their profitability and healthy balance sheets.

This is exactly what I expect to happen in this stage of the real estate cycle.

In the U.S., the government isn’t going to nationalize banks’ rising profits.

Which means they’ll be able to lend more.

With more capital available, we will see mortgage volumes soar… and as mortgage demand rises, so will house prices.

In other words, the rising interest rate environment is just what I expect for this stage of the cycle. It’s the right conditions for the housing market cycle to continue for the next few years.

This is great news for cycle traders.



Phil Anderson
Editor, Cycles Trading with Phil Anderson