Bank of America
outlined steps to boost profits from consumer debt like credit cards and mortgages on Thursday.
The Charlotte, N.C.-based bank became the latest in a string of major financial firms to hike interest rates on credit cards for balance-carrying borrowers, according to a news report Thursday. Separately, BofA also said it will officially begin participating in the
to refinance mortgages at lower rates for some homeowners.
The BofA news, combined with
report of $3 billion first-quarter earnings and positive statements by CEOs of firms like
recently, were distinct signals that big banks are regaining their footing. It also sets up a scenario in which the big four can compete ruthlessly for opportunities among the most credit-worthy consumers as the economy begins to stabilize.
Investors took heed of the news, sending BofA shares up 20%, to $8.47. Wells shares were up 25.5%, to $18.69, JPMorgan shares were up 12.4%, to $30.84 and Citi shares were up 9.2% to $2.95. The KBW Bank Index soared 10.8% to 31.20.
BofA will raise rates into double-digit territory for consumers who carry a balance and have an interest rate below 10%, according to a report in
The Wall Street Journal
. The changes will take place starting in June.
BofA's decision follows similar moves by Citi, JPMorgan,
from rising unemployment and shrinking wealth, banks have faced higher delinquency and default rates on all sorts of debt. Banks raise interest rates as a protection against such losses, although sudden rate hikes and other credit card practices have been a hot topic for lawmakers who are pushing rules to protect consumers.
Separately on Thursday, BofA also said it will officially begin participating in the government's "Making Home Affordable" plan. Under the program, homeowners with mortgages owned by
who are current with payments and whose home value exceeds the mortgage value by no more than 105% can refinance their loans.
While the plan doesn't necessarily help homeowners in the most depressed housing markets, it has set off a refinancing boom across the country, helping areas with moderate price declines. It has also been a boon for the banking industry, by stabilizing the housing market, minimizing losses and driving new business.
BofA services one in five U.S. mortgages, creating a big opportunity.
Barbara Desoer, president of Bank of America's home-loan division said that nearly 200,000 homeowners have contacted the bank to determine eligibility. BofA has extended a voluntary moratorium on foreclosures of loans that may be eligible. Desoer asserts that "a majority" are and that BofA will expand the offering to even more consumers in coming weeks.
"Combined with historically low interest rates, this program has generated significant interest from borrowers seeking the benefit of lower mortgage payments," Desoer said in a statement.