Sending a Powerful Message

Even though Bank of America (BAC) beat earnings estimates Tuesday, bringing in a 48-cent comparable profit for the quarter versus a 43 cent average guess from analysts, shares dipped slightly on the session.

The big reason why BofA’s stock price isn’t capitalizing on the earnings beat? It all comes down to interest income.

Higher interest rates have been the big catalyst captivating financial sector investors all year long, and the fact that BofA’s interest income declined last quarter in spite of rate hikes from the Federal Reserve is making investors anxious. BofA’s net interest margin fell 5 basis points to 2.34% for the quarter.

A pair of big factors in that interest income dip was the sale of the firm’s U.K. credit card business as well as low yields on long-dated Treasuries. At the same time, the firm’s biggest banking peers that have already reported their quarterly numbers have actually managed to post higher interest income this quarter. That makes BofA look less than stellar by comparison.

But while the bank’s quarter was mixed, the message that this behemoth is sending from a price standpoint is a whole lot less ambiguous. Simply put, Bank of America could still rally this summer thanks to a bullish price setup that’s been forming in shares since March.