If Zero Rates Are Gone for Good, What Is a Checking Account Worth to a Bank?

Bank of America reported average deposits of $957 billion in Q2 2026 and said it remained No. 1 in U.S. consumer deposits, underscoring the value of its low-cost, sticky checking-account funding base. The article argues that banks can better preserve lending spreads as rates rise by controlling deposit pricing, while mortgage REITs such as AGNC face both higher funding costs and declines in the value of existing mortgage securities. Bank of America has also increased its checking-account count for 30 consecutive quarters, strengthening its funding advantage.

Analysis

The relevant valuation variable for BAC is not the absolute level of rates but deposit beta relative to asset repricing and the shape of the curve. A durable mix of noninterest-bearing and low-beta operating deposits makes BAC structurally less funding-sensitive than wholesale-funded mortgage carry vehicles; that advantage is most valuable if short rates remain restrictive while competitors are forced to pay up for deposits. The second-order beneficiary is BAC's fee ecosystem: primary-account relationships lower customer-acquisition costs and improve cross-sell economics, supporting returns even if loan growth is muted.

The market risk is that the deposit franchise is already well understood and earnings upside requires a benign combination of stable balances, limited migration into higher-yielding products, and either loan growth or a steeper curve. If rate cuts arrive alongside a recession, lower funding costs may be offset by weaker loan demand, reserve builds, and charge-offs; BAC is therefore not a clean duration-long. For AGNC, the more important driver is mortgage-basis volatility, prepayment behavior, and repo/hedge costs rather than a simple directional rate view; an apparently attractive dividend can mask book-value erosion when MBS spreads widen.

Near term, bank earnings and monthly deposit/credit data matter more than this narrative. Over 1-3 months, a steepening driven by falling front-end rates without a material credit deterioration would favor BAC and large-bank peers versus mREITs. Over 6-18 months, persistent digital-bank competition and money-market fund yields could raise industry deposit betas, narrowing the franchise premium that supports large-bank multiples.

Key Decisions for Investors

• Maintain a modest long BAC versus short AGNC pair over the next 1-3 months only if the 2s10s curve steepens and BAC reports stable average deposits with no meaningful increase in interest-bearing deposit costs; target 8-12% relative return, with exit if BAC's deposit beta accelerates or AGNC book value rises materially on MBS-spread tightening.
• Do not add directional BAC exposure ahead of the next earnings release without current deposit-mix, NII-guidance, and criticized-loan data. Set an alert for a downward NII revision or reserve build above consensus: either would invalidate the low-cost-funding earnings thesis despite stable headline deposits.
• For a broad expression, prefer long KBE over REM for a 3-6 month curve-steepening/receding-front-end-rate scenario; banks retain operating leverage to funding normalization, while mortgage REIT returns remain exposed to MBS basis and hedge volatility. Risk-manage if mortgage spreads tighten sharply, which would disproportionately rerate REM constituents.
• Avoid treating NFLX and NVDA as read-throughs from this item; neither has a discernible funding-cost or deposit-franchise linkage, and the supplied ticker association appears promotional rather than economically actionable.