Bank of America wants the Fed to hike rates

Strategist: Fed will look to September for hike
Strategist: Fed will look to September for hike

It's time for the Federal Reserve to hike rates, Bank of America executives say. It's just not clear whether Janet Yellen agrees.

Right now there's a paltry 15 percent chance the Fed will hike rates at its June meeting, according to CME Group's FedWatch — and that's a big increase in odds from the beginning of this week, when it was closer to 4 percent. While few on Wall Street believe there's going to be an interest rate hike coming any time soon, Bank of America executives still sound like they're hoping for one.

"We would benefit from a more normal rate environment," Bank of America CFO Paul Donofrio said Wednesday at the Barclays Select Franchise Conference in London. "If rates would get there faster, it would help" boost the bank's returns.

He went on to say that the bank is implementing changes to help it offset the low rates at the Fed.

Brian Moynihan, chairman and CEO of Bank of America.
Dawn Giel | CNBC

While analysts' expectations for a rate hike at the Federal Open Market Committee's next meeting are low, central bankers have reiterated recently that the session will be "live." Wall Street banks and the Federal Reserve began the year with expectations that the Fed would raise interest rates by a quarter-percent four times over the course of 2016, but a turbulent market has forced the parties to scale down their projections.

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If the Fed fails to hike rates, it might put banks in a position of having to continue to cut jobs. Banks with large consumer deposit bases, like Bank of America, earn billions collectively through interest on accounts.

Layoffs were a big part of most banks' plans during this year's turbulent first quarter. Bank of America began the year by cutting 3 percent of its staff in the first quarter, according to its earnings report.

"We're driving an efficiency mindset into the drinking water of our culture," Donofrio said Wednesday. "We as a management team are very focused on expenses."

Moynihan on rates and costs
Moynihan on rates and costs

A report Monday by Keefe Bruyette and Woods analysts downgraded the bank's shares to market perform from outperform and said further cuts may be needed to boost the bank's efficiency ratio.

Bank of America CEO Brian Moynihan recently said his company would have some difficulty trying to match performance targets if the Fed did not hike interest rates as planned, but added that the bank would still be capable of matching its objectives.

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Moynihan, speaking last week in a CNBC interview, acknowledged the value of a 100- basis-point interest rate hike, and responded in the affirmative to a question on whether more cost cuts at his bank could come if the Fed doesn't increase interest rates.

"Absolutely," Moynihan said. "We've done it every quarter for 20-odd quarters in a row."