Low Rates Pressure Bank Margins

Lenders find it harder to boost profits and capital given current Fed policy.

Bank of America Corp. and Citigroup Inc. are among lenders that may find it more difficult to boost profits and capital after the Federal Reserve pledged to keep its benchmark interest rate low until at least late 2014.

“This hurts the banks, I don’t think there’s any question about that,” said Ralph Cole, a senior vice president of research at Ferguson Wellman Inc. in Portland, Oregon, which manages $2.9 billion. “Their cost of funds stays low but it makes it harder to earn a return.”

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