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What you should realize is that, despite the remaining problems in credit cards, commercial real estate or high yield loans, limiting credit growth, the changes instituted by government definitely have meant 1. that banks will earn a shed load of money and 2. that house price declines have stalled, underpinning the asset base of lenders.
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BAC's gains were derived from net interest yield, loan growth and increased income from service charges.
One-third were based on high-yield loans and are known as collateralised loan obligations (CLOs).
Demand for high-yield loans used to finance buyout deals all but dried up, leaving banks faced with the possibility of holding billions of dollars in debt.
Banks have found themselves increasingly unable to sell the high-yield loans and bonds that lie at the heart of leveraged buyouts.
But the onset of the subprime mortgage crisis last summer raised fears that other forms of debt, like high-yield loans and bonds, were at risk as well.
But beginning in late June, investors in the high-yield loans and bonds that are at the heart of buyouts began balking.
Using the specter of about $460 billion of high-yield loans that mature from 2011 through 2014, they've gotten creditors to agree to change terms in ways that indicate that leverage has swung to the borrowers from the banks.
Banks and buyout firms, for example, tussled over the weekend about the $10.3 billion price of Home Depot's building unit because investors were resisting purchase of the debt; First Data, a huge high-yield loan offering, is to reach the market after Labor Day.
Last month, SpaceX raised $250 million through a high-yield loan sale.
Last month, the company moved away from issuing shares, instead turning to a high-yield loan to raise an additional $1 billion.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com