Bank of America Corp. - Stocks

Instrument description

Banks have always been an essential financial institution, and Bank of America is a multinational bank that offers a wide range of financial services for local Americans and also international customers. Bank of America is regarded as the second-largest bank holding company in the USA after JPMorgan Chase. The Bank of America provides services to nearly 50 million customers from all over the world that includes big and small business companies, enterprises, individuals, government managed companies, and big corporations.

Bank of America has a broad portfolio of services that includes banking, asset and risk management, credit services, mortgage, automobile loans, investing, and home equity products. The segments that Bank of America functions in are consumer banking, global wealth and investment management, global markets, and global banking.

Bank of America is the world’s largest wealth management financial institution has 80% coverage of retail banking in the US. Bank of America is included in the list of four biggest banks in the USA, along with JPMorgan Chase, Wells Fargo, and CitiGroup.

Bank of America operates successfully in all the 50 states of the USA and has operations in almost 40 different countries of the world. In 2016, Forbes ranked Bank of America as the 11 largest business company in the world. According to statistics Bank of America manages nearly 4500 retail finance offices, around 16000 ATMs (Automated Teller Machines), and both online and mobile banking platforms with almost 35 million active users. Bank of America also won ‘World’s Best Bank’ in 2018 by Euromoney Institutional Investor.

The headquarter of Bank of America is in Charlotte, North Carolina, USA and central offices are located in popular places such as London, New York, Hong Kong, Toronto, Dallas, all across Europe, Middle East and 12 Asian countries. Bank of America is the 9th largest financial company based on revenue. The company has nearly 208,000 employees.

History of Bank of America

Bank of America was originally founded in 1904 in San Francisco, California, as Bank of Italy by Amadeo Pietro Giannini. Amadeo acquired Bank of America and Italy in 1922, and the company has seen numerous restructuring and fluctuation in the course of its business history.

In 1968, BankAmerica Corporation was set up as a holding company for Bank of America in both North and South America along with other subsidiaries. However, in 1998, Bank of America was acquired by NationsBank, and the new holding company was renamed as Bank of America Corporation.

BankAmerica gave loan worth $1.4 billion in 1997 to hedge fund D.E Shaw & Co to finance major operations on behalf of the bank; however, D.E Shaw suffered losses due to Russian bond defaulting in 1998, which left BankAmerica on the verge of bankruptcy. The NationsBank of Charlotte stepped in and bought BankAmerica for a deal valued at $62 billion, and it was considered as the biggest acquisition in history at that time. NationsBank was the owner but decided to use Bank of America as the name due to its significance and public perception.

The share price of NationsBank was $10.84 in December 1994 and climbed to $44.21 in July 1998 but declined sharply before the merger with BankAmerica. After the merger, the share price was $22 in October 1998. There was a rebound of $38, but share price fell continuously for the next 18 months and closed 2000 at a low value of $18.15. The highest share price of Bank of America in the 2000s was $55.08 in November 2006, but the losses start to mount in 2007 and particularly in 2008, due to the global recession.

During the economic recession of 2008, Bank of America unexpectedly acquired Merrill Lynch & Co and Countrywide Financial. Bank of America was given massive financial assistance and incentives from the US government but also had to face legal battles as the lawsuits claimed that the company had misled its investors. In August 2014, a record settlement of $16.65 billion was reached.

The financial performance of Bank of America was outstanding in 2017, where revenue was marked at $87 billion, with 4%, and earnings per share (EPS) increased to $1.56 with 5%.

Current Business and Investment of Bank of America

Bank of America is a financial bank and holding company with a global footprint and popularity. Bank of America focuses on both commercial and consumer banking along with investment banking, and wealth management. The company offers a wide assortment of financial products and services to the US population and its international clients and customers. Bank of America operates in four broad segments

1. Consumer Banking: It consists of Deposits and Consumer Lending along with investment accounts, credit and debit cards, residential mortgage, and home equity loans
2. Global Wealth and Investment Management: It comprises of Merrill Lynch Global Wealth Management, and Bank of America Private Wealth Management and offers banking, brokerage, investment, trust and retirement options.
3. Global Banking: This segment offers numerous lending products and services such as commercial loans, trade finance, asset-based lending, commitment facilities, and treasury solutions.
4. Global Markets: This division offers securities clearing, custody services, market making, sales and trading services along with equity investment

The popular financial products and services offered by Bank of America are

• Consumer banking
• Corporate banking
• Wealth Management
• Investment banking
• Finance and Insurance
• Credit cards and mortgage loans

Risk and Potential in Bank of America Environment

Bank of America is one of the leading brand providing banking and other financial services. Bank of America is the largest bank holding company in the US and offers its financial products to everyone from individuals to large business corporations. SWOT analysis is a strategic framework that allows nearly every type of business company to examine its current performance and perceive its future financial position. The SWOT analysis of Bank of America is given by

• Strengths

Banks usually see many ups and downs, but Bank of America maintained its stability and profitability for many years. It has a strong presence in the USA and most parts of the world. The bank provides excellent services to its clients and customers. It operates a large chain of ATMs and banking centers all over the world. It acquired Merrill Lynch in 2008 that diversified its portfolio. Bank of America works in various segments in the banking and financial sector.

• Weaknesses

Bank of America generates nearly 90% of its revenue and income from the USA and only has 10% from overseas business. Many clients and customers believe that Bank of America charges high-interest rates. The WikiLeaks scandal badly affected the reputation of Bank of America in 2010 that stated that it had evidence of the malpractice done in the bank’s operations.

• Opportunities

Expansion in emerging economies, along with diversity in financial products and services, is one of the ways through which Bank of America can try to take advantage of the opportunity. Bank of America can do certain purposeful and beneficial mergers and acquisitions for further growth. There is a rise in digital technology, and the bank can uplift its services with more user-friendly mobile applications and services.

• Threats

The global financial situation fluctuates frequently, and there is always a threat of global economic crisis such as that of 2008. Unfortunately, companies in the banking and financial sector are affected the most. Bank of America faces challenges from strict government regulations and rival banks, which includes JPMorgan, Citibank, Wells Fargo and international banks such as Standard Chartered, BNP Paribas, and Royal Bank of Scotland.

Stock Analysis of Bank of America

Bank of America is listed and actively trades on the New York Stock Exchange (NYSE) with the ticker symbols ‘BAC.’ The company is listed under the ‘Finance’ Sector, and the industry is ‘Major Banks.’ Bank of America is part of the S&P-100 Index and S&P-500 Index. The shares of Bank of America are known to have a high average trading volume.

The all-time high share price of Bank of America was $230.20 on January 17, 2020, and the average price in last 52 weeks is $202.74.

Bank of America released its quarterly financial report on July 16, 2020, that showed EPS at $0.37 with $0.09 increase as it was predicted to be $0.28. The revenue was estimated to be $21.71 billion, but the revenue touched $22.30 billion. The return on equity was 9.11%, but the company realized a 3.5% decline in revenue when compared on YoY (year-over-year) basis. Bank of America has a market capitalization of nearly $220 billion and generates yearly revenue of $113.60 billion each year along with net income worth $27.43 billion.

Coronavirus pandemic is influencing businesses all over the world, particularly global brands that need a steady stream of sales and revenue generation to maintain their financial position. However, Bank of America is performing rather well in the Covid-19 The loans decreased $52 million from the previous quarter, and deposits increased to $135 billion. The digital applications saw an increase in terms of usage with digital log-ins and check deposits.

The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.