Bank of America
Final Essay
Course: BUSI 304
Term: Fall 2016[pic 1]
Professor: Chen Liu
Candidate: Mauricio Javier Samour
Introduction
Bank of America, the second largest bank holding company by assets in the entire country of the United States. This humongous company is a North American multinational bank based with their headquarters in Charlotte, North Carolina. Their mission statement is quite practical and understandable, it states that “At Bank of America, our purpose is to help connect our customers and clients to what matters most to them. Every day, we’re proud to partner with 47 million individuals, businesses, and communities, bringing them our skills and expertise to help make their financial lives better.[1]” According to Forbes, Bank of America became the eleventh largest company in the entire globe, allowing them to display themselves not only in every single state of the United States, but in various other countries around the world. Additionally, Bank of America is situated in Canada, Latin America, Europe, Middle East & Africa, and Asia Pacific, making it one of the most diversified Banks around the entire banking industry. Bank of America, for several years now, has been one of the world’s leading financial institutions, offering their assistance and services to individual consumers, small and middle-market business and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services[2]. Furthermore, according to Bank of America investor relations overview, they are able to deliver unmatched convenience in the United States, serving 47 million consumer and small business relationships with approximately, 4,700 retail financial centers, approximately 16,000 ATMs, and award-winning online banking with approximately 33 million active accounts and more than 20 million mobile active users. This amazing and innovative bank is and will always be a worldwide leader, specially in wealth management, corporate and investment banking, and the use of trading among several different range of asset classes, serving corporations, governments, institutions and invidious around the world. In 2008 Bank of America made a big and successful move by acquiring Merrill Lynch, allowing them to position themselves as the world’s largest wealth management corporation and a major player in the investment banking market[3]. This being said, it is important to state that when this big movement took place, it provided the Bank of America a place on the New York Stock Exchange, mostly known as (NYSE: BAC)
Analyses of Financial Statement and Management
Bank of America has always been a bank that follows every financial procedure through what the law states. They are a bank that is totally driven by the benefit of the customers, providing an incredible place to work, fantastic risk management, operational excellence, and most of all, they always deliver for their shareholders. That’s why, Forbes listed Bank of America as the eleventh largest company in the world, and became the second largest bank holding company in the United States by assets[4]. Additionally, throughout the past few years, Bank of America has been able to enhance their automated deposits, especially through mobile banking. Which, in fact has allowed the bank to cut costs, through material expenses, for example, since 2011 their total annual expenses, excluding litigation, have declined $15 billion, or 21%, which, in fact is quite a lot for a bank. This emphasizes how good the management at the bank is, and how they make efficient strategic decision that benefit themselves and their consumers. Another fact that reinforces their good management is stated by John Maxfield, he says that “The headcount in its consumer bank has dropped by 40,000 people, or 37%, since 2009. And it's closed approximately 1,500 branches, equating to a 23% reduction over the past seven years. Bank of America now has the greatest value of deposits ($122 million) per branch of any bank.” Once gain stressing the fact that Bank of America came up with a fantastic decision when regarding the whole deposit process, allowing them to enhance their efficiency and profitability in some way. Moreover, moving towards the financial highlights of the company over the past few years, it is important to state that over the last three years, Bank of America has been able to intensify their financial status.
By looking at Fig. 6 it can be obviously observed how they have increased almost everything. For example, Net income (all in millions) was in 2013 $11,431, then in 2014 their was a huge fall to $4,833, and suddenly in 2015 they managed to increase, and reach $15,888. Meaning that over the years they have been able to well-manage all of their services and actually increase their profits throughout the years which stresses the fact that as a bank they are always looking to get more power over their competitors. Another very important factor to mention is Revenue, over the past three years they have been able to increase revenue, total assets, total deposits, shareholders equity, earning per common share, total shareholders equity etc. They all, reflect that Bank of America has been able to overcome themselves each year, which, in fact demonstrates that the values and what they stand for is something they really respect and thus, providing the bank with a higher level of integrity. In addition, this says that the Bank of America is always updating themselves to keep up with their competitors, and actually reflect the power they have in the banking industry, because it is not that easy to be able to surpass yourself each year as a company, especially that big, but Bank of America has been able to, through good and appropriate management decisions. However, in Fig. 6 there is one factor that stands out, which is Market price per common share. From 2013 to 2014 they were able to increase it, but from 2014 to 2015 it unfortunately decreased from $17.89, to $16.83, meaning that probably more people wanted to sell the share rather than buy it, therefore, the supply most have increased and actually surpass demand, and, consequently meaning that the price of the share would decrease, or it could have been some other important factor that negatively affected the market pricer per common share for the bank. Furthermore, another important factor that reflects the strong positioning of Bank of America, is the increase in their stock over the past 5 years. As you can see in Fig. 7 from a $15.25 in 2011, they have been able to increase it all the way to a $18.45 in 2015. This reflect, that more people have been wanting to buy Bank of America’s stock and therefore, increasing the number of shareholders at the company, because it is common logic, that when more people want to buy a stock then demand increases for the company and supply decreases, thus, increasing the price of the share. Basing ourselves more in the Bank of America annual report 2015, it states that Loans and Leases in Primary Lending Segments have increased over the last 5 years, now reaching $75 billion, when in 2014 they were only $67.6 billion. This steady increase repeatedly reinforces that the wealth management that Bank of America provides is very strong, and that’s why they were awarded #1 U.S. wealth management market position across client assets, deposits and loans for seven consecutive years[5]. Therefore, this links up with the fact that Bank of America all over the world has been able to state themselves as a trust and worthy bank for consumers. Meaning, more power and better positioning over the banking industry. Overall, the bank over the past three years has been able to do great and as mentioned above they have over-classed themselves by reflecting the majority of increases in all the information provided in Fig. 6 & 7, and by this, providing themselves a very strong position in the banking industry, and actually a lot of power as a company.