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Exploring Business: Bank of America

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Essay title: Exploring Business: Bank of America

Now one of the leading banks in America, Bank of America is continually proving to provide a service that surpasses most others. With a unique history in merging and acquiring, Bank of America is now number nine on the Fortune 500.

Bank of America History

Before the merger of 1998, Bank of America was two separate entities, NationsBank, and BankAmerica. BankAmerica was started in 1904 in San Francisco by Amadeo Giannini, and was then called the American Bank of Italy. Giannini’s success came from the 1906 San Francisco earthquake and fire that wiped out much of the city. Giannini was able to save all of the deposits, and thus unlike many banks, had money to lend when the costly reconstruction began.

In 1929 the Bank of Italy merged with the Los Angeles based Bank of America in part due to their advanced bank branching system. The combined company was headed by Giannini and held the name Bank of America. By the outbreak of WWII, Bank of America through aggressive progression of their branch-banking concept had become the largest bank in California.

After WWII, California became the nations fastest growing state, as well as that with the highest use of checking accounts. To accommodate the influx of transactions, the bank invested heavily into information technology, and is generally credited with inventing modern centralized bank operations, along with a number of financial transaction processing technologies such as automatic check processing, account numbers and magnetic inc character recognition. These technologies also allowed credit cards to be linked to private accounts, and in 1958, the bank created the BankAmericard, which changed its name to VISA in 1977. Because of the efficiency of these technologies, Bank of America was able to greatly expand its operations.

Following passage of the Bank Holding Company Act of 1967, Bank of America was incorporated into a holding company called BankAmerica Corporation and was then able to expand outside California. Giannini had a dream of a nationwide bank, and made considerable acquisitions outside of his home state, but fear of a monopoly caused federal regulators to prohibit the banks national banking activities, and Bank of America’s domestic banks outside of California were forced into a separate company. Even after this loss, the bank was able to maintain its status as the largest bank in the nation well into the late seventies.

The bank was again able to expand outside of California in the 1980s when changes in legislation allowed, and in 1983 SeaFirst Corporation of Seattle and its banking subsidiary Seattle-First National Bank were acquired. The new corporation achieved limited growth, and after the placement of a series of bad loans and the stock market crash in 1987, the company’s stock was selling for a mere eight dollars per share.

Despite these setbacks, the bank rebounded, and by 1992 BankAmerica acquired its California rival Security Pacific Corporation and it’s banking subsidiary Security Pacific National Bank as well as other banks in Arizona, Idaho, Washington and Oregon. Later that year BankAmerica expanded into Nevada by acquiring Valley Bank of Nevada.

In 1994 the bank expanded across the country with the acquisition of Continental Illinois National Bank and Trust Co. of Chicago. In the intent of creating a financial beach-head in the region, BankAmerica moved its national lending department to Chicago, and initial success brought the company to the number one position in terms of deposits until 1997 when it fell to second behind NationsBank.

In 1998 BankAmerica and NationsBank executed the largest merger in banking of the time, creating a new corporation, but keeping the name Bank of America. Following the merger, Bank of America had combined assets of 570 billion dollars, and 4,000 branches in 22 states.

Since 1998 Bank of America Corporation has grown considerably. In 2004 it purchased Louisville, Kentucky-based National Processing Company and created BA Merchant Services, which processes one in every five VISA and MasterCard transactions. Later that year it acquired Boston, Massachusetts-based FleetBoston Financial for $47 billion. This solidified its standing as the bank with the largest deposit market share.

In 2005 the growth continued with the purchase of the credit card company MBNA, giving the combined Bank of America card services more then 40 million U.S. accounts. In 2006 the company went international when it received a six percent share in Banco Itau, in return for BankBoston’s Brazil operations.


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