Bank of America
The Bank of America Corporation (BAC) is an American multinational corporation headquartered in Charlotte, North Carolina with central hubs in Toronto, Hong Kong, New York, and London. BAC primarily offers financial services, including investment and commercial banking, and wealth management. It is the second largest bank in the U.S. with an asset base of approximately $2.3 trillion (Li, 2019). Additionally, it was founded in 1998 through the acquisition of BankAmerica by NationsBank’s. It is a public corporation that is listed at the New York Securities Exchange under the initials BAC. The bank operates in the investment banking industry, specifically the financial services mini-industry.
Financial products offered by BAC include global and consumer banking, securities trading, and global wealth and investment management. Consumer banking involves operations such as investments, banking, lending, mortgages, and credit card services. The global banking division offers financing and investment products to businesses. The investment management division manages both institutions’ and individuals’ assets and is spearheaded by Merrill Lynch Global Wealth Management and U.S. Trust. The securities trading division is concerned with trading in foreign currencies. The contributions of these divisions to the total net income of BAC follow the order: consumer banking, global banking, investment management, and securities trading.
The investment and banking industry does not have many players, but the few available firms operate with a high degree of efficiency and effectiveness making competition very stiff. Notable competitors to BAC are national and international banks, for instance, JP Morgan Chase, Citigroup, Wells Fargo, HSBC, and China’s Big Four banks. Nevertheless, BAC is the largest entity in terms of wealth management and has the largest retail-banking network with a presence in 50 U.S. states (Maverick, 2019). However, in terms of market capitalization, BAC is lagging behind JP Morgan Chase and Wells Fargo with the former being at the forefront. With regards to Return on Capital (ROA), BAC (11.2%) also comes third behind both Wells Fargo (14.3%) and J.P. Morgan Chase (14%). Wells Fargo tops in terms of dividends and payout yield (2.9%), with JP Morgan Chase trailing it with a yield of 2.39% followed by BAC with 1.93% (Bos, 2017).
BAC has strong financials signified by its substantial profit margins. The company made $28.1 billion in 2018 compared to $18.2 billion in 2017 and $17.8 billion in 2016, which translated to diluted earnings per common share of $ 2.61 compared to $1.56 in 2017 and $1.49 offered in 2016. The increase in net income and diluted earnings per common share signify strong financials. Dividends per common share have also consistently grown from $0.25 in 2016 to $0.39 in 2016 and $0.54 in 2018 (“Bank of America,” n.d.). BAC has a strong stock performance as signified by its Year-To-Date (YTD) margin of 20.33%, the 6-month margin of 4.18%, the 3-month margin of 13.91%, and 1-month margin of 2.45% (“Bank of America Corp (BAC) Stocks Performance Report,” n.d.). Stock prices have increased from $24.74 at the beginning of the year to $29.07 by 11th April.
The rise in value is expected to continue given the favorable economic and financial conditions in the country. The second quarter of the year is a period of high investments. As such, stock prices can be expected to rise as seen in last year’s financials; the highest stock prices were realized in the period between mid-June and mi-August. Therefore, it is advisable that investors who are shareholders take a position in BAC stocks to benefit from the expected appreciation of the price of shares. Other investors can take a buy position as share prices appreciate.
References
Bank of America | Investor Relations | Annual Reports & Proxy Statements. (n.d.). Retrieved from http://investor.bankofamerica.com/phoenix.zhtml?c=71595&p=irol-reportsannual#fbid=GJcZONATa27
Bank of America Corp (BAC) Stocks Performance report. (n.d.). Retrieved from https://www.barchart.com/stocks/quotes/BAC/performance
Bos, W. (2017, September 27). Comparing Bank of America, Wells Fargo and JP Morgan Chase. Retrieved from https://seekingalpha.com/article/4110076-comparing-bank-america-wells-fargo-jpmorgan-chase?page=2
Li, Y. (2019, February 07). These are the 10 biggest banks in the country now after the BB&T-SunTrust merger. Retrieved from https://www.cnbc.com/2019/02/07/here-are-the-biggest-us-banks-with-bbt-suntrust-merger-knocking-off-pnc-to-be-the-sixth-largest-lender.html
Maverick, J. (2019, March 12). Who are Bank of America’s main competitors? (BAC, JPM). Retrieved from https://www.investopedia.com/articles/markets/090915/who-are-bank-americas-main-competitors.asp