Bank of America - or BofA - has become the second biggest financial institution in the US as a result of a string of acquisitions that turned what was originally a small regional player into a national giant. It is arguably the country's leading retail bank, the #1 in consumer deposits and digital banking, and one of the top two in credit card lending and small business banking. It claims a physical network of around 4,340 branches (or "financial centers") nationwide, and 66m consumer and small business clients. However several of its acquisitions during the 2000s also loaded the business with significant problems. These caused it to lose its position as the overall #1 US bank in 2011 to more stable rival JP Morgan Chase. The two most significant purchases were bolted on in 2008 as the economy slid from bad to worse. The group stepped in to acquire struggling mortgage lender Countrywide Financial, becoming America's #1 in that sector, but also the overseer of thousands of toxic home loans which should never have been issued in the first place. Then, in its boldest deal yet, it agreed to rescue fabled investment giant Merrill Lynch for $50bn in stock. That controversial merger, completed at the very beginning of 2009, established BofA as the undisputed leader in retail brokerage and wealth management. Yet it also generated a damaging public dispute over the quality of its due diligence when the bank was forced to make substantial additional writedowns in connection with Merrill's soaring liabilities. Kenneth Lewis, architect of the group's transformation from regional lender to national champion, was forced to step down along with several other senior managers, and it took almost another four years for BofA to fully regain its pre-2008 stability. Brian Moynihan is now chairman & CEO. Revenues for 2018 were $91.2bn, with net income of $28.1bn. As its name suggests, BofA's main market by far is the US, contributing over 85% of revenues. Most of the group's past acquisitions have been absorbed into the main brand; however, a handful still retain their original names. Merrill Lynch remains the name of the group's main wealth management division, while investment and commercial banking is conducted under the name of Bank of America Merrill Lynch. US Trust, acquired in 2007, is the wealth management and private banking division for ultra-high-wealth individuals.
Capsule checked 26th October 2018
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Adbrands Weekly Update 18th Oct 2018: All the big US banks did well in 3Q, even Wells Fargo which has spent the past couple of years struggling to bounce back from various misselling scandals. Trump's tax cuts were the major contributing factor to strong profit growth across the board. As usual, JP Morgan Chase led the field with a 24% jump in net profit to $8.4bn on revenues up 5% to $27.8bn. Strength in the consumer banking business offset weakness in investment trading. Bank of America reported a 32% jump in profits to $7.2bn on revenues of $22.8bn. Wells Fargo reported a similar leap, its best performance for several quarters, with profits also up 32% to $6.0bn on revenues of $21.9bn, up modestly on the year ago period. At Citigroup revenues dipped slightly to $18.4bn, but profit rose 12% to $4.6bn. Morgan Stanley and Goldman Sachs also performed strongly. Morgan delivered revenues of $9.9bn and profit of $2.1bn; Goldman had revenues of $8.7bn and profit of $2.5bn.
Adbrands Weekly Update 19th Jul 2018: US banks kicked off the reporting season with generally strong results. JP Morgan Chase led the charge as usual, with revenues up 6% to $27.7bn, while net income jumped 18% to $8.3bn, helped by higher interest rates and loan growth (and also of course a lower tax charge). "We see good economic growth, particularly in the US, where consumer and business sentiment is high," said CEO Jamie Dimon. Corporate and investment banking were particularly strong, offsetting declines in mortgages and credit cards. Bank of America took a slight hit on revenues, down very slightly to $22.6bn year-on-year because of a one-off gain in the prior period. Stripping out that exceptional item, comparable revenues were up 3% and net profits soared by 33% to $6.8bn. Citi's results were a little more muted, though revenues rose 2% to $18.5bn. In Citi's case, consumer banking generally fared better than investment banking, though the group's treasury and custody services were the strongest performer overall. Net profit jumped 15% to $4.5bn on the lower tax charge. Wells Fargo is still struggling under the cloud of its customer mistreatment scandals, with revenues down 3% to $21.6bn and an 11% fall in net profit to $5.2bn, despite the lower tax rate. The company said rising interest rates are putting homebuyers off new mortgages. There was much better news from Goldman Sachs, where profits soared 40% to $2.6bn on revenues up 19% to $9.4bn. Goldman also confirmed that Lloyds Blankfein will step down as CEO later this year, and will be succeeded by current president David Solomon. Morgan Stanley also reported a big jump of 39% in profits to $2.4bn - its second highest figure ever after 1Q 2018 - on revenues up 12% to $10.6bn.
Adbrands Weekly Update 18th Apr 2018: American banks enjoyed big profit gains from US tax reforms, as well as generally upbeat business sentiment. Net income at JPMorgan Chase jumped by 35% to an all-time record for the bank of $8.7bn, while Bank of America grew 30% to $6.9bn. However both were beaten in percentage terms by Morgan Stanley whose net earnings jumped by 38% to $2.7bn. Goldman Sachs was the next biggest profit jumper, up 26% to $2.8bn, while Citi was up 13% to $4.6bn. Wells Fargo gained 5% to $5.9bn, but said it might be required to restate those figures at a later date to accommodate a forthcoming $1bn regulatory settlement over mis-sold car insurance and mortgage fees. The lower tax rate alone generated a combined total of $2.9bn in extra profit from the six companies. Yet despite those big gains, investors were generally unimpressed by the lack of any significant growth in lending to businesses and consumers. That was one of the key underlying motivations for Republicans' tax reforms: to encourage borrowing and growth in the wider economy. So far, there's no sign of that, as JPMC finance chief Marianne Lake admitted: "I think we have to recognize that tax reform is in its early stages." As far as revenues were concerned, JPMC remained the clear leader among US banks with 12% growth to $27.9bn, but reigning #2 Wells Fargo slipped back to $21.9bn - it was the only bank to report a year on year decline. That allowed BofA to reclaim second place with $23.1bn. Citi had $18.9bn. Morgan Stanley topped Goldman again with $11.1bn to $10.0bn respectively.
Adbrands Weekly Update 18th Jan 2018: Most US companies will take an exceptional hit in their 4Q results from President Trump's tax reform bill, not least the big banks who kicked off the reporting season this week. The cut in the US corporate tax rate will significantly benefit all companies in the future but it creates a short-term problem for businesses that accumulated big losses during the 2008 financial crisis which they had intended to set off for tax purposes against future profits. A lower tax rate will make those deferred credits harder to use, so they now mostly have to be written off. That's a bigger issue for some companies than for others. Bank of America took a charge of $2.9bn, which curbed otherwise strong growth on the bottom line. Without the charge it would have matched the record profit it reported back in 2007; with the charge, net income came in at $18.2bn, up 2% on the year before, while revenues rose 4% to $87.4bn. Only global markets, its smallest division, reported a decline in performance.
Adbrands Weekly Update 19th Oct 2017: US banks mostly had a great quarter, as consumer and business lending offset generally lacklustre trading and investment results. JPMorgan Chase led the pack as usual with profits up 7% to $6.7bn on revenues up 3% to $26.2bn, well ahead of expectations. That was despite a shock 21% fall in trading revenues. Bank of America too beat expectations, with net profit of $5.6bn on revenues of $21.8bn. Citi delivered profit of $4.1bn on revenues of $18.2bn. Morgan Stanley also beat predictions as a result of strong performance in wealth management. Perhaps surprisingly, even Goldman Sachs - which has minimal exposure to consumer lending - also did well, with revenues ahead of expectations despite the trading downturn and profits exactly as predicted. The big disappointment - again - was Wells Fargo, still struggling with the fallout from its sales practises scandal. Given its business profile, it should have been the bank most likely to benefit from rises in lending, but actually total loans slipped by 1% year-on-year, compared to gains of 2% to 3% at the other lenders; consumer loans alone were down 3%. Revenues slipped back to $21.9bn - lower than analysts had been anticipating and putting the bank at risk of losing its second place position to BofA - while net profits slumped by 19% year-on-year to $4.6bn as a result of a $1bn charge against regulatory investigations.
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