Financial Issues: Bank of America

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Table of Contents

Company Overview
SWOT Analysis for Bank of America
Company’s Strategic Objectives
References

Company Overview

Bank of America serves individual customers, small and medium enterprises, companies and governments by offering products that include banking services, investment consultancy, asset management as well as risk management of properties and services (Reuters, 2013).

Incorporated in 1998, Bank of America has five corporate sections: client and corporate banking, client real estate services, International banking, international market, and international wealth management and an overall section known as other (Reuters, 2013).

Client and corporate banking involve deposits, card business, and corporate banking. This section offers a variety of credit, banking, and asset products to individuals and corporations. Bank of America has a presence in thirty-two states in America as well as the District of Columbia (Reuters, 2013). Its network involves over five thousand banking points, over sixteen thousand automated teller machines, call centers, and mobile access (Reuters, 2013).

International banking section contains several credit-based products and services, working finance management and treasury solutions to customers, underwriting and consultancy. Some products in this section include business loans, charters, commitment products, trade finance, real estate credit, asset-based financing, and direct client credit (Reuters, 2013).

Bank of America offers sales and marketing services, research for clients involved in fixed finance, credit, and equity products, among other areas (Reuters, 2013). International wealth and asset management offer in-depth asset management solutions to a wide range of ultra-wealthy customers. Services in this section include capital and brokerage services, retirement benefit plans, charity management, and asset administration for individual and corporate clients (Reuters, 2013).

Bank of America’s “mission is to offer lending and investment products that serve low and moderate income individuals and families, improve underserved low and moderate-income communities and ultimately create sustainable practices (Farfan, 2013).” Concerning ethics, the bank “is committed to the highest standards of ethical and professional conduct (Bank of America, 2013).”

SWOT Analysis for Bank of America

Strengths

Bank of America has a wide reach in the whole world. The bank has branches in all fifty states of America and the District of Columbia and more than forty countries outside America (Marketing Mix, 2013).

Bank of America has over fifty-seven million individual and corporate clients, close to 6,000 banking centers, approximately 18,000 automated teller machines, call centers in almost every state, and mobile banking access. Also, the bank offers business support to four million small business holders besides being a base retailer in close to twenty countries in the world (Marketing Mix, 2013).

Bank of America offers various products and services, resulting in a favorable business mix. This leads to increased revenues from various business lines. In 2011, bank of America got 25 percent of its profits from international banking and markets services, 19.2 % from card services, 18.4 % from international wealth management, 16.1 % from all other section and 13.4 %from international business banking. Such a business mix leads to a wide client base and enables the bank to maintain its revenue liquidity (Marketing Mix, 2013).

Bank of America has a strong capital base that guards against insolvency risks. Its balance sheet reveals a favorable mix of assets and liabilities (Marketing Mix, 2013). The company enhanced its capital base to a record high of 1.6 billion US dollars in 2011 as the capital ratio increased steadily through the first quarter of 2013. Bank of America had endeavored to reduce outstanding debts as evidenced in 2011 when the company paid off 76 billion US dollars. (Marketing Mix, 2013).

Weaknesses

The company registered some decline in revenues, and this can hurt its prospects of growth (Marketing Mix, 2013). The decline in revenues started in 2009 and has steadily increased. For instance, Bank of America’s profits declined at a 12 % rate in 2011 to settle at around 94 million US dollars (Marketing Mix, 2013).

The company suffered two consecutive losses in 2008 and 2009 before recording a positive gain in 2011. Such declines in profit decrease investor confidence and lead to decreased corporate value in the stock exchange market. Ultimately, growth remains stunted and results in massive layoffs and negative corporate image (Marketing Mix, 2013).

Bank of America failure to control operating expenses is one of its major weaknesses. The bank has a high-efficiency ratio resulting from increased remunerations, staff benefits, net occupancy, assets expenses, and expensive professional fees. As such, it becomes hard for the company to expand marginally (Marketing Mix, 2013).

Opportunities

There is steady growth in the banking industry in the United States of America. An 11.3 percent growth margin in 2010 and a forecast 33.3 increase by 2015 is a good indicator in the banking sector. With its wide presence and wide client base in America, the bank can harness such an opportunity to grow its books too (Marketing Mix, 2013).

Growth in mobile banking platform is another opportunity for Bank of America. The number of mobile banking clients may go up to 530 million in 2013 up from 300 million users in 2011 (Marketing Mix, 2013). Bank of America has several mobile-based products and applications that can lead to more customers due to the convenience afforded by mobile banking platform (Marketing Mix, 2013).

Bank of America has several innovative products and services such as Trade Pro, which enhances commerce for major corporate customers. Also, the company has a large network of deposit-taking automated teller machines that allow the customer to deposit huge deposits even outside banking hours (Marketing Mix, 2013).

Threats

Regulatory alterations mean more expenses for the company. Also, weak global financial growth and huge systematic risk in the US banking industry spell doom for prospects in Bank of America (Marketing Mix, 2013).

Company’s Strategic Objectives

Bank of America targets three major segments. The bank aims to be a service provider of choice, employer of choice, and an investment of choice (Farfan, 2013). In other words, the bank aims at netting a wide client base, qualified employees, and stable investors. To achieve this, the bank adopted kanri. Kanri is a Japanese management procedure and involves the use of scorecards in a definite period (Bank of America, 2013).

Also, the company uses a six-sigma method to identify prerequisites for achieving objectives (Farfan, 2013). Concerning risk management, Bank of America utilizes a combined business planning procedure to manage risk. This involves setting the direction of the company by designing a plan for the company, which cascades to the smallest unit in the company (Bank of America, 2013). The company further performs self-assessment on a periodical basis.

The company has viable corporate objective strategies, which are simple and easy to achieve. With its reach and financial base, the company can easily achieve its objectives (Bank of America, 2013).

References

Bank of America. (2013). 2013 Code of Ethics Disclosure. Web.

Bank of America. (2013). Strategic Risk Management. Web.

Farfan, B. (2013). Bank of America Mission Statement – Banking Services for Specific Niche Markets. Web.

Marketing Mix. (2013). SWOT analysis of Bank of America Corporation. Web.

Reuters. (2013). Bank of America Corp (BAC.N). Web.

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