Bank of America Financial Performance and Business Segments Report

Bank of America provides a diversified range of banking and nonbanking financial services and products and has a market share of 2.7% in the global retail banking market in 2007.

·          During 2003–2007, revenues from its retail banking business increased at a CAGR of 22.2% while its operating profit increased at a CAGR of 13.4%.

·         It has launched various innovative products to target the Hispanic population in the US. Rapidly growing Hispanic population (which is expected to triple in size in 2000–2050) represents a huge opportunity for Bank of America to capture a significant market share in this segment.

·       It claims to be the largest online US bank with more than 24m online banking customers in 2007.

Business segments

Bank of America and its various nonbanking subsidiaries provide a diversified range of banking and nonbanking financial services and products. It operates its retail banking operations primarily through two business segments: Global Consumer and Small Business Banking (GCSBB) and Global Wealth and Investment Management (GWIM). The GCSBB segment operates in 32 states in the US and more than 30 foreign countries. It serves approximately 59m consumer and small business relationships with about 6,149 retail banking offices, 18,753 ATMs and approximately 24m active on-line users. In 2007, it introduced new products with the launch of No Fee Mortgage PLUS, Mobile Banking, new Risk Free CD products and the new BankAmericard. This segment offers products that include deposits, card services and consumer real estate. The GWIM segment offers investment and brokerage services, estate management, financial planning services, fiduciary management, credit and banking expertise, and diversified asset management products to institutional clients, as well as affluent and high net-worth individuals. This business includes Premier Banking & Investments (which serves affluent clients through Premier Banking and Banc of America Investment Services); US Trust, Bank of America Private Wealth Management (which serves high-net-worth clients); and Columbia Management (asset management team). It is a leading private bank, with more than $225bn in assets under management at the end at December 2007.

Recent financial performance

Bank of America generated $55,605m revenues from its retail banking business in the fiscal year ended December 2007, an increase of 6.4% over 2006. Retail banking accounted for approximately 81.7% of its consolidated revenues in 2007. The increase in revenues was due to the impacts of organic growth and acquisitions (LaSalle and the US Trust Corporation) on average loans, leases and deposits compared to 2006. Increases in card income, service charges and mortgage banking income also contributed to higher revenues in 2007. During 2003–2007, its retail banking revenues increased at a CAGR of 22.2%.

Bank of America recorded an operating profit of $17,967m from retail banking operations in 2007, a decrease of 16.6% over 2006, due to increase in provision for credit losses and  on interest expense. During 2003–2007, its retail banking operating profit increased at a CAGR of 13.4%.

Acquisitions and divestments

In the last year, Bank of America has made two major acquisitions to enhance its portfolio in residential mortgage and commercial banking areas. In January 2008, it announced a definitive agreement to acquire Countrywide Financial, diversified financial marketing and service holding company. On completion, Bank of America will benefit from Countrywide's broader mortgage capabilities, including its extensive retail, wholesale and correspondent distribution networks. In addition, this acquisition will give Bank of America access to Countrywide’s $408bn mortgage originations and servicing portfolio of about $1.5 trillion with $9m loans. In October 2007, it acquired LaSalle Bank Corporation and its subsidiaries from ABN Amro Holding. This acquisition expanded Bank of America’s metropolitan Chicago and Michigan presence by adding LaSalle's 17,000 commercial banking clients, 1.4m retail customers, 400 banking centers and 1,500 ATMs. It also added LaSalle's six banking offices in Indiana to its network.