Bank of America CorporationBAC

Morningstar Rating

Stock Research and Analysis

by Jaime Peters, CFA, CPA

With its industry in crisis, Bank of America has doubled the size of its balance sheet in the last three years. In the process it transformed itself from being the nation's largest plain vanilla bank into a financial supermarket. Riding to the rescue Read more

Bulls Say

B of A is a dominant player in some of the most dynamic, high-growth regions in the country, such as California, Florida, and Texas. The sunshine that helped attract growth in the early part of the decade is still shining, and should help reignite growth after the recession wanes.

The bank has an immense deposit base of $975 billion, giving it a stable, low-cost source of funding.

Only 10% of B of A's estimated 8 million affluent customers currently use its wealth-management products. B of A could rapidly increase fees in this division just by attracting more of its checking account customers.

Merrill Lynch has the premier wealth-management business in the nation, with more than 16,000 advisors. This wide-moat business is its crown jewel. Read more

Bears Say

The addition of Merrill significantly alters B of A's revenue and earnings structure. We're not big fans of investment banking right now, and we worry that the downside of the investment banking business could more than offset the benefit of the wealth-management business.

Although the bank's trading operations were very profitable in the past, the credit crunch wiped out the investment bank's earnings in 2007 and 2008. With the securities markets recovering, we expect loan charge-offs to drive losses in 2009 and much of 2010.

We believe the credit crisis will compel the government to increase capital requirements for all banks. As one of the top four, we expect the government to add something extra to B of A's capital burden to compensate for its "too-big-to-fail" status. Read more

Strategy

In 2008, B of A began the year cutting back on its investment banking business and concentrating on its core business of retail banking. However, the company made a 180-degree turn when it purchased Read more

Management

After enduring a rough year that brought scandal to his institution, tarnished his reputation, and stripped him of the chairman role, Ken Lewis is stepping down as CEO at the end of 2009. The company is searching for a replacement. During his tenure Read more

Profile

Bank of America is the nation's largest consumer and small-business bank. The bank has offices in 32 states, Washington, D.C., and more than 30 countries. Along with its Read more

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