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Global Operations of Bank of America, March 2011

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Kaplan University MBA, Economics for Global Decisionmakers

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Global Operations of Bank of America, March 2011

  1. 1. Global Operations ofBank of America
  2. 2. Global Operations of Bank of America Cathie Tedrick March 1, 2011 GB540: Economics for Global Decision Makers Instructor: Timothy Terrell Kaplan University
  3. 3. Overview One of the worlds largest financial institutions. Serves 57 million consumers and business owners. Offers a full range of banking, investing, and other products and services.
  4. 4. History Started as a small bank in 1764 in Massachusetts; now headquartered in Charlotte, NC. Grown to over 5,900 retail locations due to mergers and acquisitions. Serves clients worldwide and is a publicly traded company on the New York Stock Exchange.
  5. 5. Recent and CurrentOperating Costs Lost a lot during the recent financial crisis, with Merrill Lynch and Countrywide bringing their financial losses into the acquisition. Despite the mounting costs in covering these loans, a first-quarter profit of $3.2 billion was reported in April 2010. Created a unit to deal with 1.3 million bad mortgages.
  6. 6. Economic andSocial Forces The strength of the U.S. economy and factors like interest rates, equity and debt capital markets, inflation, and money supply all impact earnings Affected by economy’s upswings and downturns:  When the economy is down, there is a greater likelihood that customers will default on loans.  When the economy is up, people have more money to deposit, invest, repay loans, get credit cards.
  7. 7. Political Forces Three areas having the greatest effect on banking industry:  Overspending: As with any budget, heavy spending in one area means that other areas have to be cut back.  Consumer spending: When consumers don’t spend, our economy slows and puts pressure on the dollar.  Uncertainty: Political change, huge spending, fear of terrorism, takes attention away from economic positives like corporate profits. This all adds up to an investment attitude that’s more “wait-and-see” than free-flowing, a situation that hurts the dollar.
  8. 8. SWOT Analysis Strengths  Diverse financial products. Provides range of banking, investing, asset management and other financial products and services.  Market domination. Positioned strongly in the market and has a variety of strengths which give the corporation a distinct advantage over its competitors.  Branding. Strong customer service position and has branded itself as such.
  9. 9. SWOT Analysis Weaknesses  Subprime Issues. The largest consumer bank in the country was also the fourth-largest subprime lender in the country.  Loss of trust from shareholders. The recent acquisitions of Countrywide and Merrill Lynch have put into question Bank of America’s leadership and integrity.
  10. 10. SWOT Analysis Opportunities  Cross selling to customers. With many related business lines, can offer a consumer coming with a specific for one thing many other different products and services.  Consolidating industry. Can consolidate small, successful, companies to bring quick earnings.  Expansion in global markets. Experience higher profits and revenue growth by expanding more into the international markets.
  11. 11. SWOT Analysis Threats  Interest rates. Profit margins could be adversely affected by increased interest rates.  Consumer spending. Following the recession, consumer spending and the interest charges on credit card balances will decrease.  Competition. Market share could be captured by competing financial institutes improving their business policies and strategies to attract the Fortune 500 businesses.
  12. 12. Factors Needed toPredict, Plan for, andAdjust to in the Future Employment/healthcare costs  Over 280,000 employees throughout the world Revenue growth  Economists predict 2011 will bring better sales and increased revenues and profits.  As the number one bank in the world, more companies will be seeking out their financial services.
  13. 13. Economic Indicatorsof Most Interest Gross Domestic Product  When growth in GDP increases, this typically means the economy is doing better.  Companies are looking to startup or expand their business. Bank of America provides lending to small and medium-sized businesses grow and succeed. Housing  Most interest-rate sector of the economy.  Monitor housing market for economy performance and effects of changes in financial conditions.
  14. 14. Economic Indicatorsof Most Interest Employment  The economy is improving when unemployment falls, causing more consumer spending. Interest Rates  Because lending is such a large part of business, they carefully consider rates set by the Fed. Inflation  Rate of change of the CPI is one of the key measures of inflation for the U.S. economy.
  15. 15. Economic Indicatorsof Most Interest Stocks and Bonds  Consumer confidence in the future is measured by the current value of the country’s stock of capital.  Financial institutions look to long-term interest rates movement to reveal future activity level . Export of Goods and Services  Bank of America must pay close attention to how the Gross National Product may affect the international countries that they serve.
  16. 16. Strategies to Respondto EI and MaximizeRevenues Focus on providing loans for small and medium-sized companies  Companies will be helping to fuel economic growth by expanding or starting their businesses which will create more jobs and increase spending. Develop community partners and increase loans and investments to CDFI  Help to grow businesses, especially in lower-income communities; will create jobs and increase spending.  Emphasize commitment to innovative programs and resources.
  17. 17. Global Operations History  The company is a long-established participant in the European markets, with a presence since 1922.  Between 1986 and 1987 BankAmerica made significant losses as a result of a number of bad loans in Latin America.
  18. 18. Global Operations Current State  The company’s largest department is Global Consumer and Small Business Banking. This also includes ATMs in other countries through the Global ATM Alliance.  Provides comprehensive market, industry, product and advisory expertise to more than 140,000 businesses around the globe: Asia Canada China Europe, Middle East and Africa India Latin America
  19. 19. Global Operations Plans and Possibilities for the Future  Incorporating more hip and hitech technology.  Recently designed software platform unifies trading, risk and pricing applications for foreign exchange options, equities and commodities.  Belongs to the Global ATM Alliance
  20. 20. Global Operations Improving What They Do: E-banking  Currently have 29 million online banking customers.  Online banking allows customers to do all of their banking online, without ever having to visit an actual brick-and-mortar bank branch – all over the world.
  21. 21. Global Operations New Venture: Mobile Banking  The new Bank of America mobile banking app gives customers a convenient way to access their accounts and complete transactions. However, many are unable to use it: One of the biggest challenges in mobile banking is connecting to online banking infrastructure. With recent mergers, Bank of America online banking is operating on several different infrastructures. To reach all consumers, the company must unify infrastructures domestically and develop new ones globally.
  22. 22. Conclusion Monitoring trends in the overall growth rate through economic indicators helps the company to forecast what activities will bring the biggest return. The company’s membership in the Global ATM Alliance gives their customers another benefit when traveling around the world. Continued investment in technology or online and mobile banking positions the company to create opportunities to grow and reach the new generation of banking customers - both domestically and globally.
  23. 23. Resources20 Hidden Ways the Iraq War is Affecting the US Dollar. Currency Trading. Retrieved from www.currencytrading.net/features/20-hidden-ways-the-iraq-war-is-affecting-the-us-dollar/2009 Annual Report. Bank of America. Retrieved from http://media.corporate- ir.net/media_files/irol/71/71595/reports/2009_AR.pdf2011 CFO Outlook. Bank of America. Retrieved on 2/12/11 from http://corp.bankofamerica. com//publicpdf/products/abf/final_pdf.pdfAsset-based financing new and resources. Bank of America. Retrieved from http://corp.bankof america.com/public/public.portal?_pd_page_label=products/abf/news&panel=2Bank of America. (2010). Helping small and medium-sized businesses to fuel the economy. Retrieved by http://ahead.bankofamerica.com/fueling-economic-growth/helping-small-and-medium-sized- businesses-to-fuel-the-economy/Bank of America. (2011). Bank of America Announces Changes to Resolve Legacy Mortgage Issues and Continue Building the Leading Home Lending Business. Retrieved from http://investor.bankofamerica.com/phoenix.zhtml?c=71595&p=irol- newsArticle_print&ID=1525073&highlight=Bank of America Annual Report. (2010). Extending nearly $150 billion in credit for the first quarter, more than any other U.S. bank. Retrieved from http://ahead.bankofamerica.com/moving-our-company- forward/extending-nearly-150-billion-in-credit-for-the-first-quarter-more-than-any-other-u-s-bank/Bank of America Corporation. New York Times. Retrieved from http://topics.nytimes.com/ top/news/business/companies/bank_of_america_corporation/index.htmlBank of America emphasizes its financial strength. Los Angeles Times. Retrieved from http://articles.latimes.com/2009/feb/14/business/fi-bofamerica14Bank of America Overview. (2011) Retrieved from www.bankofamerica.com/homepage/overview.goBureau of Economic Analysis. Retrieved from www.bea.gov/Fundamental Analysis. (2011). Retrieved from http://thismatter.com/money/forex/fundamental_analysis.htmHistory of Bank of America. The Finance Owl. Retrieved on 2/27/11 from www.thefinanceowl.com/banks/usa/bank-of-america/McConnell, Brue, Flynn. (2008). Economics. McGraw-Hill Irwin.

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