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Bank of America Corporation (BAC): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

Posted
12/2/2013 7:00:00 AM
By: Zacks.com
Referenced Stocks:BAC;CBB

Summary:
We maintain our Underperform stance on Bank of America owing to the re-submission of tapered capital plan and the persistent litigation overhang. Further, the company recorded loss in the first quarter compared to the Zacks Consensus Estimate of earnings. Litigation expense and related legal reserves previously announced by the company were primary reasons for the disappointing outcome. Tough industry backdrop acted as a headwind too. However, higher investment and brokerage income and equity investment income were the tailwinds. Also, measures like balance sheet restructuring, expense reduction and branch consolidation are expected to bolster the company's prospects. Nevertheless, persistent pressure on the top line, prevailing low-rate environment and various regulatory issues will continue to impact the near-term performance.

Overview:

Headquartered in Charlotte, NC, Bank of America Corporation is a financial holding company. Its banking and non-banking subsidiaries across the U.S. and in other international markets provide a diverse range of banking and non-banking financial services and products.

Bank of America conducts its operations through the following segments:

The Consumer and Business Banking (CBB) segment, comprising Deposits and Consumer Lending businesses, provides a wide range of credit, banking and investment products and services to consumers and businesses.

The Consumer Real Estate Services (CRES) segment includes Home Loans and Legacy Assets & Servicing. The segment originates first and second-lien mortgage loans. The first-lien mortgage loans are generally sold into the secondary mortgage market or to Corporate Investments in the All Other segment while retaining servicing and the customer relationship. Second-lien mortgages are retained on the segment's balance sheet. The segment services mortgage loans including those it owns, loans owned by other segments as well as those owned by outside investors.

The Global Banking segment, which includes Global Corporate and Global Commercial Banking, as well as Investment Banking, offers a diversified range of lending-related products and services, integrated working capital management and treasury solutions to clients through the network of offices and client relationship teams along with various product partners. Lending products and services include commercial loans and commitment facilities, real estate lending, asset-based lending and indirect consumer loans.

The Global Markets segment offers sales and trading services, including research, to institutional clients across fixed-income, credit, currency, commodity and equity businesses. The segment provides market-making, financing, securities clearing, settlement and custody services globally to the institutional investor clients in support of their investing and trading activities. It also works with commercial and corporate clients to provide risk management products using interest rate, equity, credit, currency and commodity derivatives, foreign exchange, fixed-income and mortgage-related products.

The Global Wealth & Investment Management (GWIM) segment comprises two main businesses Merrill Lynch Global Wealth Management and U.S. Trust, Bank of America Private Wealth Management. The segment offers investment and brokerage services, estate management, financial planning services, fiduciary management, credit and banking expertise, as well as diversified asset management products to institutional clients and also to affluent and high-net-worth individuals.

The All Other segment consists of two broad groups, Equity Investments and Other. Equity Investments includes Global Principal Investments, strategic and other investments. Other comprises liquidating businesses, merger and restructuring charges, ALM functions and related activities and the impact of certain allocation methodologies. Other also includes certain residential mortgage and discontinued real estate products that are managed by Legacy Assets and Servicing within CRES segment.

Among the major mergers, Bank of America acquired Merrill Lynch & Co Inc. in 2009, Countrywide Financial Corporation in 2008 and all the outstanding shares of ABN AMRO North America Holding Company in 2007.

Bank of America operates in 50 states, the District of Columbia and in more than 40 countries. It has approximately 5,095 retail banking centers, about 16,214 automated teller machines (ATMs), nationwide call centers as well as online and mobile banking platforms.


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