Personal Finance

Bank of America's Biggest Success of the Past Decade


Data source: Bank of America. Chart by author.

Transactions that are conducted on a mobile phone or an ATM are much more cost-effective for Bank of America. It estimates that an automated deposit costs 90% less than an assisted deposit. The average cost per $100 in deposits has accordingly dropped by 34% since 2010, going from $2.61 to $1.71 as of the first quarter of 2016.

These trends have allowed the bank to cut costs in two ways. The headcount in its consumer bank has dropped by 40,000 people, or 37%, since 2009. And it's closed approximately 1,500 branches, equating to a 23% reduction over the past seven years. Bank of America now has the greatest value of deposits ($122 million) per branch of any bank.

The net result is that Bank of America has seen its total expenses fall materially over the past few years. Its total annual expenses excluding litigation have declined by $15 billion, or 21%, since 2011. There are other factors at play here, as the bank has simultaneously had to deal with higher expenses related to the servicing of delinquent mortgages, but there is little question that its cost savings insofar as deposit-taking is concerned stem largely from its success with mobile banking.

In sum, while it's easy to focus on Bank of America's struggles, as I have a tendency to do even though it's my biggest stock holding, that's only part of the bank's story from the past decade. A second and more uplifting aspect of its recent performance is its aggressive approach to mobile banking, which should help the $2.2 trillion bank stay relevant in the years to come.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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