How Bank of America Makes Money: consumer banking

Bank of America Corp. (BAC), one of the world’s largest investment banks and financial institutions,

Bank of America Corp. (BAC), one of the world’s largest investment banks and financial institutions, serves a broad range of customers, including individual consumers, wealthy investors, large corporations and governments. It operates primarily in the U.S., where it gets the vast majority of its revenue, as well as in dozens of countries around the globe. The company faces a broad array of competitors, including JPMorgan Chase & Co. (JPM), Citigroup Inc. (C), Goldman Sachs Group, Inc. (GS), credit card issuers like Visa, Inc. (V), hedge funds, and private equity firms.  The Charlotte, North Carolina-headquartered company expanded from a regional player into a global giant through a series of major acquisitions in the past several decades. 

Key Takeaways

  • Bank of America provides financial services to customers including consumers, wealthy investors, institutional clients, and governments.
  • The company’s Consumer Banking segment provided the largest share of total revenue in Q2 2020, but Global Markets had the fastest revenue growth.
  • Bank of America has had to substantially increase its provisions for credit losses amid the economic fallout from the COVID-19 pandemic.

Bank of America’s Financials

Bank of America has staged an operational turnaround in the wake of the 2008 financial crisis, when many experts feared it might slip into bankruptcy. But the company is once again feeling the adverse effects of an economic crisis, this time one stemming not from within the financial sector but by the COVID-19 pandemic. Bank of America reported a year-over-year (YOY) fall in total revenue, net of interest expense, of 3.3% to $22.3 billion for Q2 2020, which ended June 30, 2020. Net income fell 51.9% to $3.5 billion compared to the same quarter a year ago. The bank’s net interest income, a key indicator, declined 11% to $10.8 billion in Q2.

Bank of America’s Business Segments

Bank of America’s four business segments are categorized predominantly according to the types of customers utilizing each area. The Consumer Banking segment is focused on consumers and small businesses, while the Global Wealth & Investment Management segment addresses the needs of individual clients with over $250,000 of total investable assets. Global Banking provides investment banking services and related products, while Global Markets focuses on institutional clients. The data shown in the pie charts above excludes negative revenue in the company’s “All Other” segment, which we detail further below.

Consumer Banking

The Consumer Banking segment provides varied credit, banking, and investment products and services to small businesses and consumer clients. These range from traditional savings accounts, CDs, and IRAs, to credit and debit cards, residential mortgages, and loans. In Q2 2020, Consumer Banking accounted for 35% of total revenue and about 2% of net income. The segment generated the most revenue across all segments, accounting for $7.9 billion in revenue. This is down about 19.2% YOY. Consumer Banking net income fell 97.8% to $71 million for the quarter, comprising the smallest share of the company’s total net income, at just 2%.

Global Wealth & Investment Management

The Global Wealth & Investment Management segment provides financial advisory, brokerage, banking, and retirement products to clients with large amounts of investable assets. In Q2 2020, this segment generated $4.4 billion in revenue, down 9.7% YOY. This segment also accounted for $624 million in net income, a decrease of 42.0% YOY. Global Wealth & Investment Management represented about 19% of total revenue and 18% of net income for Q2 2020.

Global Banking

Bank of America’s Global Banking segment offers lending-related products and services, including underwriting and advisory services, as well as investment banking products. The segment accounted for 22% of revenue and 21% of net income in Q2 2020. The customers in this segment are most commonly middle-market companies, commercial real estate firms, not-for-profit organizations, and corporations of various sizes. Global Banking was the third-largest segment in Q2 2020 in terms of revenue, generating $5.1 billion for the quarter. This was up 2.3% YOY. Global Banking also generated $726 million in net income, down 62.3% YOY.

Global Markets

The Global Markets segment provides sales and trading services as well as research services to institutional clients, including financing, securities clearing, settlement, custody, and market-making services. The segment generated $5.3 billion in revenue for Q2 2020, up 29.1% YOY. It accounted for $1.9 billion in net income, up 81.1% from Q2 2019. Global Markets made up about 24% of all revenue and 54% of net income for the quarter.

‘All Other’ Segment

Bank of America’s “All Other” segment includes non-core mortgage loans, liquidating businesses, equity investments, and other activities which are not categorized in one of the four primary segments above. This segment posted a revenue loss of $262 million and net income of $216 million.

Bank of America’s Recent Developments

Bank of America posted provision for credit losses of $5.1 billion for Q2 2020 amid the economic fallout from the coronavirus pandemic. Provisions for credit losses were up by 467% compared to the same quarter a year ago, and were mainly driven by credit-loss provisions in the bank’s Consumer Banking segment. The company stated that strong capital market performance helped to offset weakness in its consumer business related to the pandemic.

How Bank of America Reports Diversity & Inclusiveness

As part of our effort to improve the awareness of the importance of diversity in companies, we offer investors a glimpse into the transparency of Bank of America and its commitment to diversity, inclusiveness, and social responsibility. We examined the data Bank of America releases to show you how it reports the diversity of its board and workforce to help readers make educated purchasing and investing decisions.

Below is a table of potential diversity measurements. It shows whether Bank of America discloses its data about the diversity of its board of directors, C-Suite, general management, and employees overall, as is marked with a ✔. It also shows whether Bank of America breaks down those reports to reveal the diversity of itself by race, gender, ability, veteran status, and membership in the LGBTQ+ community.

Bank of America Diversity & Inclusiveness Reporting
  Race Gender Ability Veteran Status Sexual Orientation
Board of Directors      
General Management (U.S. Only)      
Employees ✔ (U.S. Only)      

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