Bank of America
The Bank of America, initially referred to as the Bank of Italy, was instituted in 1904 in San Francisco by Amadeo Giannini. Two years later, San Francisco encountered a major earthquake that saw most deposits from other banks ruined. As Giannini salvaged a good number of deposits from his bank, it gave him the impetus required to transform the bank into the current multi-billion corporation. Giannini acquired Banca dell’Italia Meridionale in the period 1922 and this offered higher resources that led to the establishment of the Bank of America and Italy (Bank of America, 2010). By 1927, Giannini had one hundred and one banking outlets and he formed a merger with the Liberty Bank of America that resulted into a one hundred and forty five million dollar establishment known as the Bank of Italy National Trust and Savings Association. A year later, Giannini formed another merger with the Bank of America, then located in Los Angeles, and in 1930, the joint establishment adopted the name Bank of America that exists to date.
Presently, the bank ranks as the largest corporation in America with regard to its asset base while in accordance to market capitalization, it is ranked in the second position. The bank’s services in banking, fiscal and asset servicing are exercised across more than one hundred and fifty nations in the globe. The bank owns 12.2% of the American banking market, constituting to 31.28% of the total share held by the four largest banks in the US. Bank of America accrued revenue of 150.45 billion dollars in the last financial year and this ranks it as position five in the company list. Additionally, the bank offers services to ninety-nine percent of the five hundred top most thriving companies in America as well as eighty-three percent of the top five hundred companies in terms of revenues base in the world (Bank of America, 2010). The current workforce is two hundred and eighty four thousand individuals.
Analysis of Macroeconomic Indicators
The economic figure related to Bank of America have been analyzed and reported by various economists and economic analysts. The Yahoo! Finance provides an economic overview related to the stock prices of the bank. The economic indicator traces the daily stock prices beginning with the opening prices. With shares trading conducted through out the day, the economic site monitors the prices as they fluctuate within the day. At the day’s closure, the analysts identify the highest and lowest prices in which shares are traded. These prices form the high and low stock figures. The price that holds as the last to be traded before the stock markets close for the day is referred to as the close price. Amongst these prices, the opening and closing figures are the most significant (Yahoo! Finance, 2010). The closing price acts as the real value of the stock during the concerned day. The data used to compile this information is accurate as it is sourced from three stock markets namely, the National Association of Securities Dealers Automated Quotation Systems (NASDAQ), the American Express Company (AmEx) and the New York Stock Exchange (NYSE). Using three material sources infers credibility in the data since all the figures have to match at any given period. Discrepancies in the figure would alert the monitoring team of a discrepancy.
The period 2007, the stock market was recording high prices with both the opening and closing prices averagely ranging within fifties. The November and December periods within the same year however, had stock prices within the scale of forty and in January 2008, the opening price stood at $41.53 and the closing at $44.15 per share (Yahoo! Finance, 2010). The prices continued to fall to gradually within the year recording the lowest price in December as $14.08. This dramatic fall in share prices was attributed to the recession that set in the American economy in the years 2008 through to 2009. The recession had its basis in the subprime mortgage issue that was a result of the housing bubble. As the recessionary forces took toll on the economy, the pressure was reflective on the bank share prices that had an opening price of $13.92 and a closing price of $6.58. In February, the corporation marked its worst share price at $3.95 as a closing price. The share prices picked up once again but on the low sides with the prices ranging below $19.1. The year closed with a price of $15.06.
The current trading period 2010 marks the recovery process as 2009 with the opening price in January being noted as $15.24. The prices slightly increased through up to April (a high of $19.86) before steadily dropping to $12.46 in August. September saw a slight improvement to $13.1 before the prices reduced once again to $11.45 and $10.95 in October and November. The opening prices as per December 1 stood at $11.17 and the last closing in Dec 6 was marked at $11.64 (Yahoo! Finance, 2010). From the historical data, it is quite evident that the corporation is still undergoing the recovery phase and following the indicated patterns, we can forecast that for the next twelve months, the stock prices will still be low. These will be marked by periods of low and high turn although the gap between the prices will become less distinct as the market acquires a relatively stable rate. Another notable factor is that, during periods of low stock prices, the trading volume increases. Therefore, as the company operates within low pricing levels, the volume of traded shares as individuals will invest more with a speculative motive.
The economic indicator is an accurate measure as noted by the causal link between the cyclical business patterns and the stock prices. The periods 2006 and 2007 were booming periods and hence the high stock prices. As the depression was ushered in, the prices dropped to their lowest level and are currently within the recovery phase (Bank of America, 2010). Additionally, the stock markets operate as autonomous bodies free from government influences and any other bodies that may manipulate the market to fit the required profile for consumer satisfaction. Stock exchange being an investment is regulated by consumer confidence and speculative purposes. When a company has low stock prices, if the consumer confidence is high, a large volume of investment will be made with the estimation that the prices will increase and consequently, the investor will earn a profit. Stock prices have had a huge impact on the company majorly noted in the period 2008 upon the possession of Merrill Lynch & Co., Inc. at the verge of insolvency due to the recession.
This saw the bank attain 25% of the market size related to the banking sector. However, as 2009 exposes a loss in the acquired asset, the stock prices an opening price of $7.05 and a closing of $3.95, a match that was only noted in stock prices in the year 1992 (Yahoo! Finance, 2010). As profits were recorded in the next quarter of the financial year, customer confidence was restored, and investments as well as the prices increased. I would urge the management to ensure that during the recovery process, the bank should work hard top ascertain profit levels and help increase consumer confidence for a higher level of investment. This will in turn lead to increased stock prices, which the corporation is aiming at. The stock is currently very good for investment, as historical indications have indicated. Additionally, with the bank rankling amongst the top three global institutes, it is bound to move from the recession by its large resource base.
Bank of America offers three types of services for sales namely banking, fiscal servicing and asset servicing. Key indicators in tracking sale levels will be analyzed through the annual and quarterly turnovers levels. Just like any other business establishments, banks operate with the aim of acquiring profits thereby necessitating the need to ensure high sales levels that translate to increased profits. The data used to analyze the mentioned indicator will be picked from the reports in Yahoo! Finance. The statistical data provided is acquired form the company’s annual and quarterly financial reports indicated in the income statements, balance sheets and cash flow statements. The turnover is calculated by the bank as a product of services offered multiplied by the cost of each service. Typical charges accrued by the bank are levied on acquired loans, accounts acquisition and management, share and bond sales. The authenticity of the data provided by the bank is ensured by regulating bodies like auditors who have to ascertain that the quoted figures are true by conducting audit processes.
As the company was experiencing the boom period in 2007, it managed to acquire an annual turnover of $124,321,000. The 2008 trading year that proved to be challenging for the company due to the depression affected the company’s level of sales and a notable decrease was noted on the revenue turnover that stood at $124,132,000 (Yahoo! Finance, 2010). The asset acquisition program that affected the stock prices as well as the volume of investments had a significant input in the sales reduction. The Bank of America noted profits in the 2009 financial year with Merrill Lynch & Co., Inc. generating $4.2billion in the first quarter of the 2009 trading period. The rest of the trading quarters were also profitable to the bank and this led to an increase in the 2009 annual turnover of $150,450,000. To review the current financial positioning of the company, we shall use quarterly statistics since the trading period has not yet ended. The first quarter of the 2010 trading period had a turnover of $38,099,000. The subsequent second and third quarters both marked a gradual decrease in the turnover level of $35,384,000 and $32,462,000 respectively. The total amount for the three periods is $105,954,000.
By averaging the highest and lowest figures in the three periods, we can use the resulting figure to act as the turnover estimate for the last quarter. The mean figure of the first and third quarters amounts to $35,280,500. Adding this to the existing revenue accrued, it amounts to $141,225,500 (Yahoo! Finance, 2010). This is a decrease compared to the 2009 trading period indicating that the conducted sales have noted a decrease within the given period. Unless the company boosts up its sales through innovative programs, revenues and sales in the year 2011 will stagnate or decrease. The competition posed by many banks as they try to overcome the depression effects is high. Banks that apply vigorous recovery aids and promotional programs for an increased customer base will succeed in the increasing the number of sales. By the year 2005, the bank has six thousand one hundred banking outlets and eighteen thousand seven hundred automated teller machines in the US. However, the marketing plans have long since been less vigorous and this has led to low sales.
The bank is privately owned and therefore not liable to government influences that may lead to improper banking practices. Consumer confidence levels are boosted by customer-centric approaches in the marketing program that focus on creating banking products as per customer needs and requirements. This can be attained by the creation of customer relation centers where product feedbacks may be collected for the enhancement of services offered. High customer confidence translates to high sales for the bank. The impact of the retail sales on the bank is clearly noted by the revenue turnover figures comparing the 2007, 2002 and 2009 periods (Bank of America, 2010). The sales do indicate growth in the resource base as well as the market share. As more banking and ATM outlets as instituted, the market share is enhanced through the ability of the company to reach to a wider clientele. The senior management should be aware of the fact that the US is well covered with financial outlets and the bank should therefore capitalize on expanding the international territory. As related to the banking outlets, the bank should also adopt aggressive promotional services to acquire more users. Having a marketing team will decrease the unemployment rate. The bank offers a good investment project as it currently ranks as the largest financial management body attributed to its rich clientele.
Bank of America. Corporate and Institutional. 2010. Web. 7 Dec. 2010.<http://www.bankofamerica.com/index.cfm?page=corp>
Yahoo! Finance. Bank of America Corporation (BAC): Historical Prices. 2010. Web. 7 Dec. 2010.<http://finance.yahoo.com/q/hp?s=BAC&a=04&b=29&c=1986&d=11&e=7&f=2010&g=>
Yahoo! Finance. Bank of America Corporation (BAC): Income Statement. 2010. Web. 7 Dec. 2010. <http://finance.yahoo.com/q/is?s=BAC>
Yahoo! Finance. Bank of America Corporation (BAC): Profile. 2010. Web. 7 Dec. 2010. <http://finance.yahoo.com/q/pr?s=BAC+Profile>
Yahoo! Finance. Bank of America Corporation (BAC): Balance Sheet. 2010. Web. 7 Dec. 2010. < http://finance.yahoo.com/q/bs?s=BAC+Balance+Sheet&annual>
Yahoo! Finance. Bank of America Corporation (BAC): Cash Flow. 2010. Web. 7 Dec. 2010. <http://finance.yahoo.com/q/cf?s=BAC+Cash+Flow&annual>