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S. The bank expanded into the Chicago market. Bank of America, with a strong California base, was already the largest bank in the U.S. By deposits at that time.
The company completed the largest bank merger in U.S. history with the acquisition of NationsBank. The next major step was the 2004 acquisition of FleetBoston, followed by MBNA, a major credit card company. The bank began to expand outside of the U.S. In 2006. Further additions have been the United States Trust Company in 2006, LaSalle Bank in 2007, Countrywide Financial in 2007 and Merrill Lynch in 2008. These deals have not only enhanced the Bank of America's retail footprint but they have also diversified the business considerably both in terms of geography and in terms of business line. Many of these acquisitions form the core of entire operating groups at Bank of America today. Mergers and acquisitions are a key component of the company's growth strategy due to the large cost and time frame of establishing a proper footprint in a region. It is simply more affordable to buy into a market than to build into a market. In addition, brand value is retained and the company can realize synergies almost immediately.
As a result of all of this merger and acquisition activity, Bank of America is now among what is known as the "Big Four" banks in the U.S., along with Citigroup, JP Morgan Chase and Wells Fargo. Bank of America is the largest bank in the U.S. By asset value at $2.2 trillion. By comparison, JP Morgan Chase has $2 trillion in assets; Citigroup $1.8 trillion and Wells Fargo $1.2 trillion (FFIEC, 2010). Bank of America's strong position gives it strength in economies of scale, technological innovation, synergies between divisions and brand equity. Using older data, Bank of America is the world's tenth-largest bank (2nd in the U.S.) with $1.7 trillion in assets (Rogers, 2009).
The implications for this are that the Bank of America has a broad footprint. It has a very broad customer base, which creates opportunities for cross-business referrals and strong relationship-building. However, that Bank of America still has as many large competitors as it does is indicative of the fact that the competitive environment is very difficult. Each major competitor can match Bank of America's capabilities and core competencies. In addition, banking is becoming a more globalized industry as banking trade barriers fall. Bank of America must contend on a global scale with institutions much larger than itself, including the Royal Bank of Scotland, HSBC, Barclay's. BNP Paribas, Deutsche Bank, Credit Agricole, UBS and Mitsubishi Financial, all of which are bigger than Bank of America and have more experience operating in international markets.
Bank of America still has tremendous strength in its U.S. base. That $6.3 billion in profit in 2009 was considered to be a bad year is indicative of the amount of value in the Bank of America and Merrill Lynch franchises. In the U.S., Bank of America is considered to be a top four bank, often viewed as the largest depending on the measure chosen. Bank of America has a presence in all fifty states and claims to have a business relationship with one out of every two Americans (2009 Annual Report). This tremendous reach means that the U.S. market is perhaps saturated, and the company will need to focus on diversification for its continued growth.
The U.S. market is highly diffused and intensely competitive. Beyond the major banks, there are many smaller banks from regional powerhouses to small local banks. All compete with the Bank of America for some aspect of BoA's business. The banking industry is also heavily regulated, both at the state and federal level. This complex regulatory regime is one of the remaining impediments to growth in the U.S. banking market.
The U.S. industry is subject to a considerable amount of consolidation of late, even into the financial crisis. It can be expected that this will give Bank of America significant domestic growth opportunities via the M&a market, subject of course to regulatory approval, in particular from antitrust authorities. Bank of America is large enough that a merger with another major U.S. bank would likely run afoul of antitrust regulators, especially another California bank like Wells Fargo.
The Bank of America has only limited access to the Canadian market. That market is heavily protected, so Bank of America's primary activities are in merchant banking, servicing Canadian subsidiaries of its U.S. customers, and in Merrill Lynch. The Canadian operation is a Schedule III bank under the Canadian Bank Act, which limits its activities significantly. Bank of America is also involved in the credit card business in Canada (2009 Annual Report).
The international market is where there is the biggest room for growth for the Bank of America. The company has subsidiaries in an estimated 150 countries worldwide (2009 Annual Report). International activities follow the Canadian model rather than the American, with a focus on merchant banking, Merrill Lynch and credit cards. Most countries have strong limits on foreign bank entry, which forces Bank of America into this position. Bank of America does have retail operations in a total of 40 countries worldwide.
The international banking industry is intensely competitive, but it is also highly lucrative. Bank of America has gained greater access to the international banking market through its Merrill Lynch subsidiary. The players in this market are among the largest companies in the world by assets and tend to be highly profitable. As with the domestic market, the international market is characterized by high levels of regulations. These regulations govern the degree of presence that foreign banks can have in the market and often govern the behavior of foreign banks as well. Adapting to the wide variety of regulatory regimes is critical for success in international banking. It can be argued that Bank of America has acquired some of this expertise through its expansion in the U.S., where the banking industry has long been controlled at the state level. Another growth area in banking is Islamic banking, but Bank of America does not have a subsidiary for this market.
Expansion in the international banking business is also subject to regulatory approval. A merger would need to pass both U.S. And European regulator authorities. In addition, the firms involved are typically in the trillion dollar asset class, so such a merger would be difficult to execute. That said, M&a activity is the most viable avenue for expanding Bank of America's international presence.
Bank of America one of the largest banks in the United States. The company has a strong leadership team and ethical code. The company has placed strong emphasis on diversity as a core value and has won awards for its diversity programs. There is no formal process for career development, but there is ample opportunity in such a large and diversified firm.
Bank of America's growth has traditionally hinged on merger and acquisition activity. The domestic market is relatively saturated and is mature. The company attempts to utilize technological innovation and new product development to generate organic growth, but credit cards and investment banking are the real key drivers for the company.
Bank of America has a major footprint in the United States but its overseas activities are primarily limited to merchant banking, typically as a result of high level of regulatory involvement in the banking industry. Mergers and acquisitions are challenging, but are the key to growth for Bank of America going forward.
Bank of America 2009 Annual Report. In possession of the author
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