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Bank of America SWOT & PESTLE Analysis

ID : 52232953 | Jun 2017

OVERVIEW

Name of the Company: Bank of America

Business Sector: Banking

Operating Geography: North America, United States

About the Company: The Bank of America was founded by Amadeo Pietro Giannini under the name of the Bank of Italy in San Fransisco. Today, after many mergers, it is a multinational bank with headquarters located in Charlotte, North Carolina. The bank has around 4,600 retail centres and 15,900 scattered across the United States. With 10.73% of all bank deposits in the United States held by the bank as of December, 2016, it has become 26th largest company by total revenue in America.

Revenue: USD 8. 3 million (2016)

SWOT & PESTLE Analysis

The SWOT analysis for Bank of America is presented below:
Strengths
Weaknesses
1. Enormous brand value
2. Diversified portfolio
3. Responsible growth strategy
4. Established global footprint
1. Income majorly attributed to home market
2. Declining reputation due to controversies
3. Depending too much on cost cuts
Opportunities
Threats
1. Tap into foreign markets
2. Mergers ,Acquisitions or joint ventures
3. Rapid technology innovation
1. Financial crisis and recessions
2. Growing market share of competitors
3. Continuously evolving government regulations
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Strengths

1. Enormous brand value- Bank of America is among the world's leading financial institutions. The bank provides unparalleled customer convenience in the United States, taking care of approximately 47 million consumers and small businesses with around 4,600 retail financial centres, approximately 15,900 ATMs, and award-winning digital banking with 35 million active users and more than 22 million mobile users.

2. Diversified portfolio- Bank Of America is currently serving in various capacities like individual customers, small and medium-market businesses and large firms with a full range of banking, asset management, investing and other financial and risk management products & services. Bank of America is the global leader in terms of wealth management, corporate as well as investment banking and trading across a wide range of asset segments, governments, serving corporations, institutions and individual customer around the world.

3. Responsible growth strategy- As per the CEO of Bank Of America their strategy of responsible growth delivered in 2016, has earned nearly $18 billion, up by 13 % from a year ago which was the second-most profitable year in the company’s history, exceeded only by the $21 billion they earned in 2006, prior to the economic and financial recession.

4. Established global footprint- Bank Of America is renowned worldwide. Not just in United States but also outside US. The company serves clients through operations in all 50 states, the District of Columbia, the U.S. Virgin Islands, Puerto Rico and more than 35 countries. 99% of fortune 500 companies are associated with Bank Of America.

Weaknesses

1. Income majorly attributed to home market- If we look at the overall distribution of Bank Of America’s income it is strictly concentrated to US. Approximately 90% of the income is through US and rest of the 10% is across outside countries. This 10% is very less in terms of the global brand value BOA has.

2. Declining reputation due to controversies- BOA has been involved in controversies like WikiLeaks controversy Paramat controversy which have dented its reputation .Recently it had to pay a record $16.65 billion fine to settle allegations that it sold toxic mortgages to its investors. BOA was also involved in issuing bad subprime loans.

3. Depending too much on cost cuts- Frequent layoffs and cost cuttings in recent years have jeopardized the reputation of the bank. Recently the CEO said BOA would incur another $5 billion in annual cost cuts by 2018 as part of its strategy to tackle the persistently low interest rates that are eating away the profitability. This shows the CEO is placing a lot of emphasis on cost discipline and job reductions which give an impression that the bank is running low on funds.

Opportunities

1. Tap into foreign markets- As the controversies have deteriorated its reputation in US, and only 10% is the contributed by foreign countries, BOA should focus more on the outside countries to not only generate more revenue and also expand its global footprint.

2. Mergers, Acquisitions or joint ventures- Apart from mergers like countrywide and Merrill Lynch, BOA should look for more such potential institutions which can increase its brand value and also be profitable. It should target such acquisitions so as to lessen the competition.

3. Rapid technology innovation- As more and more customers are switching to mobile banking and other latest innovations, BOA can capitalize this changing customer preferences. It has to keep up with the new breakthroughs in the field of banking so as to hold on the leadership it has

Threats

1. Financial crisis and recessions- Financial crisis can lead to crunch market situation. This may also impact the investors. The situation can be quiet similar to the crisis of economic recession of 2008.Recent cost cuttings by BOA can prove to be a threat.

2. Growing market share of competitors- With competitors like Barclays, CitiGroup JP Morgan Chase and Fargo it is very difficult to sustain the leadership BOA has.

3. Continuously evolving government regulations- With changing government regulations, and loan guidelines it can be dangerous for BOA and may impact its customer base.

To get the complete detailed SWOT report on Bank of America please mail us at: support@swotandpestle.com. or contact us here.

Bank of America SWOT analysis has been conducted by Khushboo Rawat and reviewed by senior analysts from Barakaat Consulting.

References

1. Bank of America Annual Report 2016- http://media.corporate-ir.net/media_files/IROL/71/71595/BOAML_AR2016.pdf

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The PESTLE analysis for Bank of America is presented below:
Political
Economical
1. Corruption amongst political parties
2. Policies for Foreign investments
3. Consumer protection
4. Tax policies
1. Vital GDP statistics
2. Largest economy in the world
3. Currency fluctuations
4. Unemployment
5. Changing inflation rate
Social
Technological
1. Demographics
2. Lifestyle and culture
3. Social atmosphere & safety
4. Educational quality
5. HR policies
1. Digitization of technology
2. Rapid innovations
3. Customer flexibility towards changes
4. R & D and skilful resources
5. Easy availability of information
6. Efficient communication
Legal
Environmental
1. Government Laws
2. Labour Laws
3. Privacy regulations
1. Paperless banking
2. Reduced Individual environmental footprint
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Political

1. Corruption amongst political parties- As the political upheaval in recent years between Donald Trump and Hillary Clinton had a huge impact on the banking industry. Stock price of banks went up and down like anything. As Donald Trump took over as the president of US the stocks of BOA shoot up. The friction between the parties impacts the banking industry.

2. Policies for Foreign investments- The foreign investment policies are solely controlled by the government and with changing governments the policies also fluctuate which in turn impacts the banking sector in a huge way.

3. Consumer Protection- The rules and regulations regarding the consumer laws and rights of the banks in controlled by the government and also the privacy of consumer details has to follow certain guidelines is highly influenced by polity of the nation.

4. Tax Policies- The tax rates and regulations and deferred tax rules are also dependent upon the government .Therefore it varies from government to government.

Economic

1. Vital GDP statistics- The banking industry and the GDP go hand in hand. How the income flows, whether the economy is prospering or struggling to survive during recession, affects how much capital banks can access.

2. Largest economy in the world- The US is the world’s supergiant with the tag of the largest economy.

3. Currency fluctuations- Inflation affects the currency rates and its value and creates instability. Foreign investors think twice while providing their funds when a certain country’s currency value is high.

4. Unemployment- Cost cuts and recent layoffs in the US has proved that unemployment rates might be increasing and also impact the banking sector.

5. Changing inflation and exchange rates- When inflation shoots up, the bank also experiences the backlash. Inflation affects currency and its value and causes instability. Exchange rates do affect banks globally and stable currencies such as the US dollar impact other currencies, their spending habits, and inflation rates in other countries.

Social

1. Demographics- Recently BOA has been included in the Gender equality index by Forbes. On the other hand the growing old age population of employees is a matter of worry for the banking industry. 2. Lifestyle and culture- As more and more people are turning towards hassle free banking, as the lifestyle is getting fast paced each and every day and the individual living standards are getting better

3. Social atmosphere & safety- Due to digitization the safety concerns are getting higher and also becoming important for banks to provide proper security.

4. Educational quality- As the living standards are getting better more and more people are achieving better quality of living as well as better quality of education standards.

5. HR policies- The banking industry and its attitude towards the employees is an important factor for its growth and progress.

Technological

1. Digitization of technology- Technology is changing how consumers handle their funds. Many banks offer a mobile app to witness accounts, transfer funds, and pay bills on smart phones.

2. Rapid innovations- Technology is changing every day and banking has been made smarter and faster from computers to mobiles and I pads.

3. Customer flexibility towards changes- Customers now a days are open to changes and accepting it flexibly. Banking has changed 360 degree across the years hence consumer preferences are also changing.

4. R & D and skilful resources- As the competition is cut throat, banking industry has to continuously evolve to keep up with the competitors. Therefore all the banks are investing hugely into R&D and innovations.

5. Easy availability of information- As internet has taken over the world, all the information is easily available for everyone to access. This has helped the banking industry in many ways.

6. Efficient communication- Every bank is utilizing technology within the workplace. Telecommunicating through virtual meetings which saves time and money is being embraced. It also replaces the need for in-person meetings.

Legal

1. Government Laws- In US alone, several laws have been introduced to regulate this sector of the industry. Since the Federal Reserve act of 1913, the Glass Steagall Act and the Dodd Frank several laws have been introduced and several agencies founded to oversee and ensure compliance.

2. Labour Laws- The banking industry globally is impacted by several laws. It is also a large employer and is affected by the labour laws. Legal risks are immense because oversight and regulation are very high in this sector.

3. Privacy regulations- The banking industry has to follow very strict laws regarding privacy, consumer laws, and trade arrangements to confirm frameworks within the industry. Such structures are required for the customers in the respective country and for international users.

Environmental

1. Paperless banking- With the use of continuously evolving technology particularly with latest mobile banking apps the use for paper is being heavily reduced.

2. Reduced Individual environmental footprint- The need to directly go to a branch to handle affairs is reduced as well. Most of the issues are taken care of through the mobile apps and online banking services.

To get the complete detailed PESTLE report on Bank of America please mail us at: support@swotandpestle.com. or contact us here.

Bank of America PESTLE analysis has been conducted by Khushboo Rawat and reviewed by senior analysts from Barakaat Consulting.

References

1. Bank of America Annual Report 2016- http://media.corporate-ir.net/media_files/IROL/71/71595/BOAML_AR2016.pdf

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