Swot Analysis for Bank of America free essay sample

I assumed the role of a mutual fund manager work for First Investment Inc Investment Inc. With the information I gathered in part one of my paper I made the decision to invest in Bank of America. In part two of these papers I will further explain why I chose to invest in Bank of America. This paper will address the financial health of Bank of America by reviewing the banks income statement, balance sheet, and cash flow (MGT/521 course syllabus). I will also analyze Bank of America’s financial health and compare it against another bank. After I do the comparison I will compare Bank of America technological advantages, or address any deficiencies they may have. This paper will also address the effects of globalization on the Bank of America and I will conduct a benchmarking analysis that will include the best practices of Bank of America, operational processes and procedures for Bank of America and products or services for Bank of America. Once regarded as one of the top banks in the banking industry Bank of America is on the decline. According to infoplease on March 31, 2010 Bank of America was ranked number one as one of the largest banks in the United States. Today they are second to JPMorgan Chase and they are in worst shape compared to the other large banks. Bank of America has made several faulty decisions that have cause the banks decline in the banking industry. Kenneth Lewis the CEO of Nations Bank acquired Bank of America after the acquisition Bank of America went on to acquire FleetBoston Financial for $48 billion and in 2005 Bank of America acquired Maryland Bank, National Association (MBNA). The acquisition of Maryland Bank, National Association positioned Bank of America at the top of the United States credit card business (New York Times 2012). First Investment Inc has come to pinpointed how Kenneth Lewis the CEO of Bank of America went wrong. In 2008 Countrywide Financial was acquired. Countrywide Financial would later bet caught up in the subprime disaster. Merrill Lynch investment bank was a billion dollar investment that was suffering from its own bad mortgages. With 30 billion in losses from Countrywide and 300 million to all the lawsuits filed against Bank of America; Kenneth Lewis had the corporation going on the decline. Bank of America didn’t do their homework on Merrill Lynch. Merrill Lynch had loses that were far above what Bank of America expected but they did convey the information to their shareholders. The lose cause bank of America to ask for a 20 billion dollar bailout in 2008 and 2009. Bank of America’s shares were cut in half after the news got out about the losses from Merrill Lynch investment bank (New York Times 2012). In 2012 Bank of America has started to turn around. Bank of America reported a first quarter gain. Bank of America had the lowest in credit loses between clientele. The failing business mortgages and Bank of Americas reputation balance out on Wall Street. Comparing Bank of America to the top two mortgage companies (JPMorgan and Wells Fargo) Bank of Americas gross is in decline. Both institutions (JPMorgan and Wells Fargo) announced a gain gross and income. Even though Bank of America’s first quarter earnings were greater than expected Bank of America’s earning fell short compared to JPMorgan and Wells Fargo. On a positive note Bank of America’s global market reported a 30 million dollar gain, but in the fourth quarter the combination of Bank of America and Merrill Lynch was down in profits after more than doubling in profits in the fourth quarter. First Investment Inc has a few concerns when it comes to investing in Bank of America. The first concern is the bad investment decision Kenneth Lewis made when he decided to purchase Countrywide Financial. When a purchase of this magnitude is made the business making the purchase must first review the company’s income statement, balance sheet, and cash flow and compare that to how they looked when they first started to how they look today and what the present outlook looks like. Clearly Kenneth Lewis did do his homework on Countrywide Financial. Kenneth Lewis knew the financial state of Countrywide Financial and failed to relay the messages to the other stakeholder in the company. If I were put in the same situation as Kenneth Lewis I would hire someone who is knowledgeable on how to conduct a SWOT on a business before a purchase. I would share the outcome of the SWOT with the stakeholders and I would hire someone to do a background and market analysis on Countrywide Financial. â€Å"The reason the stock is tanking is because the market does not believe Bank of Americas assets are worth what they say they are worth† (Henry Blodget 2011). First Investment Inc believes that the main reason is Bank of America’s failed to do the proper outlook investment analyses. Bank of America’s management should have conducted future analyses on where the business is today and where what the future holds. The managers at Bank of America should review the banks financial situation. Bank of America should have first looked at what their competitors were doing and the state of the economy. Bank of America should have should have taken the time to analyze the mortgage and real estate brokers, by not analyze the mortgage and real estate brokers people purchase property that they couldn’t afford. The price of houses declined in 2006 this caused the houses that were purchased to be worth less than what the price of the house was originally purchase for. This is when all the foreclosures started and Bank of America started losing money. Countrywide financial played a big part in the subprime loan lawsuit losses. First Investment Inc conducted a Bank of America benchmarking analysis. First Investment Inc will compare the top banking corporation (JPMorgan Chase) against Bank of America to determine who has the best practices, operational processes and procedures, and products or services. In the hands Kenneth Lewis Bank of America has made some bad investment decision; one in particular is the acquisition of Countrywide Financial. JPMorgan Chase made some risky decisions that could’ve backfired on the corporation, but during the economic disaster JPMorgan quarter earnings were positive, even after the bailout of Bear Stearns Cos and the acquisition of Washington Mutual Inc. JPMorgan increased units to the products business by doing this the number of branches has increased (VS Pages, 2011). The request by Bank of America to raise their share to one cent was refused by the federal Government, yet The Federal Government approved JPMorgan’s increase share from 5 cents a share to 25 cents a share. The approval was based on the fact the JPMorgan show a greater outlook during the financial decline. Bank of America and JPMorgan own several financial services, but unlike Bank of America JPMorgan is an investment bank. JPMorgan has services in over 60 million countries around the world, making them the king of the financial banking world (VS Pages, 2011). Throughout the economic crises Bank of America and JPMorgan have had their share of ups and downs. Bank of America angered many of its customers by increasing their loan interest rates. On the other hand JPMorgan became involved in one of the corporation’s worse lawsuits. JPMorgan was required to pay an Alabama county that was near bankrupt approximately 722 million dollars (VS Pages, 2011). The following is a table comparison of the products or services from Bank of America and JPMorgan. ServicesBank of AmericaJPMorgan Chase CDsyesyes Checkingyesyes Credit Cardsyesyes Debit Cardsyesyes Gift CardsNoyes Health Savings Account (HSAs)yesyes IRAsyesyes Savingsyesyes Number of Branches6,2335,490 Number of ATMs18,00015,000 After conducting a Benchmarking analysis First Investment Inc has concluded that Bank of America and JPMorgan are similar, but First Investment Inc feels that the cost per share is the number one reason First Investment Inc has chosen to invest in Bank of America.