Bank of America Porter’s 5 Five Forces: 2022 Detailed Overview

Written by nikolastsiri in Porter's Five Forces Analysis

Porter’s Five Forces Analysis of Bank of America

 

 

Key Facts

 

Name Bank of America Corporation
Industry Banking and Financial Services
Founded 1904.
Headquarters Charlotte, North Carolina, United States
CEOs Brian Thomas Moynihan
Revenues US $96.83billion in2021
Profit US $ 31.978 billion in 2021
Competitors JPMorgan Chase, Wells Fargo, Citigroup

 

 

 

Company Overview

 

Headquartered in Charlottes, North Caroline the Bank of America is a financial holding and bank that provides both financial and non-financial services.The company made an annual revenue of US $ 96.83 billion and a net profit of US $ 31.978 billion in the year 2021. The total assets of the company as of 2021 were US $ 3,238.22 billion and the market value of the company was US $ 303.1 billion in 2021. The company is ranked in 7th position as per the Forbes Global 2000 list 2022.

 

 

Porter’s Five Forces Analysis of Bank of America

 

Bank of America Rivalry among Existing Competitors

 

  • Bank of America Business Segments: The Company has the following segments; Global Banking,Consumer Banking, Global Markets,Investment Management Global Wealth. In 2022, Bank of America had a brand value of US $36.72 billion, making it one of the most valuable North American banking brands. The Return on equity(ROE) was 11.18% in 2021, an increase of 6.14 %as compared to 2020. Mobile banking servicesare used by almost 33 million customers, as compared to 30.8 million active mobile banking users in 2020. The market capitalization of the Bank of America was about 359 billion U.S. dollars in 2021, which was 3.5 times higher than in 2001. In 2021, Bank of America, in the United States was the fourth largest employer in the banking sector, with the employment of more than 133,000 people.
  • Bank of America Global Operations Year 2021: The company’s net income was $32.0 billion or $3.57 per diluted share in 2021 as compared to $17.9 billion or $1.87 per diluted share in 2020. In 2021, there was a decrease in net interest income amounting to $426 million in 2021 as compared to $42.9 billionin 2020.However; there was an increase in noninterest income from $4.0 billion to $46.2 billion in 2021 as compared to 2020.Due toincreased merchant services and client activity revenue from Card income increased to $562 million. Primarily, due to increased client activity and credit service charges, and higher treasury, service charges in 2021 increased to $363 million. As a result of higher market valuations,there was an increase of US $2.1 billion in Investment and brokerage services.
  • JPMorgan Chase gave tough competition by generating record sales of US$124.54 billion, with a net income of US$ 46.503 billion in 2021. The company was ranked in 4th position in Forbes Global 2000 list in 2022. The company has a market value of US $374.45 billion in 2021 and total assets of US $ 3,954.69 billion as of 2021. The company is the number one multifamily lender in the US. In 2011, JPMorgan Chase was co-founded as the 100,000 Jobs Mission. At the start only11 companies were willing to hiring military talent in the private sector, and now there are above300 companies as members with above 830,000 hired veterans. The company invested above $100 million in the equity of 16 financial institutions those providing services to almost 90 communities in 19 states with the District of Columbia.The company has the largest and fastest growing customer base of active digital users i.e. of about 59 million, as compared to the growth of major banks in 2021 in the US. The company had a record increase ininvestment assets by 22% in 2021. Also, the number of advisors increased by 7% in 2021.
  • Wells Fargo is also one of the competitors generating an annual revenue of US $ 84.12 billion or $4.95 per common share and a net profit of US $ 20.58 billion in the year 2021. There was a growth of 4% inaverage deposits of thecompany amounting to $61.8 billion, in 2021. The return on equity in 2021, was 12.0%. The loans both consumer and commercial grew by 5% in 2021. There was a significant 16% growth in loans in Corporate and Investment banking. In 2021, there was an increase of 27% in general-purpose credit cards as compared to 2020. Moreover, average depositsin Consumer Banking and Lending in 2021, totaled US $834.7 billion, as compared to  $722.1 billion in 2020. As compared to 2020, debit card purchase volume,in 2021, was US $471.5 billionan increase of 20% from US $391.9 billion. Debit card purchase transactionsamounted to US $ 9.8 billion, an increase of 12% from US 8.8 billion in 2020. Wells Fargo total equity increasedfrom aboutUS $114.4 billion to approximately US $190 billionfrom  The Consumer Banking and Lending division generated revenue of US $34.88 billion as of Year 2021. Wells Fargo hadabout 249,440 thousand employees as of Year 2021.
  • Investment in Research & Development-Marketing Cost and Brand Image:The present competition among the banks with a challenge of changing trend towards application programming interface(API) and artificial intelligence (AI) requires high investments in research and development to design a better product and service combination for a higher customer satisfaction. The company is need to concentrate more on the marketing cost for increasing better customer image and brand lotalty.

 

Bank of America Threat of New Entrants

 

  • Global Banking Industry: It is estimated that global revenue in Banking, Insurance&Finance is projected to amount to US$3.83tn in 2023. Arate of 2.19% annual growth is expected (CAGR 2023-2025).
  • High Capital Investment- Trained Human Resources: The new entrant will be requiring high capital investment, with an extensive and sophisticated structure, so it is a discouraging barrier for any new entrant. Due to the specialized nature of the services only highly trained human resources can handle such services.
  • Technological Advancement: As with the changing times and growth of technology specially towards application programming interface (API) and artificial intelligence (AI),so now only high tech companies can enter this market.

 

Bank of America Bargaining Power of Suppliers

 

  • Supplier Industry Influence: In the case of the banking industry the suppliers include the depositors and employees.The depositors include both individual and corporate clients that bring capital to the bank. Usually, individual depositors and employees have low bargaining power while corporate and high net-worth individuals have moderate power because of the high amount of deposit.
  • Suppliers Collaboration: The companyuses a reasonable and risk-based approach in order to monitor compliance with the code and a framework that is suitable for both small and diverse-owned businesses. The company is maintain close relationship with suppliers. The company spends more than US $2 billion, every year with diverse businesses.

 

Bank of America Bargaining Power of Buyers

 

  • Bargaining Power of Buyers: In the banking industry there are two types of consumers individual and corporate. Individual customers have low bargaining power because of medium or high switching particularly when they have mortgages, credit cards, car loans, etc. The company has created a record of having 55 million digital clients in Year 2022.
  • Customer Satisfaction – After Sales Services: The after-sales service in the banking industry includes prompt customer service and quick solutions to customer complaints.In order to retain market share, customer feedback, customer satisfaction, and innovation on a continuous basis is necessary. J.D. Power 2022 U.S. Merchant Services Satisfaction Study has recognized Bank of America as #1 in customer satisfaction in 2022.

 

Bank of America Threat of Substitute Products or Services

 

  • There is a threat of substitutes from PayPal and Finch Tech because both are providing similar services and continuously developing new technology to improve their services with the aim of customer centricity.

 

 

 

References

 

  1. Bank of America Annual Report 2021|Available at Bank of America
  2. Bank of America Reports Q4-22Highlights|Available at Bank of America
  3. JPMorgan Annual Report 2021|Available atJPMorgan
  4. Wells Fargo & Company 2021 Annual Report|Available atWells Fargo
  5. Forbes Global 2000 list 2022| Available at Forbes
  6. Basic information about Bank of America| Available at Forbes
  7. Most valuable banking brands in North America in 2022(Jun 21, 2022)| Available atStatista
  8. Total assets of Bank of America from 2014 to 2021, by region(Jul 20, 2022)| Available at Statista
  9. Return on equity (ROE) at Bank of America from 2007 to 2021(Sep 9, 2022)| Available at Statista
  10. Net income of Bank of America from 2009 to 2021(Jul 19, 2022)| Available at Statista
  11. Number of mobile banking users of Bank of America worldwide from 2012 to 2021(Jul 28, 2022)| Available at Statista
  12. Market capitalization of Bank of America from 2001 to 2021(Aug 29, 2022)| Available at Statista
  13. Bank of America – statistics &facts(Jan 2, 2023)| Available at Statista
  14. Bank of America Ranked No. 1 by J.D. Power for Customer Satisfaction With Merchant Services(February 3, 2022) |Available at Bank of America
  15. Total equity of Wells Fargo from 2009 to 2021(Jun 28, 2022) | Available at Statista
  16. Revenues of Wells Fargo worldwide from 2013 to 2021, by segment(Jun 28, 2022) | Available at Statista
  17. Net income of Wells Fargo 2009 to 2021(Jun 28, 2022) | Available at Statista
  18. Number of employees at Wells Fargo from 2009 to 2021(Jul 27, 2022)| Available at Statista
  19. Total revenue of Wells Fargo from 2009 to 2021(Jun 28, 2022) | Available at Statista
  20. Banking, Finance & Insurances – United States| Available at Statista

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