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Company profile

This is one of the Americas largest financial institution that serve individual consumers, small and micro enterprise businesses and large companies. It was founded in 1874 and is based in Charlotte city, North Carolina. It provides to its customers a full range of banking and investment, asset management, and numerous financial and risk management products. The bank provides unmatched convenience in the USA serving a customer base of approximately 57 million consumers and small business relationships. It has approximately six thousand retail banking offices and about 220 thousand ATM outlets.

The company boosts to have one of the country’s most extensive branch networks with over five thousand locations. The core service of the bank is to include small banking and consumer services, credit cards, corporate banking, and mortgage lending and asset management. Its acquisition of Merrill Lynch made the Bank of America the world leading wealth management company with over2 trillion dollars under its management. “the Bull” , which was a mighty investment bank also added up to the company’s trading and international businesses.

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The bank of America is one of the global leading wealth management companies and a global leader in investment and corporate banking and trading across a wider variety of assets, serving corporations, institutions, government and individuals around the world. It offers industrial leading support to around four million small business owners though a suite of innovative and manageable online services. The company serves its clients through operations in more than 40 countries. The stocks of Bank of America are components of Dow Jones Industrial Average which is also listed in the New York Stock Exchange.

Competitive analysis

The company operates in a highly competitive environment that include, banks, credit unions, investment banks, thrifts, investment advisory firms, insurance companies, brokerage firms and mortgage banking companies among others. It competes with these competitors on the global market, on regional market and other in term of products. Competitions based on various factors such as customer line, range of products, the quality offered, price, company reputation, interests on loans, lending limits and customer’s convenience. The company’s ability to compete effectively depends on its ability to attract new employees, retain them and motivate the existing ones, while managing compensation and other costs.

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In the banking industry, the participants also compete for funds. The most common source of funds for the banks is bank deposits. Competition for deposits is quite intense in this industry due to the large number of players involved. In addition to taking deposits, the company also compete for local and international short and long term debt securities in the capital market. The ability to expand certain banking operations to in the country is a subject to various federal an d state regulations.

Company’s Employees

The company had approximately 284,000 full time employees as at December 2009. 75,000 of these employees were employed within deposits, 24,000 in global cards services, 52,000 in home loans and insurance, 22,000 in global banking and 17,000 employed in global market. The rest were employed elsewhere in the company including support staff in various departments. No employee is subject to collective bargaining agreement.

The company’s management team

The management team aims at helping and providing opportunities to clients and customers. Each member of the team provides expertise, leadership and diversity of thoughts and the experience required for responsible decisions to all stakeholders. Brian Moynihan is the company’s chief executive officer was elected by the board of directors on December, 2009. Global technology and operations executive Catherine Bassant also serves as a member of the company’s executive management team. The post of co-chief operating officer is held by David Darnell who is responsible for all the businesses that provide individuals with deposit, loans, business banking, and wealth management products. The global strategy and marketing officer, Anne Finucane, has served the company for 16 years and is a senior leader in the banks legacy.

Stock analysis

The market capitalisation as per January 9, 2013 was 123.19 billion with an average volume of 167,983,554. The share price opened at 11.87$ and closed at 11.33$ with the highest trading price being 12.00$.

The graph shows a very active share of bank of America. A closer look at the pattern reveals a rising trend in the company’s’ share price ranging from 7.5$ in July 2012 to 12.5$ by January 2013. 

The historical performance of a company is a good guide for its future performance although it is imperfect. To all investor who may be interested in stock investment it is always advisable to pay attention to the company’s history but must be realistic about the future projections. BAC total returns comparison reveals an excellent performance especially if the stock are held at the current price. However, the returns can change the directions quickly. To predict the future, a closer look at the business at the business is more important than a mere consideration of historical returns.

BAC fundamental performance

(i) Price versus earnings per share

Considering the BAC long run, the price and the earnings are correlated. However, if the two parameters are diverging, there should be a good reason provided by the company management. Any divergence without proper reason can be a signal of danger or an opportunity on the other hand.

(ii) Earnings per share versus dividend yield

Yields shows an investor how much he is expected to get for each price paid. For instance, an earnings yield of 10% means that for every dollar paid he gets 10 cents worth of the current earning. An investor has to take these numbers into consideration when purchasing shares in order to estimate whether he’s overpaying or in a good deal.

BAC Stock split

On June 2004, the BOD of the bank of America declared a 2 for 1 stock split in form of common stock dividends. This resulted in an increase of quarterly cash dividends by 12.5% from 0.8$ to 0.9$ per any pre-split share, which turned up to be 0.45$ after split. The share dividend was effective as from august 27, 2004 to common stockholders of the record in that month. The cash dividend was affected on September 24, 2004.

The company assured its stockholder s that it will continue extending its rewards of handwork and strong performance to all shareholders. With an average increase of 13% per annum, in the last 27 years, the bank had the most rewarding and reliable track record of dividends in all American business.

The banks chief executive stated that the stock split was intended to make the banks share more attractive to retail investors. The board also declared a 1,75$ cash dividend which amounted to a 7% value of cumulative preference redeemable shares. In addition, a quarterly dividend of 0.84375$was declared per depository share on the corporation’s 7% perpetual preference stock.

The returns from price appreciation only provide a partial view of returns to the investor. The total returns chart indicates the returns to an investor from both price appreciation and dividends, which are assumed to be reinvested.

BAC upper indicators

To predict the future stock price of such a company as accurate as possible, an investor can use either the simple moving average method or the exponential moving average. The difference between them is that EMA reduces the lag time by applying more weight to most recent prices as compared to the older ones. One can use the number of days as the period. Other factors to consider are the company’s events such as stock split, dividends and earnings and their impact to the stock.

Comparison with others in the same industry or stock market

Some stock exchange markets provide a portal which houses stock analysis tools in their menu. The New York stock market provides a menu that compares BAC with other indices, tickers and sectors.

(i) Index compares BAC’s performance with that of 13 major indices including Dow Jones Transportation, NYSE Composite and Dow Jones Industrials among others.

(ii) Sectors compare the BAC’s performance with 17 sectors such as internet, airlines, utilities and biotech among others. The index and sector tools allow analysts to how the company matches up with more diversified index portfolio.

(iii) Compare is a tool that matches BAC with 10 other tickers and view all charts at once to have a quick overview of how the stocks performs relative to one another.  

Conclusion

The bank of america’s recent quarterly earnings were too weak that investors and analysts wondered whether the bank should sell off the Merrill Lynch department. This was the investment bank for whih it had blindly overpaid at the height of the crisis. For tha BAC, the question of whether it will raise its captal got some attention. If the company had opted to sell off its shares at such a depressed value, it would have been too costly, but the regulators only restricted the company from paying out its dividends.

The company has a very promising investment of the future to provide financial service conglomerate. The executives have the incentives to defend their empires and the clients in addition to the shareholders. Even in cases of investment pressure, the federal and state regulations provide forces that would hold up investment break-ups. The biggest motivation being that in case of a break up, the top management would earn a little less. This strategy is aimed at strengthening the owner/manager relationship that if weakened would result to a breakdown in capitalism.

On the other side, the institutional investors, who  account for the largest share of the bank, shy off in going public to make their complains. They usually establish a long term business tie with the investment. The united states need a globally competitive bank to serve its multinational corporations and preserve its position in the world market. When a giant organisation wants to conduct a major bond offering or going public, the banks never want to undertake all the risks themselves but rather share responsibilities. Therefore, it is very crucial if Americans and other citizen from the world gain a high degree of confidence in such an investment bank in order to develop the region.

To those investors who already own BAC shares, it’s very advisable for them not to sell at such a throw away price. One of the question that arise when the stocks make such a move is whether the move will last or it’s just a passing market gap. The stock market is always volatile and the share prices keeps on rising and falling, therefore, the best option for a prudent trader in the stock market is to hold share stock until a bullish market trend arise i the industry.

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