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Bank of America
Headquarters Charlotte, North Carolina, USA
Key people Ken Lewis, Chairman, CEO & President
Amy Brinkley, Global Risk Executive
Alvaro de Molina, CFO
Industry Money Center Banks
Products Banking
Revenue $117.017 billion USD (2006)
Net income $21.13 billion USD (2006)[2]
Employees 176,638 (2005)
Slogan Bank of Opportunity[1]
Website www.bankofamerica.com
Bank of America (NYSE: BAC TYO: 8648 ) is the largest commercial bank in the
United States in terms of deposits, and the largest company of its kind in
the world.[3][4] Bank of America is the largest American company (by market
capitalization) that is not part of the Dow Jones Industrial Average. On
July 19, 2006, Bank of America reported second quarter 2006 net income of
$5.48 billion,[5] surpassing that of Citigroup for the first time.
Corporate history
Before 1993, the Bank of America that exists today was known as NationsBank,
based in Charlotte, NC. In 1998, NationsBank merged with San Francisco-based
BankAmerica and assumed the Bank of America name.
Pre-1998 history
Bank of Italy
The roots of the pre-1998 Bank of America lie in the American Bank of Italy,
founded in San Francisco by Amadeo Giannini in 1904. When the 1906 San
Francisco earthquake struck, Giannini was able to get all of the deposits
out of the bank building and away from the fires. Thus, unlike many other
banks, he retained the confidence of the depositors and also had money to
loan to those struck by the disaster.
In the late 1920s, Giannini approached Orra E. Monnette, President and
founder of the Los Angeles based Bank of America, Los Angeles about a
potential merger between the two entities. The Los Angeles based bank had
exhibited strong growth throughout the 1920s, due in part to its success in
developing an advanced bank branching system. The merger of the two
institutions was completed in early 1929 and took the name Bank of America.
The combined company was headed by Giannini with Monnette serving as
co-Chair.
While the names of many nationally chartered banks end with the initials 'N.A.'
(National Association), Giannini picked a unique ending, National Trust and
Savings Association, or 'NT&SA', because he wanted the name to highlight the
different functions of the bank. Bank of America was the only NT&SA in the
country. Thanks to good management, but also to aggressive development of
the branch banking concept, the bank was soon the largest in California.
Growth in California
Giannini also sought to build a national bank, expanding into most of the
western states as well as into the insurance industry, under the aegis of
his holding company, Transamerica Corporation. Bank of America NT&SA also
had banking relationships in international financial markets. Largely out of
fear that Giannini would succeed in his efforts to create a nationwide bank,
federal legislation prohibited banks from accepting deposits in states where
they were not headquartered. This led to the creation of the bank holding
company which could own a separate bank in each state.
The passage of the Bank Holding Company Act of 1956, prohibited banks from
owning non-banking subsidiaries such as insurance companies. Bank of America
and Transamerica were separated, with the latter company continuing in the
insurance business. However, federal banking regulators prohibited Bank of
America's interstate banking activity, and Bank of America's domestic banks
outside of California were forced into a separate company that eventually
became First Interstate Bancorp, which was acquired by Wells Fargo and
Company in 1996. It was not until the 1980s with a change in federal banking
legislation and regulation that Bank of America was again able to expand its
domestic consumer banking activity outside of California.
California was the nation's fastest growing state during the post-World War
II boom, with the highest use of checking accounts (partially driven by many
soldiers being paid via bank accounts during World War II), resulting in
Bank of America being swamped by checks. By 1949 , the branches had to close
at 2:00pm in order to process the bookkeeping by 5:00 p.m. To cope with the
transaction volume, the bank invested heavily in information technology and
is generally credited, together with General Electric and SRI International,
with inventing modern centralized bank operations, along with a number of
financial transaction processing technologies such as automatic check
processing, account numbers, and Magnetic Ink Character Recognition. Because
of the efficiency of these technologies, the bank had significantly lower
administrative costs than other banks and was able to expand until it became
the world's largest bank in the early 1970s.
These technologies also enabled credit cards to be linked directly to
individual bank accounts. In 1958, the bank invented the bank credit card,
the BankAmericard, which changed its name to VISA in 1977. A consortium of
other California banks came up with Master Charge (now MasterCard) in order
to compete with BankAmericard.
Expansion outside of California
Following passage of the Bank Holding Company Act of 1967, BankAmerica
Corporation was established for the purpose of owning Bank of America and
its subsidiaries.
BankAmerica expanded outside California in 1983 with its acquisition of
Seafirst Corporation of Seattle, Washington, and its wholly owned banking
subsidiary, Seattle-First National Bank. Seafirst was at risk of seizure by
the federal government after becoming insolvent due to a series of bad loans
to the oil industry. BankAmerica continued to operate its new subsidiary as
Seafirst rather than Bank of America until the 1998 merger with NationsBank.
BankAmerica was dealt huge losses in 1986 and 1987 due to the placement of a
series of bad loans in the Third World, particularly in Latin America. The
company fired its CEO, Sam Armacost, although Armacost blamed the problems
on his predecessor, A.W. (Tom) Clausen, who was then appointed to replace
Armacost. The losses resulted in a huge decline of BankAmerica stock, making
it vulnerable to a hostile takeover. First Interstate Bancorp of Los Angeles
(which had originated from banks once owned by BankAmerica), launched such a
bid in the fall of 1986, although BankAmerica rebuffed it, mostly by selling
its FinanceAmerica subsidiary to Chrysler, and by selling the brokerage firm
Charles Schwab and Co. back to Mr. Schwab. On the day of the 1987 stock
market crash, BankAmerica was trading at $8 per share, although by 1992 it
had rebounded mightily to become one of the biggest gainers of that
half-decade. The selling of the corporate headquarters building in downtown
San Francisco to raise capital was a symbolic blow to the bank.
BankAmerica's next big acquisition came in 1992. The company acquired its
California rival, Security Pacific Corporation and its subsidiary Security
Pacific National Bank in California and other banks in Arizona, Idaho,
Oregon and Washington (which Security Pacific had acquired in a series of
acquisitions in the late 1980s). This was, at the time, the biggest bank
acquisition in history. Federal regulators nevertheless forced the sale of
Security Pacific's Washington subsidiary, Rainier Bank, because the
combination of Seafirst and Rainier would have given BankAmerica too large a
share of the market in that state. Later that year, BankAmerica expanded
into Nevada by acquiring Valley Bank of Nevada.
In 1994 , BankAmerica acquired the Continental Illinois National Bank and
Trust Co. of Chicago, which had become federally owned as part of the same
oil industry debacle that had brought down Seafirst. At the time, no bank
had the resources to bail out Continental, so the federal government
operated the bank for nearly a decade. Illinois at that time regulated
branch banking extremely heavily, so Bank of America Illinois was a
single-unit bank until the 21st century. BankAmerica moved its national
lending department to Chicago in an effort to establish a financial
beachhead in the region.
These mergers helped BankAmerica Corporation once again become the largest
U.S. bank holding company in terms of deposits, but the company fell to
second place in 1997 behind fast-growing NationsBank Corporation, and to
third in 1998 behind North Carolina's First Union Corp. In 1998, BankAmerica
and NationsBank executed a merger-of-equals and changed the headquarters to
Charlotte, North Carolina.
Merger of NationsBank and BankAmerica
In 1997, BankAmerica lent D.E. Shaw & Co., a large hedge fund, $1.4bn so
that the hedge fund would run various businesses for the bank. However, D.E.
Shaw suffered significant loss after 1998 Russia bond default. BankAmerica
was later acquired by NationsBank that year.
The purchase of BankAmerica Corp. by the NationsBank Corporation was the
largest bank acquisition in history at that time. While the deal was
technically a purchase of BankAmerica Corporation by NationsBank, the deal
was structured as merger with NationsBank renamed to Bank of America
Corporation, and Bank of America NT&SA, changing its name to Bank of
America, N.A. as the remaining legal bank entity. The bank still operates
under Federal Charter 13044 which was granted to Giannini's Bank of Italy on
March 1, 1927. However, SEC filings before 1998 are listed under
NationsBank, not BankAmerica.
Following the US$64.8 billion acquisition of BankAmerica by NationsBank, the
resulting Bank of America had combined assets of US$570 billion, as well as
4,800 branches in 22 states. Despite the mammoth size of the two companies,
federal regulators insisted only upon the divestiture of 13 branches in New
Mexico, in towns that would be left with only a single bank following the
combination. This is because branch divestitures are only required if the
combined company will have a larger than 25 percent FDIC deposit market
share in a particular state or 10 percent deposit market share overall.
History since 1998
In 2001 , Bank of America CEO and chairman Hugh McColl stepped down and
named Ken Lewis as his successor. Lewis's greater focus on financial
discipline and efficiency contrasted greatly with the expansionary mergers
and acquisition strategy of his predecessor.
Acquisition of National Processing Company
In 2004 , Bank of America purchased Louisville, Kentucky-based National
Processing Company for $1.4 billion from National City Corp. The renamed
company - BA Merchant Services - has been processing one in every five VISA
and MasterCard transactions. The company also has been providing financial
solutions for travel and healthcare companies. BA Merchant Services has been
headquartered in Louisville.
FleetBoston Financial merger
Also in 2004 , Bank of America acquired Boston, Massachusetts-based
FleetBoston Financial for $47 billion to solidify Bank of America's position
as the bank with the largest FDIC-rated deposit market share in the United
States with $513 billion in deposits, well ahead of the number two bank
holding company, newly-merged JPMorgan Chase-Bank One with $353 billion in
deposits and number three Wells Fargo & Co. with $228 billion (as of 30 June
2003).
Purchase of MBNA
On 30 June 2005, Bank of America announced it would purchase credit card
giant MBNA for $35 billion in cash and stock. The Federal Reserve Board gave
final approval to the merger on 15 December 2005, and the merger closed on 1
January 2006. The combined Bank of America Card Services organization, FIA
Card Services - including the former MBNA - will have more than 40 million
U.S. accounts and nearly $140 billion in outstanding balances.
Divestiture of Brazil operations
In May 2006, the Bank of America and Banco Itau - (Investimentos Ita S.A.)
entered into an acquisition agreement through which the Banco agreed to
acquire BankBoston's operations in Brazil. BankBoston's Brazil includes
asset management, private banking, a credit card portfolio, and small,
middle-market, and large corporate segments. It has 66 branches and 203,000
clients in Brazil. BankBoston in Chile has 44 branches and 58,000 clients
and in Uruguay it has 15 branches. In addition, there is also a credit card
Company, OCA, in Uruguay, which has 23 branches. BankBoston N.A. in Uruguay,
together with OCA, jointly serve 372,000 clients. After the merger The
BankBoston name and trademarks were not part of the transaction and, as part
of the sale agreement, cannot be used by Bank of America. That, in practical
terms, deemed the definite extinction of the BankBoston brand. Itaś also
received exclusive rights to purchase BankBoston's operations in Chile and
Uruguay. In return, Bank of America has taken about a 6% stake in Itaś.
Banco Boston do Brazil had been founded in 1947 . With the purchase, the
BankBoston name will disappear from Brazil as Bank of America has retained
the rights to the name and in which they can't use the name due to the
merger agreements.
Plans to acquire LaSalle Bank
On April 23, 2007, Bank of America announced plans to acquire LaSalle Bank
Corporation from ABN AMRO for $21 billion,[6] which will increase Bank of
America's presence in Illinois, Michigan, and Indiana. Bank of America was
also expected to thereby become the largest bank in the Chicago market. The
sale is expected to close in late 2007 or early 2008.[7] The LaSalle
acquisition would put Bank of America just above the 10% mandated limit
imposed by the Federal government of the total bank deposits in the country.
However, on May 3, 2007 a Dutch court blocked the sale until it can be
approved by shareholders of ABN AMRO as part of a larger merger discussion
involving Barclays Bank and Royal Bank of Scotland(RBS). RBS has made a
competing $24.5 billion bid for LaSalle Bank.[8] Both ABN AMRO and Bank of
America appealed to the decision of the Dutch court, and on June 26, the
Advocate-General advised to the highest Dutch court to destroy the
regulation which blocked the sale, saying approval of the shareholders isn't
necessary.[9] Since in four out of five cases the judgement of the highest
court follows the advice by the Advocate-General, it is likely that the Bank
of America can buy LaSalle without approval of ABN AMRO's shareholders.
Bank of America today
As a result of its mergers and acquisitions, Bank of America is now the
largest issuer of credit, debit and prepaid cards in the world based on
total purchase volume, as well as the largest consumer and small business
bank in the United States.
Bank of America today comprises three main divisions.
Consumer
Global Consumer and Small Business Banking is the largest division in the
company, and deals primarily with consumer banking and credit card issuance.
The acquisition of FleetBoston and MBNA significantly expanded its size and
range of services, resulting in about 51% of the company's total revenue in
2005. It competes directly with the retail banking divisions of Citigroup
and JPMorgan Chase. The GC&SBB organization includes over 5,700 retail
branches and over 17,000 ATMs across the United States.
Bank of America is a member of the Global ATM Alliance, a joint venture of
several major international banks that allows customers of the banks to use
their ATM card or check card at another bank within the Global ATM Alliance
with no fees when traveling internationally. Other participating banks are
Barclays (United Kingdom), BNP Paribas (France), China Construction Bank
(China), Deutsche Bank (Germany), Santander Serfin (Mexico), Scotiabank
(Canada) and Westpac (Australia and New Zealand).[10]
Corporate
Global Corporate and Investment Banking, also known as Banc of America
Securities, provides mergers and acquisitions advisory, underwriting, as
well as trading in fixed income and equities markets. Its strongest groups
include Leveraged Finance, Syndicated Loans, and Mortgage Backed Securities.
It also has one of the largest research teams on Wall Street.
Investment Management
Global Wealth and Investment Management manages assets of institutions and
individuals. It is among the 10 largest U.S. wealth managers (ranked by
private banking assets under management in accounts of $1 million or more as
of June 30, 2005). In July 2006, Chairman Ken Lewis announced that GWIM's
total assets under management exceeded $500,000,000,000. GWIM has five
primary lines of business: Premier Banking & Investments (including Banc of
America Investment Services, Inc.), The Private Bank, Family Wealth
Advisors, Columbia Management Group, and Banc of America Specialist.
Bank of America is currently constructing a massive new headquarters for its
New York City operations. The skyscaper will be located on 42nd Street and
Avenue of the Americas, at Bryant Park, and will feature state of the art,
environmentally-friendly technology throughout its 1.2 million square feet
(111,484 m²) of office space. The building will be the headquarters for the
company's investment banking division, and will also host most of Bank of
America's New York-based staff.
Social responsibility
In the mid 2000s, Bank of America began accentuating its charitable side. In
addition to its new eco-friendly office tower in Manhattan, Bank of America
has pledged to spend billions on commercial lending and investment banking
for projects that it considers "green". The corporation, which already
supplied all of its employees with cash incentives to buy hybrid vehicles,
is also helping its customers be eco-friendly by rolling out a new credit
card program in 2007 that would donate money to helping the environment, as
well as providing mortgage loan breaks for customers whose homes qualified
as energy efficient.[11]
In addition to trying to help the environment, Bank of America has also
donated money to help health centers in Massachusetts[12] and made donations
to help homeless shelters in Miami.[13]
Controversy and criticism
Bank of America has been involved in a number of controversial issues. Many
of its policies, such as "biggest check first" check clearing, overdraft fee
policies, and early account closures, have become heavily criticized. Bank
of America controversies details some of the more notable and public issues.
International operations
In 2005, Bank of America acquired a 9% stake in China Construction Bank,
China's second largest bank, for $3 billion.[14] It represented the
company's largest foray into China's growing banking sector. Bank of America
currently has offices in Hong Kong, Shanghai, and Guangzhou and is looking
to greatly expand its Chinese business as a result of this deal. Bank of
America has also invested in opening new branches in India, particularly
Mumbai.
Bank of America operated under the name BankBoston in many other Latin
American countries, including Brazil. In 2006, Bank of America sold all
BankBoston's operations to Brazilian bank Banco Itaś, in exchange for Itaś
shares. The BankBoston name and trademarks were not part of the transaction
and, as part of the sale agreement, cannot be used by Bank of America. That,
in practical terms, deemed the definite extinction of the BankBoston brand.
Bank of America's Global Corporate and Investment Banking spans the Globe
with divisions in United States, Europe and Asia. The U.S. headquarters are
located in New York, European headquarters are based in London and Asia's
headquarters are split between Singapore & Hong Kong.
Bank of America corporate buildings
* Bank of America Fifth Avenue Plaza in Seattle
* Columbia Center in Seattle (formerly known as Bank of America Tower)
* Bank of America Tower in St Petersburg, FL
* Bank of America Tower in Providence, RI
* Bank of America Tower in New York City (under construction)
* Bank of America Tower in Jacksonville, FL
* Bank of America Tower in Albuquerque, NM
* Bank of America Tower in Hong Kong
* Bank of America Tower in Tampa, FL
* Bank of America Plaza in St Louis
* Bank of America Tower in Richmond, VA
* Bank of America Tower in Miami, FL
* Bank of America Tower in Lubbock, TX
* Bank of America Tower in Los Angeles
* Bank of America Tower in Boca Raton
* Bank of America Center in Houston
* Bank of America Center in San Francisco
* Bank of America Banking Center in Washington, DC (across from the White
House)
* Bank of America Plaza in Atlanta, GA (the tallest building outside of NYC
and Chicago)
* Bank of America Plaza in Charlotte, NC which is adjacent to the Bank of
America Corporate Center
* Bank of America Plaza in Dallas, TX
* Bank of America Building in Chicago, Illinois
Diversity
Bank of America was named one of the 100 Best Companies for Working Mothers
in 2004 by Working Mothers magazine. Furthermore, Amy Woods Brinkley, the
Bank's Global Risk Executive, and Barbara Desoer, the Bank's Global
Technology and Service Fulfillment Executive, were named two of the most
powerful women in Banking by US Banker magazine, and were among the "top 50
most powerful women in business," as ranked by Fortune.
Major sponsorships
Bank of America owns the naming rights of several venues in the sports
world.
* Bank of America Stadium, Charlotte, North Carolina - Carolina Panthers,
NFL.
* Bank of America Arena, Seattle, Washington - University of Washington
men's and women's basketball
* Bank of America 500, a NASCAR race that is hosted annually at Lowe's Motor
Speedway, Concord, North Carolina
Official bank of
* United States Olympic Team
* NASCAR
* Major League Baseball
* Minor League Baseball
* Little League
* Carolina Panthers, a NFL team.
* New England Patriots, a NFL team
* Boston Red Sox, a MLB team.
* New York Yankees, a MLB team.
* San Francisco Giants, a MLB team.
* St. Louis Cardinals, a MLB team.
* New England Revolution, a MLS team.
Ad campaigns that run during the Little League World Series and the World
Series use the slogan "The Official Bank of Baseball."
References
1. ^ Bank of America (2007-02-22). Bank of America to Unveil New Brand
Campaign Celebrating the Power of Opportunity. Press release.
2. ^ Bank of America (2007-01-23). Bank of America Reports Record 2006
Earnings of $21.13 Billion, or $4.59 Per Share. Press release.
3. ^ The Largest Banks in the U.S. (List). The New York Job Source
(2006-06-30).
4. ^ United States' Largest Banks (List). Pearson Education, Inc.
(2005-12-31).
5. ^ Bank of America (2006-07-19). Bank of America Reports Record Second
Quarter Earnings of $5.5 Billion, or $1.19 Per Share. Press release.
Retrieved on 2007-05-05.
6. ^ ABN AMRO (2007-04-23). ABN AMRO announces USD 21 billion sale of
LaSalle to Bank of America. Press release.
7. ^ Bank of America (2007-04-23). Bank of America Agrees to Acquire LaSalle
Bank. Press release.
8. ^ "RBS Group Makes Bid for LaSalle", TheStreet.com, 2007-05-05. Retrieved
on 2007-05-05.
9. ^ "Geen stemming nodig verkoop LaSalle", NU.nl, 2007-06-26. Retrieved on
2007-06-26.
10. ^ "Five big banks form Global ATM Alliance", ATMmarketplace.com. January
9, 2002. Accessed June 22, 2007.
11. ^ "Bank vows $20 billion for green projects", msnbc, 2007-03-07.
12. ^ Kowalczyk, Liz. "Bank to aid health centers", The Boston Globe,
2007-03-10.
13. ^ Freer, Jim. "BofA donates $1M to Camillus House", South Florida
Business Journal, 2007-03-09.
14. ^ "Bank of America invests in China", BBC, 2005-06-17.
* Bonadio, Felice A. A.P. Giannini: Banker of America. Berkeley, Calif.:
University of California Press, 1994.
* Hector, Gary. Breaking the Bank: The Decline of BankAmerica. Boston:
Little, Brown, 1988.
* James, Marquie and Bessie. Biography of a Bank: The Story of Bank of
America N.T.&S.A. New York: Harper and Brothers, 1954.
* Johnston, Moira. Roller Coaster: The Bank of America and the Future of
American Banking. New York: Ticknor & Fields, 1990.
* Lampert, Hope. Behind Closed Doors: Wheeling and Dealing in the Banking
World. New York: Atheneum, 1986.
* Monnette, Orra Eugene. Personal Papers Collection. Los Angeles Public
Library (Main), Los Angeles California.
* Nash, Gerald G. A.P. Giannini and the Bank of America. Norman, Okla.:
University of Oklahoma Press, 1992.
* Yockey, Ross. McColl: The Man with America's Money. Atlanta: Longstreet
Press, 1999.
* Ahmed, Azam and Demirjian, Karoun. Credit offered to illegal residents.,
Chicago Tribune, Feb. 15, 2007.
* Boyle, Matthew. The Dirty Half-Dozen: America's Worst Boards For those who
track bad corporate. Fortune, May 14, 2001.
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