Bank of America SWOT Analysis SWOT

Pages: 5 (1546 words)  ·  Bibliography Sources: 5  ·  File: .docx  ·  Level: Master's  ·  Topic: Economics

Bank of America is one of the largest banks in the United States, with a nationwide presence. Despite this, the company has struggled in recent years, being the recipient of a substantial amount of bailout funds and recording a loss in fiscal 2010. This paper will analyze Bank of America using the SWOT analysis framework, outline the different stakeholder groups. It will then be determined what the company needs to do to meet the needs of those stakeholder groups, and analyze if these actions are currently being undertaken by the Bank.

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Bank of America is the second-largest bank in the United States and the 10th-largest in the world by assets, with assets of $1.715 trillion, trailing only Citibank -- the two being the only major American banks anywhere near the global top 30 (Google Docs, 2011). This market size is a source of strength for Bank of America in a number of areas. First, it has a broad branch network. This can be used to help the company gain deposits and develop retail businesses such as mortgages. Bank of America also gains geographic diversification from this broad spread, although its international activities are not as great as those of many of the world's largest banks. Bank of America also has a very strong brand, owing to its marketing efforts and vast branch network. The company's management team is experienced in the industry, which should be seen as a source of strength as well. The bailouts that the bank has received act as a virtual federal government guarantee, which among other things lowers the Bank's cost of capital to around the U.S. federal government level. In terms of its retail business, the Bank still holds either the #1 or #2 positions in all of its segments (2010 Annual Report).

SWOT on Bank of America SWOT Analysis Assignment

There are a number of weaknesses at Bank of America as well. The company is still suffering the impacts of the economic downturn. Bank of America had a high level of toxic assets and required a substantial amount of bailout funds. It received $45 billion and then suffered scandal from its "unfair and improper foreclosures" and struggled to repay the TARP loans (Alden, 2010). The company's reputation among both consumers and legislators has therefore been damaged. This could affect not only the willingness of consumers to use the Bank but also the willingness of government to support its endeavors in the future.

Bank of America enjoys a number of opportunities in the external environment. The company's business is strongly correlated with the health of the American economy, in a symbiotic relationship (Alden, 2010). This means that with economic growth, Bank of America's opportunities to grow its business continue to improve. The U.S. GDP is expected to grow at around 2.7% in 2011 and 3.1% in 2012, slow but steady growth (CBO, 2011). Bank of America also still has significant opportunity to expand outside the U.S. And to more international corporate business in particular, either by starting subsidiaries or through acquisition.

There are a number of significant threats that Bank of America faces. The company was hit hard by the slump in the U.S. housing market and despite some optimism in GDP and manufacturing figures, the housing slump continues and high unemployment appears to promise that it will continue further. This threatens to exclude Bank of America from any recovery that occurs. The company also faces significant competition in each of its markets. While it is battling Citigroup for dominance, within any given region there are dozens of other competitors, including relatively strong ones owned by other large banks. Another threat to Bank of America is legislation. Bank of America's performance during the real estate bubble was poor but so has been its response to the crisis, Bank of America having been accused of sloppy performance on re-writing mortgages to allow more Americans to keep their homes during the crisis. There are questions about whether or not the company is going to be able to meet its commitments under the Troubled Asset Recovery Program (Alden, 2010).

As a potential investor, the most important parts of the SWOT analysis are going to be the strengths and opportunities. The reason is because the current condition of Bank of America is relatively poor, following on several lousy years in a row. The stock is not worth much right now, at just over $10 per share (MSN Moneycentral, 2011). This reflects a multi-year history of poor performance. Thus, the stock is priced for negativity. What I would want to know as a potential investor is whether or not there is any upside. I know there are a lot of reasons to be dismissive of owning Bank of America -- I am looking in the strengths and opportunities to see reasons to buy.

Stakeholder Analysis

There are a number of stakeholders in Bank of America, owing to the Bank's unique position as a true national bank involved in all major retail banking businesses. Among the internal stakeholder groups are the employees, management and customers, all of whom have an interest in seeing Bank of America thrive. Certainly the first two groups depend on the bank for their livelihoods so it is necessary that the bank safeguard those as best as possible. The bank also needs these groups to execute its strategies. The customers are also critical for the bank not just because they contribute the bank's revenues but because they also contribute the bank's financing in the form of deposits.

Bank of America has many external stakeholders. The first such group consists of the bank's shareholders. They own shares of the bank in order to make gains from the investment, and therefore have a stake -- literally -- in the bank's financial performance. Regulators and government also are major external stakeholders, in particular in light of the bailouts. There was outrage when it was learned that some of the public taxpayer money used in the bailouts was used to pay bonuses (Blodget, 2009). This will in part characterize future relations between the Bank of America and both regulators and government. In addition, competitors are another group of external stakeholders, as are future customers. The American economy as a whole can be considered a stakeholder, because the degree to which Bank of America is willing to lend has an impact on the health of the economy as a whole so large in the bank's customer base and reach into different industries (Alden, 2010).

Bank of America does not appear to be doing enough to meet the needs of its stakeholders. As an example, the Bank does not appear to be lending enough. Perhaps gun-shy from its troubles in the real estate bubble, the Bank of America can help not only its own cause but that of the U.S. economy as a whole, and most of the stakeholders of the bank, by lending more and spurring some growth. Another task that the Bank of America can do to meet the needs of its stakeholders is to pursue any of the opportunities that are present in the marketplace. At present, the bank remains in a defensive posture, unwilling to take bold steps or brave actions that would befit the world's 10th-largest bank. Content to take TARP money, not lend it, and then wonder why it is losing money, the Bank of America does not appear committed to anything more than treading water. Even simple tasks such as restructuring mortgages and properly managing foreclosures seem beyond the Bank of America at present (Alden, 2010). This is highly discouraging.

Conclusion

As a potential investor from a mutual fund, I see the low price on Bank of America stock and in that low price I see potential. However, there is little reason for an equity investor to be optimistic about the Bank of America.… [END OF PREVIEW] . . . READ MORE

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