Should You Invest in Bank of America?

PHOTO CREDIT: Bank of America

OVERVIEW

Bank of America Corporation is a large bank that is based in the United States. They operate under the Consumer Banking division, which offers financial services like checking accounts and loans to individual customers. The Global Banking division offers financial services like loans to commercial customers around the world. The GWIM division offers investment services to customers. The company offers services to 66 million global customers.

Why You Should?

  1. Bank of America has been innovating in the financial services space. They have been developing technologies to improve efficiencies and lower costs. They have also been working on the Bank of America app to reimagine banking for their consumers around the world. This innovation will benefit the long term growth of the company.
  2. As consumers and commercial customers start to spend more money around the world, Bank of America will see higher demands for its financial services. A stronger economy will benefit the company’s top and bottom-line growth and will help the company recover from the COVID-19 Pandemic.
  3. Bank of America is one of the largest banks in the world. Several large companies rely on the company to offer consistent financial services. The strong business from its consumer base will benefit the company’s long-term growth in the financial space.

Why You Should Not?

  1. Bank of America took a federal loan to help it get through these tough times. The Federal Reserve restricted large banks to buy back their own stocks and also prevented other investor returns. This will negatively impact the investors who have positions in Bank of America and it shows that the stock price will be stable and slowly grow in the future.
  2. The COVID-19 Pandemic negatively impacted the company’s businesses. The company had to reduce its Interest Rates and had to defer credit card, debt, and other payments for its services due to government regulation. The company has also seen a drop in demand for financial services as consumers have less money to spend and as businesses save more money than they spend.
  3. Bank of America faces tough competition from other large banks like Goldman Sachs and Wells Fargo. However, large tech companies like Google, Amazon, and Apple are also entering the financial space. Consumers prefer these companies over the services offered by big banks. This tough competition might hurt the company’s long-term growth.
  4. Bank of America has seen falling revenues and profits in the financial year of 2019 due to the impacts of the COVID-19 Pandemic and other global issues. These revenues and profits will continue to fall until the impacts of the COVID-19 Pandemic and other global issues start to soften and as consumer and business confidence in the economy returns. In the financial year of 2019, the company reported revenues of around 85.6 billion and profits of around 27.4 billion. Both of these metrics are lower than what the company reported in the financial year of 2018 when they had revenues of around 88.5 billion and profits of around 28.2 billion.
PHOTO CREDIT: Yahoo Finance

MY OPINION

In my opinion, I think that Bank of America is a great long-term investment due to a fairly low and stable stock price. A stronger global economy and innovation will benefit the company’s long-term growth. However, the impacts from the COVID-19 Pandemic and tough competition have negatively impacted the company and the past and will continue to do so in the future.

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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Aaditya Patel

Aaditya Patel

Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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