Bank of America (NYSE:BAC) used its recent analyst day to discuss its improved financial and capital strength that the bank has built up since the end of the financial crisis and recession. The company also established its financial goals for 2011 and beyond.

IN PICTURES: Baby Buffett Portfolio: His 6 Best Long-Term Picks

Capital
Bank of America has improved its capital and financial position relative to last year. The bank had $131 billion in tangible common equity as of December 31, 2010, up 17% from the $112 billion at the end of 2009. The bank's tangible common equity ratio is up 90 basis points over the last year, from 5.1% to 6%.

Financial Goals
Bank of America outlined the long-term financial goals that it hopes to achieve through 2013. These include a return on tangible equity of 15% and a return on assets greater than 1%. The bank sees the best returns in its Global Wealth and Investment Management and Deposits and Global Card Services segments.

Bank of America also hopes to grow revenues by 100 basis points greater than GDP growth in the United States, and move its efficiency ratio above 55% through limited expense growth. In the short term, the bank's expenses will remain high as it works through legacy costs and new regulatory requirements in its lines of business.

Assets
Bank of America reported assets of $2.26 trillion as of December 31, 2010, and expects little growth in this metric through 2013 as it works to reduce its balance sheet. Some of this reduction will occur as the bank's run off loan portfolio declines over the next few years. Bank of America also plans to eliminate its proprietary trading operation to comply with new rules in the United States.

Despite this lack of growth in assets, Bank of America is still the largest bank holding company in terms of assets. JP Morgan (NYSE:JPM), Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) are next in line with total assets of $2.1 trillion, $1.9 trillion and $1.3 trillion, respectively.

Earnings and Dividends
Bank of America estimates that it can eventually reach a normalized earnings level of $35 billion to $40 billion annually on a pretax basis, with most of its businesses reaching normalization by 2013. Bank of America has also applied to the regulatory authorities to increase its dividend in the second half of 2011. The bank's current annual dividend is $0.04 per share.

Long-Term Debt
Bank of America has been reducing its long-term debt over the last year, and plans to continue this through 2013. The bank had $523 billion in long-term debt at the end of 2009, and has a goal of reducing this to a range of $279 billion to $329 billion by the end of 2013.

The Bottom Line
Bank of America has improved its financial strength and capital levels as the bank and the economy emerge from the recession and financial crisis. The company is optimistic about its businesses over the next few years. (For related reading, take a look at Analyzing A Bank's Financial Statements.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Investing News

    Bank Stocks: Time to Buy or Avoid? (WFC, JPM, C)

    Bank stocks have been pounded. Is this the right time to buy or should they be avoided?
  2. Stock Analysis

    Why the Bullish Are Turning Bearish

    Banks are reducing their targets for the S&P 500 for 2016. Here's why.
  3. Stock Analysis

    How to Find Quality Stocks Amid the Wreckage

    Finding companies with good earnings and hitting on all cylinders in this environment, although possible, is not easy.
  4. Stock Analysis

    Analyzing Sirius XM's Return on Equity (ROE) (SIRI)

    Learn more about the Sirius XM's overall 2015 performance, return on equity performance and future predictions for the company's ROE in 2016 and beyond.
  5. Budgeting

    5 Alternatives to Traditional Health Insurance

    Discover five of the most popular alternatives to traditional health insurance plans, alternatives that are increasingly popular as health insurance costs rise.
  6. Stock Analysis

    Will Virtusa Corporation's Stock Keep Chugging in 2016? (VRTU)

    Read a thorough review and analysis of Virtusa Corporation's stock looking to project how well the stock is likely to perform for investors in 2016.
  7. Stock Analysis

    Analyzing Porter's Five Forces on JPMorgan Chase (JPM)

    Examine the major money-center bank holding firm, JPMorgan Chase & Company, from the perspective of Porter's five forces model for industry analysis.
  8. Investing News

    What You Can Learn from Carl Icahn's Mistakes

    Carl Icahn has been a stellar performer in the investment world for decades, but following his lead these days could be dangerous.
  9. Stock Analysis

    Analyzing Dish Network's Return on Equity (ROE) (DISH, TWC)

    Analyze Dish Network's return on equity (ROE), understand why it has vacillated so greatly in recent years and learn what factors are influencing it.
  10. Economics

    The 2007-08 Financial Crisis In Review

    Subprime lenders began filing for bankruptcy in 2007 -- more than 25 during February and March, alone.
RELATED FAQS
  1. When does a growth stock turn into a value opportunity?

    A growth stock turns into a value opportunity when it trades at a reasonable multiple of the company's earnings per share ... Read Full Answer >>
  2. What is the formula for calculating EBITDA?

    When analyzing financial fitness, corporate accountants and investors alike closely examine a company's financial statements ... Read Full Answer >>
  3. How do I calculate the P/E ratio of a company?

    The price-earnings ratio (P/E ratio) is a valuation measure that compares the level of stock prices to the level of corporate ... Read Full Answer >>
  4. How do you calculate return on equity (ROE)?

    Return on equity (ROE) is a ratio that provides investors insight into how efficiently a company (or more specifically, its ... Read Full Answer >>
  5. How do you calculate working capital?

    Working capital represents the difference between a firm’s current assets and current liabilities. The challenge can be determining ... Read Full Answer >>
  6. What is the formula for calculating the current ratio?

    The current ratio is a financial ratio that investors and analysts use to examine the liquidity of a company and its ability ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center