Bank of America Corporation (NYSE: BAC) is the second-largest bank in the United States and the ninth-largest bank in the world by total assets as of June 30, 2015. It's also the fifth-largest bank in the world by market capitalization. Bank of America experienced its greatest success just before the 2007-2008 financial crisis; the bank's total net income for 2007 reached $21 billion. As the housing market bubble burst and loan losses began to pile up, Bank of America stock plummeted to as low as $3 while net income in 2011 dropped to a $2.5 billion loss.
Looking at its financial and earnings statements, Bank of America has worked much of the excess off of its books. The company's loan loss provisions, which peaked at over $40 billion in 2011, now sit at a much more reasonable $14 billion. The company reported $3.3 billion in net income in the fourth quarter of 2015 and $14.4 billion in net income for the full year.
Many of the big banks now look to interest rate policy from the Federal Reserve as a potential source of future net income growth. Interest rate increases allow banks to charge higher interest on assets like loans and credit cards and are, generally speaking, bullish for the financial services industry.
Income came from several different company areas, although the majority came from the core banking lines of business. The traditional banking business continues to perform well, while higher-margin businesses such as wealth management also augment the bank's bottom line.
1. Consumer Banking
The consumer banking group consists of all business related to the retail-facing customer side and includes retail checking and savings accounts, residential mortgages, home equity lines of credit and consumer credit cards. In the fourth quarter of 2015, this line of business netted the company $1.8 billion in net income - over half of the company's overall net income for the quarter.
Net income in this segment was driven by increased consumer deposits, total mortgage and home equity activity thanks to low interest rates and expense reductions.
2. Global Banking
Bank of America's global banking division includes investment banking, commercial and business lending, deposits and advisory services. In the fourth quarter of 2015, global banking brought $1.4 billion of net income to the company's bottom line, which represented over 40% of the bank's total.
Net income in this division was negatively impacted by lower overall investment banking fees, but helped by increasing loan and deposit balances as well as reductions in non-interest expense.
3. Global Wealth and Investment Management
Global wealth and investment management is the advisory pillar of Bank of America's business. It includes financial and wealth advisors, brokerage, asset management and other securities-based business. In the fourth quarter of 2015, global wealth and investment management accounted for $614 million in net income, nearly 18% of the company's total for the quarter.
The global wealth and investment management group grew well in the quarter thanks to improved balances in loans and deposits, gains in the wealth advisory area and positive assets under management (AUM) net flows.
4. Global Markets
The global markets division handles business related to fixed income and derivatives trading as well as equity research around the world. For the fourth quarter of 2015, the global markets division earned Bank of America a total net income of $185 million. This equates to around 5% of the company's total for the quarter.
Results from this area were helped by increased sales and trading revenue but were negatively impacted by lower investment banking fees for the quarter.