Bank of America Corporation (NYSE: BAC) is the second-largest bank in the United States and the eighth-largest bank in the world by total assets as of early 2020. The bank experienced great 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, however, 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 from its books and is again reporting record earnings. For 2018 (the most recent annual figures available), the bank earned a record $28.1 billion. Patient shareholders were duly rewarded, as the stock rose 50% over a three-year period and outpaced the S&P 500 by more than three times. It now fetches $33 and eleven times the low point of 2011.

Key Takeaways

  • Bank of America is one of the largest banks in the world and earns revenue in a number of different ways.
  • After seeing sharp losses after the global financial crisis of 2007-2008, the bank is again producing record earnings.
  • Consumer banking and global banking, which together account for more than 70% of net income, have been driving the improved performance at Bank of America.
  • Sales and trading revenue represent a large portion of the improved results in the global markets division, while the global wealth and investment group is seeing an increase in loan and lease activity.

Bank of America's income today comes from several different areas, although the majority is 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. For 2018, this line of business netted the company $12 billion in net income—up 47% from the prior year and representing 42.7% of total income. Higher deposits and loans helped drive the performance.

2. Global Banking

Bank of America's global banking division includes investment banking, commercial and business lending, deposits, and advisory services. In 2018, global banking brought $8.2 billion of net income to the company's bottom line, which represented almost 30% of the bank's total. Increased loan activity and deposit balances helped boost the results.

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 2018, global wealth and investment management accounted for $4.1 billion in net income, nearly 15% of the company's total for the year. The global wealth and investment management group grew 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. The division earned Bank of America a total net income of $4 billion in 2018. This equates to around 14% of the company's total. Sales and trading revenue represents a large portion of the results.