How Bank of America Makes Money: Consumer Banking

Bank of America gets most of its revenue from consumer banking

By
Nathan Reiff
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Nathan Reiff has been writing expert articles and news about financial topics such as investing and trading, cryptocurrency, ETFs, and alternative investments on Investopedia since 2016.
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Updated January 09, 2023
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JeFreda R. Brown
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Reviewed by JeFreda R. Brown
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Dr. JeFreda R. Brown is a financial consultant, Certified Financial Education Instructor, and researcher who has assisted thousands of clients over a more than two-decade career. She is the CEO of Xaris Financial Enterprises and a course facilitator for Cornell University.
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Bank of America (BAC) is one of the world's largest investment banks and financial institutions. It serves a broad range of customers, including individual consumers, wealthy investors, large corporations, and governments. The company offers a wide range of banking, investing, asset management, and other financial and risk management products and services. The bank operates primarily in the U.S., where it gets the vast majority of its revenue, as well as in dozens of countries around the globe.

The company faces a broad array of competitors, including JPMorgan Chase (JPM), Citigroup (C), Goldman Sachs Group (GS), credit card issuers like Visa (V), hedge funds, and private equity firms. The Charlotte, North Carolina-headquartered company expanded from a regional player into a global giant through a series of major acquisitions in the past several decades.

Key Takeaways

  • Bank of America is one of the world's largest investment banks and financial institutions.
  • The company provides financial services to customers including consumers, wealthy investors, institutional clients, and governments.
  • Bank of America's business segments include Consumer Banking, Global Wealth and Investment, Management, Global Banking, Global Markets, and All Other.
  • The bank's Consumer Banking segment is generally the biggest driver of the bank's revenue stream.
  • The All Other segment is responsible for activities that don't fit into the other divisions, such as interest rate activities and business liquidation.

Bank of America's Financials

Bank of America is the second-largest commercial bank in the United States by total assets just after JPMorgan Chase. As of September 2022, it had $2.41 trillion in assets, out of which $2.29 trillion were held in the U.S.

The company's quarterly revenue increased 10.8% year-over-year (YOY) to $24.5 billion. It reported net income of $7.1 billion for the fourth quarter of the 2022 fiscal year (FY) compared to $7 billion in 2021.

Bank of America highlighted several key drivers for the year (and the fourth quarter), including organic growth and rates in its deposit franchise and expense management driving the bank's operating leverage. The bank also cited an increase in net interest income (NII), which is what banks use to measure the difference between interest earned on the loans they make and the interest they pay on deposits.

Bank of America's Business Segments

Bank of America's four business segments are predominantly categorized according to the types of customers that use each area:

  • The Consumer Banking segment is focused on consumers and small businesses
  • The Global Wealth and Investment Management segment addresses the needs of individual clients with over $250,000 of total investable assets
  • Global Banking provides investment banking services and related products
  • Global Markets focuses on institutional clients

The data shown in the pie charts above excludes negative revenue and the net loss from the company's All Other segment, which is outlined in further detail below.

Consumer Banking

The Consumer Banking segment provides varied credit, banking, and investment products and services to small businesses and consumer clients. These range from traditional savings accounts, certificates of deposit (CDs), and individual retirement accounts (IRAs), to credit and debit cards, residential mortgages, and loans.

This division represents the bank's biggest driver, earning $10.78 billion in revenue. This represents an increase of about 21% from the same period a year ago and 44% of the bank's total revenue for the quarter. Net income was reported at $3.57 billion for the quarter. This is 50% of the company's total net income for the quarter.

Global Wealth and Investment Management

The Global Wealth and Investment Management segment provides financial advisory, brokerage, banking, and retirement products to clients with large amounts of investable assets.

In Q4 FY 2022, this segment generated $5.41 billion in revenue in the fourth quarter. This was up 0.2% from Q4 FY 2021. Global Wealth accounted for 22% of the bank's total quarterly revenue. This segment also generated $1.2 billion in net income. This is a drop from the same period a year ago when the bank reported $1.23 billion. Net income for this unit represents 17% of the total net income for the quarter.

Global Banking

Bank of America's Global Banking segment offers lending-related products and services, including underwriting and advisory services, as well as investment banking products. The customers in this segment include middle-market companies, commercial real estate firms, nonprofit organizations (NPOs), financial institutions, and corporations of various sizes.

Global Banking generated $6.44 billion in revenue in the fourth quarter, which is just over 26% of Bank of America's quarterly revenue. This was up about 9% from Q4 FY 2021. Global Banking also generated $2.54 billion in net income. This was about 36% of the bank's total quarterly net income. This is a drop from the same period a year ago when the bank reported $2.67 billion.

Global Markets

The Global Markets segment provides sales and trading services as well as research services to institutional clients, including financing, securities clearing, settlement, custody, and market-making services.

The segment generated $3.86 billion in revenue for Q4 FY 2022 compared to $3.82 billion from the fourth quarter of 2021. Global Markets accounted for about 16% of the bank's total quarterly revenue. This division accounted for $504 million in net income for the quarter. That dropped from the $669 million that the segment reported in the same period for 2021. Net income for this unit was 7% of the total net income reported for the quarter.

All Other Segment

Bank of America's All Other segment includes the bank's interest rate and foreign currency risk management activities, liquidating businesses, and other activities which are not categorized in one of the four primary segments above. This segment posted a revenue loss of $1.84 billion and a net loss of $689 million in Q4 FY 2022.

Bank of America reported total annual revenue of $95 billion for 2022 compared to $89.1 billion in 2021. Net income for the year dropped down to $27.5 billion from $32 billion for 2022 and 2021, respectively.

Bank of America's Developments

On July 20, 2022, Bank of America announced that its board of directors declared a regular quarterly cash dividend on the company's common stock of $0.22 per share. The dividend was payable on Sept. 30, 2022, to shareholders of record as of Sept. 2, 2022.

On Feb. 24, 2022, the bank announced a record-breaking year for the number of patents it received in 2021. The company was granted 512 patents across various technology categories, representing a 16% increase from 2020. Its patent growth was driven by increases in patents in certain central categories, including a 31% increase in patents for artificial intelligence (AI) innovations, 86% in blockchain patents, 32% in patents for data analytics, and 40% in payment-related patents.

How Bank of America Reports Diversity and Inclusiveness

As part of our effort to improve the awareness of the importance of diversity in companies, we offer investors a glimpse into the transparency of Bank of America and its commitment to diversity, inclusiveness, and social responsibility. We examined the data Bank of America releases to show you how it reports the diversity of its board and workforce to help readers make educated purchasing and investing decisions.

Below is a table of potential diversity measurements. It shows whether Bank of America discloses its data about the diversity of its board of directors, C-Suite, general management, and employees overall, as is marked with a ✔. It also shows whether Bank of America breaks down those reports to reveal the diversity of itself by race, gender, ability, veteran status, and LGBTQ+ identity.

Bank of America Diversity & Inclusiveness Reporting
  Race Gender Ability Veteran Status Sexual Orientation
Board of Directors ✔ ✔      
C-Suite
 		        
General Management ✔ (U.S. Only) ✔      
Employees ✔ (U.S. Only) ✔      
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  1. Bank of America Corp. "Form 10-K for the fiscal year ended December 31, 2021," Page 2.

  2. Bank of America Corp. "Form 10-K for the fiscal year ended December 31, 2021," Page 167.

  3. Fortune. "How Bank of America’s CEO Brian Moynihan orchestrated one of the biggest comebacks in banking history."

  4. Federal Reserve. "Large Commercial Banks."

  5. Bank of America. "Bank of America Reports Q4-22 Net Income of $7.1 Billion; EPS of $0.85 Revenue Grew 11%1 led by 29% Improvement in Net Interest Income to $14.7 Billion Sixth Consecutive Quarter of Operating Leverage(A); CET1 Ratio of 11.2% Full-Year 2022 Net Income of $27.5 Billion; EPS of $3.19," Page 2.

  6. Bank of America. "Bank of America Reports Q4-22 Net Income of $7.1 Billion; EPS of $0.85 Revenue Grew 11%1 led by 29% Improvement in Net Interest Income to $14.7 Billion Sixth Consecutive Quarter of Operating Leverage(A); CET1 Ratio of 11.2% Full-Year 2022 Net Income of $27.5 Billion; EPS of $3.19," Page 1.

  7. Bank of America Corp. "Form 10-K for the Fiscal Year Ended December 31, 2021," Page 162.

  8. Bank of America. "Bank of America Reports Q4-22 Net Income of $7.1 Billion; EPS of $0.85 Revenue Grew 11%1 led by 29% Improvement in Net Interest Income to $14.7 Billion Sixth Consecutive Quarter of Operating Leverage(A); CET1 Ratio of 11.2% Full-Year 2022 Net Income of $27.5 Billion; EPS of $3.19," Page 3.

  9. Bank of America. "Bank of America Reports Q4-22 Net Income of $7.1 Billion; EPS of $0.85 Revenue Grew 11%1 led by 29% Improvement in Net Interest Income to $14.7 Billion Sixth Consecutive Quarter of Operating Leverage(A); CET1 Ratio of 11.2% Full-Year 2022 Net Income of $27.5 Billion; EPS of $3.19," Page 4.

  10. Bank of America. "Bank of America Reports Q4-22 Net Income of $7.1 Billion; EPS of $0.85 Revenue Grew 11%1 led by 29% Improvement in Net Interest Income to $14.7 Billion Sixth Consecutive Quarter of Operating Leverage(A); CET1 Ratio of 11.2% Full-Year 2022 Net Income of $27.5 Billion; EPS of $3.19," Page 5.

  11. Bank of America. "Bank of America Reports Q4-22 Net Income of $7.1 Billion; EPS of $0.85 Revenue Grew 11%1 led by 29% Improvement in Net Interest Income to $14.7 Billion Sixth Consecutive Quarter of Operating Leverage(A); CET1 Ratio of 11.2% Full-Year 2022 Net Income of $27.5 Billion; EPS of $3.19," Page 6.

  12. Bank of America. "Bank of America Reports Q4-22 Net Income of $7.1 Billion; EPS of $0.85 Revenue Grew 11%1 led by 29% Improvement in Net Interest Income to $14.7 Billion Sixth Consecutive Quarter of Operating Leverage(A); CET1 Ratio of 11.2% Full-Year 2022 Net Income of $27.5 Billion; EPS of $3.19," Page 7.

  13. Bank of America. "Bank of America Increases Common Stock Dividend."

  14. Bank of America Corp. "Bank of America Sets Record-Breaking Year for Patents in 2021."

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