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How Bank of America Makes Money

Bank of America gets most of its revenue from consumer banking

Bank of America Corp. (BAC), one of the world's largest investment banks and financial institutions, 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. It 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 & Co. (JPM), Citigroup Inc. (C), Goldman Sachs Group Inc. (GS), credit card issuers like Visa Inc. (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 provides financial services to customers including consumers, wealthy investors, institutional clients, and governments.
  • The company's Consumer Banking segment provided the largest share of total revenue in Q4 FY 2021, but Global Banking had the fastest revenue growth.
  • Strong loan and deposit growth helped to fuel a $1.2 billion increase in the bank's net interest income in the fourth quarter.
  • Bank of America had a record-breaking year for the number of patents it received in 2021.

Bank of America's Financials

Bank of America announced in January financial results for Q4 of its 2021 fiscal year (FY), the three-month period ended Dec. 31, 2021. The company reported net income attributable to common shareholders of $6.8 billion, up 30.0% compared to the year-ago quarter. Revenue for the quarter rose 9.8% year over year (YOY) to $22.1 billion. The bank said that net income growth partly reflected revenue growing faster than expenses.

Bank of America highlighted its strong loan and deposit growth during the quarter, fueling a $1.2 billion increase in net interest income (NII) compared to the year-ago quarter. NII is a financial metric banks use to measure the difference between interest earned on the loans they make and the interest they payout on deposits. The global economy continued to rebound from the COVID-19 pandemic shock with loan-loss rates at historically low levels, the company said. The low loan-loss rates allowed the bank to release some of its loan-loss reserves.

Bank of America's Business Segments

Bank of America's four business segments are categorized predominantly according to the types of customers utilizing each area. The Consumer Banking segment is focused on consumers and small businesses, while 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, while 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, CDs, and IRAs, to credit and debit cards, residential mortgages, and loans. In Q4 FY 2021, Consumer Banking accounted for 37% of total revenue and about 41% of net income. The segment generated the most revenue across all segments, accounting for $8.9 billion in revenue. This is up about 8.1% from the year-ago quarter. Consumer Banking net income rose 20.7% YOY to $3.1 billion, comprising the largest share 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 2021, this segment generated $5.4 billion in revenue, up 15.5% from the year-ago quarter. This segment also accounted for $1.2 billion in net income, an increase of 47.0% YOY. Global Wealth and Investment Management represented about 22% of total revenue and 16% of net income for Q4 FY 2021.

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, not-for-profit organizations, financial institutions, and corporations of various sizes. Global Banking generated $5.9 billion in revenue in the fourth quarter. This was up 23.6% from Q4 FY 2020. Global Banking also generated $2.7 billion in net income, up 59.0% YOY. The segment accounted for 25% of revenue and 35% of net income in Q4 FY 2021.

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 $3.8 billion in revenue for Q4 FY 2021, down 2.3% from the year-ago quarter. It accounted for $669 million in net income, down 15.4% from Q4 FY 2020. Global Markets made up about 16% of all revenue and 9% of net income for the quarter.

"All Other" Segment

Bank of America's "All Other" segment includes 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 $1.9 billion and a net loss of $673 million in Q4 FY 2021.

Bank of America's Recent Developments

On Feb. 24, 2022, Bank of America announced that it had 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.

On Feb. 2, 2022, Bank of America announced that its board of directors declared a regular quarterly cash dividend on the company's common stock of $0.21 per share. The dividend is payable on March 25, 2022 to shareholders of record as of March 4, 2022.

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)      
Article Sources
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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. Bank of America Corp. "4Q21 Earnings Press Release," Page 14.

  5. Bank of America Corp. "4Q21 Earnings Press Release," Page 1.

  6. Bank of America Corp. "4Q21 Earnings Press Release," Page 2.

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

  8. Bank of America Corp. "4Q21 Earnings Press Release," Page 3.

  9. Bank of America Corp. "4Q21 Earnings Press Release," Page 4.

  10. Bank of America Corp. "4Q21 Earnings Press Release," Page 5.

  11. Bank of America Corp. "4Q21 Earnings Press Release," Page 6.

  12. Bank of America Corp. "4Q21 Earnings Press Release," Page 7.

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

  14. Bank of America Corp. "Bank of America Declares First-Quarter 2022 Stock Dividends."

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