Bank of America Corp (NYSE:BAC) is to post its earnings on July 15, 2015 with the Street waiting to see what the bank has to report on its profitability, expenses and asset value. Loan losses and increased expenses have prevented the bank from registering impressive profits since the financial crisis. The bank has slowly been pulling itself from astronomical legal fees as well as fines from regulators attributed to its practices during the financial crisis.
Return on Equity Expectations
Investors will hope to see a 10% return on equity having stuck with the bank during the events of the financial crisis. Bank of America Corp (NYSE:BAC) has over the years struggled to post the desired profits as it continues to incur charges attributed to fines and legal fees since the financial crisis. However, things are slowly changing as the bank has already settled a number of cases as it slowly moves to profitability.
Wells Fargo & Co (NYSE:WFC) and JPMorgan Chase & Co. (NYSE:JPM) have already picked themselves from the financial crisis something that investors will hope to see with Bank of America this time around. Expenses have also been a point of concern with regards to Bank of America Corp (NYSE:BAC) earnings. The banks expenses have remained far too high, compared to that of other players in the industry.
Expenses Reduction Expectation
Investors will hope to see a reduction in spending so that more money is made available for paying taxes and covering for loan losses. A reduction in spending towards expenses should translate to increased returns to shareholders through dividends and buybacks.
Legacy assets, as well as the servicing division, will also be closely watched when Bank of America Corp (NYSE:BAC) posts its earnings. The two units are expected to shed more light on the impact of disposing of toxic and non-core assets.
A reduction of expenses on these two units should be an indication that the bank is back on a recovery path back to profitability.
Bank of America Corporation (Bank of America), incorporated on July 31, 1998, is a bank holding company (BHC) and a financial holding company. The Company is a financial institution, serving individual consumers, small- and middle-market businesses, institutional investors, corporations and Governments with a range of banking, investing, asset management and other financial and risk management products and services. Through its banking and various nonbank subsidiaries throughout the United States and in international markets, it provides a range of banking and nonbank financial services and products. The Company operates in five segments: Consumer & Business Banking (CBB), Consumer Real Estate Services (CRES), Global Wealth & Investment Management (GWIM), Global Banking and Global Markets.
The Company’s all other operations consists of asset and liability management (ALM) activities, equity investments, the international consumer card business, liquidating businesses, residual expense allocations and other. ALM activities encompass the whole-loan residential mortgage portfolio and investment securities, interest rate and foreign currency risk management activities, including the residual net interest income allocation, the impact of certain allocation methodologies and accounting hedge ineffectiveness. Additionally, certain residential mortgage loans that are managed by CRES are held in all other operations.
Consumer & Business Banking
The Company’s CBB segment offers a range of credit, banking and investment products and services to consumers and businesses. CBB product offerings include traditional savings accounts, money market savings accounts, certificate of deposits (CDs) and individual retirement accounts (IRAs), noninterest- and interest-bearing checking accounts, investment accounts and products, as well as credit and debit cards to consumers and small businesses in the United States. The franchise network includes approximately 4,800 banking centers, 15,800 automated teller machines (ATMs), across the nation call centers, online and mobile platforms. CBB also offers a range of lending-related products and services, integrated working capital management and treasury solutions to clients through a network of offices and client relationship teams along with various product partners to the United States-based companies.
Consumer Real Estate Services
The Company’s CRES segment provides a line of consumer real estate products and services to customers across the nation. CRES products include fixed- and adjustable-rate first-lien mortgage loans for home purchase and refinancing needs, home equity lines of credit (HELOCs) and home equity loans. First mortgage products are either sold into the secondary mortgage market to investors, while retaining mortgage servicing rights (MSRs) and the Bank of America customer relationships, or are held on the balance sheet in Home Loans or in all other operations for asset and liability management (ALM) purposes. Newly originated HELOCs and home equity loans are retained on the CRES balance sheet. CRES services mortgage loans, including those loans it owns, loans owned by other business segments and All Other, and loans owned by outside investors.
Global Wealth & Investment Management
The Company’s GWIM segment provides wealth management solutions to a base of clients. These services include investment and brokerage services, estate and financial planning, fiduciary portfolio management, cash and liability management, and specialty asset management. GWIM also provides retirement and benefit plan services, philanthropic management and asset management to individual and institutional clients.
Global Banking
The Company’s Global Banking segment provides a range of lending-related products and services, integrated working capital management and treasury solutions to clients, and underwriting and advisory services through the Company’s network of offices and client relationship teams. Global Banking’s lending products and services include commercial loans, leases, commitment facilities, trade finance, real estate lending and asset-based lending. Global Banking’s treasury solutions business includes treasury management, foreign exchange and short-term investing options. Global Banking also provides investment banking products to clients, such as debt and equity underwriting and distribution, and merger-related and other advisory services. Global Banking clients generally include middle-market companies, commercial real estate firms, auto dealerships, not-for-profit companies, global corporations, financial institutions and leasing clients.
Global Markets
The Company’s Global Markets segment offers sales and trading services, including research, to institutional clients across fixed-income, credit, currency, commodity and equity businesses. Global Markets product coverage includes securities and derivative products in both the primary and secondary markets. Global Markets provides market-making, financing, securities clearing, settlement and custody services to institutional investor clients in support of their investing and trading activities. Global Markets also works with commercial and corporate clients to provide risk management products using interest rate, equity, credit, currency and commodity derivatives, foreign exchange, fixed-income and mortgage-related products. Global Markets also manages risk in a range of financial products, including Government securities, equity and equity-linked securities, high-grade and high-yield corporate debt securities, syndicated loans, mortgage-backed securities (MBS), commodities and asset-backed securities (ABS).
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