Bank of America's Acquisition Era Comes to a Close

Strategic Insights -

Following a series of significant mergers, Bank of America is nearing the end of its major acquisition phase, according to its chief financial officer, Alvaro de Molina. With a total of over $134 billion spent since 1998, the bank has grown to become the second-largest in the US, surpassing J.P. Morgan Chase in terms of assets. As Bank of America looks to consolidate its position, it has become increasingly focused on leveraging its existing resources to drive growth, rather than pursuing large-scale acquisitions. Despite speculation about potential future deals, including a possible partnership with General Motors Acceptance Corp., de Molina emphasized the bank's preference for strategic partnerships that minimize risk.

Key Takeaways:

  • Bank of America's total acquisition spending since 1998 exceeds $134 billion.
  • The bank has become the second-largest in the US, surpassing J.P. Morgan Chase in terms of assets.
  • Bank of America's shares trade at 11 times earnings, below the 14.3 average ratio of the Standard & Poor's 500 financial-stock index.
  • The bank's acquisition of MBNA has vaulted it over American Express in outstanding card balances and pushed its share of U.S. deposits to just under 10 percent.
  • Analysts have suggested that Bank of America might be in line to buy a controlling stake in General Motors Acceptance Corp.
  • De Molina prefers forming partnerships with finance companies, like GMAC, to avoid added risk.

Statistics:

  • Bank of America's acquisition spending since 1998: $134 billion.
  • Bank of America's current share of U.S. deposits: just under 10 percent.
  • Standard & Poor's 500 financial-stock index average ratio: 14.3.
  • MBNA acquisition price: $35 billion.
  • FleetBoston Financial acquisition price: $48 billion.
  • Timefram of Bank of America's major acquisition phase: Since 1998 (to present).

Sources:

  • Bank of America's chief financial officer, Alvaro de Molina, interview at company headquarters
  • CreditSights, David Hendler analyst
  • Standard & Poor's 500 financial-stock index data
  • Bank of America's MBNA acquisition announcement
  • FleetBoston Financial acquisition announcement