BANK OF AMERICA

BANKOF AMERICA

&nbsp&nbsp&nbsp

June31, 2014.

Analyzingthe Bank of America competitiveness

Thecompetitive forces of business can be measured by assessing iscompetitive strength and business position in regard to itscompetitors. The competitive forces analysis of business can be doneusing the five-point analysis as espoused by Porter. When acompetitive analysis is conducted on business one can determine itscompetitive force and attractiveness it derives from the market. Theessence of this competitive analysis is to assess its currentpositions and intensity in aid to assess where it might shift itsstrength too. This strategic analysis is critical in accessing theorganization potential of profitability to new services or productsthis is critical in understanding where the power line is(Porter, 2008).

Accordingto Porter, business strength is evaluated based on its threat of newentrants, bargaining power of suppliers, bargaining power of buyersand threats of substitute products. The bank of America is the thirdfinancial institution after Citi Group, which is the leading bank,and the JP Morgan Chase bank the second largest financialinstitution. In 2013, the bank was ranked as the twenty-first largestin total revenue collection. The Bank of America has been faced withstrong competition from its main competitors in the supply offinancial services, consumer acquisitions, and consumer product andservices awareness. In general using the five Porters forcesanalysis, Bank of America bargaining power of suppliers is in itsvouchers, loans, and higher interest rates for deposits and inputshave little impact on the banks costs.

Inassessing its bargaining power of customers, the bank has nobargaining power as a negotiator when compare to its competitors.Porter had pointed out that, when businesses are faced with intensecompetitions, the competition helps to improve the industry throughimprovement in price, advertising, improved customer service andproduct developments. The bank of America has large number of clientsand all clients do not have the same leverage of bargaining powereach client is approached with a different bargaining power. Bank ofAmerica is ahead of its main competitors in reliability of itsservice delivery, consumer awareness effective human resources andonline management and improved operation efficiency.

Threatsof products and services substitutes come from its main competitorslike JP Chase bank, wells Fargo and Citi Group. The main threats ofits new competitors arise from such factors as higher capitalrequirements, high sunk costs, geographic location of itscompetitors, strong brand names of competitor banks. However, inorder to fight off these threats the Bank of America has institutedvarious organizational structural changes in order to abide by thegovernment capital requirement and offering competitive prices forits products against those of competitors(Porter, 2008).

CPMand analysis

TheBank of America is among the largest financial institutions inAmerica with the largest assets in holding and capitalization in themarket. The firm has its presence in 150 countries. The bank has apowerful brand image, high customer service and diverse financialservices and products. The firm has excellent customer products andservices for small business and global consumers. However, the firm’sweaknesses are that, despite its presence in 150 countries, ninetypercent of its total sales come from its national market while onlyten percent are derived from the international markets. In addition,the company has faced some controversies by raising its interestrates, snatching other firms properties and mismanagement of thefirm.

Nonetheless,despite these shortfalls, the company has opportunities in increasingits market share and penetration through new products, offering newinnovative products and increasing its online services. Otheropportunities include diversifying the business with other non-bankservices and enlarging clients’ investment wealth. The firm’smain threats are its strong competitors such as Citigroup, WellsFargo and JP Morgan Chase, which has affected the banks market share.In addition, the bank has been facing instability from foreigninvestments due to political regulation and changed tariffs thatpossess threat to the firm financial stability.

Direct Competitor Comparison and ratios

&nbsp

BAC

C

JPM

WFC

Market Cap:

163.84B

151.56B

222.72B

273.52B

Employees:

233,201

244,000

245,192

263,500

Quarterly Rev Growth:

-0.01

-0.05

-0.06

0.01

Revenue:

85.28B

68.16B

92.62B

81.84B

Operating Margin:

0.21

0.23

0.38

0.44

Net Income:

6.92B

8.94B

14.83B

21.72B

EPS:

0.77

4.35

4.04

4.02

P/E:

20.23

11.50

14.60

12.96

PEG (5 yr expected):

2.45

1.24

2.39

1.31

P/S:

1.89

2.20

2.39

3.31

KeyBAC –Bank of America

C-Citigroup

JPM-JPMorgan Chase bank

WFC-WellFargo Bank

Sourcehttps://finance.yahoo.com/q/co?s=BAC+Competitors

Competitors’ratios (2014 as of July 30)

Indicator

Citi Group

JP Morgan Chase

Profit margin

20.80%

24.14%

Operating Margin

21.37%

34.51%

Return on assets

0.51%

0.72%

Return on Equity

6.68%

8.38%

Net income growth

14.01%

16.21%

Sourcehttp://www.marketwatch.com/investing/stock/c/profile

Bankof America financial Ratios

Indicator

2012

Change

2013

Change

2014 (by July 30)

Operating Margin

3.39%

+14.79%

18.18%

-4.75%

13.43%

Return on assets

0.13%

+0.34%

0.47%

+0.06%

0.53%

Return on Equity

1.28%

+3.33%

4.61%

-2.05%

2.56%

Net income growth

3.31%

+8.03%

11.34%

+0.21%

11.55%

SourceMarket watch Inc.http://www.marketwatch.com/investing/stock/bac/profile

Inthe above recent statistical data (July 30, 2014), it is evident thatthe Bank of America is doing relatively well with respect to its maincompetitors. However, a closer assessment reveals that, the bank isthird in terms of market capitalization after Well Fargo and JPM. Inaddition, Bank of America has the least net income growth andoperating margin ratio compared to its competitors in the year 2014.Overall, when Bank of America is compared to its competitors inrelation to return on assets, return on equity and operating margin,its performance is relatively behind.

AppendixIncome statement for BAC during the year 2011-2013

Top of Form

Income Statement

Bottom of Form

View: Annual Data

All numbers in thousands

Period Ending

Dec 31, 2013

Dec 31, 2012

Dec 31, 2011

Total Revenue

101,697,000&nbsp&nbsp

100,078,000&nbsp&nbsp

115,074,000&nbsp&nbsp

Cost of Revenue

3,034,000&nbsp&nbsp

3,753,000&nbsp&nbsp

5,214,000&nbsp&nbsp

Gross Profit

– &nbsp

– &nbsp

– &nbsp

Operating Expenses

Research Development

– &nbsp

– &nbsp

– &nbsp

Selling General and Administrative

68,128,000&nbsp&nbsp

70,829,000&nbsp&nbsp

74,943,000&nbsp&nbsp

Non-Recurring

– &nbsp

– &nbsp

3,822,000&nbsp&nbsp

Others

4,642,000&nbsp&nbsp

9,433,000&nbsp&nbsp

14,919,000&nbsp&nbsp

Total Operating Expenses

– &nbsp

– &nbsp

– &nbsp

Operating Income or Loss

– &nbsp

– &nbsp

– &nbsp

Income from Continuing Operations

Total Other Income/Expenses Net

– &nbsp

– &nbsp

– &nbsp

Earnings Before Interest And Taxes

27,531,000&nbsp&nbsp

17,826,000&nbsp&nbsp

18,388,000&nbsp&nbsp

Interest Expense

9,721,000&nbsp&nbsp

12,991,000&nbsp&nbsp

16,406,000&nbsp&nbsp

Income Before Tax

16,172,000&nbsp&nbsp

3,072,000&nbsp&nbsp

(230,000)

Income Tax Expense

4,741,000&nbsp&nbsp

(1,116,000)

(1,676,000)

Minority Interest

– &nbsp

– &nbsp

– &nbsp

Net Income From Continuing Ops

14,332,000&nbsp&nbsp

6,258,000&nbsp&nbsp

8,806,000&nbsp&nbsp

Non-recurring Events

Discontinued Operations

– &nbsp

– &nbsp

– &nbsp

Extraordinary Items

– &nbsp

– &nbsp

– &nbsp

Effect Of Accounting Changes

– &nbsp

– &nbsp

– &nbsp

Other Items

– &nbsp

– &nbsp

– &nbsp

Net Income

11,431,000&nbsp&nbsp

4,188,000&nbsp&nbsp

1,446,000&nbsp&nbsp

Preferred Stock And Other Adjustments

(1,349,000)

(1,428,000)

(1,361,000)

Net Income Applicable To Common Shares

10,082,000&nbsp&nbsp

2,760,000&nbsp&nbsp

85,000&nbsp&nbsp

References

MichaelE. Porter. 2008. The Five Competitive Forces that Shape Strategy,HarvardBusiness Review, January 2008, p.86-104.

Marketswatch Inc. 2014. Retrieved on July 31, 2014 fromhttp://www.marketwatch.com/investing/stock/bac/profile

Bankof America Competitors, 2014. Retrieved on July 31, 2014 fromhttps://finance.yahoo.com/q/co?s=BAC+Competitors

Citigroupbank. 2014. Retrieved on July 31, 2014 fromhttp://www.marketwatch.com/investing/stock/c/profile

JPMorgan Chase Bank. 2014. Retrieved on July 31, 2014 fromhttp://www.marketwatch.com/investing/stock/jpm/profile