Bank of America in 2012: A Huge Success

The year is nearing its end, and now is a good time to look at what happened throughout the year to the stocks you follow. If you know the important things a company achieved, as well as any challenges it failed to overcome, then you can make a better decision about whether it deserves a spot in your portfolio.

Today, I'll look at Bank of America (NYSE: BAC  ) . As a member of the Dow Jones Industrials (DJINDICES: ^DJI  ) and a leading U.S. bank, Bank of America has seen truly hard times over the past five years as the housing boom fizzled out. Since the financial crisis, though, B of A has taken drastic steps to survive. Below, you'll find more on what moved shares of Bank of America this year.

Stats on Bank of America

Year-to-Date Stock Return

78%

Market Cap

$106 billion

1-Year Net Interest Income Growth

(11.5%)

Net Income to Common Shareholders, Trailing 12 Months

$3.98 billion

Dividend Yield

0.4%

CAPS rating

***

Source: S&P Capital IQ.

Why has Bank of America soared this year?
Bank of America's rebound in 2012 owes in part to the simple fact that it got beaten down so hard in 2011. With lingering concerns about toxic assets, as well as potential liability for its acquisition of mortgage originator Countrywide Financial during the financial crisis, B of A seemed particularly threatened by the potential for more stringent regulation.

In response, the bank has taken steps to strengthen its capital position. By selling off assets that aren't part of its core business, including Merrill Lynch's international business and B of A's stake in China Construction Bank, B of A has slowly but surely gotten to the point where its capital ratios are better than those of Citigroup (NYSE: C  ) and its other banking peers.

Helping Bank of America in its capital-raising efforts is its base of deposit customers. As the largest bank by deposits in the U.S. at $1.13 trillion, Bank of America has a solid grip on the industry, holding 12% of the nation's deposits and besting both Wells Fargo (NYSE: WFC  ) and JPMorgan Chase (NYSE: JPM  ) by 25% to 30%. This ensures that B of A has cheap sources of funds, especially as interest rates on savings accounts and CDs remain at near-record lows.

At the same time, settlements of litigation have helped reduce uncertainty. Despite its sizable share of liability for a massive $25 billion settlement with Wells, JPMorgan, Citi, and other mortgage lenders over foreclosure-related allegations, B of A has benefited from the removal of huge potential verdicts that could have resulted from those allegations. Customers aren't entirely happy with B of A as a mortgage lender, but with a strengthening housing market, things are looking up for the bank.

Don't stop learning
After a great 2012, what does 2013 have in store for Bank of America? Find out
whether B of A is still a buy in our latest research report on the stock, which details Bank of America's prospects and includes analysis of three reasons to buy and three reasons to sell. Just click here to get access.

Click here to add Bank of America to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


Read/Post Comments (1) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2136545, ~/Articles/ArticleHandler.aspx, 11/23/2014 8:44:58 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement