Bank of America Wants to Profit Off of Small Businesses

When it comes to dealing with business clients, Bank of America's (NYSE: BAC  ) Merrill Lynch section knows exactly what it's doing: Give the customer what he wants, and make some money in the process. A perfect example of this tenet is a new line of online products called Cash Management Essentials, something the bank developed by using direct feedback from the very customers it is now serving.

Reaching out to small businesses
While the retail side of the bank has a plethora of customer-service issues, the commercial side is the exact opposite. In fact, Bank of America Merrill Lynch was recently cited by J.D. Power for superior client service. So, when its clients said they wanted a suite of products tailored to their special needs, BAML listened.

The result is a solution much like that of larger companies, but with the smaller business in mind. The beauty of this subscription-based offering is that it will make current customers happy by giving them the services they asked for -- as well as the tools they need to personalize the experience -- and it also has potential as an enticement to bring new customers on board.

B of A has been concentrating on the small business entity for some time, as evidenced by its semi-annual Small Business Owner Report and the hiring of Robb Hilson to oversee its small business banking department a little more than 18 months ago. This followed the development of Bank of America's small business outreach, whereby the bank placed 1,000 new bankers in communities far and wide in order to bump up its small business services. The push has paid off, and B of A has upped its small business lending by 28% since 2011.

Cross-selling
Bank of America isn't the only big-bank suitor courting this particular segment. Wells Fargo (NYSE: WFC  ) was recently recognized by the U.S. Small Business Administration as the No. 1 Large 7 (a) Lender of the Year, the second time in three years the bank has accepted this honor. The bank was given kudos for approving over $1 billion in small business loans in fiscal year 2011, and bested that amount in 2012.

On the other hand, Citigroup (NYSE: C  ) has taken the opposite tack, firing many of its small-business professionals in a bid to save money. The bank insists it will be able to fulfill its stated goals as far as small business lending goes, however. Recently Citi announced the opening of a flagship branch bank in Los Angeles -- where the focus is on supplying all the services of a full-sized bank, including small business and commercial lending.

For Bank of America, the emphasis on serving small businesses should segue nicely with its current plan to cross-sell different products to the same customers, something at which Wells Fargo excels, and which B of A strives to perfect. As far as that strategy is concerned, Cash Management Essentials looks like an excellent candidate.

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