Some of Bank of America's Success Is Due to Wells Fargo

Bank of America (NYSE: BAC  ) has hit the ground running in 2014, seeing its share price rise by nearly 8% and garnering glowing reports from banking analysts. Both Citigroup  and Nomura have praised B of A for its expense control and bestowed a $19 per share target on its stock -- a price that may be attained very soon if the current momentum is any indication.

Much of the bank's recovery since the financial crisis is thanks to CEO Brian Moynihan, who has taken the bull by the horns and slashed away at the bloat weighing the bank down as a result of former Bank of America chief Ken Lewis' snatch-and-grab method of expansion.

But another reason Moynihan has been so successful is that he takes note of what others are doing right, and applies that knowledge to his own bank. When it comes to a solid banking business, Wells Fargo (NYSE: WFC  ) is certainly at the top of the list, having weathered the subprime crisis with much less drama than its big-bank peers. Moynihan doubtless knows this and has been following in Wells' footsteps by stepping up mortgage lending and pushing cross-selling -- two business practices at which Wells Fargo excels.

Admiration for Wells Fargo is long-standing at B of A
Moynihan isn't the first Bank of America CEO to hold Wells in high esteem. When A.W. Clausen returned to lead the big bank away from a hostile takeover bid in the 1980s, he lured four executives away from Wells Fargo in order to get the bank back on its feet. When the chips were down, the B of A chief knew where to look for those with banking know-how.

While Wells Fargo's purchase of troubled banking giant Wachovia in 2008 worked out much better than Bank of America's acquisition of Countrywide that same year, Wells' new purchase had its share of crummy loans, as well. Wells was able to restructure many of those mortgages, however, since they were still on Wachovia's books -- unlike Countrywide's bad loans, which had been sold off after being packaged into mortgage-backed securities. When B of A pulled back from the mortgage market, Wells Fargo flourished.

Last spring, as Wells began to pump up its mortgage business after the refinance boom started to wane, Bank of America, in an about-face, followed suit. As Wells Fargo added about 5,000 new employees to its own mortgage facilities, B of A did the same, using its improved branch locations to add thousands of mortgage specialists ready and able to push production up by a stated goal of 50% year over year.

Cross-selling initiative is taking hold
Wells' success at cross-selling banking products to established customers has not gone unnoticed at Bank of America, either. Though both banks have been pushing cross-selling for some time, B of A's exit from the mortgage arena made the process more difficult. Now, however, Moynihan is using the branch model to step up the process of selling several products to existing customers, and it seems to be working.

One area where cross-selling is taking off is credit cards. Bank of America, like Wells Fargo, is concentrating on selling cards to its customer base, resulting in an additional 1 million credit cards being issued to existing customers during the third quarter of 2013.

With the mortgage business still slow, both banks are acutely aware that yields on credit card loans are generally above 12% -- much higher than yields from mortgage loans.

In the summer of 2013, Wells announced a new partnership with American Express, resulting in a credit card product that the bank marketed exclusively to its own customers at first -- but plans to sell to the public sometime this year. For its part, Bank of America plans to keep its own credit card business firmly focused on its customer base after having been burned in the past.

As Bank of America moves forward, issues remain -- one of which is a still-pending legal decision regarding the legitimacy of an $8.5 billion settlement struck back in 2011 with a slew of institutional mortgage-bond investors. The improvements made to the big bank's balance sheet are undeniable, however, and Brian Moynihan deserves accolades for that -- reserving some credit, of course, for Wells Fargo.

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