1 Incredible Change at Bank of America Worth Billions

Four years removed from the bottom of the financial crisis, one number shows how far Bank of America has come.

Jan 15, 2014 at 8:12AM

There is one stunning reality that marks the change at Bank of America (NYSE:BAC) that often goes unnoticed, but is absolutely critical to see.


Bank of America's resolution plan to the Federal Reserve and FDIC -- which effectively outlines what the bank would do were it to go bankrupt -- offers charts, descriptions, and a host of other items that attempt to consolidate everything about the company into 34 pages. Yet there is one number that leaps off the page when Bank of America compares itself from where it was in 2009 to where it is now. 


Source: Flickr/ 401(K) 2013

$261 billion
Bank of America highlighted four strategic initiatives over the last four years: streamlining the company, building capital and liquidity, improving credit quality, and driving growth. The bank said it has made key progress in each, which has allowed it to strengthen itself as a company and become a more "streamlined and simplified" organization.

One of the most stunning ways it has done this is by cutting its long-term debt in half, from $523 billion at the end of 2009 to $262 billion at the end of June 2013. That reduction of more than a quarter of a trillion dollars represents an amount that is more than the debt held by Indonesia at the end of the second quarter, according to the World Bank. Said differently, Bank of America trimmed roughly the same amount of debt from its books than a country of 247 million people has outstanding. 

This chart shows just how dramatic this reduction of B of A's debt footprint has been relative to banking peers Wells Fargo (NYSE:WFC), JPMorgan Chase (NYSE:JPM), and Citigroup (NYSE:C):

Source: Company SEC filings.

As you can see, JPMorgan Chase has actually kept its debt level relatively stable, and while Citigroup and Wells Fargo have also aggressively lessened their debt burdens, they cannot match the cutting done by Bank of America.

What it means
Bank of America has clearly now positioned itself in a much better place than where it was in the depths of the financial crisis in 2009. The conclusions from this are twofold. First, it principally helps the bank's bottom line. Consider that in 2009, Bank of America paid out $15.4 billion on that debt in interest expense, versus the $7.2 billion it has paid out over the last four quarters. This dramatically lighter debt burden benefits shareholders in a very tangible way, as the money that is freed up can go straight to the bank's bottom line.

In addition, this should help ease investors' concerns about possible risks posed by the bank. Consider that in 2009, costly, long-term debt financed 20% of its assets, while in the most recent quarter, that number now stands at 12%.

While banks certainly risk pose certain risks, these types of numbers provide further evidence that Bank of America is in a radically different place now than where it was in 2009. Investors should take note.

The biggest change for every bank
Banks over extended themselves in the years leading up to financial crisis as they took on too much debt that ultimately crippled the entire American economy. But there's a brand new company that's revolutionizing banking, and is poised to kill the hated traditional bricks-and-mortar banking model. And amazingly, despite its rapid growth, this company is still flying under the radar of Wall Street. For the name and details on this company, click here to access our new special free report.

Fool contributor Patrick Morris owns shares of Bank of America. The Motley Fool recommends Bank of America and Wells Fargo. The Motley Fool owns shares of Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information