The Little Known Way Bank of America Corp Is Topping Wall Street

Think you know everything about Bank of America (NYSE: BAC  ) ? It's just a collection of industry-lagging and risky businesses, right? Dead wrong.

The surprising lead
At a recent conference, the head of corporate and investment banking at Bank of America, Christian Meisnner, gave a fascinating update on a little-discussed part of Bank of America that brought in $16.5 billion, or 18% of total revenue, for the bank last year.

One of the most enlightening revelations was a chart comparing the progress of the investment banking arm -- which represents the fees made from other businesses issuing stock, bonds, or buying other companies -- at Bank of America.

In 2013, Bank of America topped peers Citigroup (NYSE: C  ) , Goldman Sachs (NYSE: GS  ) and others in a big way: 

Source: Company investor relations.

Even while most of the conversation surrounding Bank of America revolves around its more traditional banking arms, it turns out Bank of America was the nation's biggest investment bank last year -- ECM and DCM represent debt and equity capital markets deals, whereas M&A stands for mergers and acquisitions.

Not only did Bank of America lead the five other biggest banks in bringing in revenue through investment banking, but it trailed only Goldman Sachs in the growth of its business in 2013. This impressive lead wasn't simply in one area -- Bank of America said it held a top three position in seven of the eight industry groups that deals fall into.

Yet if you asked anyone what the biggest investment bank was in America last year, few would put Bank of America on the top of the list, and it may be a stretch for some to put it in the top five. Despite vastly overpaying for Merrill Lynch during the financial crisis, that acquisition is starting to bear fruit.

Why this matters to investors
Bank of America is still a commercial bank at its heart, it has nearly 50 million consumer and small-business relationships, versus "just" 5,200 corporate and investment banking clients, but its Wall Street-business is becoming more important.

Some detractors will say this exposes the bank to additional risk, but a Bank of America "bull" (myself included) would argue this diversity allows the bank to weather cyclical slowdowns in certain businesses like mortgage refinancing and fixed income trading.

After years of legal headaches, it's easy to forget Bank of America actually has a collection of successful business lines like its investment bank. The bank hasn't emerged from all its troubles yet, once it does, Bank of America's strongest businesses may (and should) get more attention from investors.

Big banking's little $20.8 trillion secret
The success of the investment banking arm at Bank of America is one secret, but there is an even bigger one which is about to be revealed. But you can cash in from it. It turns out there's a brand-new company that's revolutionizing banking and is poised to kill the hated traditional bricks-and-mortar banks. That's bad for them, but great for investors. And amazingly, despite its rapid growth, this company is still flying under Wall Street's radar. To learn about about this company, click here to access our new special free report.

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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.

  • Report this Comment On May 29, 2014, at 11:07 AM, Dro1992 wrote:

    The worst thing banks can do is go from a conventional banking system, from borrowing/lending, to become investment banks. Weather cyclical slow downs? Wait for another 15 years until all those greedy investment banks, that also cater to the general public, start doing illicit and shady deals which depress the economy once more. That being said, I am sure Bank of America is a solid investment, it is not going anywhere anytime soon and with large investments from companies like BRK.A it is a solid part of an investment portfolio.

  • Report this Comment On May 29, 2014, at 4:50 PM, spokanimal wrote:

    Heck, they're even going to sell the Clippers for Donald Sterling's wife.

    Stuff THAT in your "greedy investment bank shady deals" pipe and smoke it, Dro.

    Socialists are EVERYWHERE... even invested in BAC.

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Patrick Morris

After a few stints in banking and corporate finance, Patrick joined the Motley Fool as a writer covering the financial sector. He's scaled back his everyday writing a bit, but he's always happy to opine on the latest headline news surrounding Berkshire Hathaway, Warren Buffett and all things personal finance.

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