As someone who writes about Bank of America (BAC 1.96%) on a nearly daily basis, one of the things I still struggle to sort out is how much the nation's second-biggest bank by assets has changed over the past decade.
Is it the same bank that it was going into the financial crisis? Or is it something entirely different? And if it has changed, how would one go about quantifying the difference?
Questions like these may seem easy to answer. But as soon as you start digging into the specifics, it quickly becomes clear how complicated it actually is. You can get a sense for this by looking at the various ways the North Carolina-based bank has evolved since the 2008 crisis.
The list below is far from complete, but it should give you an idea of the radical nature of Bank of America's transformation. Here are 10 ways Bank of America has changed in the past decade:
- It went into the crisis as a commercial bank that dabbled in investment banking and, thanks to its 2008 acquisition of Merrill Lynch, exited as a universal bank that focuses wholeheartedly on both.
- It's spun off the equivalent of $500 billion worth of assets over the past eight years. It's done so in part to generate income that could be used to offset the damage done during the financial crisis. It's also done so in order to streamline its business model.
- Yet, Bank of America remains so large that it's literally illegal for it to acquire other banks, as federal law prohibits a bank with more than 10% of the nation's deposits to grow through acquisitions.
- It's completely revamped its corner office, installing a New Englander as chairman and CEO at a bank that had been controlled for decades by a lineage of proudly Southern executives. There have even been rumors since Brian Moynihan took over in 2010 that he could relocate its headquarters from Charlotte, North Carolina, to Boston, Massachusetts.
- It's trying to change its culture, from one based on growth for the sake of growth to one based on responsible growth.
- It's incurred nearly $200 billion worth of costs as a result of the financial crisis, exceeding its capital base going into the crisis.
- It dramatically diluted its shareholders in 2009 and 2010 in order to raise capital to, in part, pay off the government's $45 billion crisis-era investment in Bank of America. Shares of the bank are still off by 60% compared to their pre-crisis high.
- It's closing branches in response to its customers' use of its online and mobile banking channels.
- It's now operating under a dramatically reformed regulatory environment, which requires Bank of America to hold much more capital than it once did and gives the Federal Reserve veto power over its dividend and buyback plans.
- It's largely abandoned its aspirations to be an international consumer bank, most recently selling off its consumer credit card business in the United Kingdom.
This list should make it clear that the Bank of America of today hardly resembles the Bank of America that existed 10 years ago. How should this impact investors' thesis toward Bank of America's stock? That's a question for another day, but it's something that long-term investors in the $2.2 trillion bank should be thinking about.