Once more, Bank of America (NYSE:BAC) was in the headlines this week. But it turns out the media missed something critically important that investors need to know.
The headline grabbing news
Following his presentation at the Goldman Sachs Financial Services Conference, Bank of America's CEO Brian Moynihan set the press wires abuzz after he announced the bank expected its trading revenues to drop in its Global Markets business.
As The New York Times reports, "Moynihan suggested on Tuesday that the recent improvement in conditions for Wall Street trading desks might have already faded." But fortunately for its investors, Bank of America wasn't alone in this expectation. Reuters also reported Citigroup (NYSE:C) CEO Michael Corbatt noted he expects Citi's market revenue to fall by 5%.
But what the media failed to mention that is even more fortunately, a dive into its presentation reveals how far Bank of America has come over the last three years.
Put simply, in 2011, Bank of America was in bit of disarray. As a result of the financial crisis and subsequent acquisitions of Merrill Lynch and Countrywide, the bank saw its net income available to shareholders go from $14.8 billion in 2007 to a loss of $3.2 billion in the four years combined from 2008 to 2011.
While it wasn't alone in these struggles, in the eyes of many, it was the poster child of banking gone wrong. And it wasn't until Warren Buffett gave Moynihan and his team a vote of confidence with a $5 billion investment in the fall of 2011 that the questions about its solvency began to disappear.
But the turnaround didn't stop there, as the bank has continued to make extraordinary strides in improving its business -- and as a result, its bottom line -- to the delight of investors.
For example, through its Project New BAC initiative, Moynihan revealed on Tuesday the bank has definitively met its cost savings goal of $2 billion a quarter.
In addition, it has reduced the expenses of its Legacy Asset Services unit -- which managed the bank's exposure to risky mortgage loans -- from $2.9 billion in the third quarter of 2012 to an expected $1.1 billion by the first quarter of next year.
In other words, Bank of America's total expenses should be $15 billion less in 2015 than they were in 2011.
But it isn't just the cost savings that are important, as the bank has also managed to dramatically improve the operations of its core businesses. For example, its two biggest banking units -- Consumer and Business as well as Global -- have seen their combined net incomes rise by 12%, or $1 billion, through the first nine months of 2014:
While it has still dealt with the legal issues and various settlements in 2014 -- as reflected in the $13 billion loss recognized by Consumer Real Estate Services -- its core operations are continuing to perform well.
The key takeaway
As shown below, the news of the expected decline in sales and trading revenue came on the last page of the presentation, in the last bullet point (author emphasis added):
Investors need to know that while falling revenue at one of the biggest banks in America may draw eyeballs, it doesn't negate the massive improvement Bank of America has recognized over the last three years.
And all signs indicate there is no sign of that slowing down anytime soon.
Patrick Morris owns shares of Bank of America. The Motley Fool recommends Bank of America and Apple. The Motley Fool owns shares of Bank of America, Apple, and Citigroup. 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.