When most people think about Bank of America (NYSE:BAC), they're not actually thinking about Bank of America, the eponymous California bank founded in 1904. They're thinking instead about the current iteration of the $2.2 trillion colossus -- namely, a vast collection of regional lenders headquartered in Charlotte, North Carolina, that have combined via merger or acquisition since the 1970s.
Here, for instance, is how a person can think about Bank of America today:
While this chart oversimplifies the matter by ignoring the impact of smaller, but important, legacy companies such as credit card issuer MBNA, which Bank of America acquired in 2005, and Chicago-based Lasalle Bank, purchased two years later, it nevertheless gives an overview of the current company's DNA.
Two things in particular come to mind when I look at the chart. The first is that it explains how current chairman and CEO Brian Moynihan, still a resident of Boston, was able to infiltrate the executive ranks of a proud North Carolina institution.
Moynihan is smart by all accounts, but politics play a role in an executive's ascension as well. In Moynihan's case, he came to Bank of America by way of its 2003 merger with FleetBoston Financial. The Boston-based regional bank is Bank of America's largest legacy company -- with the exception of Merrill Lynch, that is, which has seen its operations curtailed in the aftermath of the financial crisis.
FleetBoston thereby controlled a plurality of votes on the board when the crisis erupted in 2008, giving its contingent of board members the opportunity to oust former CEO Ken Lewis, a descendent of NationsBank, and replace him with one of their own, Moynihan.
The second thing is the need for Bank of America to continue culling its coast-to-coast branch network. It had 6,145 branches at the beginning of 2009. Today, that figure is down to 4,789. Reducing redundant branches acquired in acquisitions is the only way Bank of America will be able to compete on a level playing field against its more efficient rivals, Wells Fargo and JPMorgan Chase, among others.
One could even argue that this will be the primary influence on Bank of America's strategy in the future. "I can't stress enough to you how much of a peace dividend we'll get without mergers," Moynihan told investors in 2011. "That peace dividend is effectively a permanent dividend."
In short, if you want to peer into Bank of America's future, it first helps to gain an appreciation for its past.