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Bank of America SWOT Analysis 2021: Can the Global Recession threaten the Bank?

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This is a Bank of America SWOT Analysis as an assessment of the bank’s strengths, weaknesses, opportunities, and threats.

The Bank of America Corporation is a multinational investment bank and financial services holding company with headquarters in North Carolina, USA. Serving almost 66 million customers, it is currently the second-largest bank in the United States. Bank of America is also part of the Big Four banking institutions in the US, with $1.43 trillion total customer deposits and $2.43 trillion total assets.

Bank of America products and services are accessible throughout the United States, with around 4,300 retail financial centers and over 16,000 ATMs across the country. The company has also recently invested in digital technology and artificial intelligence. As an adjunct to its mobile banking app, Bank of America launched its artificial intelligence-driven virtual assistant in 2018. Named “Erica,” the virtual assistant helps customers to manage debt, optimize their cash flows, and monitor transactions. Erica also provides insight regarding savings opportunities and balancing competing priorities.

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Strengths

Strong Brand and Reputation

The Bank of America brand has remained strong throughout the decades. Aside from having a wide customer base, it has also been recognized by various award-giving institutions. Fortune magazine has included Bank of America on its “Change the World” list for four consecutive years. Fortune, together with global research and consulting firm Great Place to Work, has also included Bank of America as part of its “100 Best Companies to Work For” list for two consecutive years.

Global Finance magazine also recognized Bank of America as the Most Innovative Bank in North America for 2020. The company’s various products and services have also garnered awards.

In 2019, Bank of America established its new brand identity to better reflect its mission of empowering its consumers. “What would you like the power to do?” was the new tagline, replacing “Life’s better when we’re connected”. Meredith Verdone, Chief Marketing Officer of Bank of America, explains that the company wants to make a difference in the world and help solve complex global issues.

International Presence

Outside of US territories, Bank of America has also established its presence in 35 countries. Its Global Banking division, which provides a range of lending-related products and services, generated a $3.5 billion net income in 2020. The Global Wealth & Investment Management division generated a $3.1 billion net income. The Global Markets division generated $5.2 billion, a 50% increase from the previous year and the division’s highest net income since 2009.

Weaknesses

Cost-Efficiency

Bank of America’s expenses greatly rose due to COVID-19. Brian Moynihan, the CEO, Chairman, and President of BoA, said that the corporation incurred more costs to provide better care for its employees. CFO Paul Donofrio stated that the bank also had to process an unprecedented amount of claims for unemployment insurance and had to grapple with the cost of the Paycheck Protection Program loans.

Lawsuits and Controversies

At least two class-action lawsuits were filed against Bank of America in early 2021. One of the plaintiffs, Christopher Mosson, stated that the bank failed to protect thousands of unemployment benefit accounts. Mosson reported unauthorized charges in his account, and Bank of America’s response was to freeze the account and to return the balance to California’s unemployment department. Other lawsuits claim that Bank of America failed to uphold its liability guarantee by freezing around 350,000 accounts in the fourth quarter of 2020 due to fraudulent activities.

The bank also faced a series of lawsuits in 2009. Customers claimed that Bank of America processed debit transactions in a way that led to hundreds of dollars of worth of fees.

In 2014, BoA had to pay $16.65 billion to resolve federal and state claims due to failure to fully disclose the costs of mortgage repurchase claims. The settlement was part of the initiative of former president Obama’s Financial Fraud Enforcement Task Force and the Residential Mortgage-Backed Securities Working Group.

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Opportunities

Increased Reliance on Virtual Assistants

Erica, the bank’s AI-powered virtual assistant, gained more than 1 million users within two months after being rolled out. The bot combines predictive analysis with natural language, which means that when more people interact with Erica, the more effective it becomes.

More users have relied on Erica during the COVID-19 pandemic. Various restrictions have led customers to turn to digital banking channels. Before the pandemic, the AI-powered app was considered only an added feature to Bank of America’s mobile banking services. Today, it is considered a crucial service due to many closed branches and the flooding of the bank’s call center hotlines.

As Erica continues to become more efficient, the bot will be able to provide better service throughout and after the COVID-19 pandemic.

Sustainable Finance

Bank of America plans to deploy $1 trillion by 2030 to further its environmental business and green finance initiatives. The company initially planned to allocate only $300 billion in 2019. Bank of America aims to help build a greener economy by providing lending, capital raising, advisory, and investment services to help sustainable businesses.

In support of the Paris Climate Agreement, the company also announced its plants to achieve net-zero greenhouse gas (GHG) emissions in its operations, financing activities, and supply chain by 2050.

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Threats

Hacking and Security Breaches

The company has already experienced data breaches multiple times. In 2013, a group of hackers called Par:AnoIA claimed to have accessed the bank’s employee and executive data stored through a third party. In 2019, Bloomberg reported that hacker toolkits for Bank of America were being sold on the dark web.

In April 2020, Bank of America reported a data breach that leaked the information of clients under the bank’s Paycheck Protection Program.

As Bank of America rolls out wider digital services through its mobile applications and its AI-powered bot, it also becomes more vulnerable to hacking, identity theft, and other forms of security breaches.

Global Recession

The World Bank has reported that many financial institutions around the world will continue to face an increase in non-performing loans due to COVID-19. Many banks are not prepared to deal with the situation and may struggle to balance their sheets. Government agencies also face limitations in providing additional financial stimulus to help the economy. The November 2020 Financial Report of The Federal Reserve states that policy fatigue and political constraints have led to difficulties in providing adequate financial stimulus for 2021.

Bank of America SWOT Analysis: Conclusion

Bank of America remains one of the biggest financial institutions in the United States and retains a stable global presence. This is despite the many lawsuits and controversies it has faced.

Bank of America also continues to roll out upgraded products and services to deal with changes in consumer behavior due to COVID-19. However, it faces many threats due to external factors, such as data branches and the current global recession. Strategies must be implemented to mitigate the possible effects of such threats.

A SWOT analysis is a technique for strategic planning that helps identify the strengths, weaknesses, opportunities, and threats of an organization. This framework ensures that objectives are clearly defined and that both internal and external factors related to a business or venture are identified.

If you are interested in improving your knowledge in business as well as sharpening your problem-solving skills, have a look at our other SWOT analysis samples. Check out our SWOT analysis templates and our how-to guide to learn more about SWOT analyses and how they can help your organization.