How Bank of America achieved a massive comeback from the brink of collapse
Bank of America was severely affected by the 2008 financial crisis. The bank’s shares traded as low as $2.53 in 2009, and its net income dropped from a high of $21 billion in 2006 to just $4 billion in 2008. “Bank of America was one reason why much of the investing public and consumers and government lost faith and trust in banking,” recalled Mike Mayo, a bank analyst at Wells Fargo. “If the government did not intervene for Bank of America and the other banks, Bank of America would have failed.” Despite inflation concerns and threats of a recession, Bank of America is thriving today. The bank reported a net income of $31.9 billion in 2021, compared with just $4 billion in 2008.
“As the rates have gone up and if the recession is shallow, then we’re going to see widening spreads and the ability of Bank of America to have significant earnings from net interest income,” said Kenneth Leon, a research director from CFRA Research. “This is unique to the banking industry and Bank of America being one of the largest banks, stands to benefit the most.” The hard-learned lessons from the financial crisis have also led BofA to undergo significant changes, allowing it to earn its position as the bank with the second-largest total assets in the United States. JPMorgan is still comfortably ahead as the largest bank in the U.S. based on total assets. “The big change at Bank of America is that they have gone from irresponsible growth to responsible growth,” said Mayo. A more conservative lending standard is just one example of the bank’s aim for sustainable growth. “One key aspect of Bank of America’s responsible growth is to say no and no more often,” explained Mayo. “So that when they say yes, it results in a lot more growth that’s sustainable, responsible and better for reputation.”