Bank of America (NYSE:BAC) Fall Out

When the Bank of America (NYSE:BAC) purchased Merrill Lynch, it was a deal too good to be true, and working as a synergy, the companies reached new heights with wealth advisors working coast to coast at the retail branches. It wasn’t expected that the deal would take a turn around and get stuck in ongoing legal complications. It seems now that the universal bank is spread out too thin, unable to match competitor capabilities and is recommended to be broken up.

America’s net interest income has rounded up to a large figure within the entire US. According to FDIC, the Bank of America (NYSE:BAC) total was $1.17 trillion, standing first in line as compared to JP Morgan Chase (NYSE:JPM)’s $1.08 trillion and $1.07 trillion at Wells Fargo (NYSE:WFC).

However, the Bank of America (NYSE:BAC) falls short. This is evident in their yield earning assets. Its third quarter earnings were only of 2.87% on average invested assets. Where as Well Fargo (NYSE:WFC) stood at 3.34% and a 3.58% for US Bancorp (NYSE:USB).

It seems that the Bank of America (NYSE:BAC) kept large shares for its asset earnings in low yield, but liquid forms for cash, government bonds and mortgage backed securities. It seems that the Bank of America (NYSE:BAC)’s net interest margin is lower than its commercial lenders, and stood at 2.4% by the end of September, whereas Wells Fargo (NYSE:WFC) is at 3.1% and US Bancorp (NYSE:USB) is 3.4%.

But a low net interest margin is expected of a firm that deals in both commercial and investment banking. Since investment banking produces noninterest income, coming through trading, advising on acquisitions and underwriting issuance of debt.

JP Morgan (NYSE:JPM) accounted for 54% of its revenue in noninterest income. It equals to around 2.6% earning assets against the 2.4% at the Bank of America (NYSE: BAC). According to these figures, one can easily conclude that the figures aren’t all that far apart. But JP Morgan (NYSE:JPM) spends less in terms of cost to produce a much higher fee based revenue.

The Bank of America (NYSE:BAC)’s main subsidiary costs were 1.64% of the average assets in the third quarter which was better than JP Morgan (NYSE:JPM)’s 1.68%. But once the overhead expenses are calculated, the figures fall down to the former at 0.97% and later at 0.60%.

Further analysis into the matter reveals that the Bank of America (NYSE:BAC) generates less net interest income than its competitors. It seems like the North Carolina bank spends more to produce less noninterest income compared to its competitors. To make the situation even worse for the Bank, it seems that the investment banking activities have a high operating cost for personnel expenses compared to other lenders.

To conclude, it seems like the Bank of America (NYSE:BAC) has brought onto itself more failure through its synergy with Merrill Lynch than success. The balance sheet no longer shows competitive figures to compare with commercial lenders like US Bancorp (NYSE:USB) and Wells Fargo (NYSE:WFC).