Share the article
twitter-iconcopy-link-iconprint-icon
share-icon
AmericasJuly 1 2007

Bank of America moves into pole position despite domestic focus

Bank of America has stolen the crown of Citigroup. The bank, headquartered in Charlotte, North Carolina, motored ahead of the erstwhile number one bank in our list and is now the largest bank in North America and in the world, with Tier 1 capital of $91,065m.
Share the article
twitter-iconcopy-link-iconprint-icon
share-icon

Remarkably, Bank of America has accomplished this without making any major acquisitions abroad. It remains a US-focused bank, despite the persistent rumours that it is set to take over, among others, London-based Barclays Bank. Investment bankers knocking at the bank’s doors expect that to change – the bank is near the limit of its permitted deposit market share in the US.

However, at the top of its to-do list is to complete its acquisition of Chicago-based LaSalle Bank from ABN AMRO – although the legal battle looks as though it is set to drag on amid rival bids for the Dutch bank and could well not happen.

The boost to Bank of America’s Tier 1 capital comes from steady profit growth as well as acquisitions. Early in 2006, it formally acquired MBNA Corporation, making it the largest credit card issuer in the US. This year, it teamed up with a consortium and bought a 24.9% stake in Sallie Mae, the US’s largest lender to college students. It also holds a stake in China Construction Bank.

Citigroup, on the other hand, has been attacked over its high cost base – its cost/income ratio in the first quarter of 2007 was 61% – and lacklustre share price.

Profits on capital of the US banks in the Top 1000 listing decreased to 21.95% in 2006 from 23.15% a year earlier as the economy started to slow and the housing market became more problematic. In contrast, profits on capital of the Canadian banks in the listing rose to 22.71% in 2006 from 19.31% a year earlier.

With assets of $9,826,381m, US banks in the Top 1000 are responsible for 13% of the total assets, compared with the EU’s 53%, and their return on assets was 1.89%, compared with the EU’s 0.82%.

In the first quarter of 2007, many of the US banks shrugged off the slowdown and posted higher profits. If the economy continues to slow, however, that sort of a performance may prove difficult to sustain.TOP 25: NORTH AMERICA ($M)

cp/34/p158tier1.jpg
cp/34/p158pretax.jpg

Was this article helpful?

Thank you for your feedback!