Bank of America seeks growth outside home market amid global banking turmoil

BANK of America (BOA) is one of the three largest banks in the United States, ranking second by assets after JPMorgan Chase (JPM) and ahead of Citigroup. It is also one of the largest banks in the world.

Yet, its operations outside of North America form a relatively small portion of its overall earnings profile. They brought in a profit of US$2.83 billion in 2022, on a revenue of US$12 billion. In comparison, BOA’s total net income in 2022 was US$27.5 billion and revenue was US$94.95 billion.

But the bank has clear global ambitions. Its international profit was US$2.58 billion in 2021 and US$748 million in 2020, demonstrating significant growth over a two-year period.

As its American peers get busy with other matters – JPM has just agreed to buy failed bank First Republic, and Citi is paring its global retail-banking network – BOA wants to do more business in this part of the world.

“When we do really well (in Asia), sometimes the benefit is actually in the US,” said Bernard Mensah, international president of BOA, in an interview with The Business Times. “What we try and do is really make sure that we are truly global for our clients.”

As customers reassess their banking relationships in the wake of several high-profile bank blow ups, Mensah said he believes BOA can shine: “Clients recognise the fact that there are only a few institutions like ours that can make the investments to remain committed over the long term, and at a larger scale.”

Commenting on the bank collapses this year, Mensah said BOA’s client selection strategy has kept it resilient and allowed it to continue posting good results. This comes even as its share price has fallen 23 per cent in the past year, closing at US$27.09 on Friday (May 12).

The bank posted a 15 per cent increase in net income to US$8.2 billion for its first quarter ended March 2023.

Revenue grew 13 per cent to US$26.3 billion, led by growth in its net interest income due to higher interest rates and solid loan growth.

Net profit for BOA’s global banking segment grew 49 per cent to US$2.5 billion, while the global markets segment’s net profit rose 6 per cent to US$1.7 billion. The bank’s international business contributes around 40 per cent of these segments.

Mensah said BOA has remained relevant in this period by catering to clients’ needs as they considered the impact of the bank collapses. “Given our size, scale and knowledge base across Europe, the Middle East, Africa, Asia-Pacific and Latin America, (what) we bring to our clients was quite relevant in a lot of these dialogues, in different ways.”

While the banking turmoil might have shaken up some confidence in the industry, he said the sector remains resilient: “It’s well managed, and it’s well regulated, particularly since the last financial crisis in 2008.”

He added that the banking sector turbulence had limited impact on BOA’s international business.

Mensah also said he sees “tremendous” growth opportunities in South-east Asia. Singapore is a strategically important hub for the bank – from a time-zone perspective, and due to its prospects of being a platform to support global activities.

BOA’s Singapore office – which is one of the bank’s largest regional centres and largest hubs outside the US – has teams that serve clients across Asia, and is also one of three global command centres of the bank.

He is keen to capture opportunities from a rise in the number of young entrepreneurs and young managers with pools of capital. “These are people who have a different risk appetite; they’re a little bit more efficient at finding opportunities,” he said.

There is also a “tremendous amount” of innovative and fast-growing companies in the region, which Mensah hopes to engage.

BOA may face some tough competition, though, not least from Singapore’s local banks. UOB, for instance, has built a significant presence in South-east Asia’s markets and is helping many businesses tap China-Asean trade flows.

In fact, most of the largest banks in the Asean region have already developed and rolled out Asean-focused strategies. Mensah will have his hands full.