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Is bank of america a safe bank?

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Answer # 1 #

Over the last few months, we have written several articles outlining our views of banks in general. We explained the relationship that you, as a depositor, have with your bank is in line with a debtor/creditor relationship. This places you in a precarious position should the bank encounter financial or liquidity issues. Moreover, we also outlined why reliance on the FDIC may not be wholly advisable. And, finally, we explained that the next time there is a financial meltdown, your deposits may be turned into equity to assist the bank in reorganizing.

So, at the end of the day, it behooves you, as a depositor, to seek out the strongest banks you can find, and to avoid banks which have questionable stability.

While we outlined in our last articles the potential pitfalls we foresee with regard to various banks in the foreseeable future, we have not provided you with a deeper understanding as to why we see the larger banks as having questionable stability. Over the coming months, we intend to publish articles outlining our views on this matter.

First, we want to explain the process with which we review the stability of a bank.

We focus on 4 main categories which are crucial to any bank's operating performance. These are: 1) Balance Sheet Strength; 2) Margins & Cost Efficiency; 3) Asset Quality; 4) Capital & Profitability. Each of these 4 categories is divided into 5 subcategories, and then a score ranging from 1-5 is assigned for each of these 20 sub-categories:

Afterwards, we add up all the scores to get our total rating score. To make our analysis objective and straightforward, all the scores are equally weighted. As a result, an ideal bank gets 100 points, an average one 60 points, and a bad one 20 points.

If you would like to read more detail on our process for evaluating a bank, feel free to read it here:

Our Methodology & Ranking System: Banks - SaferBankingResearch

But, there are also certain "gate-keeping" issues which a bank must overcome before we even score that particular bank. And, many banks present "red flags," which cause us to shy away from even considering them in our ranking system.

As mentioned before, it is difficult to overestimate the importance of a deeper analysis when it comes to choosing a really strong and safe bank. There are quite a lot of red flags to which many retail depositors may not pay attention, especially in a stable market environment. However, those red flags are likely to lead to major issues in a volatile environment. Below we highlight some of the key issues that we are currently seeing when we take a closer look at Bank of America (BAC).

Bank of America was ranked #1 in U.S. retail deposit market share as of the end of 1H21, according to the FDIC. In our view, this is due to the fact that the bank has historically had a strong franchise thanks to its brand and marketing efforts. As a result, many customers still think that BAC is the strongest credit institution from a retail depositor perspective as well. However, a closer look at the bank's financial statements reveals several factors that are very likely to become significant issues in a systemic crisis. In this article, we would like to highlight some of these issues we believe BAC's clients should be aware of in order to be well prepared for a potential bear market and a recession.

In its 2Q22 earnings release, BAC mentioned that its loan portfolio has less inherent risk now compared to YE2009 due to less exposure to unsecured consumer lending. Indeed, the bank's portfolio of credit consumer cards has fallen by 48% since 4Q09.

Company data

However, if we take a look at the bank's latest 10-Q form, we will see that non-mortgage retail lending (excluding home equity lines of credit) correspond to 19% of BAC's total loan book.

Company Data

As we said in our previous articles on Citigroup and JPMorgan, unsecured consumer loans are one of the riskiest business segments for a bank in a volatile environment, as provisioning charges on these loans could increase dramatically, and, as a result, a bank could face significant losses. The fact that BAC has still quite a risky and large unsecured consumer book has been once again shown in the recent Fed's stress tests, which we will discuss later.

Another important thing is that BAC decreased its residential mortgages portfolio from $257B as of YE2009 to $228B as of 1H22. While we do acknowledge that mortgages were one of the key reasons of the 2007-2008 financial crisis, we note that credit quality of U.S. residential mortgages has significantly improved since then due to stricter lending standards as the U.S. banks have increased requirements to many metrics (for example, to an LTV (loan-to-value ratio). Also, if we look at longer-term historical data, we will see that despite the 2007-2008 crisis, provisioning losses on mortgages were among the lowest compared to other lending segments. As such, we do not think that a decrease in U.S. residential mortgages should be viewed as a de-risking of BAC's book.

BAC also mentioned that one of the factors that supported the de-risking of its credit portfolio is an increase in commercial loans. As the chart below shows, there was indeed quite a large pick-up in commercial lending. Notably, non-U.S. commercial lending grew 4x times, from $29B as of YE2009 to $128B as of 1H22.

Company Data

While BAC views non-U.S. commercial lending as a less risky segment compared to U.S retail loans, we think it is far from certain that quality of non-U.S. commercial credits would be better than quality of U.S. mortgages in a recessionary scenario. The table below shows BAC's Top-20 countries exposure.

Company Data

As we can see, non-U.S. loan exposure is $170B, while total net exposure, which includes unfunded commitments and securities, is $298B. This corresponds to 28% of BAC's total retail deposits. The table above shows that top-3 countries are the U.K., Germany, and France. We currently see that while the global economy is still technically rising, both the British pound and the euro have been very weak against the dollar due to differences in the policy rates, inflation, and GDP growth between the U.S. and Europe. Those differences would very likely become larger in a global crisis scenario, and, as a result, the dollar would appreciate more against other global currencies. That would result in revenue pressure and asset quality issues for BAC's non-U.S. commercial credit book.

The table below demonstrates BAC's commercial credit exposure by industry. It might come as a surprise for many readers, but based on utilized loans, the top-3 industries are asset managers, real estate and finance companies.

Company Data

As history tells us, those industries would be among the most vulnerable ones from an asset quality perspective in a volatile environment. As a result, that would likely lead to losses for BAC in a crisis scenario.

The table below shows BAC's consolidated balance sheet.

Company Data

If we sum up federal funds sold and REPO securities, trading assets, derivatives, and debt securities, then the total amount of securities on BAC's balance sheet is $1,561B, which is more than half of the bank's total assets. By comparison, BAC's total loan book is $1,031B, and total retail deposits are $1,072B. Notably, BAC's share of securities is significantly above that of its peer group (U.S banks with total assets of more than $100B), which is 28%.

Below is a breakdown of BAC's debt securities, which were more than $900B as of the end of the first half of the year. As the table shows, there is significant exposure to mortgage-backed securities ($528B). This is by $300B higher than BAC's total mortgage loans of $228B.

Company Data

Bank of America Global Wealth & Investment Management (GWIM) consists of two primary businesses: Merrill Wealth Management (MWM) and Bank of America Private Bank (BAPB). According to the company, MWM's advisory business provides various investment services to retail clients with over $250K in total investable assets. Bank of America Private Bank provides wealth management solutions targeted to high net worth and ultra-high net worth clients.

This is one of the largest BAC's business segments as its revenue for 1H22 correspond to 24% of the group's total revenues, while its net income corresponds to 17% of the group's profit. We published a detailed report on BAC GWIM on our service, and if you are a client of BAC GWIM, you might want to read it to be aware of all the weaknesses of this business. In this article, we would like to mention the most important issues. First, BAC GWIM has a weak capital position, with an allocated capital-to-assets ratio of just a tad above of 4%. Second, the business has subpar operational efficiency with a cost-to-income ratio of as high as 72% for the first half of the year.

In June, the Fed published stress-test results for 33 U.S banks. As shown below, under the severely adverse scenario BAC posted a net loss of $45B (a net loss plus AOCI included in capital) or more than 25% of BAC's CET1 capital as of the end of 1H22. As we noted before in our articles, the Fed's assumptions for its severely adverse scenario are quite mild, in our view. In particular, Fed assumed a relatively short-lived market correction and a V-type recovery of both the markets and the global economy. However, even under these assumptions BAC loses a quarter of its CET1 capital.

The Fed

In contrast to BAC, our Top U.S 15-banks identified at Saferbankingresearch.com have a low-risk loan mix with minimal exposure to unsecured lending and non-U.S. lending, have very conservative securities books, which consist predominantly of U.S Treasuries and U.S municipal bonds, and do not have any derivatives on both their balance and their off-balance sheets. Moreover, BAC has more red flags, which we did not discuss in detail due to the limitations of the article, such as reliance on investment-banking revenues, the bank's off-balance sheet items and a potential increase in RWA (risk-weighted assets) in a volatile environment. However, all our Top-15 banks have been tested for these red flags to ensure their long-term stability.

This article, as well as Saferbankingresearch.com, was a combination of efforts between Avi Gilburt and Renaissance Research, who has been covering U.S., European, LatAm and CEEMEA banking stocks for more than 15 years.

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Daneel Amj
MODELER
Answer # 2 #

Bank of America offers a wide range of products you’d typically expect from any big bank including checking and savings accounts, CDs, credit cards, investments, and loans—home, auto, business, etc.

This article will give you a closer look at Bank of America, so you can make an informed decision. We’ll break down some of the different types of checking and savings accounts offered, give an overview of their fees and customer service, and then provide a comparison to other large banks along with pros and cons.

If you’re looking for a solid alternative for an international account, try Wise. With Wise multi-currency account, you can spend money abroad with no hidden fees and transfer funds at the mid-market rate.

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Under their Advantage Banking platform, Bank of America offers three key types of personal checking accounts. These accounts have subtle differences covered below, but they all have some key service offerings across the board such as:³

Advantage Plus Checking is Bank of America’s standard checking account offered at a monthly fee of $12 with a $100 minimum deposit to open. There’s no interest offered on this type of account.⁴

The account also offers some additional services like the option to purchase paper checks and set up overdraft protection.

Bank of America markets their Advantage SafeBalance account to students as it has some key advantages for younger individuals.

It’s only a $25 minimum deposit to open an account, and the account has a monthly maintenance fee of $4.95 that can be waived if you’re under 24 and can prove enrollment in school or if you’re a Preferred Rewards Program member.⁴

This account also has some other traits to help people stay within their budget, as these accounts are checkless and offer no overdraft protection. So if you don’t have the funds in your account, the card will decline.

There is no interest earned through this account.

The Advantage Relationship checking account is Bank of America’s interest bearing account that also waives some fees on some services like domestic wire transfers, stop payments, paper checks, and transfer fees on overdraft protection from linked accounts.

The account has a monthly fee of $25 that can be waived with a combined $10,000 balance of all of your accounts through Bank of America—including checking, savings, IRAs, CDs, or linked Merrill Lynch investment accounts—or if you’re a Preferred Rewards member.⁴

All rates verified on 7/15/2021. APY rates vary by location, but these are rates for NYC based on the account balance.

Bank of America offers only one savings account option, and it requires a $100 minimum deposit to open. But it comes with some key benefits that allow you to increase the interest rates and balance of the account.⁷

All rates verified on 7/15/2021

Bank of America offers a Standard Term CD and a Featured CD that differ in their minimum deposit amounts, terms, and APY.

The Featured CD has a $10,000 minimum opening deposit with terms ranging from 7 to 27 months and a 0.05% APY. With this account, you have a higher minimum deposit than a Standard Term CD account and fewer terms to choose from, but you’ll net a higher APY.

The Standard Term CD has a minimum opening deposit of $1,000 with terms ranging from 28 days to 10 years and a 0.03% APY. You’ll net a lower APY with this CD, but it doesn’t take as much to get going. Plus, you have more term options.

With both types of CDs—as with most CDs out there—you cannot add additional funds to the account once it’s opened, and there are penalties for withdrawing your money early.

All rates verified on 7/15/2021

Overall, the Bank of America customer experience is like most modern banks you find today. The bank offers online banking with secure login where you can take care of most of your banking needs like credit card and loan approval, transfers, and bill pay.

They also offer customer service in-person, by phone, or online.

The fastest way to get assistance is through their online platforms via chat on their website or mobile application or through messaging on Facebook or Twitter. You can also call their customer service line at 1-800-432-1000 from 8 a.m. to 11 p.m. EST Monday - Friday and from 8 a.m. to 8 p.m. EST on Saturday and Sunday.

But if you need direct assistance, it’s easy to schedule an appointment or walk-in to any of their over 4,300 branch locations. There are also 17,000 ATMs where you can handle a lot of banking needs as well.

To start, overdraft protection and fees are not applicable if you have an Advantage SafeBalance account, as the service is not available with this type of account.

Otherwise, overdraft fees at Bank of America are $35 for each item over $1.00. That means you’ll be charged every time you make a debit transaction—use your debit card, clear a check, or make an auto draft payment—that is over $1.00 in value or overdraws your account over $1.00.⁴

The bank does offer some overdraft protection services by linking other savings or credit card accounts to your checking account to cover overdrawn amounts. But they’ll still charge a $12 transfer fee and pull at least $100 from the linked account.⁴

Looking at checking accounts from some of Bank of America’s competition, it’s easy to see they’re on par with other big banks.

For example, Chase Bank—the largest bank in America in terms of assets²—also offers three checking account types with monthly fees at $25, $12, and $4.95, and only the Premier Plus checking account bears interest. The accounts have similar ATM and overdraft fees as well.

They include most—if not all—of the same features. And with 4,700 branch locations and 16,000 ATMs, you also won’t have trouble accessing your accounts in-person.⁹

US Bank also offers 3 types of checking accounts with monthly fees at $6.95, $14.95, and $24.95, and the accounts offer most of the same features and fees. They also have comparable numbers on their branch locations.¹⁰

However, there are some new online banking options out there that offer highly competitive perks.

Chime is a completely online bank—so no branch locations—that offers access to over 60,000 ATMs with no fees through their partnership with Moneypass. You can open an account through Chime with no minimum deposit, and there’s no monthly fees or minimums on the account.¹¹

Another perk is that Chime automatically rounds up your purchases and puts them into a high-yield savings account—like Bank of America’s Keep the Change program. Also, if you qualify, you can enroll in their SpotMe program that offers overdrafts up to $200 with no fees.¹²

All rates verified on 7/15/2021

Whether Bank of America is good or not is completely based on your needs. They have a lot of branches and ATMs out there, so you’ll have access to your money and customer service nearly anywhere in the US.

If you’re able to qualify for their Preferred Rewards program—minimum $20,000 combined total in all accounts—you’ll have access to higher interest rates, discounted loan interest rates, and extra perks on your credit cards. Those rates are well worth it if you have the funds.

Bank of America also offers a low minimum deposit to open a checking account, so it’s easy to switch over if you want. And they’re a well established bank with a variety of investment and lending options.

On the other side, their monthly account fees can be difficult for some to have waived, and their savings and CD rates are on the lower side unless you can qualify for Preferred Rewards.

Also, they charge various wire transfer fees for incoming and outgoing international wire transfers.⁴

Many of the fees can be waived or discounted with a Preferred Rewards membership, but they can rack up quickly if you travel or do business overseas.

If you want to save money on your international transfers and avoid international transaction fees, Wise can be a great option. With Wise, you can always wire money fast and at the mid-market rate. Plus, you’ll never get hit with currency conversion upcharges and foreign transaction fees. Transfer money up to 7x cheaper with Wise!

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Don't just take our word for it – check how much you could save here:

According to Trustpilot (a consumer review website) US Bank has a score of 1.3 out of 5 stars on where most of the feedback seem to be revolving around customer service.¹⁵ This is a exactly the same score Chase also received on the website.¹⁶

But, ultimately, this is for you to decide. Here’s our review of Chase Bank, so you can have an informed opinion.

Bank of America is the second-largest bank in America in terms of assets, and they’re FDIC insured up to $250,000 per depositor. They offer fraud protection and other security features like third-party access reviews and customized reviews, so you can keep an eye on your accounts. Overall, Bank of America is a safe place to deposit your money.

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Antonia Ellen
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Answer # 3 #

Bank of America is a full-service national bank with roots dating back 240 years. It’s the second largest in the U.S. by assets and offers in-person banking through roughly 4,300 financial centers across the country. BofA also maintains a strong digital presence through its highly rated mobile app and online banking platform. Along with personal banking products, Bank of America offers business and commercial banking products and services.

Bank of America offers three versions of its Advantage checking account. All three accounts come with a complimentary debit card.

Bank of America Advantage SafeBalance Banking® is a basic checking account. It only requires a $25 minimum deposit with a $4.95 monthly maintenance fee. The fee is waived for Preferred Rewards members and select students under 24 years of age. SafeBalance accounts aren’t eligible for overdraft protection. Transactions are declined or returned unpaid when you don’t have enough funds in your account. There’s also no option to buy paper checks.

Bank of America Advantage Plus Banking® features a $12 monthly service fee monthly maintenance fee and options for adding overdraft protection and paper checks. A $100 minimum deposit is required to open an Advantage Plus checking account. You can waive the fee by:

The fee is waived for select students under 24 years of age.

Bank of America Advantage Relationship Banking® also requires a minimum deposit and features a monthly fee. You can waive the fee two ways:

The account is interest-bearing but features low interest rates, especially compared to many online banks. Paper checks and overdraft protection are also available for Relationship Banking accounts.

One detail to note is that with Advantage Plus and Advantage Relationship Banking, Bank of America may charge a $35 fee up to four times daily if you don’t have enough money in your account to cover a check or other transaction.

Bank of America Advantage Savings is the bank’s main savings product. It takes a $100 minimum deposit to open this account. Advantage Savings accounts come with an $8 monthly maintenance fee. The fee is waived when you meet one of the following requirements:

There’s also a $10 fee for each withdrawal or transfer over the six monthly transactions allowed.

Currently, Advantage Savings accounts earn 0.01% APY on all balances. Bank of America Preferred Rewards members can earn up to 0.04% APY, depending on their rewards tier level.

Bank of America also offers two accounts for children—the Bank of America Minor Savings Account and the Bank of America Custodial UTMA Savings Account.

Minor Savings accounts are joint accounts owned by the child and parent or guardian. The account requires a $25 minimum deposit but has no fees and no minimum balance requirement. Children have access to their funds at any time. The account allows for automatic transfers from your other accounts if you want to build up your child’s savings.

Custodial UTMA Savings accounts work differently. The parent or guardian acts as the custodian for the child’s account. Minors can’t access funds until after they turn 18 years of age, so all transactions are at the parent’s discretion. Also, the account requires a $100 minimum deposit and carries an $8 monthly maintenance fee. The fee is waived by keeping a minimum daily balance of $500.

There are two options for certificates of deposit, or CDs, through Bank of America. Bank of America Featured Certificates of Deposit accounts require a $1,000 minimum deposit and come in five term lengths ranging from seven months to 37 months. Featured CDs earn between 0.05% to 3.75% depending on the term.

Bank of America Standard Term Certificates of Deposit offer even more flexibility with terms ranging from 28 days to 10 years. They also only require a $1,000 minimum deposit. All standard CD terms currently earn 0.03% APY. With so many term options available, Bank of America standard CDs are a great option if you want to build a CD ladder.

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Belle ijffx Sunder
TIME STUDY ENGINEER
Answer # 4 #

Yes, all Bank of America bank accounts are FDIC insured (FDIC #3510) up to $250,000 per depositor, for each account ownership category, in the event of a bank failure.

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Vasiliev fyimnlye Chantha
DENTAL LABORATORY TECHNICIAN APPRENTICE