Awards for Excellence 2002
Bank of America
At a financial services conference in March an investor asked Ken Lewis whether he was considering making any acquisitions. Lewis, who had become CEO 11 months previously, gave a quick-witted response: “We’ve just eaten. We’re not hungry.”
That was just what investors wanted to hear. Today’s Bank of America is the result of a series of smaller acquisitions and larger mergers undertaken in the 1990s by the old NationsBank, under former CEO Hugh McColl. The emphasis was on empire building, with three big acquisitions completed in the space of two years: Boatman’s Bancshares in 1996, Barnett Banks in 1997 and BankAmerica in 1998. The bank also ventured into full-service investment banking by acquiring Montgomery Securities in 1997; within two years most of its rainmakers had left. Successful integration and customer service came a poor second to the pursuit of size. “From late 1998 to 2000 we were working on putting the banks together,” says Lewis. “Then we made the decision to be customer-centric.” As a result, says Prudential Securities analyst Mike Mayo, “the company destroyed more shareholder value [economic value analysis] between late 1998 and early 2001 than any other US bank”.
Much has changed in the past 18 months. “Under the umbrella of focus and discipline we have put the customer at the centre of what we do,” explains Lewis. Bank of America boasts the best-performing share price over its peers since the start of 2001.
On the consumer side, which accounts for two-thirds of the banks profits, “brand awareness has improved, customer satisfaction scores are up, and turnover rates are falling,” says Lewis.
Its wholesale activities have also improved markedly. The investment bank has a great deal of momentum, with its share of investment-banking fees in the US rising from 3.9% in 1999 to 5.9% last year. That figure so far this year stands at 6.4%. The chief driver of this growth is its fixed-income business, where the bank has successfully used its position as a top-three arranger of syndicated lending to push into the high-grade debt markets, where it finished as a top-four underwriter in the US last year. High-yield has not been as successful, though it is growing steadily.
Though not a top-tier equities or M&A player, the firm is rising up the league tables. It’s still building those franchises at a time when competitors are scaling back and salary expectations are less.
As to the future, aside from continuing to focus on customer service Lewis points to three areas which he’d like to grow. “We want to add to our branch distribution system, adding 200 branches a year for the next several years, starting in 2003,” he says. “We’d also like to increase the number of private-client brokers. We have just under 1,000 now, but could easily use 5,000. But we’ll grow that carefully. And we’re always looking for opportunities in the investment bank, especially in Europe where we’d like to add 200 people or so each year.”
Antony Currie
