How Banks Have Gone Through Cliffhanging
Josef Ray is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
World market trends tend to shift without notice and the company or business who can ride the wave of shifting demands and the opposing winds contrary to growth will eventually emerge from the crisis better equipped to face the adversities that lie in every business institution’s path.
In the recent crisis that has rocked the financial world, many banking institutions were hit hard. One of the hard-hit financial institutions that emerged from the rubble of the crisis was Bank of America (NYSE: BAC). Bank of America is one of the respected and largest banking institutions in both the United States and the world involved in lending operations, asset management and investment banking. And as every investor knows, BAC is one of “two of the most favored financial stocks,” the other being Citigroup (NYSE: C). Both companies are keen on taking steps to make sure that their financial strength is always going forward, having learned their lessons from the past recession and making sure they are not vulnerably exposed to future crises. In fact, Bank of America took advantage of the crisis by expanding its own market share through acquiring institutions like Merrill Lynch and Countrywide Financial, who were worse off than they were.
The sad fact about a take-over and acquisition in business and financial institutions is that they are never without litigations and legal settlements. Settlements are better than lawsuits and both are being taken in stride by every banking institution, for it is now naturally a part of being what they are especially in this highly litigious society we live in. I don’t think any banking institution is ever free of menacing lawsuits either against others. Undeniably, legal lawsuits affect a company’s potential growth and earnings and are a company’s last resort, not its first option. Bank of America has its share of this in the recent news about its deal with the Justice Department to compensate minority borrowers $335 million for alleged discrimination.
Rising Up by Slimming Down
Growth implies hiring more people, it is true. But does the opposite, which is downsizing, reflects that a business isn’t growing? Not necessarily so. Most often, these moves are made to reduce expenses and increase revenue. Lately, Bank of America announced that it intends to close four more of its branches in Massachusetts having already closed down more than a dozen in the previous years. In the same manner, Citigroup Inc will also eliminate 11,000 jobs worldwide by closing some of its overseas operations in order to save on its expenses.
Not only are BAC and Citigroup doing this but also is JPMorgan Chase & Co. (NYSE: JPM), also a global leader in the financial field. Despite having an asset base of $2.3 trillion, Zacks Equity Research found that JPMorgan has plans of closing its retail banking operations in Malaysia. They say that JPMorgan is “aiming to limit its retail banking operations worldwide with a major focus on domestic markets.” Closing down some operations and branches is just a means of continuing upward strategies. It’s all really “different strokes for different folks,” the bottom line of which is to limit expenses and raise revenues.
Standing Above the Cliff
Despite all the sometimes harrowing challenges that these financial institutions are battling, they thrive and succeed. In fact, Bank of America’s stock was the biggest gainer on the Dow Jones industrial average in 2012 with its shares doubling within the year. This banking institution has been a prestigious bank before and after the financial crisis and their staying power is without a doubt, their greatest asset.
JosefRayDagatan has no position in any stocks mentioned. The Motley Fool owns shares of Bank of America Corp, Citigroup Inc , and JPMorgan Chase & Co.. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!