Bank of America released its fourth quarter results this week, and although revenues and profits declined compared to the same period last year, the company beat analyst expectations and has seen a significant digital boost during the COVID-19 pandemic.
CEO Brian Moynihan reported that Bank of America saw digital penetration and engagement increase across the business, including both consumer and wealth segments. The trend is one we have seen across a number of service sectors since the onset of the novel Coronavirus, as consumers and businesses shift their activities from physical to digital interactions where possible.
Bank of America is one of the world's leading financial institutions, serving individual consumers, small and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services.
The company serves approximately 66 million consumer and small business clients with approximately 4,300 retail financial centres.
However, the bank hasn't been able to avoid the impact of COVID-19 entirely, as it reported revenue of $20.1 billion for the quarter - down 10% on the same period last year. Profit also fell by 28% to $5.47 billion. Overall though, the market wasn't too unhappy with the performance and Bank of America shares fell less than 1%.
Commenting on the results, CEO Moynihan said:
In summary, it was a good year given the circumstance of the health crisis and the impact on the economy and the markets around the world. I want to thank my teammates for the hard work they did to serve our clients, to serve our communities and to help each other.
As we begin the New Year, let's turn to the economy - and what we see is the continued recovery occurring. Consumer spending by our clients and asset quality continue to improve. Our companies are highly liquid and generally in pretty good shape except of course for those industries that are most hard hit by COVID.
As we all know there's one priority and that's to get everyone vaccinated so the healthcare crisis is behind us and therefore the economy can regain its strength. Our research team has just this past week upgraded the 2021 forecast. And their view is that U.S. GDP growth will be around 5% and global forecast for growth is 5.4%.
Moynihan made a direct correlation between the COVID-19 and the Bank of America's surge in digital engagement during 2020. For example, the bank's full year cash and check transaction volume fell to its lowest level on record, down 21%, as people and businesses moved to digital card-based payments.
Bank of America isn't seeing customers sign up to digital tools and then revert back to in-person activity, noted Moynihan. Rather where digital sign up occurs, those customers are remaining digitally active. He said:
Another important consumer objective has been the focus on digital banking. Digital engagement expanded throughout all our businesses through the year. 69% of our consumer and wealth management households are now digitally active not just enrolled, but active. That's up a couple hundred basis points in this deep penetration of the customer base.
These clients signed in 9 billion times this year representing double-digit growth. And they aren't just signing in for transactions or looking at their balances they are also buying things. 42% of the sales this year were digital sales. It expanded in areas of checking account sales, auto sales and mortgage loan sales.
Bank of America's digital assistant, Erica, also saw its user base increase - with growth of 67% to 17 million. Clients spent a total of 1.4 million hours interacting with Erica. In addition, the company's money transfer app, Zelle, saw payments increase by 80% year-over-year. Moynihan notes that this is helping with the bank's costs. He said:
There's a lot of growth ahead here and it helps us move from higher-cost to lower-cost means.
CashPro app sign-ins increased by 40%, CashPro payment approvals were up 8% to $174 billion, and the use of digital wallets for commercial cards was up 18% year over year too.
But it's not just the retail/consumer side of the bank that saw a digital boon. Merrill Lynch's digital adoption soared too, with a 43% increase in clients making check deposits digitally. Moynihan said:
Given the nature of clients and staff working-from-home, the digital capabilities we had allowed, our client development to continue.
But importantly ,remember, we are investing $3.5 billion in technology next year. So you'll see sort of a change in the COVID cost coming down hopefully as we move through the year.
As noted above, the rise in digital growth at Bank of America is consistent with the trend we are seeing across services businesses, as customers look for alternative ways to engage. The investments in digital prior to the COVID-19 pandemic have served Bank of America well to take advantage of the shift - but as CEO Moynihan notes, there is still plenty of room for investment and growth. Similarly, it's worth checking out our story on how Bank of America built COVID-19 dashboards with Tableau to help the company respond to the crisis.