Bank of America’s digital platforms continue to thrive despite stock market volatility

Derek du Preez Profile picture for user ddpreez July 19, 2022 Audio mode
Summary:
Bank of America’s income slightly missed analyst expectations, but what’s clear is that the bank’s digital investments are continuing to pay off.

Image of Bank of America logo
(Image sourced via Bank of America )

Bank of America, one of the largest financial institutions in North America, is continuing to sustain growth across its digital platforms, as consumers and wealth management clients shift away from more traditional banking means. 

The digital gains were a highlight in the Bank’s results this week, with revenue and income slightly missing analyst expectations, as stock market volatility continues to impact companies across the financial sector. JPMorgan and Morgan Stanley both recently also delivered flat numbers, as the market sell-off continues to add pressure. 

However, as we highlighted last quarter, Bank of America’s technology budget has increased to $3.6 billion and it is focusing heavily on digital channels. In fact, earlier this year the Bank said that it now sells more digitally than in person, a trend it hopes to capitalize on. 

Commenting on its Q2 2022 earnings, Bank of America CEO Brian Moynihan, said: 

The organic growth engine at Bank of America that existed pre-pandemic is back in full place here. And you can see that in the second quarter…this reflects in net new checking account openings, net new consumer investment accounts, net new household growth in Wealth Management, very strong loan growth across all products and good performance by Global Markets and investment banking teams, even given a quarter with volatile capital markets.

Our expense management continues strong, and it benefits by being the best digital banking platform in the world. Once again, we drove more users, saw more log-ins and usage, and that generated 20% more sales from the platform compared to last year.

The key numbers this quarter are: 

  • Net income of $6.2 billion. Pre-tax income declined 14% to $6.9 billion. 

  • Revenue increased 6% to $22.7 billion

However, highlighting the Bank’s digital performance, CEO Moynihan said: 

Our Consumer Banking segment continued to see good momentum as we grew loans at the fastest quarterly pace in nearly 3 years. We added more than 240,000 net new checking accounts in the quarter, in the second quarter alone. We opened new financial centers and renovated others and deepened digital engagement with both consumer and small business clients.

Overall, digital sales continue to grow, up 20%. Digital choice for payments continues to grow. Sale transactions continue to outdistance checks written…and the gap continues to widen. Erica [Bank of America’s virtual assistant app] is approaching 1 billion interactions since we started with it. Clients have filled out 8 million life plans, enhancing our asset growth and account retention. That's one of the fastest-growing product implementations we've had.

You'll note the continued shift in how people spend money. The check and cash volumes continue to come down and are replaced by digital alternatives. This continues to help with our cost structure.

Digital numbers

Bank of America also breaks down its digital numbers, where for global banking it highlighted the following for the 12 months up to Q2 2022:

  • 76% digitally active clients across commercial, corporate and business banking (up 192 bps year-over-year)

  • 1.8 million sign-ins on the CashPro app (up 46% year-over-year)

  • $537 billion payment approvals on the CashPro App (up 120% year-over-year)

  • 1.6 million global payments to digital wallets (up 27% year-over-year)

  • 87,000 global digital wallet account enrolments for commercial cards (up 99% year-over-year)

And on the global wealth and investment management side, for the 12 months up to Q2 2022, Bank of America saw:

  • 81% of Merrill households digitally active across the enterprise (up from 79% in Q2 2021)

  • 56% mobile engagement (up 286 bps year-over-year)

  • Merrill advisors received 800,000 client insights from Erica 

  • 77% Merrill households enrolled in eDelivery

  • 160,000 mobile check deposits, up 2% year-over-year

Alastair Borthwick, Chief Financial Officer at Bank of America, also highlighted how digital capabilities are allowing the bank to save on costs, invest and attract new clients. He said: 

Our 43 million active digital users signed on this quarter a record 2.8 billion times, with our Erica users up 30% year-over-year, and we captured over 123 million total client interactions in the second quarter alone.

And as revenue grew, we improved the efficiency ratio to 54%. Reduced costs associated with continued shifts in client behavior to digital engagement is also allowing us to invest in higher marketing, more technology and higher wages for our people. We also continued our investment in financial centers, opening another 19 in the quarter while we renovated 157 more.

Our talented group of financial advisers, coupled with powerful digital capabilities, allowed modern Merrill to gain nearly 4,500 net new households. We also gained 650 more in the Private Bank this quarter. And that's a very solid showing by both, given the complexities of serving our clients in challenging market conditions over the past 90 days

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