What Bank of America actually does

Bank of America is one of the largest banks in the United States. It serves households and small businesses through branches and apps, manages wealth through Merrill, lends to companies and runs a large trading and investment banking business.

How the business makes money

The biggest source of income is net interest income: the difference between what the bank earns on loans and securities and what it pays on deposits. Fees from cards, wealth management, advice and trading add to that. Results move with interest rates and the health of the economy.

The dividend story

During the 2008 financial crisis the bank cut its dividend to almost nothing. It has rebuilt it since, and regulators now test its capital every year in stress tests, which decide how much it may return to shareholders. That history is a useful reminder that bank dividends are not guaranteed.

What to keep an eye on

  • Interest rates. Lower or falling rates can squeeze lending income.
  • Credit losses. Recessions raise unpaid loans.
  • Regulation. Capital rules limit how much can be paid out.
  • Bond holdings. Rising rates reduce the value of securities on the books.

Quick take

Bank of America is a diversified bank with a recovering and growing dividend, but it is cyclical and tied to the economy.