Bank of America is one of the oldest and largest banks in the US. In fact, it is the second-largest banking institution after JPMorgan Chase. Bank of America is also the eighth-largest bank in the world. It has branches all over the US and services almost 11% of all American bank deposits. But that’s not all. Bank of America also has sizeable wealth management and investment banking operations.
The Best Bank Stocks To Buy 2020 Have Investment Banking Operations
The investment banking segment has proven to be a crucial counterbalance to the economic hit endured by the commercial banking sector as a whole. As job losses mounted and lockdowns occurred, the borrower’s ability to borrow or repay existing loans fell significantly. In such times, the trading income and investment banking activity brought in revenues during a volatile period. This balance between commercial banking and other financial activities makes Bank of America one of the best bank stocks to buy 2020. Other banking stocks that have done well are JPMorgan Chase, Goldman Sachs, and Morgan Stanely. All of these banks have investment banking operations.
Bank of America Moats
Bank of America has two key economic moats. The first is the cost advantage and the second is switching costs. The cost advantage comes largely from the fact that the bank has a high market share of deposits from customers via checking and saving accounts. These deposits come with low interest rates and are cheap sources of “raw material” for the bank. The switching costs stem from the fact that Bank of America has an extensive network of branches throughout the US. Customers going anywhere in the country will have access to a Bank of America branch. Therefore, switching over to another bank wouldn’t necessarily improve access for them. Bank of America is also one of the largest issuers of credit and debit cards and customers using more Bank of America products will face even higher switching costs.