The story
Founded by Amadeo Giannini in 1998, in San Francisco.1
Bank of America, Los Angeles, was founded in California in 1923, with San Francisco banker A.P. Giannini taking a minority position. In 1928, this entity was acquired by Giannini's Bank of Italy (founded in San Francisco, 1904), which took the Bank of America name two years later.
The eastern portion of the Bank of America franchise can be traced to 1784, when the Massachusetts Bank was chartered, the first federally chartered joint-stock owned bank in the United States and only the second bank to receive a charter in their country. This bank became FleetBoston, with which Bank of America merged in 2004. In 1874, Commercial National Bank was founded in Charlotte. That bank merged with American Trust Company in 1958 to form American Commercial Bank. Two years later, it became North Carolina National Bank when it merged with Security National Bank of Greensboro. In 1991, it merged with C&S/Sovran Corporation of Atlanta and Norfolk to form NationsBank.
The central portion of the franchise dates to 1910, when Commercial National Bank and Continental National Bank of Chicago merged to form Continental & Commercial National Bank, which evolved into Continental Illinois National Bank & Trust.
Early history
The history of Bank of America dates to October 17, 1904, when Amadeo Giannini founded the Bank of Italy in San Francisco. In 1922, the Bank of America, Los Angeles, was established with Giannini as a minority investor. The two banks merged in 1928 and, through further consolidations to become the largest banking institution in the country.
In 1928, Bank of Italy merged with Bank of America, Los Angeles. The following year, New York City investment bank, Blair & Co., merged with Bank of America. The Bank of Italy was renamed on November 3, 1930, to Bank of America National Trust and Savings Association, with Giannini and Monnette as co-chairs. By 1929, the bank had 453 banking offices in California with aggregate resources of over US$1.4 billion. Giannini sought to build a national bank, expanding into most of the western states, as well as into the insurance industry, under his holding company, Transamerica Corporation.
In 1953, regulators succeeded in forcing the separation of Transamerica Corporation and Bank of America under the Clayton Antitrust Act.
New technologies enabled the direct linking of credit cards with individual bank accounts, so that, in 1958, the bank introduced its BankAmericard, later renamed Visa, in 1977.
From February 1970 through September 1971, there were 66 attacks on Bank of America branches in California, including 53 bombings or fire-bombings, and 13 arson fires. There were "few injuries" and the property damage cost about $500,000, 80% of which was from the burning of the Isla Vista branch during a February 1970 riot.
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Expansion outside California
Following the passage of the Bank Holding Company Act of 1956 by the U.S. Congress, BankAmerica Corporation was established for the purpose of owning and operating Bank of America and its subsidiaries.
In 1983, Bank of America expanded outside California, through acquisition of Seafirst Corporation in Seattle and its wholly owned banking subsidiary, Seattle-First National Bank.
BankAmerica experienced huge losses in 1986 and 1987 due to the placement of a series of bad loans in the Third World. In 1992, the company acquired Security Pacific Corporation and its subsidiary Security Pacific National Bank in California and other banks in Arizona, Idaho, Oregon, and Washington, which Security Pacific had acquired in a series of acquisitions in the late 1980s. This represented, at the time, the largest bank acquisition in history.
The series of mergers helped BankAmerica Corporation to once again become the largest U.S. bank holding company in terms of deposits, but the company fell to second place in 1997 behind North Carolina's fast-growing NationsBank Corporation, and to third in 1998 behind First Union Corp.
On the capital markets side, the acquisition of Continental Illinois helped BankAmerica to build a leveraged finance origination- and distribution business, which allowed the firm's existing broker-dealer, BancAmerica Securities (originally named BA Securities), to become a full-service franchise. In addition, in 1997, BankAmerica acquired Robertson Stephens, a San Francisco–based investment bank specializing in high technology for $540 million. Robertson Stephens was integrated into BancAmerica Securities, and the combined subsidiary was renamed "BancAmerica Robertson Stephens".
Merger of NationsBank and BankAmerica, 1998
In 1997, BankAmerica lent investment management firm D. E. Shaw & Co. $1.4 billion to run various businesses for the bank. However, D.E. Shaw suffered significant losses during the 1998 Russian financial crisis. NationsBank of Charlotte acquired BankAmerica in 1998 in what was the largest bank acquisition in history at that time.
While NationsBank was the nominal survivor, the merged bank took the better-known name of Bank of America. Hence, the holding company was renamed Bank of America Corporation, while NationsBank, N.A., merged with Bank of America NT&SA to form Bank of America, N.A. as the remaining legal bank entity. The combined bank operates under Federal Charter 13044, which was granted to Giannini's Bank of Italy on March 1, 1927. However, the merged company was and still is headquartered in Charlotte, and retains NationsBank's pre-1998 stock price history. All U.S. Securities and Exchange Commission (SEC) filings before 1998 are listed under NationsBank, not Bank of America. NationsBank president, chairman, and CEO Hugh McColl took on the same roles with the merged company.
In 1998, Bank of America possessed combined assets of $570 billion, as well as 4,800 branches in 22 U.S. states. Despite the size of the two companies, federal regulators insisted only upon the divestiture of 13 branches in New Mexico, in towns that would be left with only a single bank following the combination. These branches were sold to BOK Financial Corporation, which operates them under the name "Bank of Albuquerque". The broker-dealer, NationsBanc Montgomery Securities, was named Banc of America Securities in 1998.
Banc of America Securities subsidiary
Banc of America Securities LLC (BAS) was the investment banking subsidiary of BoA from 1998 until BoA was merged with Merrill Lynch (2008). Headquartered in New York City, the company competed in both the domestic and international equity and investment banking markets. The company was a registered broker-dealer with the United States Securities and Exchange Commission (SEC) and was a member of the New York Stock Exchange and the National Association of Securities Dealers. The use of "Banc" in the BAS's name was indicative of the fact that the company was not a bank, and its deposits and other holdings were not insured by the Federal Deposit Insurance Corporation.
The subsidiary was founded in 1998 following a strategy pioneered by Citigroup that combines corporate lending with investment banking advice and services. During its years of operation, its strongest investment banking groups included high-yield debt underwriting and Leveraged Finance, in addition to industry coverage groups such as Healthcare, Consumer & Retail, Global Industries, Media & Telecom, Financial Institutions, Real Estate, and Gaming. It also had a massive equities and derivatives group led by John Sandelman. The group was later led by Chris Innes from 2002 to 2006 (in 2001, Innes was instrumental in a deal kept private that generated $100 million in fees for the bank adjusted ($US191 million in 2025), the largest equities derivative deal of all time. Innes had become one of the youngest managing directors in the firm's history at 27, and made Global Head of Equities, Derivatives, and Prime Brokerage at 32 before leaving to launch his own hedge fund. BAS also did a significant amount of work for Financial Sponsors, or private equity firms, often financing leveraged transactions. On the product side, the firm employed M&A senior bankers throughout the industry coverage groups. BAS also had a stand-alone Mergers & Acquisitions Group, consisting of bankers that transact M&A deals across all industries, as well as a Transaction Development Group, which aimed to identify and market transaction opportunities. The unit also had sizeable fixed income, currency, and commodities divisions.
During 2007–2008, BAS significantly downsized its international operations, eliminating a number of industry groups in Europe, as well as cutting numerous banking and sales and trading positions in North America and Asia prior to its merger with Merrill Lynch. On October 3, 2008, Bank of America announced that John Thain would lead the combined Bank of America/Merrill Lynch Global Corporate and Investment Banking enterprise. Thain was forced out by Bank of America Chairman Kenneth D. Lewis on January 22, 2009, because of the colossal losses visited on B of A due to its acquisition of Merrill Lynch. With Thain's departure, Brian Moynihan became president of Global Banking and Global Wealth and Investment Management. After the merger was closed, the SEC Registration of Banc of America Securities was terminated in January 2011.
BAS operated from a number of offices across the world, with major offices in New York, New York, Charlotte, North Carolina, Chicago, Illinois, San Francisco, California, Tokyo, Frankfurt, London, and Mumbai. The bulk of its investment banking operations eventually moved to the Bank of America Tower, a $1 billion, 58-story skyscraper, at Bryant Park in New York City that was completed in 2009. Prior to that, BAS in New York had offices in various locations due to the numerous mergers that had taken place over the previous decade, including space at 9 West 57th Street, 1 World Trade Center, 1633 Broadway, 40 East 52nd Street, 335 Madison Avenue, and 100 West 33rd Street.
2005 to 2007
In 2001, McColl stepped down as CEO and named Ken Lewis as his successor. In 2004, Bank of America announced it would purchase Boston-based bank FleetBoston Financial for $47 billion in cash and stock. By merging with Bank of America, all of its banks and branches were given the Bank of America logo. At the time of the merger, FleetBoston was the seventh-largest bank in the United States with $197 billion in assets, over 20 million customers, and revenue of $12 billion. Hundreds of FleetBoston workers lost their jobs or were demoted, according to The Boston Globe.
On June 30, 2005, Bank of America announced it would purchase credit card giant MBNA for $35 billion in cash and stock. The Federal Reserve Board gave final approval to the merger on December 15, 2005, and the merger closed on January 1, 2006. The acquisition of MBNA provided Bank of America with a leading domestic and foreign credit card issuer. The combined Bank of America Card Services organization, including the former MBNA, had more than 40 million U.S. accounts and nearly $140 billion in outstanding balances. Under Bank of America, the operation was renamed FIA Card Services.
Bank of America operated under the name BankBoston in many other Latin American countries, including Brazil. In May 2006, Bank of America and Banco Itaú (Investimentos Itaú S.A.) entered into an acquisition agreement, through which Itaú agreed to acquire BankBoston's operations in Brazil, and was granted an exclusive right to purchase Bank of America's operations in Chile and Uruguay, in exchange for Itaú shares. The deal was signed in August 2006.
Before the transaction, BankBoston's Brazilian operations included asset management, private banking, a credit card portfolio, and small, middle-market, and large corporate segments. It had 66 branches and 203,000 clients in Brazil. BankBoston in Chile had 44 branches and 58,000 clients, and in Uruguay, it had 15 branches. In addition, there was a credit card company, OCA, in Uruguay, which had 23 branches. BankBoston N.A. in Uruguay, together with OCA, jointly served 372,000 clients. While the BankBoston name and trademarks were not part of the transaction, as part of the sale agreement, they cannot be used by Bank of America in Brazil, Chile, or Uruguay following the transactions. Hence, the BankBoston name has disappeared from Brazil, Chile, and Uruguay. The Itaú stock received by Bank of America in the transactions has allowed Bank of America's stake in Itaú to reach 11.51%. Banco de Boston de Brazil had been founded in 1947.
On November 20, 2006, Bank of America announced the purchase of The United States Trust Company for $3.3 billion from the Charles Schwab Corporation. US Trust had about $100 billion of assets under management and over 150 years of experience. The deal closed July 1, 2007.
On September 14, 2007, Bank of America won approval from the Federal Reserve to acquire LaSalle Bank Corporation from ABN AMRO for $21 billion. With this purchase, Bank of America possessed $1.7 trillion in assets. A Dutch court blocked the sale until it was later approved in July. The acquisition was completed on October 1, 2007. Many of LaSalle's branches and offices had already taken over smaller regional banks within the previous decade, such as Lansing and Detroit-based Michigan National Bank. The acquisition also included the Chicago Marathon event, which ABN AMRO acquired in 1996. Bank of America took over the event starting with the 2007 race.
The deal increased Bank of America's presence in Illinois, Michigan, and Indiana by 411 branches, 17,000 commercial bank clients, 1.4 million retail customers, and 1,500 ATMs. Bank of America became the largest bank in the Chicago market with 197 offices and 14% of the deposit share, surpassing JPMorgan Chase.
LaSalle Bank and LaSalle Bank Midwest branches adopted the Bank of America name on May 5, 2008.
2007–2010 (Subprime mortgage crisis)
During the subprime mortgage crisis, the bank, under Ken Lewis, made two major acquisitions that would shape the future of the company for the next couple of years coming out of the crisis. Specifically, the bank was sued by many different parties and made to pay tens of billions of dollars.
Acquisition of Countrywide Financial
On August 23, 2007, the company announced a $2 billion repurchase agreement for Countrywide Financial. This purchase of preferred stock was arranged to provide a return on investment of 7.25% per annum and provided the option to purchase common stock at a price of $18 per share.
On January 11, 2008, Bank of America announced that it would buy Countrywide Financial for $4.1 billion. In March 2008, it was reported that the Federal Bureau of Investigation (FBI) was investigating Countrywide for possible fraud relating to home loans and mortgages. This news did not hinder the acquisition, which was completed in July 2008, giving the bank a substantial market share of the mortgage business, and access to Countrywide's resources for servicing mortgages. The acquisition was seen as preventing a potential bankruptcy for Countrywide. Countrywide, however, denied that it was close to bankruptcy. Countrywide provided mortgage servicing for nine million mortgages valued at $1.4 trillion as of December 31, 2007.
This purchase made Bank of America Corporation the leading mortgage originator and servicer in the U.S., controlling 20–25% of the home loan market. The deal was structured to merge Countrywide with the Red Oak Merger Corporation, which Bank of America created as an independent subsidiary. It has been suggested that the deal was structured this way to prevent a potential bankruptcy stemming from large losses in Countrywide, hurting the parent organization by keeping Countrywide's bankruptcy remote. Countrywide Financial has changed its name to Bank of America Home Loans.
In December 2011, the Justice Department announced a $335 million settlement with Bank of America over discriminatory lending practices at Countrywide Financial. Attorney General Eric Holder said a federal probe found discrimination against qualified African-American and Latino borrowers from 2004 to 2008. He said that minority borrowers who qualified for prime loans were steered into higher-interest-rate subprime loans.
Acquisition of Merrill Lynch
On September 14, 2008, Bank of America announced its intention to purchase Merrill Lynch & Co., Inc. in an all-stock deal worth approximately $50 billion. Merrill Lynch was at the time within days of collapse, and the acquisition effectively saved Merrill from bankruptcy. Around the same time Bank of America was reportedly also in talks to purchase Lehman Brothers, however a lack of government guarantees caused the bank to abandon talks with Lehman. Lehman Brothers filed for bankruptcy the same day Bank of America announced its plans to acquire Merrill Lynch. This acquisition made Bank of America the largest financial services company in the world. Temasek Holdings, the largest shareholder of Merrill Lynch & Co., Inc., briefly became one of the largest shareholders of Bank of America, with a 3% stake. However, taking a loss Reuters estimated at $3 billion, the Singapore sovereign wealth fund sold its whole stake in Bank of America in the first quarter of 2009.
Shareholders of both companies approved the acquisition on December 5, 2008, and the deal closed January 1, 2009. Bank of America had planned to retain various members of the then Merrill Lynch's CEO, John Thain's management team after the merger. However, after Thain was removed from his position, most of his allies left. The departure of Nelson Chai, who had been named Asia-Pacific president, left just one of Thain's hires in place: Tom Montag, head of sales and trading.
The bank, in its January 16, 2009, earnings release, revealed massive losses at Merrill Lynch in the fourth quarter, which necessitated an infusion of money that had previously been negotiated with the government as part of the government-persuaded deal for the bank to acquire Merrill. Merrill recorded an operating loss of $21.5 billion in the quarter, mainly in its sales and trading operations, led by Tom Montag. The bank also disclosed it tried to abandon the deal in December after the extent of Merrill's trading losses surfaced, but was compelled to complete the merger by the U.S. government. The bank's stock price sank to $7.18, its lowest level in 17 years, after announcing earnings and the Merrill mishap. The market capitalization of Bank of America, including Merrill Lynch, was then $45 billion, less than the $50 billion it offered for Merrill just four months earlier, and down $108 billion from the merger announcement.
Bank of America CEO Kenneth Lewis testified before Congress that he had some misgivings about the acquisition of Merrill Lynch and that federal official pressured him to proceed with the deal or face losing his job and endangering the bank's relationship with federal regulators.
Lewis's statement is backed up by internal emails subpoenaed by Republican lawmakers on the House Oversight Committee. In one of the emails, Richmond Federal Reserve President Jeffrey Lacker threatened that if the acquisition did not go through, and later Bank of America were forced to request federal assistance, the management of Bank of America would be "gone". Other emails, read by Congressman Dennis Kucinich during the course of Lewis' testimony, state that Mr. Lewis had foreseen the outrage from his shareholders that the purchase of Merrill would cause, and asked government regulators to issue a letter stating that the government had ordered him to complete the deal to acquire Merrill. Lewis, for his part, states he didn't recall requesting such a letter.
From Wikipedia’s article on Bank of America, shared under CC BY-SA 4.0.7