PNC Financial Services (PNC), JPMorgan Chase & Co. (JPM): One Place Where Bank of America Corp (BAC) Comes Up Woefully Short

And the same can be said for Bank of America Corp (NYSE:BAC)’s yield on earning assets, which, at 3.28%, was again behind only JPMorgan Chase & Co. (NYSE:JPM)’s 3.08%. The best performer in this regard was the mid-Atlantic regional lender BB&T Corporation (NYSE:BBT), which recorded an average yield of 4.61%.

Why did it come up so short in this regard? As I noted above, it has to do with Bank of America Corp (NYSE:BAC)’s ratio of loans to total assets. While only 41% of its assets consisted of loans, BB&T Corporation (NYSE:BBT)’s ratio was 62% — thus explaining the gap in the earning-asset yields.

Finally, while Bank of America unquestionably has one of the best deposit franchises in the United States, its cost of funds nevertheless came in at 0.95% for the 12 months ended December 31. That was behind only Citigroup Inc. (NYSE:C)‘s 1.45%, which operates much more like an investment bank than a traditional bank when it comes to funding.

The issue here is twofold. Even though Bank of America has a massive amount of deposits, they still only make up 56% of its total funds. By comparison, the average among the largest lenders is 80%. In addition, only 34% of its deposits are demand deposits; the remainder consists of more expensive certificates of deposits and money market accounts, among other things.

Once you take all of these things into consideration, in turn, it becomes exceedingly obvious that Bank of America has more than just financial-crisis related problems to deal with over the foreseeable future. Will it be able to do so and reward investors at the same time? While I believe it will, the proof will nevertheless be in the pudding.

The article 1 Place Where Bank of America Comes Up Woefully Short originally appeared on Fool.com and is written by John Maxfield.

John Maxfield owns shares of Bank of America. The Motley Fool recommends Bank of America. The Motley Fool owns shares of Bank of America, Citigroup, JPMorgan Chase, and PNC Financial Services (NYSE:PNC).

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