Bank of America Corp (BAC): This Bank’s Strategy Will Fail

Page 1 of 2

Cross-selling sounds like the perfect cure for banks still ailing from the financial crisis. Net interest margins are at significant lows, and banks are trimming expenses to keep profits at meaningful levels. So adding new sales to old customers should be the perfect fix. But – not all banks are created equal. As such, cross-selling won’t work effectively for every bank.

Bank of America Corp (NYSE:BACis a great example. Recently the bank implemented a Merrill Lynch-Bank of America cross-selling strategy that is bound to miss expectations. To explain why it will fail (see below for why) we must first look at the cross-selling success stories. Then we will examine those who failed to execute the strategy and why Bank of America Corp (NYSE:BAC) will also fail to meet its marks.

Bank of America Corp (NYSE:BAC)

Successful cross-selling

Wells Fargo & Co (NYSE:WFC) is the go-to example of successful cross-selling. It has consistently sold an increasing number of products to households each year.

Wells Fargo’s achievement comes from its well-developed strategy and organizational commitment to cross-selling. Many other firms struggle to imitate this strategy, but few have nailed it down. One of the keys to Wells Fargo’s strategy is the successful integration of Wachovia. The integration included three key efforts:

1. Assimilate IT

2. Keep the structure flat

3. Stick to one business model

Through these three steps, the two large banks came together as one united group, giving Wells Fargo an even broader audience to whom it could cross-sell business and consumer products.

BB&T Corporation (NYSE:BBT) is another example of successful cross-selling. Its corporate culture integrates all of its business units (such as business banking, commercial real estate, investments, and insurance). Each unit is a functioning part of the whole, rather than operating within its own “silo”. The bank’s consistent effort to bring all these business units together allows for effective cross-selling.

BB&T’s strategy also permits the bank to keep profit-per-customer high, even when its lending margin is shrinking (from the Fed’s bond buying program). The obvious result is that BB&T is able to procure “sticky”, profitable relationships with its customers without having to increase loan volume during a time when long-term rates permit little profit. The graph below depicts how BB&T retained a consistent profit margin in comparison with big banks that did not effectively cross-sell.

Wells Fargo and (NYSE:WFC) BB&T teach us that a bank must have the right corporate culture and IT infrastructure to successfully execute a cross-selling strategy. Next we look at banks that lacked these traits.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Top 10 Most Expensive Luxury Cars in the World – 2014

Killer Small Business Ideas

The 50 Best Personal Finance Blogs

Most Expensive Apartments in New York City

Bloodiest UFC Fights Ever Fought

Most Expensive Rum Brands in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!