February 8, 2013 3:05 pm

BofA plans drive on commercial banking

Bank of America is increasing investment in its commercial bank, which provides credit and advice to US companies with revenues of $50m to $2bn, after several years of decline.

A year ago competitors including JPMorgan Chase and Wells Fargo were eyeing BofA’s clients in the sector, helped by BofA tightening credit standards amid concerns about its capital levels.

Alastair Borthwick, BofA’s new head of commercial banking, says he is investing in the business, adding about 50 bankers as a first step even as more automation brings job losses in administrative roles.

“We have invested and we will invest more,” he said, while declining to give a dollar value. “We hope to take some market share.”

The move is the latest sign of green shoots at BofA, which has decided to be more aggressive in mortgage lending. It lost market share in the three years since the financial crisis.

Scottish-born Mr Borthwick, 44, worked at Goldman Sachs before he joined BofA in 2005 and moved from co-head of capital markets to his new role in January.

Long a laggard on capital, BofA has recently overtaken JPMorgan, Wells and Citigroup to be the best capitalised of the large commercial banks.

However, on several levels BofA has an uphill struggle. Citigroup has a broader international network, JPMorgan’s commercial bank is much more profitable, and “super regional” banks such as Pittsburgh-based PNC have also taken market share.

But BofA hopes to benefit from its large network of branches and the increasing appetite of US companies to do business overseas.

A BofA survey of more than 600 chief financial officers due to be published on Friday showed a significant increase in international activity, with 62 per cent reporting a rise in buying from overseas compared with 47 per cent last year.

BofA still has to convince. Some customers switched to competitors in the past two years, complaining that BofA was tightening lending standards. “We tightened at the beginning of last year,” acknowledged Mr Borthwick, though he says they have since eased.

Some of BofA’s rivals are sceptical about any return. “They may be making a comeback but we haven’t felt that yet,” said one.

Revenues have declined steadily from more than $3bn a quarter two years ago to about $2bn a quarter. BofA has stopped disclosing the profitability of the business but the last published numbers in 2011 showed a return on equity of about 9 per cent, less than half that of JPMorgan.

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