2 Reasons the Future Looks Bleak for Bank of

America

Where’s the lending?Late last year, CEO Brian Moynihan spoke of how the bank was polishing up its image and listening to its customers even as it closed branch locations. Part of this new business style was to create mini "banking centers" in its remaining branches, and staffing these locations with mortgage specialists.

The effort appears to have fallen flat. The mortgage business is still tough for all banks, but B of A seems to have taken a bigger hit than its peers. Rival Wells Fargo saw its total loan volume increase year over year by 4%, while Bank of America's mortgage originations dropped by 59%.

Where’s the lending?Wells seems to have caught up to B of A in the retail deposits area, too.

Both banks reported around $1.1 trillion in deposits; Bank of America used to hold the top spot, while Wells Fargo came in second.

New BAC has worked its magicMoynihan's New BAC cost-cutting program has worked wonders, cutting expenses from a high of $59 billion to the current $13 billion.

As analysts from Deutsche Bank and CLSA note on the earnings call, however, the initiative has just about run its course.

Moynihan acknowledges that New BAC has done the heavy lifting that it was meant to do, and that expense trimming has segued more into an ongoing cost-control model. That's wonderful, but this normalization removes a huge source of profits that Bank of America can show off at the end of each quarter as it used to, following another round of expense-slashing and branch sales.

What's next?With the exception of ongoing expense reduction through New BAC and the runoff of legacy assets, B of A management has not address the bank's future money-making capabilities.

Cheap retail deposits are great, but don't pay the bills. What happens when reserve releases wind down – as Moynihan predicts – and reductions in costs aren't hefty enough to prop up the bottom line?

What's next?Bank of America has proved it can be outstanding at trimming the bloat, but what is needed now is a New BAC-style initiative to bring loan business through its doors.

Until then, B of A's story is one of recovery, not revival.

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