1 Crazy Reason Bank of America Is a Buy
What is a good reputation worth? In business, it can be worth quite a lot. The concept of "goodwill" is considered an intrinsic part of a particular company's value, something that a purchaser will pay extra for, despite its amorphous quality. Generally accepted accounting principles even dictate that the amount paid for a business' goodwill be amortized over a period of time, much like any other asset.
Successful businesses understand this concept and work hard to maintain a good relationship with customers. Since the financial crisis, however, the big banks have suffered severe damage to their reputations, and Bank of America has found itself particularly despised. Realizing just how much of a detriment to its recovery this perception has become, the big bank is taking steps to remake itself in an effort to boost its bottom line.
Many areas need to be addressed
In the image department, Bank of America lags its peers in many areas. Late last year, a mortgage customer survey put B of A at the bottom of the heap of 14 servicers when it came to satisfaction with all aspects of the mortgage process, with JPMorgan Chase doing the best of the megabanks. Then, in the American Customer Satisfaction Index, the big guy finished behind its peers again.
It's obvious that Bank of America's reputation is in worse shape than the other big banks by checking out Amplicate.com. On this site, where customers of just about any company can log on and vent, fully 89% of people who rated B of A are categorized as "hating" the bank.
To be fair, other big banks aren't garnering much love, either. JPMorgan has 79% of respondents feeling negative, and Wells Fargo's detractors are around 87% of that bank's total comments. Citigroup fares best of all, with a paltry 62% of commenters disliking the bank. The revealing aspect here is that while B of A's peers have between approximately 5,700 and 2,800 reviews, Bank of America has more than 25,500. It doesn't take a math whiz to realize that a whole lot of people are very upset with the big guy.
CEO Moynihan is taking action
In an effort to stem the tide of bad feelings, B of A's Brian Moynihan is instituting a new program aimed at making B of A's customers happy. This is a huge step, and, though it will take some time to implement, is definitely a move in the right direction. Bank of America knows full well how dings in its reputation can hurt its business, mentioning that very fact in its latest 10-K filing.
With the bank's renewed vigor after a successful outcome from the recent stress tests, bulking up earnings and repairing its tattered reputation are two items that are on the front burner. The bank is already seeing results from its campaign to burnish its image, which shows just how seriously Moynihan is taking this issue. Higher customer satisfaction translates into better earnings, and higher stock prices, so once B of A has the image problems licked, there will be no stopping it.
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The article 1 Crazy Reason Bank of America Is a Buy originally appeared on Fool.com.Fool contributor Amanda Alix has no position in any stocks mentioned. The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.