clash_largeThe Problem With Bank of America’s Business Model


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Bank of America‘s business model, combining commercial and investment banking, is predicated on faulty logic. Its size hasn’t translated into economies of scale, and far from providing benefits, the combination of investment and commercial banking has run up costs at the nation’s second biggest bank by assets.

You can see the fissures in the universal banking model when you compare Bank of America’s compensation and occupancy expenses to that of Wells Fargo , which remains, for all intents and purposes, a commercial bank. Last year, Bank of America paid its employees an average of $154,000. The average pay at Wells Fargo, meanwhile, was $116,000. Bank of America’s average compensation expense per employee is thus 33% higher than Wells Fargo’s.

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