Turning Variables into Knowledge: Bank of America Corp Financial Analysis

Banks and non-financial entities have several similarities in their financial statements, but a few critical differences exist due to the nature of their businesses. The Bank of America Corp operates by storing customer deposits and lending money out. As a result, it earns income from the interests received and the expenses incurred by customers. To understand key customer trends between 2016 and 2020, the bank should consider the three variables; total annual deposits, net interest income, and total annual revenue. Therefore, this analyzes the three variables using tables and charts and summarizes their significance.

Variables of Interest

Total annual deposit is a crucial variable for a bank. It influences revenue and income directly, despite being a liability. The second variable is revenue, which indicates the total earnings in the year. If the bank records increasing revenue annually, there is a high likelihood of attracting investors and partners. Net interest income is a financial performance measure reflecting the difference between the amount that the bank generates as revenue from its interest-bearing assets and the expenses of paying the interest-bearing liabilities (Wagner, 2021).

Data Visualization

Raw Data (All data in millions $)

Variable	2020	2019	2018	2017	2016
Net Interest Income	$ 43,360	$ 48,891	$ 48,162	$ 45,239	$ 41,486
Deposits	1,632,998	1,380,326	1,314,941	1,269,796	1,222,561
Total Revenue	85,528	91,244	91,020	87,126	83,498

The frequency table and bar chart combine the three variables. Hence, it is possible to compare the bank’s performance in the five years (See Appendix 1 and Appendix 2). However, the pie chart can only represent a single data series at a time. Thus, having three data sets (deposits, total revenue, and net interest income) on a single pie chart is technically impossible on excel. For easier visualization, each of the three is represented on their pie charts, with the disparity being the year (See Appendix 3).

Case Report

Analysis

Data visualization is crucial for corporations seeking to understand a specific trend. Customer behavior and trends are critical information that the bank could use to develop strategies to change a few aspects that perform poorly and improve its competitiveness. The frequency table and bar chart are less helpful in drawing a clear picture of the trends, especially when the value difference is significant. A pie chart is preferred for single variables, showing the bank’s performance over the years. For the three variables, the values differ by a substantial amount. Representing them equally on the same table or chart does not indicate the extent of changes from one year to another. They are all crucial for the bank in understanding any changes during the five years, especially the impact caused by the COVID-19 pandemic in 2020. Nevertheless, the single-series pie chart is the most important for single variables, while the bar chart is most important when representing two or more variables together.

Summary

According to the bar chart, total deposits have increased for the five years. However, 2020 saw a noteworthy increase in this variable compared to 2019. It could indicate a possible growth in savings during the pandemic as consumers saw a rise in economic uncertainty. With such figures in the deposits variable, the chart does not offer a clear picture of net interest income and total revenue, which have considerably smaller figures than deposits. The same trend is shown on the frequency table. The pie charts give a different picture of these variables. They are much clear in showing how each variable changed across the period. However, they don’t show how one variable performs compared to another. The charts were crucial for this research because they helped ease data interpretation. The representations showed critical customer trends and variable relationships. Such information could help show potential economic consequences of events, such as pandemics.

Conclusion

Data visualization is crucial for financial institutions, such as the Bank of America, to understand customers’ behavior and economic trends. After filing Form-10K as required every year, the bank or investors could use such information to figure out its financial performance and draw necessary conclusions. The bank could employ figures, charts, and tables to illustrate trends and devise strategies to deal with emerging weaknesses while capitalizing on the strengths. The research was significant and could be an eye-opener to understanding how other entities perform by considering specific variables.

Reference

Bank of America. (2016-2020). Bank of America Corp (NYS: BAC): As reported annual balance sheet [Data set]. Mergent Online.

Wagner, H. (2021). Analyzing a bank’s financial statements. Investopedia. https://www.investopedia.com/articles/stocks/07/bankfinancials.asp