Last week, Bank of America Corp. (BAC) announced that it will increase its spending on small and medium-sized and diverse businesses. The company has pledged to buy $10 billion of products and services from these companies over the next half-decade, with a 5% increase in spending every year.
Small business owners were hit hard by the market turmoil. Providing more business to these organizations will be a key to economic recovery as small and medium-sized businesses are the lifeblood of the economy. As a leading bank, this will be a vital role for BofA to help regain economic growth. Apart from providing technical support, banking services and credit, BofA sees this as an opportunity to assist these small and medium-sized businesses to create more jobs in the challenged economy.
The small, medium-sized and diverse businesses provide BofA with a broad range of valuable services and products, including cleaning, furniture, advertising, courier service, legal service, home inspections, maintenance, photography, security and software.
The commitment made by the bank has been lauded by the National Federation of Independent Business (NIFB). A recent survey done by the NIFB has established that biggest problem faced by small organizations was lack of business. BofA’s pledge to increase spending with these businesses will help addressing the concern to a great extent as these small-business clients are very reluctant to invest in their businesses and hire until their sales increase.
BofA had extended loans of $19.4 billion to small businesses during the first quarter 2010, about a 17% increase from the year-earlier period.
Similarly, JPMorgan Chase (JPM) also continued to make contributions to the economic recovery by lending to small businesses. Building on the efforts of the Obama Administration, the company has launched an initiative to increase small-business lending to $10 billion by the end of 2010.
Wells Fargo & Company (WFC) remained one of the largest providers of credit to the U.S. economy in first quarter 2010 and continued to lend to credit-worthy customers. During the first quarter of 2010, the company made $128 billion in new loan commitments to consumers, small businesses and other commercial customers, including $76 billion of residential mortgage originations.
According to BofA, these small organizations require more business to survive and hope that other large companies will also make similar pledges to increase their spending with the small businesses for job growth.
Though there remain concerns related to BofA’s inconsistent credit quality and net interest yield compression, we anticipate continued synergies from the company’s large scale operations and balance sheet restructuring. Finally, as the company has settled the litigation issues over its Merrill Lynch acquisition, there remains limited room for regulatory and legal pressure.
Read the full analyst report on “BAC”
Read the full analyst report on “JPM”
Read the full analyst report on “WFC”
Zacks Investment Research
