Bank of America was formed through NationsBank's acquisition of BankAmerica in 1998. Since then, Bank of America has become the second-largest banking institution in the U.S. after JPMorgan Chase. Bank of America is also the eighth-largest bank in the world. So, why is the second-largest bank in the U.S. locking the doors on so many of its branches?
Bank of America website outage
In addition to struggles amid the COVID-19 pandemic, Bank of America customers reported a website and app outage at the beginning of October 2021. The beginning of the month is a crucial time because many people's bills are due. The outage impacted thousands of customers using Bank of America digital banking.
Why are so many Bank of America branches closed right now?
When the COVID-19 pandemic started, it wasn't unusual for people to walk up to their local bank and discover that the doors were at least temporarily locked.
Colleen Haggerty, senior vice president of media relations for Bank of America, spoke about the temporary closures early on. According to Haggerty, "These temporary closures occur in areas where foot traffic is low, or when staffing is not sufficient for all to remain open...When a center closes, we work to reopen it as soon as possible...Clients also always have the ability to transact most financial needs through our ATM network, mobile and online banking."
Days turned into weeks, which turned into months and many banks remained closed to the public. Six months later, many local Bank of America branches across the U.S. are still closed. Consumers want to know if their money is still safe.
Is Bank of America going out of business?
Bank of American hasn't made any announcements regarding its imminent closure. In fact, the bank's website shows a clear desire to keep its customers connected during this time. Bank of America wants to devote all of the necessary resources to help ensure clients' and staff members' personal safety while maintaining all of its banking services.
Most of Bank of America's staff members have been working from home. At the height of the COVID-19 pandemic, 150,000 Bank of America employees worked from home, which is about 72 percent of its total workforce. As branches open, more workers are returning to the field. However, like many companies that deal with the public, Bank of America is being cautious about how many employees and customers are allowed in its brick-and-mortar locations.
How Bank of America responded to the COVID-19 pandemic
Bank of America was been very responsive to the COVID-19 pandemic. The company shifted 72 percent of its total workforce to a work from a home model and pledged a robust $100 million commitment to support communities facing challenges due to the COVID-19 outbreak. Most of the funds were used to increase medical response capacity, address food insecurity, and boost access to learning in the wake of nationwide school closures.
Bank of America CEO Brian Moynihan said that the bank won't have layoffs during the COVID-19 pandemic. Morgan Stanley and Citigroup also promised not to have layoffs during the coronavirus outbreak. With several banks closing up and moving to an all-digital model, time will tell if Moynihan is able to keep his word.
Has the COVID-19 pandemic impacted the way banking is done?
Many traditional banks are under pressure to move to an all-digital model or at least a mostly-digital one. Some people will always prefer to deal with cash, checks, or speaking to a physical person compared to digital banking. Right now, in-person banking isn't as possible as it used to be, but times are changing.
Shutting down branches allows traditional banks to cut costs. Bank of America has slowly reduced its branch network, which lowered the bank's non-interest expenses by 5 percent last quarter.
Warren Buffett is bullish on Bank of America stock.
Bank of America, like many other banks, is rationalizing the branch network at a time when many customers have been pivoting towards digital banking. However, fears of the bank going out of business seem unfounded. Incidentally, Berkshire Hathaway is the largest shareholder in the bank.
While Warren Buffett has sold the stake in several banks over the last year, he increased the stake in Bank of America. He made an exception for the stock and increased the stake beyond 10 percent. Buffett has a self-imposed limit on the stakes in banks below 10 percent. Currently, the stock is the second-largest holding in Berkshire Hathaway's portfolio after Apple.