Bank of America Announces Earnings of $7.9 Billion for 2000
CHARLOTTE, N.C., Jan. 16 -- Bank of America Corporation (NYSE: BAC) today reported fourth quarter earnings of $1.39 billion, or $.85 per share (diluted), in line with the company's estimates last December that higher loan losses and reduced capital markets related business associated with a slowing economy would impact results.
A year ago, the company reported net income of $1.90 billion, or $1.10 per share, including a $213 million after-tax charge to cover costs associated with the merger of NationsBank and BankAmerica corporations.
Cash-basis earnings -- which exclude the amortization of intangibles -- were $1.60 billion, or $ .98 per share, in the latest quarter.
For the full year, Bank of America's operating earnings were $7.86 billion, or $4.72 per share. A year earlier, the company's operating earnings totaled $8.24 billion, or $4.68 per share.
The return on common equity for 2000 was 16.70 percent while the return on average assets was 1.17 percent.
In 2000, Bank of America's net income was $7.52 billion, or $4.52 per share, compared to $7.88 billion, or $4.48 per share, in 1999. Results in 2000 and 1999 included after-tax charges associated with growth initiatives and mergers of $346 million and $358 million, respectively.
Fourth Quarter Financial Highlights (compared to a year ago)
Managed loans increased 9 percent to $422 billion.
Deposits grew 5 percent to $358 billion.
Deposit and loan growth more than offset the impact of lower spreads and the cost of share repurchases to produce 5 percent growth in net interest income.
Card fee revenue rose 7 percent.
Investment and Brokerage Service revenues were up 10 percent.
Provision expense exceeded net charge-offs by $135 million in the fourth quarter of 2000.
Results included a gain from the sale of the company's factoring unit.
Revenue declined 1 percent in the fourth quarter from the previous year, mostly reflecting the impact of declines in the market value of equity investments and increased lease residual charges.
Fully taxable-equivalent net interest income increased 5 percent to $4.79 billion, reflecting a 9 percent increase in earning assets, partly offset by continued spread compression and the cost of share repurchases. Despite moderating growth in the fourth quarter due to slowing economic conditions and strategic efforts to reduce portfolio levels, average managed loans were 9 percent above a year ago. Deposits were up 5 percent, in part reflecting initiatives aimed at expanding balances with core relationship customers. The impact of lower estimated auto lease residual values reduced net interest income by $24 million.
Noninterest income declined 8 percent to $3.30 billion, as revenue increases in card services, investment and brokerage services and service charges were offset by declines in equity investment gains, mortgage servicing, investment banking and trading revenue. Debit card fees rose 25 percent as marketing efforts paid off in a sharp increase in market penetration.
Among the factors offsetting these and other improvements were a $208 million decline in the market value of equity investments and a $57 million increase in auto lease residual writedowns. Trading account profits were down 8 percent while investment banking fees declined by 7 percent from a year ago, due to the slowdown in capital markets.
Noninterest expense increased 2 percent to $4.64 billion, reflecting a 5 percent reduction in personnel expense offset by higher marketing and legal expenses plus costs related to the downsizing of operations in Columbia and Venezuela. The efficiency ratio was 57.4 percent.
As the company projected late last year, loan losses and nonperforming assets increased significantly in the fourth quarter as the economy slowed. Higher provision expense accounted for the majority of the decline in net income.
The provision for credit losses in the fourth quarter was $1.21 billion compared to $350 million a year earlier. Provision expense exceeded net charge-offs by $135 million.
Net charge-offs were $1.08 billion, or 1.07 percent of loans and leases, up from $501 million, or .55 percent, a year ago. Net charge-offs included a one-time addition of $104 million to conform to new FFIEC standards on consumer loans and a significant writedown of one large credit as announced in the company's 10-Q last November.
Nonperforming assets were $5.5 billion, or 1.39 percent of loans, leases and foreclosed properties at December 31, 2000, compared to $3.2 billion, or .86 percent a year earlier. The increase in nonperforming assets was centered in the commercial domestic portfolio, where nonperforming loans were up $1.7 billion from a year earlier. A $497 million increase in consumer finance nonperforming loans, associated with the growth in that portfolio, also contributed to the rise in problem assets.
The allowance for credit losses totaled $6.8 billion at December 31, 2000, up $10 million from a year ago, and equaled 1.74 percent of loans and leases.
Total shareholders' equity was $47.6 billion at December 31, 2000, up 7 percent from 12 months earlier. This represented 7.42 percent of period-end assets of $642 billion. The Tier 1 Capital Ratio was 7.50 percent.
During the quarter, the company repurchased 18 million shares. Since June 1999, 146 million shares have been repurchased, representing an investment in Bank of America stock of $8.1 billion. Average (diluted) common shares outstanding were 1.639 billion in the fourth quarter, down 5 percent from 1.725 billion a year earlier.
Full Year Summary
Revenue rose 2 percent over the previous year.
Net interest income increased 2 percent to $18.76 billion.
A 9 percent increase in managed loans and higher trading related revenues more than offset spread compression caused in part by a change in mix and the cost of share repurchases.
The deterioration in auto lease residual values created a $107 million increase in auto lease residual charges to net interest income.
Noninterest income increased 3 percent to $14.49 billion.
Card fee revenue, investment and brokerage service fees and trading revenue all grew by double digits.
The absence of loan sales and securitizations, which boosted the year- ago results, and the impact of a $278 million increase in auto lease residual charges were the primary factors in reducing other income to $775 million from $1.5 billion.
Noninterest expense was virtually unchanged.
Deterioration in credit quality in the second half of the year resulted in higher loan losses and provision expense.
Provision expense rose 39 percent to $2.5 billion due to an increase in loan losses and nonperforming assets in the fourth quarter.
Net charge-offs totaled $2.4 billion compared to $2.0 billion in 1999. A sharp increase in the fourth quarter of 2000, driven by a one-time addition of $104 million to conform to new FFIEC standards on consumer loans and a significant writedown of one large credit, more than accounted for the rise.
Nonperforming assets rose 70 percent to $5.5 billion at December 31, 2000.
The reserve for loan losses ended 2000 at $6.8 billion, or 1.74 percent of loans and leases, compared to $6.8 billion, or 1.84 percent a year ago.
Consumer and Commercial Banking
For the full year, Consumer and Commercial Banking earnings declined 2 percent to $4.64 billion. Revenue declined 2 percent while expenses fell 4 percent.
The Card businesses, which include consumer, commercial, debit and government cards and merchant processing, all achieved double-digit growth. Total card fee revenue was up 11 percent and purchase volume rose 17 percent. Service charge revenue was up 4 percent in the Banking Regions. A $385 million increase in auto lease residual charges, the impact of divestitures and fewer one-time gains than a year earlier more than offset these positive trends. Personnel expense was lower due to growth and productivity initiatives.
Global Corporate and Investment Banking
Global Corporate and Investment Banking earnings declined 10 percent to $2.1 billion, reflecting higher loan losses and slower capital markets activity at the end of the year. Revenue increased 9 percent and expenses were up 11 percent.
Revenue growth in 2000 was driven by the buildout of the investment banking and trading platforms. Global Capital Raising reported 38 percent revenue growth due to higher investment banking fees and trading revenue. This growth resulted in a steady increase in market shares and rankings. Bank of America ranked in the top ten in all key product areas. The decline in earnings was primarily the result of higher credit costs.
Asset Management earned $601 million, 18 percent above a year earlier. Revenue rose 7 percent while expenses were up 2 percent.
Mutual fund fees grew 30 percent, reflecting an increase in mutual fund assets under management during the year of almost $29 billion to $110 billion. Total assets under management were up $30 billion to $277 billion. Higher expenses reflected the company's investments to expand the number of private banking offices and sales personnel across the asset management businesses.
Equity Investments earned $460 million, 39 percent above a year earlier.
Revenues rose 26 percent to $864 million, driven by strong gains in strategic investments and alliances as well as in principal investing.
Bank of America is the largest bank in the United States. With full- service operations in 21 states and the District of Columbia, it provides financial products and services to almost 40 percent of the households in its retail footprint and two million businesses. The bank also supports business transactions in 190 countries. Its stock (ticker: BAC) is listed on the New York, Pacific and London stock exchanges. Certain shares also are listed on the Tokyo Stock Exchange.
|NOTE:||James H. Hance Jr., vice chairman and chief financial officer, will|
|discuss the results for the fourth quarter and the full year 2000 as well as|
|the outlook for 2001 in a conference call at 9:30 a.m. (EDT) today. The call|
|can be accessed through a webcast available on the Bank of America website at|
Forward Looking Statements
This press release contains forward-looking statements with respect to the financial conditions and results of operations of Bank of America, including, without limitation, statements relating to the earnings outlook of the company. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following possibilities: (1) projected business increases following process changes and other investments are lower than expected; (2) competitive pressure among financial services companies increases significantly; (3) costs or difficulties related to the integration of acquisitions are greater than expected; (4) general economic conditions, internationally, nationally or in the states in which the company does business, are less favorable than expected; (5) changes in the interest rate environment reduce interest margins and affect funding sources; (6) changes in market rates and prices may adversely affect the value of financial products; and (7) legislation or regulatory requirements or changes adversely affect the businesses in which the company is engaged; and (8) decisions to downsize, sell or close units or otherwise change the business mix of the company. For further information, please refer to Bank of America's reports filed with the SEC.
Bank of America
Three Months Twelve Months Ended December 31 Ended December 31 2000 1999 2000 1999 Financial Summary (In millions, except per share data) Operating net income $1,385 $2,115 $7,863 $8,240 Operating earnings per common share 0.85 1.24 4.77 4.77 Diluted operating earnings per common share 0.85 1.23 4.72 4.68 Cash basis earnings (A) 1,599 2,334 8,727 9,128 Cash basis earnings per common share 0.98 1.37 5.30 5.28 Cash basis diluted earnings per common share 0.98 1.35 5.24 5.19 Dividends per common share .56 .50 2.06 1.85 Closing market price per common share 45.88 50.19 45.88 50.19 Average common shares issued and outstanding 1,623.721 1,701.092 1,646.398 1,726.006 Average diluted common shares issued and outstanding 1,638.863 1,725.187 1,664.929 1,760.058 Summary Income Statement (Operating Basis) (Taxable-equivalent basis in millions) Net interest income $4,788 $4,541 $18,764 $18,452 Provision for credit losses (1,210) (350) (2,535) (1,820) Gains on sales of securities 2 14 25 240 Noninterest income 3,298 3,596 14,489 14,069 Other noninterest expense (4,637) (4,550) (18,083) (17,986) Income before income taxes 2,241 3,251 12,660 12,955 Income taxes - including taxable- equivalent basis adjustment 856 1,136 4,797 4,715 Operating net income $1,385 $2,115 $7,863 $8,240 SUMMARY Balance Sheet (Average balances in billions) Loans and leases $399.549 $364.210 $392.622 $362.783 Managed loans and leases (B) 422.171 387.898 418.597 382.445 Securities 79.501 86.442 84.211 80.127 Earning assets 590.728 543.564 583.467 531.511 Total assets 677.458 630.743 671.573 616.838 Deposits 357.554 341.913 353.294 341.748 Shareholders' equity 47.639 46.792 47.132 46.601 Common shareholders' equity 47.565 46.714 47.057 46.527 PERFORMANCE INDICES (Operating Basis) Return on average common shareholders' equity 11.57% 17.95% 16.70% 17.70% Return on average tangible common shareholders' equity 18.54 28.38 26.06 28.46 Return on average assets 0.81 1.33 1.17 1.34 Return on average tangible assets 0.96 1.50 1.33 1.52 Net interest yield 3.23 3.32 3.22 3.47 Efficiency ratio 57.35 55.91 54.38 55.30 Cash basis efficiency ratio 54.70 53.22 51.78 52.57 Shareholder Value Added (SVA) $164 $921 $3,081 $3,544 Net charge-offs (in millions) 1,075 501 2,400 2,000 % of average loans and leases 1.07% .55% .61% .55% Managed bankcard net charge-offs as a % of average managed bankcard receivables 4.33 5.29 4.66 5.57 REPORTED RESULTS (Including Merger and Restructuring Charges) (In millions, except per share data) Net income $1,385 $1,902 $7,517 $7,882 Earnings per common share 0.85 1.12 4.56 4.56 Diluted earnings per common share 0.85 1.10 4.52 4.48 Return on average common shareholders' equity 11.57% 16.14% 15.96% 16.93%
(A) Cash basis earnings equals operating net income excluding
amortization of intangibles.
(B) Prior periods have been restated for comparability (e.g. acquisitions,
divestitures and securitizations).
DECEMBER 31 2000 1999 Balance Sheet highlights (In billions, except per share data) Loans and leases $392.193 $370.662 Securities 65.838 83.069 Earning assets 549.736 544.940 Total assets 642.191 632.574 Deposits 364.244 347.273 Shareholders' equity 47.628 44.432 Common shareholders' equity 47.556 44.355 Per share 29.47 26.44 Total equity to assets ratio (period-end) 7.42% 7.02% Risk-based capital ratios: Tier 1 7.50 7.35 Total 11.04 10.88 Leverage ratio 6.12 6.26 Period-end common shares issued and outstanding (in millions) 1,613.632 1,677.273 Allowance for credit losses $6.838 $6.828 Allowance for credit losses as a % of loans and leases 1.74% 1.84% Allowance for credit losses as a % of nonperforming loans 131.30 224.48 Nonperforming loans $5.208 $3.042 Nonperforming assets 5.457 3.205 Nonperforming assets as a % of: Total assets .85% .51% Loans, leases and foreclosed properties 1.39 .86 OTHER DATA Full-time equivalent employees 142,724 155,906 Number of banking centers 4,390 4,524 Number of ATM's 13,963 14,019
BUSINESS SEGMENT RESULTS - Three Months Ended December 31, 2000
TOTAL OPERATING AVG LOANS RETURN ON REVENUE NET INCOME AND LEASES EQUITY Consumer and Commercial Banking $5,293 $1,172 $263,222 19.3% Asset Management Group 585 129 23,371 28.9 Global Corporate and Investment Banking 2,022 164 112,597 4.7 Equity Investments (89) (73) 462 (13.4) Other 275 (7) n/m n/m
n/m = not meaningfulSOURCE Bank of America Corporation
CONTACT: investors, Susan Carr, 704-386-8059, or Kevin Stitt, 704-386-5667, or media, Bob Stickler, 704-386-8465, all of Bank of America Corporation/