Bank of America Reports 2nd Quarter Earnings of $1.23 Per Share
CHARLOTTE, N.C., July 17 /PRNewswire/ -- Bank of America Corporation (NYSE: BAC) today reported second quarter earnings of $1.23 per share (diluted), up 7 percent from operating earnings per share of $1.15 a year ago.
Net income was $2.06 billion, essentially unchanged from operating earnings a year earlier. Net income in the second quarter of 1999 was $1.92 billion, or $1.07 per share, including a $145 million after-tax merger-related charge.
For the first six months of 2000, Bank of America earned $2.56 per share, up 15 percent from operating earnings per share of $2.23 a year earlier and up 19 percent from reported earnings per share of $2.15. Net income for the first half of 2000 was $4.30 billion, compared to operating earnings of $3.97 billion and net income of $3.83 billion, respectively, a year earlier.
The return on common equity in the latest quarter was 17.63 percent, virtually unchanged from a year earlier, and the return on assets was 1.23 percent.
Cash-basis earnings - which exclude the amortization of intangibles - were $2.28 billion, or $1.36 per share, in the latest quarter. The return on average tangible common shareholders' equity was 27.5 percent.
"A number of our businesses had a strong quarter - especially in consumer banking," said Hugh L. McColl Jr., chairman and chief executive officer. "Net interest income picked up as loan growth continued to be strong. Slower capital markets activity and depreciation in venture capital investments due to lower stock prices somewhat offset the significant improvement in these and other areas," he said, "Despite a slower market, we did gain market share in a number of key investment banking businesses."
"We are hard at work transforming our company to succeed in the new millennium," McColl continued. "We have many initiatives underway to streamline processes and make investments that will enhance our customers' experience with us. We expect these initiatives to boost our business in future quarters."
Second Quarter Strategic Highlights
Mutual fund assets rose by $12 billion, or 14 percent, during the first six months of the year. In addition, the company agreed to acquire the remaining 50 percent of Marsico Capital Management LLC, a highly successful and fast-growing investment management firm which manages more than $15 billion in assets.
Balances in Money Manager, the company's combination checking and brokerage product, increased 80 percent from a year ago to $16.5 billion. Total Money Manager accounts more than doubled to 121,000.
An alliance with Checkfree Holdings Corporation was announced, aimed at enhancing the company's advantage in online banking and creating a national platform for accelerating the development of electronic bill payment and presentment convenience for consumers in the United States.
Second Quarter Financial Highlights (compared to a year ago)
Consumer and Commercial Banking had a strong quarter, with earnings rising 5 percent from a year ago and 18 percent from the first quarter. The return on equity for this unit rose to 21 percent.
Card revenue rose 13 percent.
Consumer investment and brokerage revenue grew 16 percent.
Trading revenue was up 19 percent.
Corporate banking service revenue rose 9 percent.
Noninterest expense declined 1 percent.
Average managed consumer loans and leases increased 19 percent.
Net charge-offs declined to an annualized .48 percent of loans and leases - an improvement of 9 basis points.
Net Interest Income
Fully taxable-equivalent net interest income of $4.71 billion was 1 percent above a year earlier. The increase reflected 12 percent average managed loan growth, higher levels of core deposits and equity and an increased contribution from trading activities. These improvements were partially offset by the impact of loan sales and securitizations in 1999, margin compression and the cost of share repurchases, all of which also contributed to the decline in the net interest yield of 29 basis points to 3.24 percent.
Average managed loans and leases reached $419 billion, primarily reflecting a 19 percent increase in consumer loans and leases. Average core deposits grew by 3 percent, or $9.2 billion, to $300 billion.
Noninterest Income Noninterest income declined 1 percent to $3.50 billion, primarily because of the absence of loan sales and securitizations in other income which occurred a year ago.
Card revenue rose due to double-digit purchase volume growth across all card products and improved credit quality in the managed portfolio. Consumer investment and brokerage revenue increased, reflecting higher mutual fund, brokerage and tax preparation fees. Service charges and trading revenues also registered significant gains.
Investment banking results declined 11 percent due to slower market activity in the quarter. Other income, which includes loan sales and securitizations as well as other miscellaneous fee income, dropped 48 percent.
Realized equity investment gains totaled $221 million. The depreciation in fair value of equity investments was $87 million.
Securities gains were $6 million compared to $52 million in the second quarter of 1999.
Noninterest expense declined 1 percent to $4.41 billion, reflecting continued benefits from recent mergers. The efficiency ratio was 54 percent.
The provision for credit losses in the second quarter was $470 million, down from $510 million a year earlier. Net charge-offs were $470 million, down from $520 million a year ago, driven primarily by lower losses on credit card loans. Net charge-offs were equal to an annualized .48 percent of loans and leases.
Nonperforming assets were $3.89 billion, or .97 percent of loans, leases and foreclosed properties at June 30, 2000, compared to $3.07 billion, or .84 percent a year earlier. The increase reflects a rise in nonperforming loans in the corporate portfolio that was not concentrated in any single industry or region. Non-performing loans also increased in real estate-secured consumer finance loans, reflecting the growth and maturing of that portfolio.
The allowance for credit losses totaled $6.82 billion at June 30, 2000, equal to 1.70 percent of loans and leases.
Total shareholders' equity was $45.9 billion at June 30, 2000. This represented 6.75 percent of period-end assets of $680 billion. The Tier 1 Capital Ratio was 7.40 percent.
In June 1999, the company initiated a share buyback program of up to 130 million shares. Through June 2000, 112 million shares had been repurchased, representing an investment in Bank of America stock of $6.5 billion. Average (diluted) common shares outstanding were 1.676 billion in the second quarter, down from 1.787 billion a year earlier.
Business Segment Results
Consumer and Commercial Banking, which serves individuals and businesses with annual sales of up to $500 million, earned $1.25 billion and had a return on equity of 21 percent. This segment represented 61 percent of the company's net income.
Asset Management, which encompasses the private bank, trust, investment management, mutual funds and retail brokerage, earned $163 million, representing 8 percent of total net income. The return on equity was 37 percent.
Global Corporate and Investment Banking, which serves large corporate, institutional and government customers, earned $600 million, representing 29 percent of the company's earnings. The return on equity was 16 percent.
Bank of America is the largest bank in the United States. It has full- service operations in 21 states and the District of Columbia and provides financial products and services to 30 million households and two million businesses, as well as providing international corporate financial services for business transactions in 190 countries. The company's stock (ticker: BAC) is listed on the New York, Pacific and London stock exchanges and certain shares are listed on the Tokyo Stock Exchange.
|NOTE:||James H. Hance Jr., vice chairman and chief financial officer, will|
|discuss the quarter 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.|
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.
Bank of america Corporation
Three Months Six Months Ended JUNE 30 Ended JUNE 30 2000 1999 2000 1999 Financial Summary (In millions, except per share data) Operating net income $2,063 $2,060 $4,303 $3,974 Operating earnings per common share 1.25 1.18 2.59 2.28 Diluted operating earnings per common share 1.23 1.15 2.56 2.23 Cash basis earnings (A) 2,281 2,285 4,738 4,421 Cash basis earnings per common share 1.38 1.31 2.85 2.54 Cash basis diluted earnings per common share 1.36 1.28 2.82 2.48 Dividends paid per common share .50 .45 1.00 .90 Price per share of common stock at period-end 43.00 73.31 43.00 73.31 Average common shares 1,653.495 1,743.503 1,661.403 1,740.549
Average diluted common shares 1,676.089 1,786.844 1,681.630 1,783.316
Summary Income Statement (Operating Basis) (Taxable-equivalent basis in millions) Net interest income $4,709 $4,663 $9,304 $9,308 Provision for credit losses (470) (510) (890) (1,020) Gains on sales of securities 6 52 12 182 Noninterest income 3,500 3,522 7,546 6,745 Other noninterest expense (4,413) (4,457) (9,036) (8,910) Income before income taxes 3,332 3,270 6,936 6,305 Income taxes - including FTE adjustment 1,269 1,210 2,633 2,331 Operating net income $2,063 $2,060 $4,303 $3,974 SUMMARY Balance Sheet (Average balances in billions) Loans and leases $391.404 $364.753 $383.994 $362.760 Managed loans and leases(B) 418.910 374.855 412.219 373.564 Securities 85.460 77.855 86.835 76.848 Earning assets 582.490 530.049 572.830 526.884 Total assets 672.588 615.364 661.804 612.510 Deposits 353.426 342.249 349.400 344.080 Shareholders' equity 47.112 46.891 46.571 46.587 Common shareholders' equity 47.037 46.821 46.495 46.516 PERFORMANCE INDICES (Operating Basis) Return on average common shareholders' equity 17.63% 17.64% 18.60% 17.22% Return on average tangible common shareholders' equity 27.51 28.49 29.14 27.97 Return on average assets 1.23 1.34 1.31 1.31 Return on average tangible assets 1.39 1.53 1.47 1.49 Net interest yield 3.24 3.53 3.26 3.55 Efficiency ratio 53.77 54.44 53.63 55.49 Cash basis efficiency ratio 51.12 51.70 51.04 52.71 Net charge-offs (in millions) $470 $520 $890 $1,039 % of average loans and leases .48% .57% .47% .58% Managed bankcard net charge-offs as a % of average managed bankcard receivables 4.84 6.13 5.13 6.07 REPORTED RESULTS (Including Merger-Related Charges) (In millions, except per share data) Net income $2,063 $1,915 $4,303 $3,829 Earnings per common share 1.25 1.10 2.59 2.20 Diluted earnings per common share 1.23 1.07 2.56 2.15 Return on average common shareholders' equity 17.63% 16.40% 18.60% 16.59%
(A) Cash basis earnings equal operating net income excluding
amortization of intangibles.
(B) Prior periods are restated for comparison (e.g. acquisitions,
divestitures and securitizations).
JUNE 30 2000 1999 Balance Sheet highlights (In billions, except per share data) Loans and leases $400.817 $363.581 Securities 80.957 76.511 Earning assets 587.985 528.797 Total assets 679.538 614.102 Deposits 356.664 339.045 Shareholders' equity 45.861 45.631 Common shareholders' equity 45.786 45.551 Per share 27.82 26.44 Total equity to assets ratio (period-end) 6.75% 7.43% Risk-based capital Tier 1 capital ratio 7.40 7.38 Total capital ratio 11.03 11.09 Leverage ratio 6.11 6.34 Common shares issued and outstanding (in millions) 1,645.701 1,722.931 Allowance for credit losses $6.815 $7.096 Allowance for credit losses as a % of loans and leases 1.70% 1.95% Allowance for credit losses as a % of nonperforming loans 184.66 252.38 Nonperforming loans $3.691 $2.812 Nonperforming assets 3.886 3.070 Nonperforming assets as a % of: Total assets .57% .50% Loans, leases and foreclosed properties .97 .84 OTHER DATA Full-time equivalent headcount 150,854 161,919 Banking centers 4,450 4,531 ATMs 13,944 14,051
BUSINESS SEGMENT RESULTS - Three Months Ended June 30, 2000
OPERATING AVERAGE RETURN ON TOTAL NET LOANS AVERAGE REVENUE INCOME AND LEASES EQUITY Consumer and Commercial Banking $5,214 $1,254 $261,091 20.6% Asset Management 579 163 21,772 37.2 Global Corporate and Investment Banking 2,336 600 108,635 15.6 Other 80 46 n/m n/m
n/m = not meaningful
Follow this link for the second quarter earnings analyst conference call handout.
CONTACT: investors, Susan Carr, 704-386-8059, or Kevin Stitt, 704-386-5667, or media, Bob Stickler or Cary Walker, 704-386-8465, all of Bank of America Corporation