Bank of America Reports Record 2004 Earnings of $14.1 Billion, or $3.69 Per Share
Fourth quarter earnings rise to $.94 per share
All major lines of business achieve solid earnings growth
Commercial lending accelerates
Investment banking shows momentum
Card income continues to increase
Successful brand rollout complete across Northeast
CHARLOTTE, N.C., Jan. 18 /PRNewswire-FirstCall/ -- Bank of America Corporation today reported that fourth quarter net income rose 41 percent to $3.85 billion, or $.94 per share (diluted), from $2.73 billion, or $.92 per share, a year ago. Under purchase accounting rules, results reported for periods in 2003 and the first quarter of 2004 do not include the impact of FleetBoston Financial Corporation, which was acquired on April 1, 2004. Return on common equity in the fourth quarter was 15.63 percent.
For the full year, net income increased 31 percent to $14.1 billion, or $3.69 per share (diluted) from $10.8 billion, or $3.57 per share in 2003.
In addition to the impact of Fleet, the fourth quarter increase resulted from improving performance in all major business lines driven by the continued success in attracting, retaining and expanding customer relationships. Consumer accounts, deposit and card balances, credit and debit card purchase transaction volumes, trading, investment banking and assets under management all registered growth from the third quarter and the prior year.
The integration of Fleet remained on schedule as the major rebranding effort across the franchise was completed, systems conversions began and customer satisfaction and accounts continued to rise.
Fourth quarter earnings included merger and restructuring charges of $181 million after-tax, which reduced earnings by 4 cents per share.
"We are pleased with the year's successes and our position entering 2005," said Kenneth D. Lewis, president and chief executive officer. "We began 2004 with the objective of achieving a seamless integration of Fleet while not interrupting our momentum in the legacy Bank of America franchise. The Fleet transition is not only on schedule, but we have increased customer satisfaction during the year, hit or exceeded our customer account growth and profitability targets and achieved promised cost savings."
"While 2005 presents such challenges as a flattening yield curve and continued systems conversions in the Northeast, I couldn't be more satisfied with where Bank of America stands in meeting those challenges," said Lewis.
Business Highlights - The company grew net new consumer checking accounts by 2.11 million in 2004, compared to an increase of 1.25 million in 2003. The number of accounts increased by 596,000 in the fourth quarter. - The company grew net new consumer savings products by 2.60 million in 2004, compared to an increase of 640,000 in 2003. The number of new savings products was 729,000 in the fourth quarter. - The company opened 5.59 million new consumer credit card accounts in 2004, compared to 4.28 million in 2003. The number of new consumer credit card accounts opened in the fourth quarter was 1.53 million. - Online banking active users increased 72 percent to 12.4 million, representing a 50 percent penetration of checking account customers. Of those users, 5.8 million use bill pay, an increase of 78 percent from a year ago. - For the year, both syndicated loans and leveraged loans were first in market share in the number of deals closed and were both second in the market for the dollar volume of deals closed. - In 2004, the company became the top U.S. deal manager in commercial mortgage-backed securities, issuing $11.8 billion in securities. Fleet Merger Highlights - During the quarter, the company successfully completed the rebranding of all banking centers in the former Fleet franchise. - The company opened 46,000 net new consumer checking accounts in the former Fleet franchise during the quarter, bringing its total in 2004 to 184,000. This surpassed the goal of opening 150,000 during the year. - In the Northeast, the company opened 75,000 net new consumer savings accounts, bringing its annual total to 196,000. This surpassed its goal of opening 150,000 during the year. - Customer satisfaction across the Northeast continued to grow. - The company announced the opening of a new call center in Rhode Island to support customers in the Northeast. Fourth Quarter Financial Summary These are GAAP-reported results, which exclude Fleet results in 2003. Revenue
Revenue on a fully taxable-equivalent basis grew to $13.9 billion from $9.79 billion the previous year.
Net interest income on a fully taxable-equivalent basis was $7.96 billion compared to $5.75 billion a year earlier. In addition to the impact of Fleet, the increase was driven by the results of asset-liability management activities, consumer and middle-market commercial loan growth and domestic deposit growth. These increases were partially offset by the impact of lower trading-related contributions and large-corporate and foreign loan balances.
Noninterest income was $5.96 billion compared to $4.05 billion a year earlier. In addition to the impact of Fleet, these results were driven by record card income, higher service charges, investment and brokerage income, trading account profits and equity investment gains, offset by lower mortgage banking income, which resulted from lower origination volume and adjustments to the value of mortgage servicing rights.
During the quarter, the company realized $101 million in securities gains as it repositioned its mortgage-backed securities to reduce prepayment risk.
Based on strong revenue growth and expense control this quarter, the efficiency ratio improved to 52.69 percent. Noninterest expense was $7.33 billion compared to $5.29 billion a year ago, driven by the addition of Fleet. Pre-tax cost savings from the merger were $394 million during the quarter.
All major commercial asset quality indicators showed positive trends. Credit card charge-offs grew as a result of card portfolio growth, the return of previously securitized loans to the balance sheet and increases in minimum payment requirements. Consumer asset quality remained strong in all other categories.
- Provision for credit losses was $706 million, up from $650 million in the third quarter and $583 million a year earlier. - Net charge-offs were 0.65 percent of average loans and leases, or $845 million. This compared to 0.57 percent, or $719 million, in the third quarter and 0.77 percent of average loans and leases, or $725 million, a year earlier. - Nonperforming assets were 0.47 percent of total loans, leases and foreclosed properties, or $2.46 billion, as of December 31, 2004. This compared to 0.55 percent, or $2.84 billion, on September 30, 2004 and 0.81 percent, or $3.02 billion, on December 31, 2003. - The allowance for loan and lease losses stood at 1.65 percent of loans and leases, or $8.63 billion, on December 31, 2004. This compared to 1.70 percent or $8.72 billion on September 30, 2004 and 1.66 percent, or $6.16 billion, on December 31, 2003. As of December 31, 2004, the allowance for loan and lease losses represented 390 percent of nonperforming loans and leases, compared to 343 percent on September 30, 2004 and 215 percent on December 31, 2003. Capital Management
Total shareholders' equity was $99.6 billion on December 31, 2004, compared to $48.0 billion a year ago, and represented 9 percent of period-end assets of $1.11 trillion. The Tier 1 Capital Ratio was 8.10 percent, compared to 8.08 percent on September 30, 2004 and 7.85 percent a year ago.
During the quarter, Bank of America paid a cash dividend of $.45 per share. The company also issued 31.5 million shares, primarily related to employee stock options and ownership plans, and repurchased 34.1 million shares. Average common shares issued and outstanding were 4.03 billion in the fourth quarter, compared to 4.05 billion in the third quarter and 2.93 billion a year earlier.
2004 Full-Year Financial Summary
These are GAAP-reported results, which exclude Fleet results in 2003 and first quarter of 2004.
Fully taxable-equivalent revenue grew to $49.6 billion from $38.6 billion in 2003.
Fully taxable-equivalent net interest income rose 34 percent to $29.5 billion. In addition to the impact of Fleet, the increase was driven by the results of asset-liability management activities, higher consumer loan levels and higher deposit levels. This was partially offset by reductions in large corporate and foreign loan portfolios as well as lower trading-related contributions and mortgage warehouse levels. The net interest yield declined 14 basis points to 3.26 percent.
Noninterest income grew 22 percent to $20.1 billion, driven by the impact of Fleet and the growth of card income, service charges, investment and brokerage fees and investment banking income. This was offset by lower mortgage banking income, which resulted from lower origination volume and adjustments to the value of mortgage servicing rights.
Securities gains were $2.12 billion compared to $941 million a year ago.
Noninterest expense grew 34 percent to $27.0 billion, driven by the impact of Fleet, merger and restructuring costs, higher personnel costs, revenue- related incentive compensation and increased occupancy and marketing expense. The efficiency ratio was 54.48 percent.
Provision expense was $2.77 billion in 2004, a 2 percent decline from 2003. Net charge-offs totaled $3.11 billion, or 0.66 percent of loans and leases, compared to $3.11 billion, or 0.87 percent of loans and leases, in 2003.
2004 Full-Year Business Segment Results
Effective April 1, 2004, the company reorganized its business segments. What was formerly Consumer and Commercial Banking has been separated into two segments -- Consumer and Small Business Banking; and Commercial Banking. Wealth and Investment Management has added Premier Banking and the NYSE Specialist firm. Global Corporate and Investment Banking is relatively unchanged, and Corporate Other includes Latin America, equity investments, liquidating businesses and treasury.
Consumer and Small Business Banking
Consumer and Small Business Banking earnings increased 15 percent in 2004 to $6.55 billion. Revenue of $26.9 billion was up 28 percent.
Strong business results were partially offset by significantly increased amortization of deposit intangibles and additional expenses associated with the Fleet merger.
Excluding the impact of Fleet, average deposits increased while loan balances rose, led by growth in credit card and home equity loans. Credit and debit card purchase volumes also grew as more customers moved away from writing checks and using cash.
Revenue and profit were negatively impacted by a decrease in mortgage banking income, which resulted from lower origination volume and adjustments to the value of mortgage servicing rights. Results included higher provision expense of $3.34 billion, reflecting growth in the credit card portfolio, securitizations returning to the balance sheet, increases in minimum payment requirements and higher charge-offs.
Commercial Banking earnings increased 93 percent to $2.83 million as revenue rose 49 percent to $6.72 billion.
Provision expense was negative $241 million as a result of improved credit quality.
Excluding the impact of Fleet, commercial lending grew modestly during the year. Increased volume late in the year was an indication of corporate confidence in the economy. Clients also increased demand for middle market investment banking and treasury management services. Deposits also rose.
Global Corporate and Investment Banking
Global Corporate and Investment Banking earnings rose 9 percent to $1.95 billion as revenue increased 9 percent to $9.05 billion.
Provision expense was negative $459 million for the year, reflecting continued improvement in credit quality.
Excluding the impact of Fleet, investment banking results increased, reflecting the company's continuing platform build-out and market share gains in several product lines. Trading-related revenue also increased, led by demand for fixed income and foreign exchange products. Also driving trading- related revenue were lower costs to hedge the corporate loan portfolio.
Wealth and Investment Management
Wealth and Investment Management earnings grew 28 percent to $1.58 billion. Revenue rose 47 percent to $5.92 billion.
Provision expense was negative $20 million as a result of improved credit quality.
Assets under management increased to $451.5 billion, due primarily to the Fleet merger.
Excluding the impact of Fleet, growth in assets under management and earnings was driven by strong performance in the credit portfolios of Premier and the Private Bank, increased market valuations in the asset management portfolio and a growing focus on relationship development and a broader product offering.
Corporate Other earned $1.23 billion for the year, compared to $605 million in 2003. Principal Investing earned $166 million in 2004. Latin America earned $310 million during the year. Securities gains were also included in this segment.
Note: Kenneth D. Lewis, president and chief executive officer, will present the company's 2005 outlook and Marc Oken, chief financial officer, will discuss fourth quarter and full year 2004 results in a conference call at 9:30 a.m. (Eastern Time) today. The call can be accessed via a webcast available on the Bank of America Web site at http://www.bankofamerica.com/investor/ .
Bank of America is one of the world's largest financial institutions, serving individual consumers, small businesses and large corporations with a full range of banking, investing, asset management and other financial and risk-management products and services. The company provides unmatched convenience in the United States, serving 33 million consumer relationships through more than 5,800 retail banking offices and 16,700 ATMs and through award-winning online banking with more than twelve million active users. Bank of America is the No. 1 Small Business Administration Lender in the United States by the SBA. The company serves clients in 150 countries and has relationships with 96 percent of the U.S. Fortune 500 companies and 82 percent of the Global Fortune 500. Bank of America Corporation stock (ticker: BAC) is listed on the New York Stock Exchange.
This press release contains forward-looking statements, including statements about the financial conditions, results of operations and earnings outlook of Bank of America Corporation. The forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results or earnings to differ materially from such forward-looking statements include, among others, the following: 1) projected business increases following process changes and other investments are lower than expected; 2) competitive pressure among financial services companies increases significantly; 3) general economic conditions are less favorable than expected; 4) political conditions including the threat of future terrorist activity and related actions by the United States military abroad may adversely affect the company's businesses and economic conditions as a whole; 5) changes in the interest rate environment reduce interest margins and impact funding sources; 6) changes in foreign exchange rates increases exposure; 7) changes in market rates and prices may adversely impact the value of financial products; 8) legislation or regulatory environments, requirements or changes adversely affect the businesses in which the company is engaged; 9) litigation liabilities, including costs, expenses, settlements and judgments, may adversely affect the company or its businesses; and 10) decisions to downsize, sell or close units or otherwise change the business mix of any of the company. For further information regarding Bank of America Corporation, please read the Bank of America reports filed with the SEC and available at http://www.sec.gov .
Bank of America Selected Financial Data (1) (Dollars in millions, except per share Three Months Twelve Months data; shares in Ended December 31 Ended December 31 thousands) 2004 2003 2004 2003 Financial Summary Earnings $3,849 $2,726 $14,143 $10,810 Earnings per common share 0.95 0.93 3.76 3.63 Diluted earnings per common share 0.94 0.92 3.69 3.57 Dividends paid per common share 0.45 0.40 1.70 1.44 Closing market price per common share 46.99 40.22 46.99 40.22 Average common shares issued and outstanding 4,032,979 2,926,494 3,758,507 2,973,407 Average diluted common shares issued and outstanding 4,106,040 2,978,962 3,823,943 3,030,356 Summary Income Statement Net interest income $7,750 $5,586 $28,797 $21,464 Total noninterest income 5,964 4,049 20,097 16,450 Total revenue 13,714 9,635 48,894 37,914 Provision for credit losses 706 583 2,769 2,839 Gains on sales of securities 101 139 2,123 941 Other noninterest expense 7,062 5,288 26,409 20,155 Merger and restructuring charges 272 - 618 - Income before income taxes 5,775 3,903 21,221 15,861 Income tax expense 1,926 1,177 7,078 5,051 Net income $3,849 $2,726 $14,143 $10,810 Summary Average Balance Sheet Total loans and leases $515,463 $371,071 $472,645 $356,148 Securities 171,173 59,197 150,171 70,666 Total earning assets 998,004 666,780 905,302 649,548 Total assets 1,152,551 764,186 1,044,660 749,056 Total deposits 609,936 418,840 551,559 406,233 Shareholders' equity 98,100 48,293 84,183 49,204 Common shareholders' equity 97,828 48,238 83,953 49,148 Performance Indices Return on average assets 1.33 % 1.42 % 1.35 % 1.44 % Return on average common shareholders' equity 15.63 22.42 16.83 21.99 Credit Quality Net charge-offs $845 $725 $3,113 $3,106 Annualized net charge-offs as a % of average loans and leases outstanding 0.65 % 0.77 % 0.66 % 0.87 % Managed credit card net losses as a % of average managed credit card receivables 5.90 5.14 5.63 5.36 At December 31 2004 2003 Balance Sheet Highlights Loans and leases $521,837 $371,463 Total securities 195,073 66,629 Total earning assets 948,083 619,091 Total assets 1,110,457 719,483 Total deposits 618,570 414,113 Total shareholders' equity 99,645 47,980 Common shareholders' equity 99,374 47,926 Book value per share 24.56 16.63 Total equity to assets ratio (period end) 8.97 % 6.67 % Risk-based capital ratios: Tier 1 8.10 * 7.85 Total 11.63 * 11.87 Leverage ratio 5.82 * 5.73 Period-end common shares issued and outstanding 4,046,546 2,882,288 Allowance for credit losses: Allowance for loan and lease losses $8,626 $6,163 Reserve for unfunded lending commitments 402 416 Total $9,028 $6,579 Allowance for loan and lease losses as a % of total loans and leases 1.65 % 1.66 % Allowance for loan and lease losses as a % of total nonperforming loans and leases 390 215 Total nonperforming loans and leases $2,213 $2,873 Total nonperforming assets 2,455 3,021 Nonperforming assets as a % of: Total assets 0.22 % 0.42 % Total loans, leases and foreclosed properties 0.47 0.81 Nonperforming loans and leases as a % of total loans and leases 0.42 0.77 Other Data Full-time equivalent employees 175,742 133,549 Number of banking centers - domestic 5,885 4,277 Number of ATMs - domestic 16,771 13,241 * Preliminary data Information for periods after April 1, 2004 includes the FleetBoston acquisition; prior periods have not been restated. BUSINESS SEGMENT RESULTS Global Corporate Consumer and and Small Business Commercial Investment Banking Banking Banking Three Months Ended December 31, 2004 Total revenue (FTE) (2) $7,589 $1,946 $2,203 Net income 1,763 887 596 Shareholder value added 802 282 308 Return on average equity 17.46 % 15.47 % 21.81 % Average loans and leases $154,506 $142,610 $34,246 Three Months Ended December 31, 2003 Total revenue (FTE) (2) $5,344 $1,201 $1,935 Net income 1,431 410 512 Shareholder value added 1,048 252 305 Return on average equity 37.49 % 27.68 % 26.38 % Average loans and leases $95,408 $94,996 $31,034 Year Ended December 31, 2004 Total revenue (FTE) (2) $26,857 $6,722 $9,049 Net income 6,548 2,833 1,950 Shareholder value added 3,390 884 891 Return on average equity 19.89 % 15.34 % 19.46 % Average loans and leases $137,357 $129,671 $34,237 Year Ended December 31, 2003 Total revenue (FTE) (2) $20,930 $4,517 $8,334 Net income 5,706 1,471 1,794 Shareholder value added 4,367 846 893 Return on average equity 42.25 % 25.01 % 21.35 % Average loans and leases $92,776 $93,378 $36,640 n/m = not meaningful BUSINESS SEGMENT RESULTS Wealth and Investment Corporate Management Other Three Months Ended December 31, 2004 Total revenue (FTE) (2) $1,676 $506 Net income 477 126 Shareholder value added 239 (97) Return on average equity 20.39 % n/m Average loans and leases $47,948 $136,153 Three Months Ended December 31, 2003 Total revenue (FTE) (2) $1,203 $111 Net income 428 (55) Shareholder value added 313 (475) Return on average equity 39.08 % n/m Average loans and leases $37,660 $111,973 Year Ended December 31, 2004 Total revenue (FTE) (2) $5,918 $1,064 Net income 1,584 1,228 Shareholder value added 782 36 Return on average equity 20.17 % n/m Average loans and leases $44,049 $127,331 Year Ended December 31, 2003 Total revenue (FTE) (2) $4,030 $746 Net income 1,234 605 Shareholder value added 854 (1,339) Return on average equity 33.94 % n/m Average loans and leases $37,675 $95,679 n/m = not meaningful Three Months Ended Twelve Months Ended December 31 December 31 2004 2003 2004 2003 SUPPLEMENTAL FINANCIAL DATA Fully taxable-equivalent basis data (2) Net interest income $7,956 $5,745 $29,513 $22,107 Total revenue 13,920 9,794 49,610 38,557 Net interest yield 3.18 % 3.43 % 3.26 % 3.40 % Efficiency ratio 52.69 53.98 54.48 52.27 Reconciliation of net income to operating earnings Net income $3,849 $2,726 $14,143 $10,810 Merger and restructuring charges 272 - 618 - Related income tax benefit (91) - (207) - Operating earnings $4,030 $2,726 $14,554 $10,810 Operating Basis Diluted earnings per common share $0.98 $0.92 $3.80 $3.57 Return on average assets 1.39 % 1.42 % 1.39 % 1.44 % Return on avg common shareholders' equity 16.37 22.42 17.32 21.99 Efficiency ratio 50.73 53.98 53.23 52.27 Reconciliation of net income to shareholder value added Net income $3,849 $2,726 $14,143 $10,810 Amortization of intangibles 209 54 664 217 Merger and restructuring charges, net of tax benefit 181 - 411 - Capital charge (2,705) (1,337) (9,235) (5,406) Shareholder value added $1,534 $1,443 $5,983 $5,621 (1) Certain prior period amounts have been reclassified to conform to current period presentation. (2) Fully taxable-equivalent (FTE) basis is a performance measure used by management in operating the business that management believes provides investors with a more accurate picture of the interest margin for comparative purposes. Information for periods after April 1, 2004 includes the FleetBoston acquisition; prior periods have not been restated.
SOURCE Bank of America Corporation
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CO: Bank of America Corporation; FleetBoston Financial Corporation