Strong Performance in Consumer Banking Continues To Lead Bank of America Growth in Earnings
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CHARLOTTE, N.C., Jan. 15 /PRNewswire-FirstCall/ -- Bank of America Corporation (NYSE: BAC) today reported fourth quarter net income of $2.61 billion, or $1.69 per share (diluted) up from $2.06 billion, or $1.28 per share, a year ago.
For the full year, Bank of America reported net income of $9.25 billion, or $5.91 per share (diluted). A year earlier, the company reported net income of $6.79 billion, or $4.18 per share.
In the fourth quarter and full year, the return on average common equity was 21.58 percent and 19.44 percent, respectively.
As previously announced, the company recorded after-tax income of $488 million resulting from a tax settlement during the quarter.
Fourth quarter results were driven by continued growth in consumer revenue from mortgage, debit and credit card, and deposits. These items were partly offset by weak market-related revenue.
"We continue to benefit from our diversified business mix," said Kenneth D. Lewis, chairman and chief executive officer. "Fourth quarter performance was led by the strong growth we saw throughout the year in consumer banking and by tight expense control."
"Although the economy remains challenging," continued Lewis, "it was a successful year. We made great progress on our customer-focused strategy. We added talent, launched new products that deepened relationships, improved our customers' satisfaction scores and increased retention. This intense focus paid off and we will continue to execute this strategy for 2003."
Excluding goodwill amortization in 2001, fourth quarter net income was up 18 percent. Excluding goodwill amortization and $1.25 billion in costs related to the exit of the company's auto leasing and subprime real estate lending business in 2001, full-year net income was up 7 percent.
Fourth quarter financial summary (compared to a year earlier)
Fully taxable-equivalent revenue of $8.97 billion was relatively unchanged from the previous year.
Both fully taxable-equivalent net interest income and noninterest income remained relatively unchanged at $5.54 billion and $3.43 billion, respectively, from fourth quarter 2001 levels. Record refinance levels drove higher mortgage banking income results. Card income rose as a result of higher interchange and other fees. Total service charges increased 7 percent.
Other income was up due primarily to $172 million in gains on whole loan mortgage sales taken to manage prepayment risk. These improvements were offset by lower market-related revenues as investment banking and trading account profits declined a total of $286 million.
During the quarter, the company realized $304 million in net securities gains, down from $393 million in 2001, as the discretionary portfolio was repositioned in line with market conditions.
Expenses were down 9 percent from a year earlier to $4.83 billion, primarily due to tightened expense control, less litigation expense and using Six Sigma tools that resulted in productivity gains and efficiencies. Adjusted for the amortization of goodwill, expenses decreased 6 percent. The efficiency ratio was 53.9 percent.
Credit quality continued to be affected by uncertain economic and market conditions. Consumer credit quality continues to perform well while the franchise-based commercial portfolio improved during the quarter. The large corporate portfolio continued to experience credit issues in a few industries such as airlines, telecom and utilities as well as around specific events.
Total shareholders' equity was $50.3 billion on Dec. 31, 2002, up 4 percent from a year ago, and represented 8 percent of period-end assets of $660 billion. The preliminary Tier 1 Capital Ratio was 8.22 percent, a decrease of 8 basis points from a year earlier.
During the quarter, Bank of America repurchased 9.7 million shares and issued 8.2 million shares as stock options were exercised. Average common shares outstanding were 1.50 billion, down 4 percent from 1.57 billion a year earlier, and were unchanged from the third quarter of 2002.
2002 full-year financial summary
Fully taxable-equivalent revenue, at $35.1 billion, remained relatively unchanged from 2001.
Fully taxable-equivalent net interest income rose 4 percent to $21.5 billion. This growth was driven by a larger discretionary portfolio, the impact of interest rates, higher deposit balances and trading-related activities. These factors offset the impact of the exited subprime business in 2001. The net interest yield of 3.75 percent improved 7 basis points, reflecting a favorable change in loan mix and higher deposit levels. These factors somewhat offset the absence of the subprime business and the yield impact of trading-related activities.
Noninterest income declined 5 percent to $13.6 billion. Solid growth in fee income from consumer products such as mortgages and debit and credit cards was unable to offset a sharp decline in equity investments and trading account profits due to the challenging economy. Other income was up, primarily due to higher levels of whole loan mortgage sale gains.
Noninterest expense decreased 11 percent to $18.4 billion from the prior year. This decline was driven by reduced litigation expense, lower business exit costs and lower personnel expense. Adjusted for the amortization of goodwill, expenses were down 8 percent.
Provision expense was $3.70 billion in 2002, a 14 percent decline from 2001. Included in the 2001 expense was $395 million related to the exit of the subprime business. Excluding that charge, provision expense declined 5 percent.
Net charge-offs totaled $3.70 billion, or 1.10 percent of loans and leases, down from $4.24 billion, or 1.16 percent of loans and leases, in 2001. Net charge-offs in 2001 included $635 million in losses related to the exit of the subprime business. Excluding that loss, full year charge-offs rose 2 percent, led by higher losses in the card portfolio.
2002 full-year business segment results
To present comparable business segment results, earnings and expenses for 2001 have been adjusted to exclude goodwill amortization.
Consumer & Commercial Banking
Consumer & Commercial Banking (CCB) earned $6.09 billion, up 13 percent from a year earlier. Total revenue grew 9 percent while expenses increased 5 percent. Return on equity was 33.1 percent and Shareholder Value Added (SVA) grew 23 percent to $4.05 billion.
Net interest income increased 10 percent to $14.5 billion, driven by growth in consumer loans and deposits. Consumer loans grew 16 percent, primarily in residential mortgages and credit cards. Commercial loan levels declined 12 percent as companies paid down loan balances.
Average CCB deposits grew 6 percent, driven by growth in new checking accounts and improved account retention. Growth in consumer deposits continued to be led by increases in money market savings and checking account balances.
Noninterest income was up 8 percent to $8.45 billion, driven by higher consumer service charges from increased customer activity, mortgage activity, growth in new customers, increased use of debit and credit cards by customers and higher commercial account service charges.
Global Corporate and Investment Banking
Global Corporate and Investment Banking (GCIB) earned $1.72 billion, a 17 percent decline from last year. Revenue decreased 8 percent to $8.83 billion, while the provision for loan losses decreased 6 percent. Additionally, expenses declined 5 percent. Return on equity was 15.5 percent and SVA decreased 19 percent to $421 million.
Total trading-related revenue in GCIB, which includes trading-related net interest income and trading-account profits, was $2.80 billion, down 18 percent from 2001 results, primarily due to weaker demand for equity and fixed-income products.
Despite the challenging environment, investment banking income only decreased 3 percent from 2001 to $1.48 billion. This result was driven by increased syndications and advisory fees, which offset weaker market demand for securities underwriting.
Asset Management earnings decreased 29 percent from a year ago to $404 million, primarily due to one large credit. Provision for credit losses rose to $318 million from $121 million a year earlier. Revenue of $2.40 billion was down 3 percent, while expenses remained flat as the business continued to invest in distribution capabilities. Return on equity was 16.3 percent and SVA declined $199 million to $113 million.
Assets under management remained relatively unchanged at $310 billion. Asset Management grew its distribution capabilities to better serve the financial needs of clients across the franchise, surpassing its 20 percent goal of increasing the number of financial advisors and relationship managers in 2002.
Equity Investments reported a net loss of $329 million, compared to a net loss of $115 million a year ago. In Principal Investing, cash gains of $432 million were offset by impairments of $710 million. In 2001, cash gains of $425 million offset impairments of $335 million.
One of the world's leading financial services companies, Bank of America is committed to making banking work for customers and clients like it never has before. Through innovative technologies and the ingenuity of its people, Bank of America provides individuals, small businesses and commercial, corporate and institutional clients across the United States and around the world new and better ways to manage their financial lives.
Shares of Bank of America (ticker: BAC), the second largest banking company in the United States by market capitalization, are listed on the New York, Pacific and London stock exchanges. The company's Web site is www.bankofamerica.com. News, speeches and other corporate information may be found at www.bankofamerica.com/newsroom.
Additional financial tables are available at www.bankofamerica.com/investor .
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) changes in the interest rate environment reduce interest margins and impact funding sources; 5) changes in foreign exchange rates increases exposure; 6) changes in market rates and prices may adversely impact the value of financial products; 7) legislation or regulatory environments, requirements or changes adversely affect the businesses in which the company is engaged; 8) litigation liabilities, including costs, expenses, settlements and judgments, may adversely affect the company or its businesses; and 9) 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 www.sec.gov.
Bank of America
Three Months Twelve Months Ended December 31 Ended December 31 2002 2001 2002 2001
(Dollars in millions,
except per share data;
shares in thousands)
Financial Summary (1) Earnings $2,614 $2,057 $9,249 $6,792 Earnings per common share 1.74 1.31 6.08 4.26 Diluted earnings per common share 1.69 1.28 5.91 4.18 Dividends per common share 0.64 0.60 2.44 2.28 Closing market price per common share 69.57 62.95 69.57 62.95 Average common shares issued and outstanding 1,499,557 1,570,083 1,520,042 1,594,957 Average diluted common shares issued and outstanding 1,542,482 1,602,886 1,565,467 1,625,654 Summary Income Statement (1) Net interest income $5,374 $5,417 $20,923 $20,290 Noninterest income 3,430 3,398 13,571 14,348 Total revenue 8,804 8,815 34,494 34,638 Provision for credit losses 1,165 1,401 3,697 4,287 Gains on sales of securities 304 393 630 475 Noninterest expense 4,832 5,324 18,436 20,709 Income before income taxes 3,111 2,483 12,991 10,117 Income tax expense 497 426 3,742 3,325 Net income $2,614 $2,057 $9,249 $6,792 Summary Average Balance Sheet Loans and leases $343,099 $333,354 $336,819 $365,447 Managed loans and leases 347,970 342,866 343,109 375,624 Securities 83,751 71,454 75,298 60,372 Earning assets 601,881 555,205 573,521 560,316 Total assets 695,468 651,797 662,401 649,547 Deposits 381,381 368,171 371,479 362,652 Common shareholders' equity 48,015 48,850 47,552 48,609 Total Shareholders' equity 48,074 48,916 47,613 48,678 Performance Indices (1) Return on average assets 1.49% 1.25% 1.40% 1.05% Return on average common shareholders' equity 21.58 16.70 19.44 13.96 Credit Quality Net Charge-offs (2) $1,165 $1,194 $3,697 $4,244 % of average loans and leases 1.35% 1.42% 1.10% 1.16% Managed bankcard net charge-offs as a % of average managed bankcard receivables 4.99 4.90 5.28 4.76 At December 31 2002 2001 Balance Sheet Highlights Loans and leases $342,755 $329,153 Securities 69,148 85,499 Earning assets 562,432 517,650 Total assets 660,458 621,764 Deposits 386,458 373,495 Common shareholders' equity 50,261 48,455 Book value per share 33.49 31.07 Total Shareholders' equity 50,319 48,520 Total equity to assets ratio (period end) 7.62% 7.80% Risk-based capital ratios: (3) Tier 1 8.22 8.30 Total 12.43 12.67 Leverage ratio 6.31 6.56 Period-end common shares issued and outstanding 1,500,691 1,559,297 Allowance for credit losses $6,851 $6,875 Allowance for credit losses as a % of loans and leases 2.00% 2.09% Allowance for credit losses as a % of nonperforming loans 136 153 Nonperforming loans $5,037 $4,506 Nonperforming assets 5,262 4,908 Nonperforming assets as a % of: Total assets .80% .79% Loans, leases and foreclosed properties 1.53 1.49 Nonperforming loans as a % of loans and leases 1.47 1.37 Other Data Full-time equivalent employees 133,944 142,670 Number of banking centers 4,208 4,253 Number of ATM's 13,013 13,113
(1) The three months ended December 31, 2001 included goodwill
amortization of $160 million. The impact on net income was $149 million, or $0.09 per share (diluted). The year ended December 31, 2001 included goodwill amortization of $662 million. The impact on net income was $616 million, or $0.38 per share (diluted).
(2) Net charge-offs in 2001 included $635 million related to the exit of
certain consumer finance businesses.
(3) 2002 ratios are preliminary.
BUSINESS SEGMENT RESULTS
Consumer and Global Corporate Commercial Asset and Investment Equity Corporate Banking Management Banking Investments Other Twelve months ended December 31, 2002 Total revenue $22,989 $2,399 $8,833 $(433) $1,294 Net income 6,088 404 1,723 (329) 1,363 Shareholder value added 4,054 113 421 (582) (246) Return on equity 33.1% 16.3% 15.5% (15.5)% n/m Average loans and leases $183,341 $23,251 $62,934 $440 $66,853 Twelve months ended December 31, 2001 Total revenue $21,058 $2,475 $9,586 $29 $1,833 Net Income (4) 4,953 522 1,956 (115) (524) Shareholder value added 3,286 312 519 (388) (642) Return on equity 25.9% 23.5% 14.9% (4.9)% n/m Average loans and leases $178,116 $24,381 $82,321 $477 $80,152
n/m = not meaningful
(4) Includes goodwill amortization of $421 million for Consumer and
Commercial Banking, $47 million for Asset Management, $108 million for Global Corporate and Investment Banking, $8 million for Equity Investments and $32 million for Corporate Other.
Three Months Ended Twelve Months Ended December 31 December 31 2002 2001 2002 2001 SUPPLEMENTAL FINANCIAL DATA (Non-GAAP basis) Performance Metrics- Excluding exit charges (1,2) Earnings excluding exit charges $2,614 $2,057 $9,249 $8,042 Return on average assets 1.49% 1.25% 1.40% 1.24% Return on average common shareholders' equity 21.58 16.70 19.44 16.53 Efficiency ratio (taxable-equivalent basis) 53.90 59.80 52.55 55.47 Shareholder value added $1,214 $793 $3,760 $3,087 Taxable-equivalent basis data Net interest income 5,537 5,505 21,511 20,633 Total revenue 8,967 8,903 35,082 34,981 Net interest yield 3.66% 3.95% 3.75% 3.68% Efficiency ratio 53.90 59.80 52.55 59.20
(1) Excludes charges for provision for credit losses of $395 million and
noninterest expense of $1.3 billion, both of which are related to the exit of certain consumer finance businesses in the third quarter of 2001. Noninterest expense charges consisted of goodwill write-offs, auto lease residual charges, real estate servicing asset charges and other transaction costs. The impact of business exit charges on net income for the year ended December 31, 2001 was $1.25 billion or $0.77 per share (diluted).
(2) See footnote (1) on page 1. SOURCE Bank of America Corporation
/CONTACT: Investor, Kevin Stitt, +1-704-386-5667, or Lee McEntire, +1-704-388-6780, or media, Eloise Hale, +1-704-387-0013, or e-mail, email@example.com, all of Bank of America Corporation/
/Web site: http://www.bankofamerica.com/newsroom /
/Web site: http://www.bankofamerica.com/investor /