Bank of America Reports Record Quarterly Earnings of $4.7 Billion, or $1.14 Per Share
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Revenue and earnings momentum strong across enterprise Commercial loans up significantly in Northeast Efficiency ratio beats target
CHARLOTTE, N.C., April 18 /PRNewswire-FirstCall/ -- Bank of America Corporation today reported that first quarter net income rose to $4.70 billion, or $1.14 per share (diluted), from $2.68 billion, or $0.91 per share, a year ago. Under purchase accounting rules, results reported for 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 first quarter was 19.30 percent.
In addition to the impact of Fleet, net income increased due to strong results throughout the company's businesses, lower credit costs, increasing merger-related efficiencies and gains from the sales of securities.
The integration of Fleet remained on schedule as several systems conversions were completed during the quarter and additional conversions were started. Direct cost savings achieved in the quarter totaled $437 million.
First quarter earnings included merger and restructuring charges of $112 million pre-tax, which reduced net income by 2 cents per share.
"I am very pleased with the continued momentum of our businesses," said Kenneth D. Lewis, chairman and chief executive officer. "The continuing successful integration of the Fleet franchise has bolstered our ability to achieve future growth and value creation for our shareholders. In particular, we saw the strongest commercial loan growth in many quarters across our company and deposit growth continues to be robust.
"This quarter shows how our balanced business mix is paying off," Lewis continued. "The power of our franchise is evident in our ability this quarter to deliver an efficiency ratio below our target of 50 percent."
Business Highlights (Unless otherwise stated, the following highlights compare results in the first quarter of 2005 to the fourth quarter of 2004. Both periods include the impact of the Fleet merger.)
2005 First Quarter Versus 2004 First Quarter Financial Summary Revenue
Revenue on a fully taxable-equivalent basis grew to $14.22 billion from $9.70 billion the previous year.
Net interest income on a fully taxable-equivalent basis was $8.07 billion compared to $5.97 billion a year earlier. In addition to the impact of Fleet, the increase was driven by consumer and middle-market business loan growth, higher domestic deposit levels and asset-liability management portfolio activity net of the impact of rates. These increases were partially offset by a lower trading-related contribution and lower levels of foreign loans.
Noninterest income was $6.15 billion compared to $3.73 billion a year earlier. In addition to the impact of Fleet, these results were driven by higher investment and brokerage services, equity investment gains, trading account profits and card income.
During the quarter, the company realized $659 million in securities gains. The company realized $495 million in securities gains in the first quarter of 2004.
With strong revenue growth and expense control, the efficiency ratio, including merger and restructuring charges, improved to 49.62 percent. Noninterest expense was $7.06 billion compared to $5.43 billion a year ago, driven by the addition of Fleet.
All major commercial credit quality indicators continued to show positive trends. Credit card charge-offs grew as a result of the Fleet acquisition, card portfolio growth and seasoning and increases in minimum payment requirements as compared to the first quarter of 2004. Consumer credit quality remained strong in all other categories.
Total shareholders' equity was $98.52 billion at March 31, 2005. Period- end assets grew to $1.21 trillion. The Tier 1 Capital Ratio was 8.20 percent, compared to 8.10 percent at December 31, 2004 and 7.73 percent a year ago.
During the quarter, Bank of America paid a cash dividend of $0.45 per share. The company also issued 32 million shares, primarily related to employee stock options and ownership plans, and repurchased 43 million shares. Average common shares issued and outstanding were 4.03 billion in the first quarter, compared to 4.03 billion in the fourth quarter of 2004 and 2.88 billion in the first quarter of 2004.
First Quarter 2005 Business Segment Results
Global Consumer and Small Business Banking
Global Consumer and Small Business Banking earnings in the first quarter were $1.90 billion. Revenue in the first quarter was $6.96 billion.
As compared to the first quarter of 2004, improvement in mortgage banking income and continued growth in card income and service charges was somewhat offset by an increase in provision.
Excluding the impact of Fleet, average deposits increased slightly while loan balances continued to grow, 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. Loan production in Consumer Real Estate was led by significant improvement in home equity volume as compared to the first quarter of 2004.
Global Business and Financial Services
Global Business and Financial Services earnings in the first quarter were $1.12 billion. Revenue in the first quarter was $2.73 billion.
Excluding the impact of Fleet, steady growth in commercial lending continued. The benefit of steady loan and deposit growth was partially offset by a slight compression in loan margin spreads as compared to the first quarter of 2004.
Global Capital Markets and Investment Banking
Global Capital Markets and Investment Banking earnings in the first quarter were $721 million. Revenue in the first quarter was $2.63 billion.
The business recorded its best quarter ever in earnings and revenue. This was primarily due to increases in trading profits, led by increased sales of interest rate products, equities and strong portfolio management in fixed income. Also contributing to the increase in trading-related revenue were gains on credit portfolio hedges. These increases were somewhat offset by lower investment banking fees as compared to the first quarter of 2004.
Due to the favorable credit environment, Global Capital Markets and Investment Banking had a negative provision in the large corporate loan book in the first quarter of 2005.
Global Wealth and Investment Management
Global Wealth and Investment Management earnings in the first quarter were $576 million. Revenue in the first quarter was $1.79 billion.
Excluding the impact of Fleet, revenue and earnings growth was led by increases from the impact of loan and deposit growth and asset management fees, as well as strong expense management. These factors were partially offset by lower brokerage volume and price compression in addition to a drop in assets under management.
All Other reflected $379 million of net income for the quarter. Securities gains related to asset/liability management are included in this reporting segment. Equity Investments earned $98 million compared to a loss of $29 million in the first quarter of 2004.
Note: Marc Oken, chief financial officer, will discuss first quarter 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 thirteen 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 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) Three Months Ended March 31 2005 2004 (Dollars in millions, except per share data; shares in thousands) Financial Summary Earnings $4,695 $2,681 Earnings per common share 1.16 0.93 Diluted earnings per common share 1.14 0.91 Dividends paid per common share 0.45 0.40 Closing market price per common share 44.10 40.49 Average common shares issued and outstanding 4,032,550 2,880,306 Average diluted common shares issued and outstanding 4,099,062 2,933,402 Summary Income Statement Net interest income $7,873 $5,801 Total noninterest income 6,149 3,730 Total revenue 14,022 9,531 Provision for credit losses 580 624 Gains on sales of debt securities 659 495 Other noninterest expense 6,945 5,430 Merger and restructuring charges 112 -- Income before income taxes 7,044 3,972 Income tax expense 2,349 1,291 Net income $4,695 $2,681 Summary Average Balance Sheet Total loans and leases $524,944 $374,077 Securities 204,574 99,755 Total earning assets 1,044,914 734,808 Total assets 1,200,883 833,192 Total deposits 627,419 425,075 Shareholders' equity 98,814 48,686 Common shareholders' equity 98,542 48,632 Performance Indices Return on average assets 1.59 % 1.29 % Return on average common shareholders' equity 19.30 22.16 Credit Quality Net charge-offs $889 $720 Annualized net charge-offs as a % of average loans and leases outstanding 0.69 % 0.77 % Managed credit card net losses as a % of average managed credit card receivables 6.17 5.05 At March 31 2005 2004 Balance Sheet Highlights Loans and leases $529,466 $375,968 Total securities 218,950 139,788 Total earning assets 1,059,816 705,039 Total assets 1,212,239 799,974 Total deposits 629,987 435,592 Total shareholders' equity 98,519 48,776 Common shareholders' equity 98,248 48,723 Book value per share 24.35 16.85 Total equity to assets ratio (period- end) 8.13 % 6.10 % Risk-based capital ratios: Tier 1 8.20 * 7.73 Total 11.46 * 11.46 Leverage ratio 5.82 * 5.43 Period-end common shares issued and outstanding 4,035,319 2,890,975 Allowance for credit losses: Allowance for loan and lease losses $8,313 $6,080 Reserve for unfunded lending commitments 394 401 Total $8,707 $6,481 Allowance for loan and lease losses as a % of total loans and leases 1.57 % 1.62 % Allowance for loan and lease losses as a % of total nonperforming loans and leases 401 258 Total nonperforming loans and leases $2,073 $2,354 Total nonperforming assets 2,338 2,485 Nonperforming assets as a % of: Total assets 0.19 % 0.31 % Total loans, leases and foreclosed properties 0.44 0.66 Nonperforming loans and leases as a % of total loans and leases 0.39 0.63 Other Data Full-time equivalent employees 175,365 134,374 Number of banking centers - domestic 5,889 4,272 Number of ATMs - domestic 16,798 13,168 * Preliminary data Information for periods after April 1, 2004 includes the FleetBoston acquisition; prior periods have not been restated. BUSINESS SEGMENT RESULTS Global Global Global Business Capital Consumer and and Markets and Small Business Financial Investment Banking Services Banking Three Months Ended March 31, 2005 Total revenue (FTE) (2) $6,961 $2,734 $2,632 Net income 1,899 1,120 721 Shareholder value added 1,154 350 449 Return on average equity 23.54 % 15.33 % 27.90 % Average loans and leases $138,670 $171,500 $35,508 Three Months Ended March 31, 2004 Total revenue (FTE) (2) $4,724 $1,569 $2,173 Net income 1,070 582 453 Shareholder value added 716 385 253 Return on average equity 30.30 % 31.36 % 24.28 % Average loans and leases $86,082 $109,193 $29,333 BUSINESS SEGMENT RESULTS Global Wealth and Investment All Management Other Three Months Ended March 31, 2005 Total revenue (FTE) (2) $1,794 $100 Net income 576 379 Shareholder value added 328 24 Return on average equity 23.74 % n/m Average loans and leases $50,759 $128,507 Three Months Ended March 31, 2004 Total revenue (FTE) (2) $1,101 $133 Net income 246 330 Shareholder value added 127 (76) Return on average equity 21.78 % n/m Average loans and leases $38,442 $111,027 n/m = not meaningful Three Months Ended March 31 2005 2004 SUPPLEMENTAL FINANCIAL DATA Fully taxable-equivalent basis data (2) Net interest income $8,072 $5,970 Total revenue 14,221 9,700 Net interest yield 3.11 % 3.26 % Efficiency ratio 49.62 55.98 Reconciliation of net income to operating earnings Net income $4,695 $2,681 Merger and restructuring charges 112 -- Related income tax benefit (37) -- Operating earnings $4,770 $2,681 Operating Basis Diluted earnings per common share $1.16 $0.91 Return on average assets 1.61 % 1.29 % Return on avg common shareholders' equity 19.61 22.16 Efficiency ratio 48.83 55.98 Reconciliation of net income to shareholder value added Net income $4,695 $2,681 Amortization of intangibles 208 54 Merger and restructuring charges, net of tax benefit 75 -- Capital charge (2,673) (1,330) Shareholder value added $2,305 $1,405 (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.