Bank of America Corporation (ticker: BAC, exchange: New York Stock Exchange (.N))
News Release -
Bank of America First Quarter Earnings Increase 11 Percent; Earnings Per Share Rise to $1.83
Supplemental first quarter 2004 financial information
- Revenue grows 7%
- Core deposits rise 11%
- Consumer loans increase 20%
- Nonperforming assets decline 51%
- Highly satisfied customers up 11%
CHARLOTTE, April 14 /PRNewswire-FirstCall/ -- Bank of America Corporation
today reported first quarter earnings of $2.68 billion, or $1.83 per share
(diluted), 11 and 15 percent increases, respectively, from $2.42 billion, or
$1.59 per share, earned a year ago. These results do not reflect first
quarter earnings for FleetBoston Financial Corporation, which the company
acquired on April 1, 2004.
Higher earnings were driven by an increase in net interest income, as loan
balances and average deposits grew. Also driving the results were increases
in card income, investment and brokerage services income, and consumer and
corporate service charges, reflecting the growing volume of business customers
are doing with the company.
"Bank of America started the year with good momentum in its businesses,"
said Kenneth D. Lewis, Bank of America chief executive officer. "We are
encouraged by the economic growth we see in the U.S. Our continuing process
and service improvements are being reflected in higher customer satisfaction,
which is the foundation for attracting more business and growing organically.
"As we look forward to a combined future with Fleet, we are encouraged by
the momentum they exhibited in the first quarter. The integration is ahead of
schedule and we remain optimistic about the business."
As previously announced, the company took a $285 million pre-tax charge in
the first quarter to cover its mutual fund settlement, which negatively
impacted earnings by 16 cents per share.
First quarter financial highlights (compared to a year earlier)
Customer highlights (compared to a year earlier)
- Return on common equity was 22.2 percent.
- Shareholder Value Added (SVA) grew 23 percent to $1.41 billion.
- Product sales in the banking centers increased 39 percent.
- Average loans grew 8 percent.
- Card income increased 17 percent.
First quarter financial summary (compared to a year ago)
- The company grew the number of consumer checking accounts by 425,000
during the quarter compared to an increase of 243,000 a year ago.
- The company grew the number of consumer savings accounts by 531,000
during the quarter compared to an increase of 125,000 a year ago. This
growth was primarily driven by the success of the Risk Free CD product,
which now comprises 40 percent of the CD portfolio.
- The company opened 1,001,000 new credit card accounts during the
quarter compared to 741,000 a year ago. This growth was driven by the
development of more competitive offers, improved technology at the
point of sale and an increase in direct mail marketing.
- The number of customers expressing the highest level of satisfaction
with the company increased 11 percent. This equates to an increase of
1.4 million customers being highly satisfied with their banking
experience. These customers are more likely to expand their
relationships and lead to long-term revenue growth.
- Small business satisfaction increased 16 percent.
- Consumer satisfaction increased 10 percent.
- Investment product satisfaction increased 11 percent.
- Banking center satisfaction increased 9 percent.
- Customer dissatisfaction declined 13 percent, reaching its
lowest level ever.
- In a recent Forrester Research report, Bank of America received the
highest customer satisfaction rating among its peer banks, including
Citibank, Chase, Wachovia, Bank One and Washington Mutual.
- Online banking and bill pay customers increased 55 and 79 percent,
respectively, from a year ago. Customers using both online banking and
bill pay are 21 percent more profitable than those who do not use
- Marsico's assets under management doubled to $33.2 billion.
Revenue on a fully taxable-equivalent basis grew 7 percent from the
previous year to $9.69 billion.
Net interest income on a fully taxable-equivalent basis increased
11 percent to $5.97 billion. This increase was driven by the impact of higher
asset/liability management portfolio levels and interest rate movements as
well as consumer and middle market commercial loan growth and domestic deposit
growth. These were partially offset by the impact of lower large corporate
and foreign loan balances, continued run off of previously exited consumer
businesses and lower mortgage warehouse levels. The net interest yield
declined 30 basis points to 3.22 percent.
Noninterest income was up slightly to $3.72 billion driven by improvements
in equity investments, card income, investment and brokerage services, service
charges and investment banking income. Mortgage banking income declined 48
percent, driven by a slowdown in refinance activity. A $275 million writedown
in mortgage banking assets, a result of faster prepayment speeds due primarily
to the low interest rate environment and changes in other assumptions,
significantly reduced trading account profits.
During the quarter, the company realized $495 million in net debt
Expenses increased 15 percent from a year ago to $5.42 billion. Excluding
the impact of the mutual fund settlement, expenses grew 9 percent, driven by
an increase in revenue-based employee incentives and benefits cost.
Overall credit quality continued to improve. Net charge-offs and
nonperforming assets continued to decline. All major commercial asset quality
indicators are showing positive trends and consumer credit quality continues
to perform well.
- Provision for credit losses was $624 million, down 25 percent from
$833 million a year earlier and up 7 percent from $583 million in the
- Net charge-offs were $720 million, or 0.77 percent of loans and leases,
down 14 percent from $833 million, or 0.98 percent, a year earlier and
down from $725 million, or 0.77 percent, in the fourth quarter.
- Nonperforming assets were $2.48 billion, or 0.66 percent of loans,
leases and foreclosed properties as of March 31, 2004. This was down
51 percent from $5.03 billion on March 31, 2003 and down 18 percent
from $3.02 billion on December 31, 2003.
- The allowance for loan and lease losses stood at $6.08 billion, or
1.62 percent of loans and leases on March 31, 2004. That was down from
$6.42 billion, or 1.87 percent, on March 31, 2003 and down from
$6.16 billion, or 1.66 percent, as of December 31, 2003.
As of March 31, 2004, the allowance for loan and lease losses
represented 258 percent of nonperforming loans, up from 134 percent on
March 31, 2003 and 215 percent as of December 31, 2003.
Total shareholders' equity was $48.8 billion at March 31, 2004, down 3
percent from a year ago, and represented 6 percent of period-end assets of
$816 billion. The Tier 1 Capital Ratio was 7.73 percent, a decline of 47 basis
points from a year ago and 12 basis points from the December 31, 2003 level.
During the quarter, Bank of America issued 16 million shares related to
employee options and stock ownership plans and repurchased 12 million shares.
Average common shares issued and outstanding were 1.44 billion in the first
quarter, down 4 percent from 1.50 billion a year earlier.
Consumer and Commercial Banking
The consumer business achieved significant acceleration of its customer
results, continuing the momentum of its customer-relationship strategy.
Consumer and Commercial Banking (CCB) earned $1.85 billion, up 16 percent from
a year ago. Total revenue grew 9 percent to $6.63 billion while expenses
increased 8 percent due to higher personnel and processing expense. Return on
equity was 32.4 percent and SVA grew $158 million to $1.27 billion.
CCB's ability to attract and deepen customer relationships generated
growth across the business line. Both credit card purchase volume and average
price per transaction amount increased. The number of checking, credit card
and debit card accounts increased as did home equity lines of credit. Core
consumer deposits rose 12 percent.
Net interest income grew to $4.53 billion, as average deposits and loans
grew 10 and 6 percent, respectively. Customers continued to take advantage of
the interest rate environment for home equity lines. Credit card managed
loans were up 26 percent driven by new account growth and balance-building
Noninterest income declined 9 percent to $2.09 billion, due to the decline
in mortgage banking income.
Commercial banking earnings rose 49 percent as commercial deposits grew 18
percent and loans increased 4 percent. Commercial investment banking services
income grew 50 percent.
Global Corporate and Investment Banking
Global Corporate and Investment Banking (GCIB) earned $463 million,
relatively unchanged from a year ago. The mutual fund settlement reduced pre-
tax income by $142.5 million. Revenue decreased 2 percent to $2.27 billion
and expenses increased 18 percent. Return on equity was 21 percent and SVA
increased $52 million to $225 million.
Net interest income decreased 10 percent to $1.13 billion from a year ago,
which was attributable to a 28 percent decline in the loan portfolio and a
continued narrowing of core loan spreads.
Noninterest income grew 7 percent as investment and brokerage services,
equity investment gains and investment banking income increased. The increase
in investment banking fees was led by the strong demand for securities
underwriting and advisory services. Fixed income trading continued to show
strong results in high yield debt, commercial mortgage-backed securities and
As overall credit quality continued to improve, GCIB recorded a
$23 million net recovery of reserves compared to provision expense of
$272 million a year earlier. During the quarter, the company charged off
$106 million in loans to Parmalat and wrote down approximately $29 million of
Asset Management earned $53 million, down 62 percent from a year ago. The
mutual fund settlement reduced pre-tax income by $142.5 million. Revenue
increased 14 percent to $669 million. Expenses increased 55 percent,
reflecting the settlement, professional and legal fees related to the inquiry,
and the increase in distribution capabilities over the last several quarters.
Return on equity was 7 percent and SVA declined $94 million to $(27) million.
Assets under management increased 14 percent to $337 billion and saw a
significant change in mix as equities increased to 36 percent of assets under
management, from 27 percent a year ago. Assets invested in equities,
primarily in equities-based mutual funds, increased 51 percent to
Continuing to focus on expanding distribution capabilities, Asset
Management ended the quarter with 244, or 25 percent more, financial advisors
than 12 months earlier. Deposits in the private bank reached an all time high
of $15.8 billion. Much of this growth is the result of the business' focus on
relationship development and a broader product offering.
Equity Investments reported a loss of $30 million, compared to a loss of
$85 million a year ago. Principal Investing reported cash gains of
$101 million in the first quarter offset by $99 million in impairments and
$13 million in mark-to-market adjustments.
Note: James H. Hance, Jr., vice chairman, 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
with 5,700 retail banking offices, more than 16,000 ATMs and award-winning
online banking with more than nine million active users. Bank of America is
rated 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. Additional information is available
at www.bankofamerica.com . 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) 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;
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
Ended March 31
(Dollars in millions, except per
share data; shares in thousands)
Earnings $2,681 $2,424
Earnings per common share 1.86 1.62
Diluted earnings per common share 1.83 1.59
Dividends paid per common share 0.80 0.64
Closing market price per common share 80.98 66.84
Average common shares issued and
outstanding 1,440,153 1,499,405
Average diluted common shares issued
and outstanding 1,466,701 1,526,288
Summary Income Statement
Net interest income $5,801 $5,209
Total noninterest income 3,717 3,693
Total revenue 9,518 8,902
Provision for credit losses 624 833
Gains on sales of debt securities 495 273
Total noninterest expense 5,417 4,725
Income before income taxes 3,972 3,617
Income tax expense 1,291 1,193
Net income $2,681 $2,424
Summary Average Balance Sheet
Total loans and leases $374,077 $345,662
Debt securities 99,755 66,186
Total earning assets 743,711 613,092
Total assets 849,625 713,780
Total deposits 425,075 385,760
Shareholders' equity 48,686 49,400
Common shareholders' equity 48,632 49,343
Return on average assets 1.27 % 1.38 %
Return on average common shareholders' equity 22.16 19.92
Net charge-offs $720 $833
Annualized net charge-offs as a % of
average loans and leases outstanding 0.77 % 0.98 %
Managed credit card net losses as a % of
average managed credit card receivables 5.05 5.25
At March 31
Balance Sheet Highlights
Loans and leases $375,968 $343,412
Total debt securities 139,788 74,837
Total earning assets 713,070 577,404
Total assets 816,012 680,197
Total deposits 435,592 395,176
Total shareholders' equity 48,776 50,052
Common shareholders' equity 48,723 49,995
Book value per share 33.71 33.38
Total equity to assets ratio (period end) 5.98 % 7.36 %
Risk-based capital ratios:
Tier 1 7.73 8.20
Total 11.46 12.29
Leverage ratio 5.43 6.24
Period-end common shares issued and
outstanding 1,445,487 1,497,531
Allowance for credit losses:
Allowance for loan and lease losses $6,080 $6,421
Reserve for unfunded lending commitments 401 432
Total $6,481 $6,853
Allowance for loan and lease losses
as a % of total loans and leases 1.62 % 1.87 %
Allowance for loan and lease losses
as a % of total nonperforming loans
and leases. 258 134
Total nonperforming loans and leases $2,354 $4,806
Total nonperforming assets 2,485 5,033
Nonperforming assets as a % of:
Total assets 0.30 % 0.74 %
Total loans, leases and
foreclosed properties 0.66 1.46
Nonperforming loans and leases as a %
of total loans and leases 0.63 1.40
Full-time equivalent employees 134,374 132,583
Number of banking centers 4,272 4,202
Number of ATMs 13,168 13,266
BUSINESS SEGMENT RESULTS
and and Equity
Commercial Investment Asset Invest Corporate
Banking Banking Management -ments Other
Three Months Ended
March 31, 2004
Total revenue (FTE)(1) $6,629 $2,270 $669 $(18) $137
Net income 1,854 463 53 (30) 341
Shareholder value added 1,269 225 (27) (86) 24
Return on average equity 32.4 % 20.9 % 7.2 % (5.7)% n/m
Average loans and
leases $197,681 $40,785 $24,430 $87 $111,094
Three Months Ended
March 31, 2003
Total revenue (FTE)(1) $6,061 $2,319 $586 $(107) $195
Net income 1,604 460 139 (85) 306
Shareholder value added 1,111 173 67 (142) (69)
Return on average equity 32.9 % 17.2 % 20.9 % (16.5)% n/m
Average loans and
leases $186,706 $56,543 $22,706 $434 $79,273
n/m = not meaningful
Three Months Ended
SUPPLEMENTAL FINANCIAL DATA
Fully taxable-equivalent basis data(1)
Net interest income $5,970 $5,361
Total revenue 9,687 9,054
Net interest yield 3.22 % 3.52 %
Efficiency ratio 55.92 52.18
Reconciliation of net income to
shareholder value added
Net income $2,681 $2,424
Amortization of intangibles 54 54
Capital charge (1,330) (1,338)
Shareholder value added $1,405 $1,140
(1) 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
SOURCE Bank of America
/CONTACT: Investors, Kevin Stitt, +1-704-386-5667, or Lee McEntire,
+1-704-388-6780, or Media, Eloise Hale, +1-704-387-0013, all of Bank of
/Web site: http://www.bankofamerica.com