Bank of America Corporation (ticker: BAC, exchange: New York Stock Exchange (.N))
News Release -
14-Oct-2004
Bank of America Reports Third Quarter Earnings of $3.76 Billion, or $.91 Per ShareSupplemental third quarter 2004 financial information
Successful brand rollout continues across Northeast
Fleet merger transition on target
Consumer bank momentum continues
CHARLOTTE, N.C., Oct. 14 /PRNewswire-FirstCall/ -- Bank of America
Corporation today reported third quarter earnings of $3.76 billion, or $.91
per share (diluted), compared to earnings of $2.92 billion, or $.96 per share,
a year ago. Under purchase accounting rules, year-ago results do not include
the impact of FleetBoston Financial Corporation, which was acquired on
April 1, 2004.
Return on common equity in the third quarter was 15.56 percent.
In addition to the impact of Fleet, the company's net income improvement
was driven by continued momentum in consumer banking, merger-driven cost
savings, lower provision expense and gains on the sale of debt securities.
Third quarter earnings included merger and restructuring charges of
$221 million pre-tax, which reduced earnings by 4 cents per share. These
included $156 million for the Fleet merger and $65 million for severance
related to the infrastructure initiative announced last week.
For the first nine months of 2004, Bank of America earned $10.29 billion,
or $2.76 per share, compared to $8.08 billion, or $2.65 per share, a year
earlier.
"Business momentum remains strong," said Kenneth D. Lewis, president and
chief executive officer. "Our results show we are attracting and deepening
customer relationships across the franchise. This is evident from the growth
in consumer accounts and card usage to the improvement in market penetration
in corporate banking products to the significant growth in Premier Banking
relationships. We are also particularly pleased with the progress in
integrating Fleet, where we are meeting, or exceeding, the plans we announced
last fall."
"We are beginning to tap into the wealth in the Northeast; GCIB is gaining
market share in key product lines and should gain strength as we invest more
than $600 million into the business. Commercial is seeing positive growth
trends and the consumer business remains our workhorse. "
Fleet Merger Highlights from the Quarter
- The company opened 87,000 net new consumer checking accounts in the
former Fleet franchise during the quarter, more than double the 42,000
in the prior quarter.
- In the Northeast, the company opened 81,000 net new consumer savings
accounts, compared to 37,000 in the prior quarter.
- Product sales in the six new Manhattan banking centers averaged 12
sales per associate per day, which is twice the average rate across the
franchise.
- 399 Premier banking client managers were added, 50 percent in New
England and 50 percent in the New York City area.
- To date, 621 Fleet banking centers, or more than a third of the total,
have been re-branded.
- Attesting to the convenience of the national network, "legacy" Bank of
America and Fleet customers have begun to make cross-footprint
transactions in increasing volumes. In the last week of September
alone, customers completed 25,000 cross-footprint transactions,
60 percent of which were performed by "legacy" Bank of America
customers in former Fleet banking centers.
Third Quarter Business Highlights
To provide a meaningful period-to-period comparison and one that is more
reflective of ongoing operations, this section's highlights are calculated by
combining Bank of America and Fleet results on a pro forma basis for the
applicable comparisons.
- The company announced a new national business designed to serve the
needs of ultra high net worth individuals and families.
- Retail deposits grew 11 percent to $399.6 billion.
- The number of consumer checking accounts grew by net 537,000 during the
quarter. Year to date, the company has increased accounts by 1,515,000
and is on target to exceed its goal of 2.0 million for the year.
- The number of consumer savings accounts grew by net 624,000 during the
quarter. Year to date, the company has increased accounts by 1,876,000
and is on target to exceed its goal of 2.0 million for the year.
- The company opened 1.6 million new credit card accounts during the
quarter. This growth was driven by targeted direct mail marketing
campaigns, strong co-brand programs and effective cross selling of
cards in banking centers.
- During the quarter, the company opened 38 new banking centers,
bringing total openings to 83 for the year.
- Customers continued to expand their use of debit cards. Both purchase
volumes and total transactions increased 19 and 18 percent,
respectively, from a year ago.
- Online banking active users increased 5 percent, to 11.8 million. Of
those users, 4.8 million use bill pay. During the quarter, bill pay
volume increased 10 percent.
- In the first nine months of the year, the company became the top U.S.
deal manager in commercial mortgage-backed securities.
- In the first nine months of the year, the company's market share in
syndicated loans increased to 20.0 percent. High yield debt market
share increased to 12.2 percent.
Third Quarter Financial Summary
These are GAAP-reported results, which exclude Fleet results in the year-
ago period.
Revenue
Revenue on a fully taxable-equivalent basis grew to $12.73 billion from
$9.92 billion the previous year.
Net interest income on a fully taxable-equivalent basis was $7.84 billion
compared to $5.48 billion a year earlier. In addition to the impact of
Fleet, this increase was driven by the impact of higher asset/liability
management portfolio and rate levels, consumer loan growth and domestic
deposit growth. These increases were partially offset by the impact of lower
large corporate and foreign loan balances in addition to lower trading-related
margins and mortgages held-for-sale.
Noninterest income was $4.90 billion compared to $4.45 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
and equity investment gains, offset by a loss of $250 million in mortgage
banking income, which resulted from lower origination volume and a writedown
of mortgage servicing rights.
During the quarter, the company realized $732 million in securities gains
as it repositioned its mortgage-backed securities to reduce mortgage
prepayment risk.
Efficiency
Noninterest expense was $6.99 billion compared to $5.08 billion a year
ago, driven by the addition of Fleet. Pre-tax cost savings from the merger
were $309 million during the quarter.
Credit Quality
Overall credit quality continued to improve. Both net charge-offs and
nonperforming assets continued to decline. All major commercial asset quality
indicators showed positive trends and consumer asset quality remained stable
as credit card charge-offs grew in line with card portfolio growth.
- Provision for credit losses was $650 million, down from $789 million in
the second quarter of 2004 and $651 million a year earlier.
- Net charge-offs were 0.57 percent of average loans and leases, or
$719 million, down from 0.67 percent, or $829 million, in the second
quarter and 0.86 percent of loans and leases, or $776 million, a year
earlier.
- Nonperforming assets were 0.55 percent of total loans, leases and
foreclosed properties, or $2.84 billion, as of September 30, 2004.
This compared to 0.64 percent, or $3.18 billion, on June 30, 2004 and
0.98 percent, or $3.66 billion, on September 30, 2003.
- The allowance for loan and lease losses stood at 1.70 percent of loans
and leases, or $8.72 billion, on September 30, 2004. This compared to
1.76 percent or $8.77 billion on June 30, 2004 and 1.68 percent or
$6.26 billion on September 30, 2003. As of September 30, 2004, the
allowance for loan and lease losses represented 343 percent of
nonperforming loans and leases, compared to 305 percent on June 30,
2004 and 183 percent on September 30, 2003.
Capital Management
Total shareholders' equity was $98.0 billion on September 30, 2004,
compared to $50.4 billion a year ago. This represented 9 percent of period-
end assets of $1.09 trillion. The Tier 1 Capital Ratio was 8.08 percent,
compared to 8.20 percent on June 30, 2004 and 8.25 percent a year ago.
During the quarter, Bank of America paid a cash dividend of $.45 per
share, a 12.5 percent increase from the prior quarter's dividend. The company
also issued 26.8 million shares primarily related to employee options and
stock ownership plans and repurchased 40.4 million shares. Average common
shares issued and outstanding were 4.05 billion in the third quarter compared
to 4.06 billion in the second quarter and 2.98 billion a year earlier. The
company's stock split 2-for-1 on August 27, 2004.
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 earned $1.68 billion on total revenue
of $7.03 billion.
During the quarter, successful execution of the company's customer
relationship strategy continued to provide momentum for this business.
Product sales per associate continued to grow as customer relationships
deepened. This trend was reflected in continued solid growth in checking and
savings accounts. Home equity and credit card balances increased
significantly during the quarter. Credit card purchase volume increased and
the number of cardholders continued to grow.
Revenue and profit were negatively impacted by a loss of $250 million in
mortgage banking income, which resulted from lower origination volume and a
writedown of mortgage servicing rights. Results were also impacted by higher
provision expense due to growth in the credit card portfolio.
Commercial Banking
Commercial Banking earned $824 million on total revenue of $1.82 billion.
During the quarter, service charges and investment banking fees grew as
the company recorded lower provision and personnel expense. Loans continued
to grow modestly.
Global Corporate and Investment Banking
Global Corporate and Investment Banking earned $475 million on total
revenue of $2.06 billion.
A slow economy, flattening yield curve, normal summer slowdown and
continued geo-political risk impacted results. Investment banking results,
while lower than the second quarter, were above year-ago levels, reflecting
the company's continuing platform build-out. Growth in loan syndications and
advisory services drove investment banking fees.
Trading results were below the record set in second quarter and lower than
a year ago. A flattening yield curve and tightening credit spreads created a
difficult trading environment. Offsetting this was continued strong demand
for commercial mortgage-backed and asset-backed securities. Provision expense
was negative for the fourth straight quarter, reflecting continued improvement
in credit quality.
Wealth and Investment Management
Wealth and Investment Management earned $469 million on total revenue of
$1.57 billion.
The segment benefited from its diversified business model with significant
increases in loans and deposits in the Private Bank and Premier Banking. This
more than offset lower brokerage fees, which reflected lower retail trading in
the debt and equity markets.
Net interest income grew 12 percent during the quarter as deposits in this
segment increased 14 percent, reflecting strong deposit efforts by Premier
Banking and the Private Bank. Loans increased 3 percent during the quarter.
Assets under management were $430 billion, which was down from the prior
quarter.
Corporate Other
Corporate Other earned $314 million. Principal Investing continued to
show improvements, reporting cash gains of $257 million in the third quarter
offset by $59 million in impairments and $27 million in mark-to-market
adjustments. Latin America earned $151 million on total revenue of
$264 million, primarily due to lower provision.
Note: Marc D. Oken, chief financial officer, will discuss third 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 5,800 retail banking offices, more than 16,500 ATMs and award-winning
online banking with more than eleven 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.
Forward-Looking Statements
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 http://www.sec.gov .
Bank of America
Selected Financial Data(1)
Three Months Nine Months
Ended September 30 Ended September 30
2004 2003 2004 2003
(Dollars in millions,
except per share
data; shares in
thousands)
Financial Summary
Earnings $3,764 $2,922 $10,294 $8,084
Earnings per
common share 0.93 0.98 2.80 2.70
Diluted earnings
per common share 0.91 0.96 2.76 2.65
Dividends paid per
common share 0.45 0.40 1.25 1.04
Closing market price
per common share 43.33 39.02 43.33 39.02
Average common shares
issued and
outstanding 4,052,304 2,980,206 3,666,298 2,988,739
Average diluted common
shares issued and
outstanding 4,121,375 3,039,282 3,729,120 3,047,046
Summary Income Statement
Net interest income $7,665 $5,304 $21,047 $15,878
Total noninterest
income 4,895 4,446 14,052 12,401
Total revenue 12,560 9,750 35,099 28,279
Provision for credit
losses 650 651 2,063 2,256
Gains on sales of debt
securities 732 233 2,022 802
Other noninterest
expense 6,773 5,077 19,266 14,867
Merger and
restructuring charges 221 - 346 -
Income before income
taxes 5,648 4,255 15,446 11,958
Income tax expense 1,884 1,333 5,152 3,874
Net income $3,764 $2,922 $10,294 $8,084
Summary Average
Balance Sheet
Total loans and leases $503,078 $357,288 $458,268 $351,119
Debt securities 169,515 63,423 143,119 74,532
Total earning assets 954,626 677,308 881,377 651,535
Total assets 1,110,124 786,155 1,023,005 758,605
Total deposits 587,878 414,569 531,958 401,985
Shareholders' equity 96,392 48,871 79,510 49,512
Common shareholders'
equity 96,120 48,816 79,293 49,455
Performance Indices
Return on average
assets 1.35 % 1.48 % 1.34 % 1.43 %
Return on average
common shareholders'
equity 15.56 23.74 17.32 21.85
Credit Quality
Net charge-offs $719 $776 $2,268 $2,381
Annualized net
charge-offs as a
% of average
loans and leases
outstanding 0.57 % 0.86 % 0.66 % 0.91 %
Managed credit card
net losses as a % of
average managed credit
card receivables 5.48 5.33 5.55 5.44
At September 30
2004 2003
Balance Sheet Highlights
Loans and leases $511,639 $373,098
Total debt securities 163,858 63,279
Total earning assets 933,479 627,721
Total assets 1,088,996 737,546
Total deposits 591,258 408,510
Total shareholders' equity 98,011 50,445
Common shareholders' equity 97,740 50,390
Book value per share 24.14 16.92
Total equity to assets ratio (period
end) 9.00 % 6.84 %
Risk-based capital ratios:
Tier 1 8.08 * 8.25
Total 11.70 * 12.17
Leverage ratio 5.92 * 5.95
Period-end common shares issued and
outstanding 4,049,063 2,978,874
Allowance for credit losses:
Allowance for loan and lease losses $8,723 $6,258
Reserve for unfunded lending
commitments 446 458
Total $9,169 $6,716
Allowance for loan and lease losses
as a % of total loans and leases 1.70 % 1.68 %
Allowance for loan and lease losses
as a % of total nonperforming loans
and leases 343 183
Total nonperforming loans and leases $2,546 $3,429
Total nonperforming assets 2,836 3,657
Nonperforming assets as a % of:
Total assets 0.26 % 0.50 %
Total loans, leases and
foreclosed properties 0.55 0.98
Nonperforming loans and leases as a %
of total loans and leases 0.50 0.92
Other Data
Full-time equivalent employees 175,523 132,749
Number of banking centers - domestic 5,829 4,211
Number of ATMs - domestic 16,728 13,120
* 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 September 30,
2004
Total revenue (FTE) (2) $7,025 $1,821 $2,064
Net income 1,682 824 475
Shareholder value added 754 222 185
Return on average equity 17.35 % 14.42 % 17.30 %
Average loans and leases $150,334 $139,983 $35,881
Three Months Ended September 30,
2003
Total revenue (FTE) (2) $5,561 $1,165 $2,064
Net income 1,679 400 435
Shareholder value added 1,348 244 216
Return on average equity 50.13 % 27.26 % 21.30 %
Average loans and leases $92,509 $93,451 $33,805
n/m = not meaningful
Information for periods after April 1, 2004 includes the FleetBoston
acquisition; prior periods have not been restated.
BUSINESS SEGMENT RESULTS
Wealth and
Investment Corporate
Management Other
Three Months Ended September 30,
2004
Total revenue (FTE) (2) $1,573 $248
Net income 469 314
Shareholder value added 246 46
Return on average equity 21.27 % n/m
Average loans and leases $45,646 $131,234
Three Months Ended September 30,
2003
Total revenue (FTE) (2) $959 $174
Net income 256 152
Shareholder value added 166 (350)
Return on average equity 29.70 % n/m
Average loans and leases $37,159 $100,364
n/m = not meaningful
Three Months Ended Nine Months Ended
September 30 September 30
2004 2003 2004 2003
SUPPLEMENTAL FINANCIAL DATA
Fully taxable-equivalent basis
data (2)
Net interest income $7,836 $5,477 $21,557 $16,362
Total revenue 12,731 9,923 35,609 28,763
Net interest yield 3.28 % 3.22 % 3.26 % 3.35 %
Efficiency ratio 54.94 51.16 55.07 51.69
Reconciliation of net income to
operating earnings
Net income $3,764 $2,922 $10,294 $8,084
Merger and restructuring charges 221 - 346 -
Related income tax benefit (74) - (116) -
Operating earnings $3,911 $2,922 $10,524 $8,084
Operating Basis
Diluted earnings per common
share $0.95 $0.96 $2.82 $2.65
Return on average assets 1.40 % 1.48 % 1.37 % 1.42 %
Return on avg common
shareholders' equity 16.17 23.74 17.71 21.85
Efficiency ratio 53.20 51.16 54.10 51.69
Reconciliation of net income to
shareholder value added
Net income $3,764 $2,922 $10,294 $8,084
Amortization of intangibles 200 55 455 163
Merger and restructuring
charges, net of tax benefit 147 - 230 -
Capital charge (2,658) (1,353) (6,530) (4,069)
Shareholder value added $1,453 $1,624 $4,449 $4,178
(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
CONTACT:
Investors
Kevin Stitt, +1-704-386-5667
or
Lee McEntire,
+1-704-388-6780
or
Leyla Pakzad, +1-704-386-2024
or
Media
Eloise Hale,
+1-704-387-0013
all of Bank of America
Web site: http://www.bankofamerica.com>
http://www.bankofamerica.com/investor
(BAC)
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Bank of America Corporation
