Bank of America Corporation (ticker: BAC, exchange: New York Stock Exchange (.N))
News Release -
Bank of America Earns $2.02 Billion, or $1.24 Per Share, in Second Quarter; Results Driven By Strong, Broad-Based Revenue Growth
Second Quarter Earnings Analyst Call
CHARLOTTE, N.C., July 16 /PRNewswire/ -- Bank of America Corporation (NYSE: BAC - news) today reported second quarter earnings of $2.02 billion, or $1.24 per share (diluted), compared to $2.06 billion, or $1.23 per share, a year ago. Earnings per share increased 8 percent over the first quarter of 2001. The return on common equity was 16.7 percent.
''Our performance in the face of a strong economic headwind was gratifying,'' said Kenneth D. Lewis, chairman and chief executive officer. ''We produced attractive revenue growth across most of our business lines, which allowed us to produce a solid bottom line for our shareholders as we continued to make key investments to fuel future growth. Our ability to grow revenue in this economic environment demonstrates that we are beginning to unlock the value inherent in our unique franchise. However, we have a lot of work to do to reach the premium returns and stock valuation that our shareholders desire. And we are committed to doing that work.''
For the first half of 2001, Bank of America earned $2.39 per share (diluted), compared to $2.56 per share a year ago. Net income was $3.89 billion for the first six months of 2001. This compares to $4.30 billion reported during the same period in 2000. Shareholder Value Added (SVA) was $1.47 billion.
Second Quarter Financial Highlights (compared to a year ago)
- Net interest income increased 9 percent, driven by a favorable change in
loan mix, lower funding costs and increased trading activities. The net
interest yield increased 38 basis points to 3.61 percent.
- Consumer-based fee income continued its momentum with growth of 11 percent.
- Investment banking income grew 22 percent, led by strong fixed-income originations and syndications.
- Pricing initiatives continued to attract customers to money market
savings accounts leading to a 19 percent balance increase. Average
deposits grew to $363 billion, up $10 billion, or 3 percent.
''During the quarter, we continued to make investments in products and processes that make our customers' experience with us even better,'' said Lewis. ''Digital check imaging was rolled out across all banking centers in Georgia. In May, we began to roll out premier relationship centers, which are our centralized sales and service centers, across the franchise. And we now have nearly 1 million electronic bill pay customers who utilize this channel to make more than $3 billion of payments a quarter.''
Revenue grew by 8 percent in the second quarter from the previous year, reflecting strong gains in both net interest income and noninterest income.
Fully taxable-equivalent net interest income increased 9 percent to $5.12 billion. Falling interest rates and a steepened yield curve allowed the company to shed lower yielding assets faster than planned. Additional benefits were achieved from trading activities, deposit growth and a favorable shift in mix on the balance sheet from commercial to consumer loans. These factors resulted in a 38 basis point improvement in the net yield to 3.61 percent.
Noninterest income was up 6 percent to $3.74 billion. This growth was driven by strong increases in service charges, mortgage banking results, card income and investment and brokerage services. Investment banking income increased 22 percent to $455 million, while trading profits declined $109 million to $376 million.
Noninterest expense was up 9 percent to $4.82 billion compared to the prior year. Primary drivers of expenses were revenue-related incentive payments and increases in marketing, as the company pursued its national brand-building campaign. The cash-basis efficiency ratio was 51.92 percent.
In line with the company's expectations, credit quality declined as the economy continued its slowdown.
- The provision for credit losses in the second quarter was $800 million
compared to $470 million a year earlier.
- Net charge-offs were $787 million, or 0.82 percent of loans and leases,
up from $470 million, or 0.48 percent, a year ago. The growth in
charge-offs from last year continued to be largely concentrated in the
commercial domestic portfolio. An increase in bankcard outstandings and
personal bankruptcy filings during the first half of 2001 contributed to
a $96 million increase in consumer charge-offs from a year earlier.
- Nonperforming assets were $6.2 billion, or 1.63 percent of loans, leases
and foreclosed properties at June 30, 2001, compared to $3.9 billion, or
0.97 percent, a year earlier. The majority of the increase in
nonperforming assets was concentrated in the domestic commercial loan
portfolio, which accounted for 72 percent of the growth. Consumer
finance nonperforming loans accounted for 18 percent of the growth in
In the second quarter, nonperforming assets rose 5 percent, or
$298 million, and net charge-offs were up 2 percent, or $15 million,
from the first quarter of 2001.
- The allowance for credit losses totaled $6.9 billion at June 30, 2001,
up $96 million from a year ago. The allowance equaled 1.82 percent of
loans and leases compared to 1.70 percent.
Total shareholders' equity was $49.3 billion at June 30, 2001, up 8 percent from 12 months earlier and representing 7.88 percent of period-end assets of $626 billion. The Tier 1 Capital Ratio rose 50 basis points from June 30, 2000 to 7.90 percent.
During the quarter, the company repurchased 15 million shares. Since June 1999, 175 million shares have been repurchased, representing an investment in Bank of America stock of $9.7 billion. Average (diluted) common shares outstanding were 1.63 billion in the second quarter, down 3 percent from 1.68 billion a year earlier but up slightly from last quarter as a greater number of associates exercised stock options that expired at the end of the second quarter.
Consumer and Commercial Banking
Consumer and Commercial Banking (CCB) earned $1.27 billion, up 2 percent from a year ago, despite a $167 million increase in provision expense. Total revenues grew 6 percent. Return on equity was 23.4 percent and SVA grew $49 million to $790 million.
Net interest income increased 4 percent over a year ago, as loan and deposit growth was partially offset by the impact of the money market savings pricing initiative. Managed loans grew 6 percent, led by consumer loan growth of 10 percent, primarily in bankcard, home equity and residential first mortgages. Average deposits grew 3 percent due to a 19 percent increase in money market savings account balances. This growth was partially offset by the impact of lower balances in time and savings accounts.
Noninterest income was up 8 percent compared to a year ago.
- Service charges grew 11 percent, reflecting higher business volumes.
Mortgage banking results increased 26 percent, as the company
experienced a record quarter in originations driven by consumers taking
advantage of falling interest rates.
- Card income grew 8 percent, reflecting an increase in purchase volumes
as well as in active debit cards.
- Middle-market investment banking income grew 17 percent, a result of the
company's ongoing strategy to grow existing commercial customer
relationships by leveraging the company's expertise in the equity and
Global Corporate and Investment Banking
Global Corporate and Investment Banking (GCIB) earned $450 million, 7 percent below last year's results. Revenue increased 13 percent to $2.36 billion but was offset by increased credit costs and higher expenses. Return on equity was 15.1 percent for the quarter. SVA increased $10 million to $131 million.
Total trading-related revenue in GCIB was $838 million, up 14 percent, led by stronger contributions from fixed-income and interest rate products. Investment banking income increased 22 percent to $455 million over last year. These results were driven by strong fixed-income originations and syndications. The demand for equity products and merger and acquisition services remained weak.
Bank of America Securities continued to increase its lead-managed market share in fixed-income high-grade and high-yield underwriting during the most active quarter in the history of the U.S. corporate bond market. The company also remained the most active lead arranger of syndicated credit facilities.
Asset Management earnings were down 27 percent to $116 million from a year ago. Revenue increased 5 percent, offset by increased credit costs and the company's continued investment in this business. Provision expense increased due to one large charge-off. Return on equity was 22.9 percent and SVA declined by $54 million.
Assets under management grew $28 billion over last year to $290 billion, up 11 percent despite the impact of the market. This increase was driven by the growth in the Nations Funds family of mutual funds and the addition of Marsico Funds, which the company acquired in the first quarter.
Equity Investments earned $18 million, down from $36 million a year earlier. Equity investment gains increased to $134 million, with $99 million in Principal Investing and $35 million in the strategic investments portfolio.
One of the world's leading financial services companies, Bank of America is committed to making banking work for customers 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.
Bank of America stock (ticker: BAC) is 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 available at www.bankofamerica.com/investor.
NOTE: James H. Hance Jr., vice chairman and chief financial officer, will discuss second 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.
Forward Looking Statements
This press release contains forward-looking statements with respect to the financial conditions and results of operations of Bank of America, including, without limitation, statements relating to the earnings outlook of the company. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following possibilities: (1) projected business increases following process changes and other investments are lower than expected; (2) competitive pressure among financial services companies increases significantly; (3) costs or difficulties related to the integration of acquisitions are greater than expected; (4) general economic conditions, internationally, nationally or in the states in which the company does business, including the impact of the energy crisis, are less favorable than expected; (5) changes in the interest rate environment reduce interest margins and affect funding sources; (6) changes in market rates and prices may adversely affect the value of financial products; (7) legislation or regulatory requirements or changes adversely affect the businesses in which the company is engaged; and (8) decisions to downsize, sell or close units or otherwise change the business mix of the company. For further information, please refer to Bank of America's reports filed with the SEC.
Bank of America
Three months Six months
Ended June 30 Ended June 30
Financial Summary 2001 2000 2001 2000
(In millions, except
per share data;
shares in thousands)
Net Income $ 2,023 $ 2,063 $ 3,893 $ 4,303
common share 1.26 1.25 2.42 2.59
per common share 1.24 1.23 2.39 2.56
Cash basis earnings(A) 2,246 2,281 4,339 4,738
Cash basis earnings per
common share 1.40 1.38 2.70 2.85
Cash basis diluted
earnings per common
share 1.38 1.36 2.66 2.82
Dividends per common
share 0.56 0.50 1.12 1.00
Closing market price
per common share 60.03 43.00 60.03 43.00
Average common shares
outstanding 1,601,537 1,653,495 1,605,193 1,661,403
Average diluted common
shares issued and
outstanding 1,632,964 1,676,089 1,631,892 1,681,630
Summary Income Statement
(Taxable-equivalent basis in millions)
Net interest income $ 5,117 $ 4,695 $ 9,838 $ 9,271
Noninterest income 3,741 3,514 7,521 7,579
Total revenue 8,858 8,209 17,359 16,850
Provision for credit
losses (800) (470) (1,635) (890)
sales of securities (7) 6 (15) 12
expense (4,821) (4,413) (9,475) (9,036)
Income before income
taxes 3,230 3,332 6,234 6,936
Income taxes -
adjustment 1,207 1,269 2,341 2,633
Net income $ 2,023 $ 2,063 $ 3,893 $ 4,303
Summary Balance Sheet
(Average balances in billions)
Loans and leases $ 383.500 $ 391.404 $ 385.683 $ 383.994
Managed loans and
leases(B) 403.836 395.640 406.531 392.933
Securities 55.719 85.460 55.472 86.835
Earning assets 567.628 582.490 564.544 572.830
Total assets 655.557 672.588 652.147 661.804
Deposits 363.348 353.426 359.504 349.400
Shareholders' equity 48.709 47.112 48.290 46.571
equity 48.640 47.037 48.219 46.495
(Dollars in millions)
Return on average
equity 16.67 % 17.63 % 16.27 % 18.60 %
Cash basis return on
average equity 18.52 19.49 18.14 20.49
Return on average
assets 1.24 1.23 1.20 1.31
Cash basis return on
average assets 1.37 1.36 1.34 1.44
Net interest yield 3.61 3.23 3.50 3.25
Efficiency ratio 54.44 53.77 54.58 53.63
Cash basis efficiency
ratio 51.92 51.12 52.01 51.04
added $ 791 $ 878 $ 1,470 $ 1,964
Net charge-offs 787 470 1,560 890
% of average loans
and leases 0.82 % 0.48 % 0.82 % 0.47 %
Managed bankcard net
charge-offs as a % of
bankcard receivables 4.94 4.84 4.66 5.13
(A) Cash basis calculations exclude goodwill and other intangible
(B) Prior periods have been restated for comparability (e.g.,
acquisitions, divestitures, sales and securitizations).
Bank of America
Balance Sheet Highlights June 30
(In billions, except per share data) 2001 2000
Loans and leases $ 380.425 $ 400.817
Securities 54.577 80.957
Earning assets 538.926 587.985
Total assets 625.525 679.538
Deposits 363.486 356.664
Shareholders' equity 49.302 45.861
Common shareholders' equity 49.234 45.786
Per share 30.75 27.82
Total equity to assets ratio (period end) 7.88 % 6.75 %
Risk-based capital ratios:
Tier 1 7.90 7.40
Total 12.09 11.03
Leverage ratio 6.50 6.11
Period-end common shares issued and
outstanding (in thousands) 1,601,126 1,645,701
Allowance for credit losses $ 6.911 $ 6.815
Allowance for credit losses as a % of
loans and leases 1.82 % 1.70 %
Allowance for credit losses as a % of
nonperforming loans 118.16 184.64
Nonperforming loans $5.849 $3.691
Nonperforming assets 6.195 3.886
Nonperforming assets as a % of:
Total assets .99 % .57 %
Loans, leases and foreclosed properties 1.63 .97
Full-time equivalent employees 144,287 150,854
Number of banking centers 4,275 4,450
Number of ATM's 12,883 12,931
BUSINESS SEGMENT RESULTS - Three months Ended June 30, 2001
(Dollars in millions)
Avg Loans Return on
Total Revenue Net Income and Leases Equity
Consumer and Commercial
Banking $ 5,515 $ 1,274 $ 218,880 23.4 %
Asset Management Group 599 116 23,758 22.9
Global Corporate and Investment
Banking 2,362 450 85,541 15.1
Equity Investments 77 18 491 3.1
Corporate Other 305 165 54,830 6.3
n/m = not meaningful
SOURCE: Bank of America Corporation
Second Quarter Earnings Analyst Call