Bank of America Reports Q4-15 Net Income of $3.3B, EPS of $0.28
Full-Year 2015 Net Income of $15.9B, EPS of $1.31(1)
CHARLOTTE, N.C.--(Business Wire/Korea Newswire) January 22, 2016 -- Bank of America (NYSE: BAC):
· Revenue, net of interest expense, (FTE basis) up 4% to $19.8B(A)
· Net interest income (NII) (FTE basis) up 2% to $10.0B(A)
Excluding market-related NII and other adjustments(A), NII was $10.5B, compared to $10.3B in Q3-15 and $10.4B in Q4-14
· Noninterest income up 7% to $9.7B
· Provision for credit losses $0.8B, compared to $0.8B in Q3-15 and $0.2B in Q4-14
· Noninterest expense declined 2% to $13.9B; excluding litigation, noninterest expense declined 3% to $13.4B(B)
· Net income up 9% to $3.3B; earnings per diluted share $0.28, compared to $0.25
Previously Disclosed Q4-15 Items
· ($0.03) per share for reduction to NII for certain trust preferred securities
· ($0.03) per share for negative impact of U.K. tax law changes
Balance Sheet, Capital and Liquidity
· Common equity tier 1 capital (transition) of $163.0B; Common equity tier 1 capital (fully phased-in) of $154.1B(C)
· Global Excess Liquidity Sources increased $65B to record $504B; time to required funding at 39 months(D)
· Total deposit balances up $78B to $1.2T
· Return on average assets 0.61%; return on average common equity 5.1%; return on average tangible common equity 7.3%(E)
· Tangible book value per share(F) increased 8% to $15.62; book value per share increased 6% to $22.54
· Returned $4.5B in capital to shareholders in 2015 through common stock repurchases and dividends
· Loans up $12B, deposits up $48B2
· Brokerage assets up 8%
· Total mortgage production up 13%
· Total U.S. credit card spending up 5%
Global Wealth and Investment Management
· Total client balances of nearly $2.5T
· Long-term assets under management flows of $7B in Q4-15
· Loans up $12B, deposits up $16B2
· Loans up $37B, deposits up $16B2
· No. 3 in Global Investment Banking fees(G)
· Participated in 8 of top 10 debt deals and 7 of top 10 equity deals(G)
· Excluding net DVA, sales and trading revenue up 11%(H)
Fixed income up 20%(H)
Equities down 3%(H)
Legacy Assets and Servicing
· Noninterest expense down 16% to $1.1B; noninterest expense, excluding litigation, down 28% to $795MM(I)
· Number of 60+ days delinquent first mortgage loans down 46% to 103,000 units
1 2015 results include early adoption of new accounting guidance on the recognition and measurement of financial instruments. See endnote H for more information.
2 Financial Highlights and Business Highlights comparison to year-ago quarter unless noted. Loan and deposit balances are shown on an end-of-period basis. Fully taxable-equivalent (FTE) basis for the corporation is a non-GAAP financial measure. See endnote A for more information. Total revenue, net of interest expense, on a GAAP basis was $19.5B for Q4-15, and net interest income on a GAAP basis was $9.8B for Q4-15. Earnings per share on a fully diluted basis.
Highest Annual Net Income in Nearly a Decade
“The 2015 results were our highest earnings in nearly a decade, reflecting the work we’ve done to develop a straightforward operating model focused on responsible growth and doing more business with each customer and client. We saw solid customer activity in loan growth, deposits, and wealth management asset flows, and we returned more capital to our shareholders. As we build on this progress, we will continue to invest in the future and manage expenses.”
- Brian Moynihan, Chief Executive Officer
“Our results this quarter reflect our ongoing efforts to improve operating leverage while continuing to invest in our business. We increased net interest income, managed expenses tightly, and returned $1.3 billion in capital to our shareholders this quarter through common stock repurchases and dividends.”
Paul Donofrio, Chief Financial Officer
Consumer Banking (To view the detailed information including tables, please visit http://goo.gl/3IFjRC)
1 Represents a non-GAAP financial measure. For reconciliation, see pages 17-19 of this press release.
2 Regulatory capital ratios are preliminary. Common equity tier 1 (CET1) capital, Tier 1 capital, risk-weighted assets (RWA), CET1 ratio and bank holding company supplementary leverage ratio (SLR) as shown on a fully phased-in basis are non-GAAP financial measures. For a reconciliation of CET1 to fully phased-in, see page 13 of this press release.
3 As previously disclosed, Bank of America received approval to begin using the Advanced approaches capital framework to determine risk-based capital and is now required to report regulatory capital under both the Standardized and Advanced approaches. The approach that yields the lower ratio is to be used to assess capital adequacy and was the Advanced approaches in the fourth quarter of 2015. Prior to exiting the parallel run, we were required to report regulatory capital under the Standardized approach only.
4 With the approval to exit parallel run, U.S. banking regulators requested modifications to certain internal analytical models including the wholesale (e.g., commercial) credit models, which increased our risk-weighted assets in the fourth quarter of 2015. Proforma information for Q3-15 includes the impact of these modifications as if effective at September 30, 2015.
5 Basel 3 fully phased-in Advanced approaches estimates assume approval by U.S. banking regulators of our internal analytical models, including approval of the internal models methodology (IMM). As of December 31, 2015, BAC had not received IMM approval.
A Fully taxable-equivalent (FTE) basis for the Corporation is a non-GAAP financial measure. For reconciliation to GAAP financial measures, refer to pages 17-19 of this press release. Net interest income on a GAAP basis was $9.8 billion, $9.5 billion and $9.6 billion for the three months ended December 31, 2015, September 30, 2015 and December 31, 2014, respectively. Net interest income on an FTE basis, excluding market-related and other adjustments, represents a non-GAAP financial measure. Market-related adjustments of premium amortization expense and hedge ineffectiveness were $0.1 billion, ($0.6) billion and ($0.6) billion for the three months ended December 31, 2015, September 30, 2015 and December 31, 2014, respectively. Other adjustments for the quarter ended December 31, 2015 include $0.6 billion in negative adjustments on certain trust preferred securities. Total revenue, net of interest expense, on a GAAP basis was $19.5 billion, $20.4 billion and $18.7 billion for the three months ended December 31, 2015, September 30, 2015 and December 31, 2014, respectively. Net DVA gains (losses) were ($198) million, $12 million and ($626) million for the three months ended December 31, 2015, September 30, 2015 and December 31, 2014, respectively.
B Noninterest expense, excluding litigation expense, is a non-GAAP financial measure. Noninterest expense on a GAAP basis was $13.9 billion, $13.8 billion and $14.2 billion for the three months ended December 31, 2015, September 30, 2015 and December 31, 2014, respectively. Litigation expense was $428 million, $231 million and $393 million for the three months ended December 31, 2015, September 30, 2015 and December 31, 2014, respectively.
C Fully phased-in estimates are non-GAAP financial measures. For reconciliation to GAAP financial measures, refer to pages 17-19 of this press release. On January 1, 2014, the Basel 3 rules became effective, subject to transition provisions primarily related to regulatory deductions and adjustments impacting Common equity tier 1 (CET1) capital and Tier 1 capital. Bank of America received approval to begin using the Advanced approaches capital framework to determine risk-based capital requirements beginning in the fourth quarter of 2015. As previously disclosed, with the approval to exit parallel run, U.S. banking regulators requested modifications to certain internal analytical models including the wholesale (e.g., commercial) credit models, which increased our risk-weighted assets in the fourth quarter of 2015. Proforma information for Q3-15 includes the impact of these modifications as if effective at September 30, 2015. Basel 3 Advanced approaches estimates on a fully phased-in basis assume approval by U.S. banking regulators of our internal analytical models, including approval of the internal models methodology (IMM). As of December 31, 2015, BAC had not received IMM approval.
D Global Excess Liquidity Sources include cash and high-quality, liquid, unencumbered securities, limited to U.S. government securities, U.S. agency securities, U.S. agency MBS, and a select group of non-U.S. government and supranational securities, and are readily available to meet funding requirements as they arise. It does not include Federal Reserve Discount Window or Federal Home Loan Bank borrowing capacity. Transfers of liquidity from the bank or other regulated entities are subject to certain regulatory restrictions. Time to required funding is a debt coverage measure and is expressed as the number of months unsecured holding company obligations of Bank of America Corporation can be met using only the parent company’s Global Excess Liquidity Sources without issuing debt or sourcing additional liquidity. We define unsecured contractual obligations for purposes of this metric as maturities of senior or subordinated debt issued or guaranteed by Bank of America Corporation. For all periods shown, we have included in the amount of unsecured contractual obligations the liability, including estimated costs, for the previously announced BNY Mellon private-label securitization settlement. As of December 31, 2015, this amount was $8.5B.
E Return on average tangible common equity is a non-GAAP financial measure. For more information, refer to pages 17-19 of this press release.
F Tangible book value per share of common stock is a non-GAAP financial measure. For more information, refer to pages 17-19 of this press release.
G Rankings per Dealogic as of January 5, 2016 for the quarter ended December 31, 2015.
H In January 2016, the FASB issued new accounting guidance on recognition and measurement of financial instruments. The Corporation has early adopted, retrospective to January 1, 2015, the provision that requires the Corporation to present unrealized gains/losses resulting from changes in the Corporation's own credit spreads on liabilities accounted for under the fair value option (referred to as debit valuation adjustments, or DVA) in accumulated OCI. The impact of the adoption was to reclassify, as of January 1, 2015, unrealized DVA losses of $2.0B pretax ($1.2B after tax) from January 1, 2015 retained earnings to accumulated OCI. Further, pretax unrealized DVA gains of $301 million, $301 million and $420 million were reclassified from other income to accumulated OCI for Q3-15, Q2-15 and Q1-15, respectively. This had the effect of reducing net income as previously reported for the aforementioned quarters by $187 million, $186 million and $260 million, or approximately $0.02 per quarter. This change is reflected in consolidated results and the Global Markets segment results. Results for 2014 were not subject to restatement under the provisions of the new accounting guidance.
Revenue for all periods included net DVA on derivatives, as well as amortization of own credit portion of purchase discount and realized DVA on structured liabilities; periods prior to 2015 also included unrealized DVA on structured liabilities.
Global Markets revenue, excluding net DVA, and sales and trading revenue, excluding net DVA, are non-GAAP financial measures. Net DVA losses were $198 million and $626 million for the three months ended December 31, 2015 and 2014, respectively. FICC net DVA losses were $190 million and $577 million for the three months ended December 31, 2015 and 2014, respectively. Equities net DVA losses were $8 million and $49 million for the three months ended December 31, 2015 and 2014.
I Legacy Assets and Servicing (LAS) noninterest expense, excluding litigation, is a non-GAAP financial measure. LAS noninterest expense was $1.1 billion, $1.1 billion and $1.4 billion for the three months ended December 31, 2015, September 30, 2015 and December 31, 2014, respectively. LAS litigation expense was $353 million, $228 million and $256 million in the three months ended December 31, 2015, September 30, 2015 and December 31, 2014, respectively.
J Return on average allocated capital is a non-GAAP financial measure. The company believes the use of this non-GAAP financial measure provides additional clarity in assessing the results of the segments. Other companies may define or calculate this measure differently. For reconciliation to GAAP financial measures, refer to pages 17-19 of this press release.
K The estimated supplementary leverage ratio is measured using quarter-end Tier 1 capital as the numerator, calculated under Basel 3 on a fully phased-in basis. The denominator is supplementary leverage exposure based on the daily average of the sum of on-balance sheet exposures less permitted Tier 1 deductions, as well as the simple average of certain off-balance sheet exposures, as of the end of each month in a quarter. Off-balance sheet exposures primarily include undrawn lending commitments, letters of credit, potential future derivative exposures and repo-style transactions. At December 31, 2015, the estimated SLR for the Bank Holding Company on a fully phased-in basis was 6.4 percent. Differences between fully phased-in and transitional supplementary leverage exposures are immaterial.
Contact Information and Investor Conference Call Invitation
Investor Call Information
Note: Chief Executive Officer Brian Moynihan and Chief Financial Officer Paul Donofrio will discuss fourth-quarter 2015 results in a conference call at 8:30 a.m. ET today. The presentation and supporting materials can be accessed on the Bank of America Investor Relations website at http://investor.bankofamerica.com.
For a listen-only connection to the conference call, dial 1.877.200.4456 (U.S.) or 1.785.424.1732 (international), and the conference ID is: 79795. Please dial in 10 minutes prior to the start of the call. A replay will also be available beginning at noon ET on January 19 through midnight, January 27 by telephone at 1.800.753.8546 (U.S.) or 1.402.220.0685 (international).
About Bank of America
Bank of America is one of the world's leading financial institutions, serving individual consumers, small and middle-market 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 approximately 47 million consumer and small business relationships with approximately 4,700 retail financial centers, approximately 16,000 ATMs, and award-winning online banking with approximately 32 million active users and approximately 19 million mobile users. Bank of America is a global leader in wealth management, corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in all 50 states, the District of Columbia, the U.S. Virgin Islands, Puerto Rico and more than 35 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.
Bank of America and its management may make certain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as “anticipates,” “targets,” “expects,” “hopes,” “estimates,” “intends,” “plans,” “goals,” “believes,” “continue” and other similar expressions or future or conditional verbs such as “will,” “may,” “might,” “should,” “would” and “could.” Forward-looking statements represent Bank of America‘s current expectations, plans or forecasts of its future results and revenues, and future business and economic conditions more generally, and other future matters. These statements are not guarantees of future results or performance and involve certain known and unknown risks, uncertainties and assumptions that are difficult to predict and are often beyond Bank of America’s control. Actual outcomes and results may differ materially from those expressed in, or implied by, any of these forward-looking statements.
You should not place undue reliance on any forward-looking statement and should consider the following uncertainties and risks, as well as the risks and uncertainties more fully discussed under Item 1A. Risk Factors of Bank of America‘s 2014 Annual Report on Form 10-K, and in any of Bank of America’s subsequent Securities and Exchange Commission filings: the Company‘s ability to resolve representations and warranties repurchase and related claims, including claims brought by investors or trustees seeking to distinguish certain aspects of the ACE Securities Corp. v. DB Structured Products, Inc. (ACE) ruling or to assert other claims seeking to avoid the impact of the ACE ruling; the possibility that the Company could face related servicing, securities, fraud, indemnity, contribution or other claims from one or more counterparties, including trustees, purchasers of loans, underwriters, issuers, other parties involved in securitizations, monolines or private-label and other investors; the possibility that future representations and warranties losses may occur in excess of the Company’s recorded liability and estimated range of possible loss for its representations and warranties exposures; the possibility that the Company may not collect mortgage insurance claims; potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation and regulatory proceedings, including the possibility that amounts may be in excess of the Company’s recorded liability and estimated range of possible losses for litigation exposures; the possibility that the European Commission will impose remedial measures in relation to its investigation of the Company‘s competitive practices; the possible outcome of LIBOR, other reference rate and foreign exchange inquiries and investigations; uncertainties about the financial stability and growth rates of non-U.S. jurisdictions, the risk that those jurisdictions may face difficulties servicing their sovereign debt, and related stresses on financial markets, currencies and trade, and the Company’s exposures to such risks, including direct, indirect and operational; the impact of U.S. and global interest rates, currency exchange rates and economic conditions; the impact on the Company‘s business, financial condition and results of operations of a potential higher interest rate environment; the impact on the Company’s business, financial condition and results of operations from a protracted period of lower energy prices; adverse changes to the Company’s credit ratings from the major credit rating agencies; estimates of the fair value of certain of the Company's assets and liabilities; uncertainty regarding the content, timing and impact of regulatory capital and liquidity requirements, including the potential adoption of total loss-absorbing capacity requirements; the potential for payment protection insurance exposure to increase as a result of Financial Conduct Authority actions; the possible impact of Federal Reserve actions on the Company’s capital plans; the impact of implementation and compliance with new and evolving U.S. and international regulations, including but not limited to recovery and resolution planning requirements, the Volcker Rule, and derivatives regulations; a failure in or breach of the Company’s operational or security systems or infrastructure, or those of third parties, including as a result of cyber attacks; and other similar matters.
Forward-looking statements speak only as of the date they are made, and Bank of America undertakes no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the date the forward-looking statement was made.
BofA Global Capital Management Group, LLC (BofA Global Capital Management) is an asset management division of Bank of America Corporation. BofA Global Capital Management entities furnish investment management services and products for institutional and individual investors.
Bank of America Merrill Lynch is the marketing name for the Global Banking and Global Markets businesses of Bank of America Corporation. Lending, derivatives and other commercial banking activities are performed by banking affiliates of Bank of America Corporation, including Bank of America, N.A., member FDIC. Securities, financial advisory and other investment banking activities are performed by investment banking affiliates of Bank of America Corporation (Investment Banking Affiliates), including Merrill Lynch, Pierce, Fenner & Smith Incorporated, which are registered broker-dealers and members of FINRA and SIPC. Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured * May Lose Value * Are Not Bank Guaranteed. Bank of America Corporation's broker-dealers are not banks and are separate legal entities from their bank affiliates. The obligations of the broker-dealers are not obligations of their bank affiliates (unless explicitly stated otherwise), and these bank affiliates are not responsible for securities sold, offered or recommended by the broker-dealers. The foregoing also applies to other non-bank affiliates.
For more Bank of America news, visit the Bank of America newsroom at http://newsroom.bankofamerica.com.
Bank of America Corporation and Subsidiaries
Selected Financial Data
(Dollars in millions, except per share data; shares in thousands)
(To view the tables, please visit http://goo.gl/3IFjRC)
Bank of America Corporation and Subsidiaries
Reconciliations to GAAP Financial Measures
(Dollars in millions)
The Corporation evaluates its business based on a fully taxable-equivalent basis, a non-GAAP financial measure. The Corporation believes managing the business with net interest income on a fully taxable-equivalent basis provides a more accurate picture of the interest margin for comparative purposes. Total revenue, net of interest expense, includes net interest income on a fully taxable-equivalent basis and noninterest income. The Corporation views related ratios and analyses (i.e., efficiency ratios and net interest yield) on a fully taxable-equivalent basis. To derive the fully taxable-equivalent basis, net interest income is adjusted to reflect tax-exempt income on an equivalent before-tax basis with a corresponding increase in income tax expense. For purposes of this calculation, the Corporation uses the federal statutory tax rate of 35 percent. This measure ensures comparability of net interest income arising from taxable and tax-exempt sources. The efficiency ratio measures the costs expended to generate a dollar of revenue, and net interest yield measures the basis points the Corporation earns over the cost of funds.
The Corporation also evaluates its business based on the following ratios that utilize tangible equity, a non-GAAP financial measure. Tangible equity represents an adjusted shareholders‘ equity or common shareholders’ equity amount which has been reduced by goodwill and intangible assets (excluding mortgage servicing rights), net of related deferred tax liabilities. Return on average tangible common shareholders‘ equity measures the Corporation’s earnings contribution as a percentage of adjusted average common shareholders‘ equity. The tangible common equity ratio represents adjusted ending common shareholders’ equity divided by total assets less goodwill and intangible assets (excluding mortgage servicing rights), net of related deferred tax liabilities. Return on average tangible shareholders‘ equity measures the Corporation’s earnings contribution as a percentage of adjusted average total shareholders‘ equity. The tangible equity ratio represents adjusted ending shareholders’ equity divided by total assets less goodwill and intangible assets (excluding mortgage servicing rights), net of related deferred tax liabilities. Tangible book value per common share represents adjusted ending common shareholders‘ equity divided by ending common shares outstanding. These measures are used to evaluate the Corporation’s use of equity. In addition, profitability, relationship and investment models all use return on average tangible shareholders' equity as key measures to support our overall growth goals.
In addition, the Corporation periodically reviews capital allocated to its businesses and allocates capital annually during the strategic and capital planning processes. We utilize a methodology that considers the effect of regulatory capital requirements in addition to internal risk-based capital models. The Corporation‘s internal risk-based capital models use a risk-adjusted methodology incorporating each segment’s credit, market, interest rate, business and operational risk components. Return on average allocated capital is calculated as net income, adjusted for cost of funds and earnings credits and certain expenses related to intangibles, divided by average allocated capital. Allocated capital and the related return both represent non-GAAP financial measures. Allocated capital is reviewed periodically and refinements are made based on multiple considerations that include, but are not limited to, risk-weighted assets measured under Basel 3 Standardized and Advanced approaches, business segment exposures and risk profile, and strategic plans. As part of this process, in 2015, the Corporation adjusted the amount of capital being allocated to its business segments, primarily Legacy Assets & Servicing.
See the tables below and on pages 18-19 for reconciliations of these non-GAAP financial measures to financial measures defined by GAAP for the years ended December 31, 2015 and 2014, and the three months ended December 31, 2015, September 30, 2015 and December 31, 2014. The Corporation believes the use of these non-GAAP financial measures provides additional clarity in assessing the results of the Corporation. Other companies may define or calculate supplemental financial data differently.
(To view the tables, please visit http://goo.gl/3IFjRC)
View source version on businesswire.com: http://www.businesswire.com/news/home/20160119005701/en/
Investors May Contact:
Lee McEntire, Bank of America
Jonathan Blum, Bank of America (Fixed Income)
Reporters May Contact:
Jerry Dubrowski, Bank of America
Investors May Contact:
Lee McEntire, Bank of America
Jonathan Blum, Bank of America (Fixed Income)
Reporters May Contact:
Jerry Dubrowski, Bank of America