Business Wire India
Bank of America Corporation today reported net income of $5.3 billion, or $0.45 per diluted share, for the second quarter of 2015, compared to $2.3 billion, or $0.19 per share, in the year-ago period. Revenue, net of interest expense, on an FTE basis, rose $385 million, or 2 percent, from the second quarter of 2014 to $22.3 billion(I).
Net interest income for the most recent quarter included $669 million ($0.04 per share) in positive market-related adjustments, primarily from the company's debt securities portfolio, due to the impact of higher long-term interest rates. This compares with $175 million in negative market-related adjustments in the year-ago quarter.
“Solid core loan growth, higher mortgage originations and the lowest expenses since 2008 contributed to our strongest earnings in several years, as we continued to build broader and deeper relationships with our customers and clients,” said Chief Executive Officer Brian Moynihan. “We also benefited from the improvement in the U.S. economy, where we are particularly well positioned.
"Also, we continued to deliver value for our shareholders by increasing tangible book value and returning $1.3 billion in capital through common stock repurchases and dividends."
"We strengthened an already strong and highly liquid balance sheet this quarter," said Chief Financial Officer Bruce Thompson. "We improved capital and liquidity to record levels. Equally important, we put our balance sheet to work this quarter, growing core loan balances while maintaining strong risk underwriting."
Selected Financial Highlights
| Three Months Ended | ||||||||||||
| (Dollars in millions, except per share data) | June 30 2015 |
March 31 2015 |
June 30 2014 |
|||||||||
| Net interest income, FTE basis1 | $ | 10,716 | $ | 9,670 | $ | 10,226 | ||||||
| Noninterest income | 11,629 | 11,751 | 11,734 | |||||||||
| Total revenue, net of interest expense, FTE basis1 | 22,345 | 21,421 | 21,960 | |||||||||
| Provision for credit losses | 780 | 765 | 411 | |||||||||
| Noninterest expense2 | 13,818 | 15,695 | 18,541 | |||||||||
| Net income | $ | 5,320 | $ | 3,357 | $ | 2,291 | ||||||
| Diluted earnings per common share | $ | 0.45 | $ | 0.27 | $ | 0.19 | ||||||
1 Fully taxable-equivalent (FTE) basis is a non-GAAP financial measure. For reconciliations to GAAP financial measures, refer to pages 22-24 of this press release. Net interest income on a GAAP basis was $10.5 billion, $9.5 billion and $10.0 billion for the three months ended June 30, 2015, March 31, 2015 and June 30, 2014, respectively. Total revenue, net of interest expense, on a GAAP basis was $22.1 billion, $21.2 billion and $21.7 billion for the three months ended June 30, 2015, March 31, 2015 and June 30, 2014, respectively.
2 Noninterest expense includes litigation expense of $175 million, $370 million and $4.0 billion for the three months ended June 30, 2015, March 31, 2015 and June 30, 2014, respectively.
Net interest income, on an FTE basis, was $10.7 billion in the second quarter of 2015, up 5 percent, or $490 million, from the year-ago quarter. The improvement was driven by the market-related adjustments mentioned above, lower long-term debt balances, deposit growth and commercial loan growth. This was partially offset by lower consumer loan balances and lower yields. Excluding the impact of the market-related adjustments, net interest income was $10.0 billion in the second quarter of 2015, compared to $10.2 billion in the prior quarter and $10.4 billion in the year-ago quarter(I).
Noninterest income was down $105 million from the year-ago quarter to $11.6 billion as higher mortgage banking income and higher investment and brokerage services income were more than offset by lower equity investment income, reduced gains on sales of debt securities, and modest declines in sales and trading revenue and investment banking fees. Noninterest income for the second quarter of 2015 also included $346 million in pretax gains on sales of consumer real estate loans, compared to $170 million in pretax gains in the year-ago quarter.
The provision for credit losses increased $369 million from the second quarter of 2014 to $780 million. Adjusted for the impact of the August 2014 U.S. Department of Justice (DoJ) settlement (previously reserved for) and recoveries from nonperforming loan sales, net charge-offs declined $329 million, or 26 percent, from the second quarter of 2014 to $929 million, with the adjusted net charge-off ratio falling to 0.43 percent in the second quarter of 2015 from 0.56 percent in the year-ago quarter(D). The decline in net charge-offs was driven by an improvement in consumer portfolio trends. In the second quarter of 2015, the reserve release was $288 million, including the utilization of previously accrued DoJ reserves, compared to a reserve release of $662 million in the second quarter of 2014.
Noninterest expense declined $4.7 billion, or 25 percent, from the second quarter of 2014 to $13.8 billion. Excluding litigation expense of $175 million in the second quarter of 2015 and $4.0 billion in the year-ago quarter, noninterest expense decreased 6 percent from the year-ago quarter to $13.6 billion, reflecting continued progress on Legacy Assets and Servicing (LAS) cost initiatives, and good expense control(B).
The effective tax rate for the second quarter of 2015 was 29.2 percent.
Business Segment Results
The company reports results through five business segments: Consumer Banking, Global Wealth and Investment Management (GWIM), Global Banking, Global Markets and Legacy Assets and Servicing (LAS), with the remaining operations recorded in All Other.
Consumer Banking
| Three Months Ended | ||||||||||||
| (Dollars in millions) | June 30 2015 |
March 31 2015 |
June 30 2014 |
|||||||||
| Total revenue, net of interest expense, FTE basis | $ | 7,544 | $ | 7,450 | $ | 7,649 | ||||||
| Provision for credit losses | 506 | 716 | 550 | |||||||||
| Noninterest expense | 4,321 | 4,389 | 4,505 | |||||||||
| Net income | $ | 1,704 | $ | 1,475 | $ | 1,634 | ||||||
| Return on average allocated capital1 | 24 | % | 21 | % | 22 | % | ||||||
| Average loans | $ | 201,703 | $ | 199,581 | $ | 195,413 | ||||||
| Average deposits | 545,454 | 531,365 | 514,137 | |||||||||
| At period-end | ||||||||||||
| Brokerage assets | $ | 121,961 | $ | 118,492 | $ | 105,926 | ||||||
1 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 22-24 of this press release.
Business Highlights
Financial Overview
Consumer Banking reported net income of $1.7 billion, up 4 percent from the year-ago quarter, as the business reduced expenses for the fourth consecutive quarter and asset quality continued to improve. These factors were partially offset by a decline in net interest income.
Revenue was down 1 percent from the second quarter of 2014 to $7.5 billion, as the allocation of asset liability management (ALM) activities and lower card yields and card loan balances were partially offset by higher noninterest income. Noninterest income of $2.6 billion was up 2 percent, driven by higher card income and higher mortgage banking income.
The provision for credit losses decreased $44 million from the year-ago quarter to $506 million, driven by continued improvement in credit quality within the credit card and consumer vehicle lending portfolios.
Noninterest expense decreased 4 percent from the second quarter of 2014 to $4.3 billion, as the company continued to optimize its delivery network. Driven by the continued growth in mobile banking and other self-service customer touchpoints, the company continued to refine its retail footprint, closing or divesting 267 locations and adding 33 locations since the second quarter of 2014, resulting in a total of 4,789 financial centers at the end of the second quarter of 2015.
Return on average allocated capital was 24 percent in the second quarter of 2015, compared to 22 percent in the second quarter of 2014.
Global Wealth and Investment Management (GWIM)
