Bank of America Earns $367M in 4Q
Press release from the issuing company
Friday, January 18th, 2013
Bank of America Corporation today reported net income of $0.7 billion, or $0.03 per diluted share, for the fourth quarter of 2012, compared to $2.0 billion, or $0.15 per diluted share in the year-ago period. Revenue, net of interest expense, on a fully taxable-equivalent (FTE)B basis was $18.9 billion.
Fourth-quarter 2012 revenue, net of interest expense, on an FTE basis, excluding $0.7 billion of debit valuation and fair value option adjustments, was $19.6 billion; excluding $3.0 billion of provisions for representations and warranties and obligations related to mortgage insurance rescissions related to settlement agreements with the Federal National Mortgage Association (Fannie Mae) revenue net of interest expense, on an FTE basis, was $22.6 billionB.
For the full year, the company reported net income of $4.2 billion, or $0.25 per diluted share, compared to $1.4 billion, or $0.01 per diluted share in 2011.
“We enter 2013 strong and well positioned for further growth,” said Chief Executive Officer Brian Moynihan. “Double-digit growth since last year in mortgage production, commercial lending, and Global Markets revenue demonstrates the power of deeper customer and client relationships as we intensify the focus on connecting all our capabilities.”
As previously announced, financial results in the fourth quarter of 2012 were negatively impacted by a provision of $2.7 billion related to the settlements with Fannie Mae with respect to representations and warranties and compensatory fees; other provision items of $2.5 billion which included a $1.1 billion provision for the Independent Foreclosure Review (IFR) acceleration agreement, total litigation expense of $0.9 billion and a $0.5 billion provision for obligations related to mortgage insurance rescissions; and $0.7 billion of negative debit valuation adjustments (DVA) and fair value option (FVO) adjustments due to improvement in the company's credit spreads. These items were partially offset by a net income tax benefit of $1.3 billion primarily due to the recognition of foreign tax credits of certain non-U.S. subsidiaries; a gain of $0.4 billion on the previously announced sale of the company's 49-percent stake in Mitsubishi UFJ Merrill Lynch PB Securities; and a positive valuation adjustment on mortgage servicing rights (MSR) of $0.3 billion related to the previously announced servicing sales.
The year-ago quarter included $1.3 billion of negative DVA and FVO adjustments, $1.8 billion of total litigation expense and a $0.6 billion goodwill impairment charge in the European consumer card business. In addition, the year-ago quarter included, among other significant items, a $2.9 billion pretax gain on the sale of a portion of the company's investment in China Construction Bank (CCB), a $1.2 billion gain on the exchange of trust preferred securities, and a $1.2 billion gain on the sale of debt securities.
Relative to the year-ago quarter, the results for the fourth quarter of 2012 were driven by improved credit quality across most major portfolios, increased sales and trading revenue (excluding the impact of DVAE), increased investment and brokerage income, higher investment banking fees, partially offset by an increase in consumer real estate losses, reflecting the Fannie Mae settlements and the provision for the IFR acceleration agreement. In addition, noninterest expense declined from the year-ago quarter, driven primarily by cost savings achieved through Project New BAC initiatives over the course of 2012.
"We addressed significant legacy issues in 2012 and our strengths are coming through," said Chief Financial Officer Bruce Thompson. "Capital and liquidity remain strong and credit continues to improve. Our primary focus this year is to grow revenue, manage expenses and drive core earnings growth."
Key Business Highlights
The company made significant progress in 2012 in line with its operating principles, including the following developments:
Focus on customer-driven businesses
- Bank of America extended approximately $475 billion in credit in 2012. This included $310.5 billion in commercial non-real estate loans, $75.1 billion in residential first mortgages, $40.0 billion in commercial real estate loans, $17.9 billion in U.S. consumer and small business card, $3.6 billion in home equity products and $27.9 billion in other consumer credit.
- The $75.1 billion in residential first mortgages funded in 2012 helped more than 305,000 homeowners either purchase a home or refinance an existing mortgage. This included approximately 17,500 first-time homebuyer mortgages originated by retail channels, and more than 96,000 mortgages to low- and moderate-income borrowers. Approximately 16 percent of funded first mortgages were for home purchases and 84 percent were refinances.
- The company originated approximately $8.7 billion in small business loans and commitments in 2012, up 28 percent from 2011, reflecting a continued focus on supporting small businesses.
- Bank of America provided assistance to more than 2 million customer accounts in 14 states affected by Hurricane Sandy with comprehensive customer assistance programs including financial contributions to relief efforts, payment deferrals and fee waivers.
- Total client balances in Global Wealth and Investment Management increased 7 percent from 2011 led by market gains and solid flows in long-term assets under management (AUM), deposits and loans.
- The company continued to deepen and broaden customer relationships. The number of mobile banking customers increased 31 percent from December 31, 2011 to 12.0 million customers, and the number of new U.S. credit card accounts opened in 2012 grew 7 percent from 2011.
- Merrill Edge brokerage assets increased $9.4 billion from the end of 2011 to $75.9 billion, driven by market improvement and an increase in new accounts.
- The company continued to increase its specialized sales force of Financial Solutions Advisors, Mortgage Loan Officers and Small Business Bankers during the quarter to nearly 6,200 specialists at the end of 2012.
- The company continued to support the economy by:
- Helping clients raise $605 billion in capital in 2012.
- Extending approximately $475 billion in credit in 2012.
- Bank of America Merrill Lynch (BofA Merrill) continued to rank No. 2 globally in net investment banking fees in 2012, as reported by Dealogic. Results for the fourth quarter of 2012 included record debt issuance fees since the Bank of America Merrill Lynch merger.
Continue to build a fortress balance sheet
- The Tier 1 common capital ratio under Basel 1 was 11.06 percent at December 31, 2012, down 35 bps from September 30, 2012 and 120 bps higher than December 31, 2011.
- The Tier 1 common capital ratio under Basel 3 on a fully phased-in basis is estimated at 9.25 percent at December 31, 2012, up from 8.97 percent at September 30, 2012.A
- The company reduced long-term debt by nearly $100 billion from the end of 2011 while maintaining significant excess liquidity. Global Excess Liquidity Sources totaled $372 billion at December 31, 2012, slightly less than $380 billion at September 30, 2012 and $378 billion at December 31, 2011. Long-term debt declined to $276 billion at December 31, 2012 from $287 billion at September 30, 2012 and $372 billion at December 31, 2011.
Managing risk well
- The provision for credit losses declined 25 percent from the year-ago quarter, reflecting improved credit quality across major consumer and commercial portfolios and the benefit of underwriting changes implemented over the past several years.
- The U.S. credit card loss rate declined in the fourth quarter of 2012 to the lowest level since the second quarter of 2006C while the 30+ day delinquency rate was at a historic low.
- Consumer loan loss rates declined in the fourth quarter of 2012 to their lowest level since early 2008 and commercial loan loss rates declined to their lowest level since the fourth quarter of 2006C.
Delivering for our shareholders
- Tangible book value per share increased to $13.36 at December 31, 2012, compared to $12.95 at December 31, 2011D. Book value per share was $20.24 at December 31, 2012, compared to $20.09 at December 31, 2011.
- The company continued to make progress on its legacy issues, reaching settlements with Fannie Mae to resolve substantially all outstanding and potential agency mortgage repurchase claims on loans originated and sold directly to Fannie Mae from January 1, 2000 through December 31, 2008 by legacy Countrywide and Bank of America, National Association (BANA); settling substantially all of Fannie Mae's outstanding and future claims for compensatory fees arising out of alleged past foreclosure delays; and clarifying the parties' obligations with respect to mortgage insurance.
Managing efficiency well
- Fourth-quarter 2012 noninterest expense declined 6 percent from the year-ago quarter, reflecting a decrease in personnel expense as the company continued to streamline processes and achieve cost savings.
- At December 31, 2012, the company had 267,190 full-time employees, down 5,404 from the end of the prior quarter, and 14,601 fewer than December 31, 2011.