01—Abstract
Summary
Summary of the 10-K filed February 25, 2015. Cited figures are marked; the original filing is the authoritative source.
Bank of America Corporation (BAC) reported a net income of $4.8 billiona for the fiscal year ended December 30, 2014, a significant decrease from $11.4 billion in 2013.
This decline was primarily driven by a substantial increase in litigation expenses, totaling $10.3 billionb, largely due to settlements with the Department of Justice and the Federal Housing Finance Agency. Despite the drop in net income, the company's capital ratios remained strong, with a Common Equity Tier 1 capital ratio of 12.3% under Basel 3 Standardized – Transition. Total assets remained relatively stable at approximately $2.1 trillion, while shareholders' equity saw an increase, benefiting from preferred stock issuances and a rise in accumulated other comprehensive income.
Operationally, the company focused on balance sheet optimization and preparing for new Basel 3 liquidity coverage ratio requirements, leading to a shift towards more liquid debt securities. While net interest income declined due to premium amortization on debt securities and lower loan yields, noninterest income saw an increase, primarily driven by higher asset management fees in Global Wealth & Investment Management.
The company's risk management framework remains robust, with management assessing risks across seven categories, including credit, market, liquidity, compliance, operational, strategic, and reputational risks. The report highlights efforts to manage credit risk through improved economic conditions, leading to lower net charge-offs and delinquencies across portfolios.
02—Key points
Key Highlights
- Net income decreased to $4.8 billion in 2014 from $11.4 billion in 2013, primarily due to a $10.3 billion increase in litigation expenses.
- Total assets remained stable at approximately $2.1 trillion as of December 31, 2014.
- Common Equity Tier 1 capital ratio was 12.3% under Basel 3 Standardized – Transition.
- Investment and brokerage services income increased by $1.0 billion, driven by higher asset management fees.
- The provision for credit losses decreased by $1.3 billion due to improved credit quality across portfolios.
- Noninterest expense increased by $5.9 billion, largely due to the aforementioned litigation expenses.
- The company completed its Project New BAC expense program ahead of schedule, achieving its target of $2 billion in quarterly cost savings.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 25, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $85.89B$88.94B | −3.4% |
| Interest Expense | $10.94B$12.76B | −14.3% |
| Net Income | $5.52B$11.43B | −51.7% |
| EPS (Basic) | $0.43$0.94 | −54.3% |
| EPS (Diluted) | $0.42$0.90 | −53.3% |
| Shares Outstanding (Basic) | 10.53B10.73B | −1.9% |
| Shares Outstanding (Diluted) | 10.58B11.49B | −7.9% |
05—Questions
Frequently Asked Questions
What was Bank of America's net income in 2014 compared to 2013?
Bank of America's net income decreased to $4.8 billion in 2014 from $11.4 billion in 2013. This was primarily due to a significant increase in litigation expenses.
How did litigation expenses impact the company's financial results?
Litigation expenses increased by $10.3 billion in 2014, largely as a result of charges related to settlements with the U.S. Department of Justice and the Federal Housing Finance Agency. This increase was a primary driver for the decrease in net income.
What is the status of Bank of America's capital ratios?
Bank of America maintained strong capital ratios, with a Common Equity Tier 1 capital ratio of 12.3% under Basel 3 Standardized – Transition as of December 31, 2014. The Tier 1 capital ratio was 13.4% and the Total capital ratio was 16.5%.
What were the key drivers for the changes in noninterest income?
Noninterest income decreased by $2.4 billion to $44.3 billion in 2014 compared to 2013. Key changes included an increase in Investment and brokerage services income (driven by higher asset management fees) and a decrease in Equity investment income and Trading account profits.
How did the company manage its expenses in 2014?
Bank of America continued its cost-saving initiatives through Project New BAC, which was completed ahead of schedule, achieving its target of $2 billion in quarterly cost savings. However, overall noninterest expense increased due to higher litigation expenses.
06—Continue