10-QPeriod: Q3 FY2001

BANK OF AMERICA CORP /DE/ Quarterly Report for Q3 Ended Sep 30, 2001

Filed November 14, 2001For Securities:BACBAC-PBBAC-PKBAC-PLBAC-PMBAC-PNBAC-PSBML-PJBAC-PEBAC-PPBAC-PQBACRPBML-PGBML-PHBML-PLBAC-POMER-PK

Summary

Bank of America Corporation (BAC) reported its financial results for the nine months ended September 30, 2001. The company saw a decrease in net income to $4.73 billion from $6.13 billion in the prior year period, with diluted earnings per share falling to $2.90 from $3.66. This decline was largely influenced by a significant pre-tax charge of $1.7 billion ($1.3 billion after-tax) associated with exiting its auto leasing and subprime real estate lending businesses. Excluding these exit and restructuring charges, operating earnings were $6.0 billion compared to $6.5 billion in the prior year. Total revenue saw an increase to $26.1 billion, driven by a rise in net interest income, though noninterest income declined due to lower equity investment gains and trading profits. The company's balance sheet reflected total assets of $640.1 billion, a slight decrease from the previous year-end. Loans and leases, net of allowance for credit losses, stood at $332.4 billion. The provision for credit losses saw a substantial increase, largely due to the exit charges and a general deterioration in credit quality linked to the weakening economic environment, leading to higher net charge-offs. Despite the challenging economic climate and strategic business exits, the company maintained strong capital ratios, with its Tier 1 capital ratio at 7.95% and total capital at 12.12% at the end of the period.

Key Highlights

  • 1Net income for the nine months ended September 30, 2001, decreased to $4.73 billion from $6.13 billion in the same period of 2000.
  • 2Diluted earnings per share declined to $2.90 from $3.66, reflecting the overall decrease in profitability.
  • 3The company recorded a significant pre-tax charge of $1.7 billion ($1.3 billion after-tax) related to exiting its auto leasing and subprime real estate lending businesses.
  • 4Total revenue increased to $26.1 billion, up from $24.9 billion in the prior year, driven by higher net interest income.
  • 5Noninterest income decreased to $11.0 billion from $11.3 billion, primarily due to lower equity investment gains.
  • 6The provision for credit losses increased significantly to $2.9 billion from $1.3 billion, impacted by the business exits and a weaker economic environment.
  • 7Bank of America maintained strong capital adequacy, with a Tier 1 capital ratio of 7.95% and a Total Capital ratio of 12.12% as of September 30, 2001.

Frequently Asked Questions

The primary driver behind the decrease in net income was a significant pre-tax charge of $1.7 billion ($1.3 billion after-tax) related to the company's strategic decision to exit its auto leasing and subprime real estate lending businesses. This charge impacted the overall profitability for the period.

Total loans and leases decreased to $339.0 billion from $392.2 billion at the end of the previous year. Net charge-offs increased significantly to $3.1 billion from $1.3 billion, largely due to a weaker economic environment impacting the commercial loan portfolio and increased bankcard charge-offs. The company also transferred approximately $21.4 billion of subprime real estate loans to 'loans held for sale' as part of its business exit strategy.

Bank of America maintained strong capital ratios. As of September 30, 2001, its Tier 1 capital ratio was 7.95%, and its Total Capital ratio was 12.12%. These ratios were well above the regulatory minimums, indicating a solid capital position despite the economic challenges and business exits.

Total noninterest income decreased to $11.0 billion from $11.3 billion in the prior year. This decline was primarily driven by a sharp decrease in equity investment gains, which fell by $779 million. While service charges and card income saw increases, they were not enough to offset the drop in equity investment gains and declines in trading account profits and investment banking income.