10-QPeriod: Q2 FY2006

BANK OF AMERICA CORP /DE/ Quarterly Report for Q2 Ended Jun 30, 2006

Filed August 8, 2006For Securities:BACBAC-PBBAC-PKBAC-PLBAC-PMBAC-PNBAC-PSBML-PJBAC-PEBAC-PPBAC-PQBACRPBML-PGBML-PHBML-PLBAC-POMER-PK

Summary

Bank of America Corporation (BAC) reported strong financial results for the second quarter and first half of 2006, largely driven by the successful integration of the MBNA acquisition. Net income for the quarter increased by 18% to $5.5 billion ($1.19 per diluted share), and for the first half, it rose 16% to $10.5 billion ($2.25 per diluted share). Total revenue saw a significant jump, up 25% year-over-year for the quarter, bolstered by robust performance across most business segments, particularly Card Services and Investment Banking. The company also announced an increase in its quarterly dividend on common stock, signaling confidence in its continued profitability. The MBNA integration appears to be proceeding smoothly, contributing positively to both revenue and earnings, though offset by higher noninterest expenses related to the acquisition.

Key Highlights

  • 1Net income for the quarter increased 18% to $5.5 billion ($1.19 per diluted share), and for the first half, it increased 16% to $10.5 billion ($2.25 per diluted share).
  • 2Total revenue for the quarter grew 25% to $18.2 billion, driven by strong contributions from Card Services and Investment Banking.
  • 3The MBNA acquisition integration is progressing well, contributing significantly to revenue and customer base expansion.
  • 4Provision for credit losses increased for both the quarter and the first half, primarily due to the inclusion of MBNA's portfolio and the absence of prior year reserve releases.
  • 5Noninterest expense rose 24% year-over-year for the quarter, largely due to the costs associated with the MBNA acquisition, including personnel and amortization expenses.
  • 6The company announced a 12% increase in its quarterly cash dividend on common stock to $0.56 per share, payable in September 2006.
  • 7Total assets grew to $1.4 trillion, an increase of 12% from the end of 2005, primarily driven by loan growth and the MBNA acquisition.

Frequently Asked Questions

The MBNA acquisition, completed on January 1, 2006, significantly boosted Bank of America's financial performance. It led to a substantial increase in total revenue, particularly in Card Services, and expanded the company's customer base and product offerings. While the integration increased noninterest expenses, the overall impact on net income was positive, demonstrating a successful strategic move.

Net interest income, on a fully taxable-equivalent (FTE) basis, increased significantly due to the MBNA merger, organic loan growth, and higher ALM activities. The net interest yield also saw a slight increase. The company's interest rate risk management strategies and continued loan growth suggest a positive outlook for net interest income, though sensitivity to yield curve movements remains a factor.

The provision for credit losses increased compared to the prior year. This was driven by the inclusion of MBNA's portfolio in the calculations and the absence of prior year releases of commercial credit reserves. While overall consumer credit quality remained stable, with some benefit from bankruptcy reform, the increase in commercial credit provisions reflects higher net charge-offs and the impact of the MBNA integration.