10-QPeriod: Q3 FY2006

BANK OF AMERICA CORP /DE/ Quarterly Report for Q3 Ended Sep 30, 2006

Filed November 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 a strong performance for the quarter ended September 30, 2006, with Net Income of $5.4 billion, a 41% increase year-over-year. This growth was significantly driven by the integration of MBNA Corporation, acquired on January 1, 2006, which boosted Total Revenue by 44% to $10.4 billion in the Global Consumer and Small Business Banking segment. The company demonstrated robust asset growth, with Total Assets reaching $1.4 trillion, up 12% from the previous year-end, largely due to the MBNA acquisition and organic loan growth. Noninterest income also saw substantial growth, up $3.7 billion year-over-year, primarily fueled by a significant increase in Card Income, reflecting the MBNA integration, and strong Trading Account Profits. Despite increased noninterest expenses, largely attributable to acquisition-related costs, the company maintained a solid efficiency ratio. Management highlighted a strategic shift to reduce mortgage-backed securities to a more concentrated loan portfolio, indicating a focus on core lending activities. The company also continued its commitment to shareholder returns through share repurchases and an increased quarterly dividend. Overall, the report signals a positive trajectory for Bank of America, driven by strategic acquisitions and strong operational performance.

Key Highlights

  • 1Net Income increased 41% year-over-year to $5.4 billion, or $1.18 per diluted share.
  • 2Total Revenue grew 32% year-over-year to $18.7 billion, driven by the MBNA acquisition and organic loan growth.
  • 3Global Consumer and Small Business Banking segment revenue increased 44% to $10.4 billion, with Card Income up significantly due to MBNA.
  • 4Noninterest Income rose 56% to $10.1 billion, primarily due to Card Income, Trading Account Profits, and a $720 million pre-tax gain from the sale of Brazilian operations.
  • 5Total Assets grew 12% to $1.4 trillion, reflecting the MBNA acquisition and organic loan growth.
  • 6The company announced an increase in its quarterly cash dividend on common stock from $0.50 to $0.56 per share.
  • 7Bank of America is strategically reducing its mortgage-backed securities portfolio by approximately $100 billion over the next two years.

Frequently Asked Questions

The acquisition of MBNA, completed on January 1, 2006, significantly boosted Bank of America's financial performance. It led to a substantial increase in Total Revenue, particularly within the Global Consumer and Small Business Banking segment, driven by higher Card Income and Net Interest Income. The acquisition also contributed to increased noninterest expenses due to integration costs.

Bank of America is undergoing a strategic shift to reduce its mortgage-backed securities portfolio by approximately $100 billion over the next couple of years. This move aims to achieve a balance sheet composition more heavily concentrated in loans and reduce concentration in debt securities.

Overall consumer credit quality remained stable. Commercial credit quality also remained good. Net charge-offs for the held credit card domestic portfolio saw an increase year-over-year for the quarter, partly due to changes in payment requirements and the addition of the MBNA portfolio, but the net loss ratio improved compared to the prior year. Nonperforming consumer and commercial assets remained relatively stable as a percentage of total loans and leases.

Bank of America increased its quarterly cash dividend on common stock from $0.50 to $0.56 per share. The company also indicated its intention to continue repurchasing shares, intending to repurchase at least as many shares as are issued under employee stock plans.