10-QPeriod: Q2 FY2008

BANK OF AMERICA CORP /DE/ Quarterly Report for Q2 Ended Jun 30, 2008

Filed August 7, 2008For 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 second-quarter 2008 financial results, showing a significant decrease in net income and diluted earnings per share compared to the same period in the prior year. Net income was $3.4 billion, or $0.72 per diluted share, down from $5.8 billion, or $1.28 per diluted share in Q2 2007. This decline was largely driven by a substantial increase in the provision for credit losses, which rose to $5.8 billion from $1.8 billion in the prior year, reflecting deteriorating economic conditions and weakness in the housing market, particularly impacting the home equity and residential mortgage portfolios. While net interest income saw an increase due to loan growth and the acquisition of LaSalle, this was more than offset by higher credit provisions and increased noninterest expenses related to integration costs. The company also experienced a decrease in noninterest income, largely due to significant losses in trading account profits and equity investment income, impacted by ongoing market disruptions and write-downs related to CDO exposure. Despite these challenges, the company maintained a strong capital position, with its Tier 1 Capital ratio at 8.25% and Total Capital ratio at 12.60% at June 30, 2008, well above regulatory requirements. The acquisition of Countrywide Financial Corporation closed on July 1, 2008, which is expected to significantly enhance the company's mortgage origination and servicing capabilities.

Financial Highlights

23 data points
Beta

Revenue

$20.41B

Net Income

$3.41B

16.7% Net Margin

EPS (Diluted)

$0.72

Cash & Equivalents

$39.13B

Free Cash Flow

$11.20B

Financial Statements
Beta
Revenue$20.41B
Interest Expense$9.41B
Net Income$3.41B
EPS (Basic)$0.72
EPS (Diluted)$0.72
Shares Outstanding (Basic)4.44B
Shares Outstanding (Diluted)4.44B

Key Highlights

  • 1Net income for Q2 2008 was $3.4 billion, a significant decrease from $5.8 billion in Q2 2007.
  • 2Diluted EPS for Q2 2008 was $0.72, down from $1.28 in Q2 2007.
  • 3Provision for credit losses increased substantially to $5.8 billion from $1.8 billion year-over-year, driven by economic weakness and housing market deterioration.
  • 4Noninterest income declined, impacted by trading account losses and write-downs related to CDO exposure.
  • 5The company completed the acquisition of Countrywide Financial Corporation on July 1, 2008.
  • 6Capital ratios remained strong, with Tier 1 Capital at 8.25% and Total Capital at 12.60%.

Frequently Asked Questions

The primary driver of the decrease in net income was a substantial increase in the provision for credit losses, which rose to $5.8 billion from $1.8 billion in the prior year. This was largely due to deteriorating economic conditions, weakness in the housing market, and portfolio seasoning, particularly impacting home equity and residential mortgage loans.

The company experienced a decline in noninterest income. Trading account profits decreased significantly due to losses related to CDO exposure and market disruptions. Investment banking income also decreased due to reduced underwriting and advisory fees in the challenging market conditions.

The acquisition of Countrywide Financial Corporation closed on July 1, 2008. The company estimates this acquisition will reduce its Tier 1 Capital ratio by approximately 65 basis points at the date of acquisition. The acquisition is expected to significantly enhance mortgage origination and servicing capabilities.

Despite the challenging market environment and the Countrywide acquisition, Bank of America maintained strong capital ratios. At June 30, 2008, its Tier 1 Capital ratio was 8.25% and its Total Capital ratio was 12.60%, both exceeding regulatory requirements. The company also issued preferred stock and senior notes in the first half of 2008 to bolster its liquidity and capital position.