10-QPeriod: Q2 FY2009

BANK OF AMERICA CORP /DE/ Quarterly Report for Q2 Ended Jun 30, 2009

Filed August 7, 2009For 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 2009 financial results, showcasing a complex picture impacted by ongoing economic challenges and the integration of recent acquisitions, notably Merrill Lynch and Countrywide. The company experienced a significant increase in total assets and liabilities, largely due to the Merrill Lynch acquisition, which closed in January 2009. Net income for the quarter was $3.2 billion ($0.33 per diluted share), a decrease from the $3.4 billion ($0.72 per diluted share) reported in the same quarter of the previous year. This decline was primarily driven by a substantial increase in the provision for credit losses, which rose to $13.4 billion from $5.8 billion year-over-year, reflecting deteriorating credit quality across both consumer and commercial portfolios due to the weak economic environment. Noninterest income saw a significant boost, primarily from equity investment income due to sales of China Construction Bank shares and strong trading account profits, but this was partially offset by negative credit valuation adjustments on derivative liabilities. Despite the challenges, Bank of America demonstrated resilience by significantly strengthening its capital position. The company raised approximately $39.7 billion in common capital, exceeding regulatory requirements and the Supervisory Capital Assessment Program (SCAP) projections. This capital was raised through preferred stock exchanges, an at-the-market common stock offering, and the sale of China Construction Bank shares. The company's Tier 1 common capital ratio improved substantially, reinforcing its capital buffer against severe economic conditions.

Financial Highlights

34 data points
Beta

Revenue

$32.77B

Net Income

$3.22B

9.8% Net Margin

EPS (Diluted)

$0.33

Total Assets

$2.25T

Cash & Equivalents

$140.37B

Free Cash Flow

$19.97B

Financial Statements
Beta
Revenue$32.77B
Interest Expense$7.96B
Net Income$3.22B
EPS (Basic)$0.33
EPS (Diluted)$0.33
Shares Outstanding (Basic)7.24B
Shares Outstanding (Diluted)7.27B

Key Highlights

  • 1Net income of $3.2 billion ($0.33 per diluted share) for the quarter, compared to $3.4 billion ($0.72 per diluted share) in Q2 2008.
  • 2Provision for credit losses increased significantly to $13.4 billion from $5.8 billion year-over-year, reflecting economic deterioration.
  • 3Total assets grew to $2.3 trillion due to the Merrill Lynch acquisition.
  • 4Total liabilities also increased significantly due to the Merrill Lynch acquisition, impacting various categories like long-term debt and deposits.
  • 5Shareholders' equity increased to $255.2 billion, boosted by capital raises including preferred stock issuances and common stock offerings.
  • 6The company successfully raised approximately $39.7 billion in common capital, significantly exceeding regulatory and SCAP requirements.
  • 7Noninterest income saw a substantial increase, driven by equity investment income from CCB share sales and strong trading account profits, partially offset by derivative valuation adjustments.

Frequently Asked Questions

The Merrill Lynch acquisition, completed on January 1, 2009, significantly increased Bank of America's total assets and liabilities. Merrill Lynch's results were consolidated, contributing to higher revenue and expenses across various segments. The acquisition added substantially to trading account assets, derivative assets, loans and leases, long-term debt, and deposits. It also contributed $5.0 billion in goodwill.

The economic recession led to a significant deterioration in credit quality across both consumer and commercial portfolios. This resulted in a substantial increase in the provision for credit losses to $13.4 billion for the quarter, up from $5.8 billion in the prior year's second quarter. Higher unemployment, declining home prices, and reduced consumer and business spending contributed to increased net charge-offs and nonperforming assets.

Bank of America took several proactive steps to bolster its capital position. During the second quarter of 2009, the company completed preferred stock exchanges for common stock totaling approximately $11.3 billion, conducted an at-the-market common stock offering raising $13.5 billion, and benefited from the sale of China Construction Bank shares. These actions, along with others, resulted in approximately $39.7 billion in additional Tier 1 common capital, significantly exceeding the $33.9 billion capital requirement identified by federal regulators under the Supervisory Capital Assessment Program (SCAP).

Trading account profits saw a significant increase of $1.8 billion year-over-year, driven by favorable core trading results. Investment banking income also grew substantially by $951 million, reflecting the expanded platform post-Merrill Lynch acquisition and strong demand in debt and equity capital markets. However, trading results were partially impacted by negative credit valuation adjustments on derivative liabilities due to tightening credit spreads.

Bank of America anticipates that continued market turbulence and economic uncertainty will persist throughout 2009. The company expects these conditions to continue to affect many of its business lines and may adversely impact future results. The degree of this impact will depend on the duration and severity of these economic conditions.