10-QPeriod: Q3 FY2012

BANK OF AMERICA CORP /DE/ Quarterly Report for Q3 Ended Sep 30, 2012

Filed November 2, 2012For 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 third quarter 2012 financial results, showing a net income of $340 million, or $0.00 per diluted share. This marks a significant decrease from the $6.2 billion net income reported in the same period last year. The decline is largely attributed to lower total revenue, driven by a $7.5 billion decrease in noninterest income primarily due to negative fair value adjustments on structured liabilities compared to positive adjustments in the prior year, and debit valuation adjustment (DVA) losses on derivatives. Despite the lower net income, the company highlighted improvements in asset quality, with a decrease in the allowance for loan and lease losses as a percentage of total loans and leases, and a reduction in net charge-offs. The company also continued its cost-saving initiatives through "Project New BAC," expecting significant annualized savings by the end of 2013. Operationally, Bank of America announced an agreement to settle a major class action lawsuit for $2.4 billion, which will be covered by existing litigation reserves. The company also provided an update on its capital and liquidity positions, indicating plans to redeem $5.1 billion of trust preferred securities, which is expected to generate pre-tax net interest income savings. Management remains focused on streamlining operations and managing expenses to navigate the ongoing economic uncertainties, particularly in Europe, and the "fiscal cliff" concerns in the U.S.

Financial Highlights

35 data points
Beta

Revenue

$20.43B

Net Income

$340.00M

1.7% Net Margin

EPS (Diluted)

$0.00

Total Assets

$2.17T

Cash & Equivalents

$106.42B

Free Cash Flow

$8.82B

Financial Statements
Beta
Revenue$20.43B
Interest Expense$4.04B
Net Income$340.00M
Shares Outstanding (Basic)10.78B
Shares Outstanding (Diluted)10.78B

Key Highlights

  • 1Net income for the third quarter of 2012 was $340 million, a significant decrease from $6.23 billion in Q3 2011.
  • 2Diluted EPS was $0.00 for Q3 2012, compared to $0.56 in Q3 2011.
  • 3Total revenue, net of interest expense, decreased by $8.0 billion to $20.7 billion in Q3 2012 compared to Q3 2011.
  • 4Provision for credit losses decreased significantly to $1.8 billion in Q3 2012 from $3.4 billion in Q3 2011, reflecting improved portfolio trends.
  • 5The Merrill Lynch Class Action Settlement agreement was announced for $2.4 billion, to be funded by existing litigation reserves.
  • 6Bank of America announced plans to redeem $5.1 billion of trust preferred securities, expecting pre-tax net interest income savings.
  • 7Tier 1 common capital ratio improved to 11.41% at September 30, 2012, up from 9.86% at December 31, 2011.

Frequently Asked Questions

The significant decrease in net income was primarily driven by a substantial reduction in noninterest income, largely due to negative fair value adjustments on structured liabilities and debit valuation adjustment (DVA) losses on derivatives. These factors were partially offset by lower provision for credit losses.

Bank of America announced an agreement to settle the Merrill Lynch Class Action Settlement for $2.4 billion. This amount will be covered by litigation reserves already established as of September 30, 2012.

Bank of America is continuing with 'Project New BAC' to streamline workflows, simplify processes, and align expenses, targeting significant cost savings. Phase 1 is expected to yield over $1 billion in savings in 2012 and $5 billion annualized by Q4 2013. Phase 2 aims for an additional $3 billion in annualized savings by mid-2015.

Bank of America's capital position strengthened, with the Tier 1 common capital ratio increasing to 11.41% at the end of the third quarter of 2012, up from 9.86% at the end of 2011. This improvement was primarily driven by earnings and a reduction in risk-weighted assets.