10-QPeriod: Q2 FY2015

BANK OF AMERICA CORP /DE/ Quarterly Report for Q2 Ended Jun 30, 2015

Filed July 29, 2015For Securities:BACBAC-PBBAC-PKBAC-PLBAC-PMBAC-PNBAC-PSBML-PJBAC-PEBAC-PPBAC-PQBACRPBML-PGBML-PHBML-PLBAC-POMER-PK

Summary

Bank of America Corporation (BAC) reported solid financial results for the second quarter and first half of 2015, demonstrating a significant improvement compared to the prior year, primarily driven by a substantial reduction in litigation expenses. Net income increased substantially year-over-year, with diluted earnings per share showing a corresponding improvement. The company's capital position remains strong, with Common Equity Tier 1 capital ratios well above regulatory minimums. The company also experienced growth in key segments like Consumer Banking and Global Wealth & Investment Management, evidenced by increased deposits and client balances. Management highlighted operational efficiencies and cost savings initiatives, contributing to a lower efficiency ratio. While overall performance is positive, investors should note the ongoing capital planning review with the Federal Reserve and the potential impact of upcoming G-SIB surcharges. The company continues to navigate a complex regulatory environment, which may lead to increased compliance costs.

Financial Highlights

35 data points
Beta

Revenue

$21.96B

Net Income

$5.13B

23.4% Net Margin

EPS (Diluted)

$0.43

Total Assets

$2.15T

Cash & Equivalents

$163.51B

Free Cash Flow

-$3.33B

Financial Statements
Beta
Revenue$21.96B
Interest Expense$2.64B
Net Income$5.13B
EPS (Basic)$0.46
EPS (Diluted)$0.43
Shares Outstanding (Basic)10.49B
Shares Outstanding (Diluted)11.24B

Key Highlights

  • 1Net income for the three months ended June 30, 2015, was $5.3 billion, or $0.45 per diluted share, a significant increase from $2.3 billion, or $0.19 per diluted share, in the same period of 2014.
  • 2The substantial year-over-year earnings improvement was primarily driven by a reduction of $3.8 billion in litigation expenses.
  • 3Consumer Banking average deposits increased by six percent for the first six months of 2015 compared to the same period in 2014.
  • 4Global Wealth & Investment Management client balances reached a record $2.5 trillion at June 30, 2015, reflecting growth in assets under management.
  • 5The Common Equity Tier 1 capital ratio under Basel 3 Standardized – Transition was 11.2% at June 30, 2015, down from 12.3% at December 31, 2014, but remained strong and well above regulatory requirements.
  • 6Noninterest expense decreased significantly, primarily due to lower litigation expenses.
  • 7The company returned $1.8 billion in capital to common shareholders through common stock repurchases and dividends during the first half of 2015.

Frequently Asked Questions

The substantial increase in net income was primarily driven by a significant reduction in litigation expenses, which decreased by $3.8 billion for the three months ended June 30, 2015, compared to the same period in the prior year.

The company's capital position remained strong. The Common Equity Tier 1 capital ratio under Basel 3 Standardized – Transition was 11.2% at June 30, 2015. While this was a decrease from 12.3% at December 31, 2014, it remained well above regulatory minimums. The company also reported a Tier 1 leverage ratio of 8.5% at June 30, 2015.

The company believed that the Federal Reserve was unlikely to raise the target for the federal funds rate until late in the third quarter of 2015 at the earliest and expected a more gradual firming of monetary policy once tightening began.

The New York Court of Appeals' ACE decision, which held that the statute of limitations for breach of representations and warranties begins when they are made, resulted in a reduction in unresolved repurchase claims, a benefit in the provision for representations and warranties, and a decrease to both the accrued liability and estimated range of possible loss for representations and warranties exposures.

The company received a conditional non-objection on its 2015 CCAR capital plan, requiring it to resubmit the plan by September 30, 2015, and address identified weaknesses. The company has developed action plans to improve its CCAR process and is currently executing on them.