10-QPeriod: Q3 FY2015

BANK OF AMERICA CORP /DE/ Quarterly Report for Q3 Ended Sep 30, 2015

Filed October 30, 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 a significant improvement in net income for the third quarter of 2015 compared to the same period in 2014, with net income of $4.5 billion, or $0.37 per diluted share, a substantial turnaround from a net loss of $232 million, or $0.04 per share, in the prior year. This positive performance was primarily driven by a considerable reduction in litigation expenses, which decreased by $5.7 billion year-over-year. While revenue saw a slight decrease primarily due to lower net interest income on a fully taxable-equivalent basis and negative market-related adjustments on debt securities, the substantial drop in noninterest expenses, particularly those related to litigation, boosted profitability. Financially, BAC maintained a strong capital position, with a Common Equity Tier 1 (CET1) capital ratio of 11.6% under the Basel 3 Standardized – Transition framework. The company also saw an increase in total assets to $2.2 trillion, driven by deposit inflows. Management is actively addressing a conditional non-objection from the Federal Reserve on its capital plan by resubmitting it with necessary revisions.

Financial Highlights

35 data points
Beta

Revenue

$20.99B

Net Income

$4.62B

22.0% Net Margin

EPS (Diluted)

$0.38

Total Assets

$2.15T

Cash & Equivalents

$170.43B

Free Cash Flow

$25.80B

Financial Statements
Beta
Revenue$20.99B
Interest Expense$2.50B
Net Income$4.62B
EPS (Basic)$0.40
EPS (Diluted)$0.38
Shares Outstanding (Basic)10.44B
Shares Outstanding (Diluted)11.20B

Key Highlights

  • 1Net income significantly improved year-over-year, turning from a loss to a substantial profit, largely due to lower litigation expenses.
  • 2Total revenue saw a slight decline, impacted by lower net interest income and negative market-related adjustments on debt securities.
  • 3Noninterest expense decreased substantially, mainly due to reduced litigation charges.
  • 4Common Equity Tier 1 (CET1) capital ratio remained strong at 11.6% under Basel 3 Standardized – Transition, though slightly down from the prior year-end.
  • 5Total assets increased to $2.2 trillion, primarily driven by deposit inflows.
  • 6Bank of America is actively working with the Federal Reserve to address weaknesses identified in its capital planning process as part of the CCAR submission.
  • 7The company is preparing to transition to the Basel 3 Advanced approaches capital framework in the fourth quarter of 2015.

Frequently Asked Questions

The primary driver for the improved net income was a significant reduction in litigation expenses. This decrease in noninterest expense, despite a slight decline in revenue, led to a substantial increase in profitability compared to the prior year's net loss.

Bank of America maintained a strong capital position, reporting a Common Equity Tier 1 (CET1) capital ratio of 11.6% under the Basel 3 Standardized – Transition framework as of September 30, 2015. This ratio reflects regulatory capital requirements and the company's ability to absorb potential losses.

Management expects the provision for credit losses to remain generally consistent with current levels through mid-2016, assuming economic conditions remain unchanged.

Bank of America received a conditional non-objection from the Federal Reserve for its 2015 CCAR submission. The company has resubmitted its capital plan by the September 30, 2015 deadline, addressing identified weaknesses, and is awaiting the Federal Reserve's final review.