10-QPeriod: Q1 FY2016

BANK OF AMERICA CORP /DE/ Quarterly Report for Q1 Ended Mar 31, 2016

Filed May 2, 2016For 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 first quarter 2016 financial results, with net income of $2.7 billion, or $0.21 per diluted share, a decrease from $3.1 billion, or $0.25 per diluted share, in the same period of 2015. This decline was primarily attributed to lower net interest income and noninterest income, along with higher provision for credit losses, partially offset by a reduction in noninterest expense. The company maintained a strong capital position with a Common Equity Tier 1 capital ratio of 10.3% under the Basel 3 Advanced – Transition framework, exceeding regulatory minimums. Total assets grew to $2.2 trillion driven by increased customer financing activity and deposit inflows. The company continued its capital return to shareholders, distributing $2.0 billion through dividends and stock repurchases during the quarter. Management highlighted a stable U.S. economy with continued consumer spending growth, though at a slower pace, and noted challenges in the energy sector impacting commercial loan provisions.

Financial Highlights

35 data points
Beta

Revenue

$20.79B

Net Income

$3.47B

16.7% Net Margin

EPS (Diluted)

$0.28

Total Assets

$2.19T

Cash & Equivalents

$179.61B

Free Cash Flow

$10.90B

Financial Statements
Beta
Revenue$20.79B
Interest Expense$2.52B
Net Income$3.47B
EPS (Basic)$0.29
EPS (Diluted)$0.28
Shares Outstanding (Basic)10.37B
Shares Outstanding (Diluted)11.10B

Key Highlights

  • 1Net income for Q1 2016 was $2.7 billion, down from $3.1 billion in Q1 2015.
  • 2Diluted EPS was $0.21 in Q1 2016, compared to $0.25 in Q1 2015.
  • 3Total revenue (net of interest expense, FTE basis) was $19.7 billion, down from $21.1 billion in the prior year quarter.
  • 4Provision for credit losses increased to $997 million from $765 million, primarily due to higher energy sector reserves.
  • 5Noninterest expense decreased to $14.8 billion from $15.8 billion, driven by lower personnel and litigation expenses.
  • 6Common Equity Tier 1 capital ratio remained strong at 10.3% (Basel 3 Advanced – Transition).
  • 7Returned $2.0 billion to shareholders through dividends and common stock repurchases during the quarter.

Frequently Asked Questions

The decrease in net income was primarily driven by lower net interest income on a fully taxable-equivalent (FTE) basis and lower noninterest income. Higher provision for credit losses also contributed to the decline, although this was partially offset by lower noninterest expense.

Bank of America maintained a strong capital position. As of March 31, 2016, its Common Equity Tier 1 capital ratio was 10.3% under the Basel 3 Advanced – Transition framework, and its Tier 1 leverage ratio was 8.7%. Both ratios were well above the required minimums.

Consumer Banking saw a net income increase to $1.8 billion, driven by higher net interest income and lower provisions. Global Wealth & Investment Management's net income rose to $740 million, mainly due to reduced noninterest expense. Global Banking's net income decreased to $1.1 billion, largely due to higher provisions for credit losses. Global Markets' net income increased to $984 million, benefiting from higher net interest income and lower noninterest expense, while Legacy Assets & Servicing reported a net loss of $40 million, an improvement from the prior year.

For the remainder of 2016, the company expects provision expense to approximate net charge-offs. The increase in provision for credit losses in the current quarter was primarily driven by higher energy sector reserves due to increased allowance coverage for higher-risk sub-sectors within that industry.