10-QPeriod: Q3 FY2019

BANK OF AMERICA CORP /DE/ Quarterly Report for Q3 Ended Sep 30, 2019

Filed October 28, 2019For 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 third quarter of 2019, with total revenue remaining stable year-over-year at $22.8 billion. Net income, however, saw a decline to $5.8 billion from $7.2 billion in the prior year's quarter, primarily due to a significant $2.1 billion pretax impairment charge related to the termination of its merchant services joint venture. Despite the impairment charge, core banking operations showed resilience. Net interest income increased slightly to $12.2 billion, driven by loan and deposit growth. Noninterest income remained stable, with increases in investment banking fees offsetting decreases in other areas. The company continued to return capital to shareholders, repurchasing $7.6 billion of common stock during the quarter and declaring a $0.18 per share dividend. Capital ratios remained strong, well above regulatory minimums.

Financial Highlights

35 data points
Beta

Revenue

$22.81B

Net Income

$5.78B

25.3% Net Margin

EPS (Diluted)

$0.56

Total Assets

$2.43T

Cash & Equivalents

$157.09B

Free Cash Flow

-$5.70B

Financial Statements
Beta
Revenue$22.81B
Interest Expense$5.73B
Net Income$5.78B
EPS (Basic)$0.57
EPS (Diluted)$0.56
Shares Outstanding (Basic)9.30B
Shares Outstanding (Diluted)9.35B

Key Highlights

  • 1Total revenue for Q3 2019 was $22.8 billion, a slight increase from $22.7 billion in Q3 2018.
  • 2Net income decreased to $5.8 billion from $7.2 billion in the prior year quarter, largely due to a $2.1 billion impairment charge on the merchant services joint venture.
  • 3Net interest income increased by 1.0% year-over-year to $12.2 billion, driven by loan and deposit growth.
  • 4Provision for credit losses increased to $779 million from $716 million in the prior year quarter.
  • 5Noninterest expense increased significantly to $15.2 billion from $13.0 billion, primarily due to the merchant services joint venture impairment charge.
  • 6The company repurchased $7.6 billion of common stock in Q3 2019 and maintained its quarterly dividend of $0.18 per share.
  • 7Capital ratios remained strong, with Common Equity Tier 1 (CET1) capital ratio at 11.4% under the Standardized Approach.

Frequently Asked Questions

The primary driver for the decrease in net income compared to the prior year quarter was a $2.1 billion pretax impairment charge related to the notice of termination of the merchant services joint venture. This charge significantly impacted the "Other general operating" expense category.

Bank of America maintained a strong capital position. As of September 30, 2019, its Common Equity Tier 1 (CET1) capital ratio was 11.4% under the Standardized Approach and 11.7% under the Advanced Approaches, both well above regulatory minimums. The company also repurchased $7.6 billion of common stock, demonstrating a commitment to returning capital to shareholders.

The company expects net interest income for 2019 to grow approximately one percent compared to 2018. This expectation is based on anticipated short-end rate cuts in the fourth quarter of 2019, stable long-end interest rates, and stable economic conditions.

Bank of America provided notice to its joint venture partner to terminate the merchant services joint venture upon the conclusion of its current term in June 2023. The company incurred a $2.1 billion pretax impairment charge in the third quarter of 2019 as a result of this action and expects to account for the joint venture as an equity method investment until June 2020.