CHARLOTTE - Wednesday, July 27th 2011 [ME NewsWire]
Second-Quarter Loss of $0.90 per Share, in Line With Previous Estimates
Excluding Certain Mortgage-Related Items and Other Selected Items, Net Income Was $0.33 per Share1
Consumer Real Estate Services Reports $14.5 Billion Loss; Other Businesses Earn $5.7 Billion2
Credit Costs Continue to Decrease With Net Charge-Offs Declining Across Most Portfolios
Average Deposit Balances Grew for the Third Consecutive Quarter
Global Banking and Markets Reports Record Investment Banking Fees of $1.6 Billion; Highest Since Merrill Lynch Acquisition, Excluding Self-Led Deals
Global Wealth and Investment Management Achieves Record Asset Management Fees and Strong Growth in Advisors
Capital Ratios Above Prior Guidance; Liquidity Levels Remain Strong
(BUSINESS WIRE)-- Bank of America Corporation today reported a net loss of $8.8 billion, or $0.90 per diluted share, for the second quarter of 2011, compared with net income of $3.1 billion, or $0.27 per diluted share, in the year-ago period. Excluding certain mortgage-related items and other selected items, net income was $3.7 billion1, or $0.33 per diluted share, in the second quarter of 2011.
Compared to the second quarter of 2010, results were driven by charges related to the recently announced agreement to resolve nearly all of the legacy Countrywide-issued first-lien non-GSE residential mortgage-backed securitization (RMBS) repurchase exposures, as well as the impact of other mortgage-related costs. These charges were partially offset by lower credit costs, gains from the sale of non-core assets and debt securities, improved sales and trading revenues and higher asset management fees and investment banking fees.
“Obviously, the solid performance in our underlying businesses continues to be clouded by the costs we are absorbing from our legacy mortgage issues," said Bank of America Chief Executive Officer Brian Moynihan. “But it is clear that – from deposits to wealth management to investment banking – our customers and clients are choosing to do more with us every day. We intend to continue our efforts to put the mortgage uncertainty behind us, build capital through the strength of the franchise, and deliver the returns for shareholders that we owe them.”
Making Progress on Operating Principles
During the second quarter of 2011, the company continued to make significant progress on its operating principles, including the following developments:
Customer-driven businesses
Bank of America extended approximately $147 billion in credit in the second quarter of 2011, according to preliminary data. This included $84 billion in commercial non-real estate loans, $40 billion in residential first mortgages, $11 billion in commercial real estate loans, $4 billion in U.S. consumer and small business card, $1 billion in home equity products and $7 billion in other consumer credit.
The $40 billion in residential first mortgages funded in the second quarter helped nearly 194,000 homeowners either purchase a home or refinance an existing mortgage. This included approximately 15,000 first-time homebuyer credit-qualified mortgages originated by retail channels, and more than 70,000 mortgages to low- and moderate-income borrowers. Approximately 52 percent of funded first mortgages were for home purchases and 48 percent were refinances.
Total average deposit balances were up $44 billion, or 4 percent, from the year-ago period and $13 billion, or 1 percent, from the first quarter of 2011 to $1.04 trillion.
The number of net new consumer and small business checking accounts was positive for the second consecutive quarter as the company continued to focus on quality sales and retention of customer relationships.
Bank of America continued to expand its service for small business owners in the second quarter of 2011 by hiring 92 locally-based small business bankers to provide convenient access to financial advice and solutions. This brings the number of small business bankers hired this year to 285. The company previously said it plans to hire more than 1,000 small business bankers by early 2012.
Referral volumes remained strong during the second quarter with referrals from Global Wealth and Investment Management to Global Commercial Banking up 75 percent from the prior quarter, and referrals from Global Commercial Banking to Global Wealth and Investment Management up 23 percent from the prior quarter. Referrals from Global Wealth and Investment Management to Global Banking and Markets were up 19 percent from the first quarter of 2011.
The number of Global Wealth and Investment Management client-facing associates increased for the eighth consecutive quarter, with the company adding 546 Financial Advisors in the quarter and 942 since the second quarter of 2010.
Global Banking and Markets reported record investment banking fees in the second quarter of 2011 of $1.6 billion, excluding self-led deals. This marks the highest investment banking fees since the acquisition of Merrill Lynch.
Creating a fortress balance sheet
The company continued to strengthen the balance sheet with risk-weighted assets declining $41 billion, and global excess liquidity increasing $16 billion from the end of the first quarter of 2011 to $402 billion at June 30, 2011.
Regulatory capital ratios finished above the company’s prior guidance with the Tier 1 common equity ratio at 8.23 percent at June 30, 2011 and the tangible common equity ratio3 at 5.87 percent at June 30, 2011. On June 29, the company estimated that the Tier 1 common ratio at the end of the second quarter of 2011 would be above 8 percent.
Pursuing operational excellence in efficiency and risk management
The provision for credit losses declined 60 percent from the year-ago quarter and net charge-offs fell for the fifth consecutive quarter, reflecting improved credit quality across most consumer and commercial portfolios and underwriting changes implemented over the last several years.
The allowance for loan and lease losses to annualized net charge-off coverage ratio increased in the second quarter of 2011 to 1.64 times, compared to 1.18 times in the second quarter of 2010 (1.28 times compared to 1.05 times excluding purchased credit-impaired loans).
Delivering on the shareholder return model
The company continued to focus on streamlining the balance sheet by selling non-core assets, addressing legacy issues, reducing debt and implementing its customer-focused strategy to position the company for long-term growth.
Tangible book value per share3 of $12.65 in the second quarter of 2011 was down from $13.21 in the first quarter of 2011 and up from $12.14 in the second quarter of 2010. Book value per share of $20.29 in the second quarter of 2011 was down from $21.15 in the first quarter of 2011 and $21.45 in the second quarter of 2010.
Continuing to clean up legacy issues
The company continued to make progress on its legacy mortgage issues during the second quarter, including an agreement to resolve nearly all of the legacy Countrywide-issued first-lien non-GSE RMBS repurchase exposures, representing 530 trusts with an original principal balance of $424 billion.
With the agreement and other mortgage-related actions taken in the second quarter of 2011, the company believes it has recorded reserves in its financial statements for a substantial portion of its representations and warranties exposure as measured by original principal balance.
The company also has updated the range of possible loss for the remainder of its exposure with respect to non-GSE investor representations and warranties provision and currently estimates that such range of possible loss could be up to $5 billion over accruals at the end of the second quarter of 2011.
Since the start of 2008, Bank of America and legacy Countrywide have completed more than 900,000 loan modifications with customers. During the second quarter, more than 69,000 loan modifications were completed, an 8 percent increase from the modifications completed in the first quarter of 2011.
1Excluding certain mortgage-related items and other selected items represents a non-GAAP measure. For reconciliation to GAAP net income and EPS, refer to page 15 of this press release.
2Other businesses include the results from All Other.
3Tangible common equity ratio and tangible book value per share of common stock are non-GAAP measures. Other companies may define or calculate these measures differently. For reconciliation to GAAP measures, refer to pages 25-26 of this press release.
To view the full report including tables please click here.
Contacts
Investors May Contact:
Kevin Stitt, Bank of America, 1.980.386.5667
Lee McEntire, Bank of America, 1.980.388.6780
Reporters May Contact:
Jerry Dubrowski, Bank of America, 1.980.388.2840
jerome.f.dubrowski@bankofamerica.com
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