Bank of America Reports Record 2006 Earnings of $21.13 Billion, or $4.59 Per Share
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Fourth quarter earnings were $5.26 billion or $1.16 per share 2006 EPS grew 14 percent Fourth quarter EPS up 32 percent Significant operating leverage drives results
CHARLOTTE, N.C., Jan. 23 /PRNewswire-FirstCall/ -- Bank of America Corporation today reported that 2006 net income rose 28 percent to $21.13 billion from $16.47 billion a year earlier, reflecting both the addition of MBNA at the start of the year and organic growth in most major customer segments.
Per share earnings increased 14 percent to $4.59 per diluted share from $4.04 per share last year. Return on average common equity for the year was 16.27 percent.
Excluding pre-tax merger and restructuring charges of $805 million, or 11 cents per share, Bank of America earned $21.64 billion, or $4.70 per share, for the full year 2006.
In the fourth quarter of 2006, net income was $5.26 billion, or $1.16 per diluted share, compared with $3.57 billion, or $0.88 per share, a year earlier. Excluding pre-tax merger and restructuring charges of $244 million, equal to 3 cents per share, earnings per share were $1.19. For the fourth quarter of 2005, pre-tax merger and restructuring charges were $59 million, or 1 cent per share.
The increase in 2006 earnings was driven by growth in card income, including the addition of MBNA, strong growth in capital markets and investment banking activities reflecting the company's recent investments in those areas, increased equity investment gains, growth in service charges paced by deposit account growth, higher other income and strong expense control. These improvements were partially offset by higher credit costs, again in part because of the addition of MBNA.
For the year, revenue on a fully taxable-equivalent basis increased 30 percent while expenses rose 24 percent. On a pro forma basis (adjusting for the inclusion of MBNA), revenue increased 10 percent while expenses were flat.
"Bank of America had another strong year in 2006," said Kenneth D. Lewis, chairman and chief executive officer. "We created opportunities for our customers and clients through improved service, product innovations such as the $0 Online Equity Trade program and Business 24/7(TM) for small businesses, new more convenient ATMs and excellent investment performance in our Columbia Funds. Our capital markets groups served more clients than ever before, increasing our market share in important product categories. In short, our associates are proving that when you combine listening to customers to understand their needs with our advantages of scale, innovation and execution, it creates a powerful value proposition that wins in the marketplace."
2006 Business Highlights
Revenue on a fully taxable-equivalent basis increased 34 percent to $18.82 billion from $14.05 billion in the fourth quarter of 2005. The previous year's results did not include MBNA.
Net interest income on a fully taxable-equivalent basis was $8.96 billion, compared with $8.10 billion a year earlier. Besides the addition of MBNA, the increase was driven by loan growth and increased benefits from asset and liability management activity, partially offset by lower core deposit levels. The net interest yield tightened 7 basis points to 2.75 percent.
Noninterest income rose 66 percent to $9.87 billion from $5.95 billion. Besides the addition of MBNA, which helped boost card income, these results were supported by equity investment gains, continued strength in service fee income and investment banking. The sale of Bank of America's Asia Commercial Banking unit resulted in a $165 million gain.
Sales of debt securities resulted in a $21 million gain in the fourth quarter of 2006 compared with a $71 million gain a year earlier.
The efficiency ratio on a fully taxable-equivalent basis for the fourth quarter of 2006 was 48.31 percent (47.02 percent before merger and restructuring charges) driven by continued positive operating leverage. Noninterest expense increased to $9.09 billion from $7.32 billion a year ago. Expenses increased primarily because of the addition of MBNA.
Pre-tax cost savings for the merger in the fourth quarter were approximately $450 million primarily because of personnel reductions, technology savings and marketing synergies.
Credit quality remained stable. Consumer credit costs rose in the fourth quarter from the third quarter of 2006 reflecting portfolio seasoning and the trend toward more normalized levels post-bankruptcy reform. Compared to the fourth quarter of 2005, consumer net charge-offs decreased primarily due to the impact of bankruptcy reform which accelerated charge-offs into 2005. Provision expense in the fourth quarter was higher than a year ago due to the addition of MBNA, partially offset by lower bankruptcy-related credit costs on the domestic consumer credit card portfolio.
Total shareholders' equity was $135.27 billion at December 31, 2006. Period-end assets were $1.5 trillion. The Tier 1 Capital Ratio increased to 8.64 percent from 8.48 percent at September 30, 2006 and 8.25 percent a year earlier. The issuance of $2.03 billion of non-cumulative preferred stock contributed to the increase during the fourth quarter.
During the quarter, Bank of America paid a cash dividend of $0.56 per share. Additionally, the company issued approximately 20 million common shares primarily related to employee stock options and ownership plans, and repurchased 60 million common shares. Period-ending common shares issued and outstanding were 4.46 billion for the fourth quarter of 2006, compared to 4.50 billion for the third quarter of 2006 and 4.00 billion for the fourth quarter of 2005.
Full-Year 2006 Financial Summary
Revenue on a fully taxable-equivalent basis increased 30 percent to $74.25 billion from $56.92 billion from the previous year.
Net interest income on a fully taxable-equivalent basis increased 13 percent to $35.82 billion from $31.57 billion in 2005. The increase was driven by the addition of MBNA, consumer and middle market business loan growth and increases in the benefits from asset liability management activity, partially offset by lower core deposit levels and higher trading-related earning assets. The net interest yield tightened 2 basis points to 2.82 percent.
Noninterest income increased 52 percent to $38.43 billion from $25.35 billion. These results were driven by higher card income, which included MBNA, equity investment gains, increases in investment banking income and trading account profits and an increase in other income related to the sale of the Brazil and Asia Commercial Banking businesses.
Losses on sales of debt securities were $443 million in 2006 compared to gains on sales of debt securities of $1.08 billion in 2005.
The efficiency ratio on a fully taxable-equivalent basis for 2006 was 47.94 percent (46.86 percent excluding merger and restructuring charges). Noninterest expense increased 24 percent to $35.60 billion from $28.68 billion a year ago primarily due to MBNA. Included in expenses for 2006 were $805 million in pre-tax merger and restructuring charges related to the MBNA merger. Full year 2006 cost savings from the merger with MBNA were approximately $1.25 billion, accelerating original projections.
Provision expense was $5.01 billion in 2006, a 25 percent increase from 2005. The increase in provision expense was driven by the addition of MBNA and 2005 commercial reserve releases, partially offset by lower bankruptcy- related credit costs on the domestic consumer credit card portfolio.
Net charge-offs totaled $4.54 billion, or 0.70 percent of average loans and leases, compared with $4.56 billion, or 0.85 percent of average loans and leases in 2005. The decrease in net charge-offs was due to the impact of bankruptcy reform which accelerated net charge-offs into 2005, partially offset by the addition of MBNA.
For 2006, Bank of America paid $9.64 billion in cash dividends to common shareholders. The company also issued 118.4 million common shares, primarily related to employee stock options and ownership plans, and repurchased 291.1 million common shares for $14.36 billion.
The company also issued 631 million shares of common stock associated with the acquisition of MBNA, resulting in a net increase of 458.4 million common shares outstanding for the year.
2006 Business Segment Results Global Consumer and Small Business Banking (Dollars in millions) YTD 2006 YTD 2005 Total Revenue (1) $41,691 $28,323 Provision for credit losses 5,172 4,243 Noninterest expense 18,830 13,124 Net Income 11,171 7,021 Efficiency ratio 45.17% 46.34% Return on average equity 17.70 23.73 Loans and leases (2) $192,072 $144,027 Deposits (2) 330,072 306,098 (1) Fully taxable-equivalent basis (2) Balances averaged for period
Net income rose 59 percent to $11.17 billion in 2006 and revenue grew 47 percent to $41.69 billion from the previous year. Results for 2005 did not include MBNA. Net income was driven by higher card income including the MBNA acquisition, higher net interest income, partially offset by higher provision expense primarily due to MBNA. On a pro forma basis (including MBNA's 2005 results), revenue increased 7 percent while net income increased 19 percent.
Sales of consumer financial products increased across-the-board, as the business leveraged its leading franchises in both banking centers and online capabilities. Franchise sales totaled 44 million units, a 7 percent increase compared to 2005, including record performance in checking, debit and online sales.
Average deposit balances increased by $23.97 billion, or 8 percent, driven by the addition of the MBNA deposit portfolio. On a pro forma basis, deposits decreased $3.21 billion in 2006 from a year earlier as the company continued to balance growth and profitability. As part of Bank of America's integrated offerings, customers also chose alternative instruments such as Columbia money market mutual funds.
E-Commerce reported sales of more than 7 million units in the year, driven by checking and credit card sales and supported by enhanced website design and a streamlined application process. Bankofamerica.com now has 21.3 million active users and 11.1 million active bill-payers.
Fourth quarter net income for Global Consumer and Small Business Banking rose 44 percent to $2.53 billion from the year earlier period. Revenue in the period increased 46 percent to $10.63 billion, driven primarily by higher credit card income, including the addition of MBNA, and service charges. On a pro forma basis, net income increased 16 percent during the period and revenue increased 8 percent.
Global Corporate and Investment Banking (Dollars in millions) YTD 2006 YTD 2005 Total Revenue (1) $22,691 $20,600 Provision for credit losses (6) (291) Noninterest expense 11,998 11,133 Net Income 6,792 6,384 Efficiency ratio 52.87% 54.04% Return on average equity 16.21 15.28 Loans and leases (2) $243,282 $214,818 Deposits (2) 205,652 189,860 Trading-related assets (2) 338,364 314,568 (1) Fully taxable-equivalent basis (2) Balances averaged for period
Net income increased 6 percent to $6.79 billion in 2006 compared with a year earlier impacted by the $885 million pre-tax gain from the sale of Bank of America's Brazil operations and its Asia Commercial Banking business. Revenue increased 10 percent to $22.69 billion as income from sales and trading, Treasury Services and investment banking increased. Excluding the impact of the Brazil and Asia transactions, revenue rose 6 percent to $21.17 billion from 2005 while net income declined less than 1 percent, including a lower provision benefit.
Capital Markets and Advisory Services benefited from strong sales and trading results and an increase in debt underwriting compared with a year earlier.
Global Corporate and Investment Banking's fourth quarter net income rose 23 percent to $1.57 billion from the same period a year earlier as income from sales and trading and investment banking increased, reflecting company investments in capital markets platforms and the sale of the Asia business. Revenue rose 9 percent in the quarter to $5.40 billion.
Global Wealth and Investment Management (Dollars in millions) YTD 2006 YTD 2005 Total Revenue (1) $7,779 $7,316 Provision for credit losses (40) (7) Noninterest expense 4,005 3,710 Net Income 2,403 2,316 Efficiency ratio 51.48% 50.72% Return on average equity 23.20 22.52 Loans and leases (2) $61,497 $54,102 Deposits (2) 115,071 117,338 (in billions) At 12/31/06 At 12/31/05 Assets under management $542.9 $482.3 (1) Fully taxable-equivalent basis (2) Balances averaged for period
Net income increased 4 percent to $2.40 billion compared with a year earlier. Revenue rose 6 percent, supported by 11 percent growth in asset management fees. Improved spreads on deposits and a 14 percent increase in average loan balances were largely offset by the impact of asset and liability management activity.
Assets Under Management grew $60.58 billion, or 13 percent in 2006, reflecting strong net inflows of $37.87 billion and market appreciation.
For the fourth quarter of 2006, Global Wealth and Investment Management net income declined 1 percent to $602 million from the previous year. Revenue increased 5 percent to $1.99 billion.
For 2006, All Other reflected $767 million of net income, compared with $744 million a year earlier. In 2005, All Other was negatively affected by the results of the asset liability management process, including the change in the value of derivatives used as economic hedges that did not qualify for SFAS 133. Equity Investment gains were $2.87 billion in 2006 compared with $1.96 billion in 2005 driven by increases in Principal Investing and Corporate and Strategic Investments. For the fourth quarter of 2006, All Other reflected $556 million of net income, compared with a net loss of $63 million for the same period in 2005. Equity Investment gains were $1.03 billion in the fourth quarter of 2006 compared with $493 million a year earlier.
Note: Ken Lewis, chairman and chief executive officer, and Joe Price, chief financial officer, will discuss fourth quarter and full-year 2006 results in a conference call at 9:30 a.m. (Eastern Time) today. The call and accompanying presentation can be accessed via a webcast available on the Bank of America Web site at http://www.bankofamerica.com/investor/.
Bank of America is one of the world's largest financial institutions, serving individual consumers, small and middle market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk-management products and services. The company provides unmatched convenience in the United States, serving more than 55 million consumer and small business relationships with more than 5,700 retail banking offices, through more than 17,000 ATMs and award-winning online banking with more than 21 million active users. Bank of America is the No. 1 overall Small Business Administration (SBA) lender in the United States and the No. 1 SBA lender to minority-owned small businesses. The company serves clients in 175 countries and has relationships with 98 percent of the U.S. Fortune 500 companies and 80 percent of the Global Fortune 500. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.
This press release contains forward-looking statements, including statements about the financial conditions, results of operations and earnings outlook of Bank of America Corporation. The forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results or earnings to differ materially from such forward-looking statements include, among others, the following: 1) projected business increases following process changes and other investments are lower than expected; 2) competitive pressure among financial services companies increases significantly; 3) general economic conditions are less favorable than expected; 4) political conditions including the threat of future terrorist activity and related actions by the United States abroad may adversely affect the company's businesses and economic conditions as a whole; 5) changes in the interest rate environment reduce interest margins and impact funding sources; 6) changes in foreign exchange rates increases exposure; 7) changes in market rates and prices may adversely impact the value of financial products; 8) legislation or regulatory environments, requirements or changes adversely affect the businesses in which the company is engaged; 9) litigation liabilities, including costs, expenses, settlements and judgments, may adversely affect the company or its businesses; and 10) decisions to downsize, sell or close units or otherwise change the business mix of any of the company. For further information regarding Bank of America Corporation, please read the Bank of America reports filed with the SEC and available at www.sec.gov.
Please consider the investment objectives, risks, charges and expenses of Columbia mutual funds carefully before investing. Contact your financial advisor for a prospectus which contains this and other important information about the fund. Read it carefully before you invest.
(1) Results shown are defined by Columbia Management's calculation of its percentage of assets under management in the top two quartiles of categories based on Morningstar (Equity categories), Lipper (Fixed Income categories) iMoneyNet (Money Market categories). The category percentile rank was calculated by ranking the three year gross return of share classes within the categories stated above. The assets of the number of funds within the top 2 quartile results were added and then divided by Columbia Managements total assets under management. Had fees been included, rankings would have been lower. Past performance is no guarantee of future results. The share class earning the ranking may have limited eligibility and may not be available to all investors.
Columbia Management is the primary investment management division of Bank of America Corporation. Columbia Management entities furnish investment management services and advise institutional and mutual fund portfolios. Columbia Funds are distributed by Columbia Management Distributors, Inc., member NASD, SIPC. Columbia Management Distributors, Inc. is part of Columbia Management and an affiliate of Bank of America Corporation.
www.bankofamerica.com Bank of America Selected Financial Data (1) Three Months Ended Year Ended December 31 December 31 2006 2005 2006 2005 (Dollars in millions, except per share data; shares in thousands) Financial Summary Earnings $5,256 $3,574 $21,133 $16,465 Earnings per common share 1.17 0.89 4.66 4.10 Diluted earnings per common share 1.16 0.88 4.59 4.04 Dividends paid per common share 0.56 0.50 2.12 1.90 Closing market price per common share 53.39 46.15 53.39 46.15 Average common shares issued and outstanding 4,464,110 3,996,024 4,526,637 4,008,688 Average diluted common shares issued and outstanding 4,536,696 4,053,859 4,595,896 4,068,140 Summary Income Statement Net interest income $8,599 $7,859 $34,591 $30,737 Total noninterest income 9,866 5,951 38,432 25,354 Total revenue 18,465 13,810 73,023 56,091 Provision for credit losses 1,570 1,400 5,010 4,014 Gains (losses) on sales of debt securities 21 71 (443) 1,084 Other noninterest expense 8,849 7,261 34,792 28,269 Merger and restructuring charges 244 59 805 412 Income before income taxes 7,823 5,161 31,973 24,480 Income tax expense 2,567 1,587 10,840 8,015 Net income $5,256 $3,574 $21,133 $16,465 Summary Average Balance Sheet Total loans and leases $683,598 $563,589 $652,417 $537,218 Securities 193,601 221,411 225,219 219,843 Total earning assets 1,299,461 1,145,550 1,269,144 1,111,994 Total assets 1,495,150 1,305,057 1,466,681 1,269,892 Total deposits 680,245 628,922 672,995 632,432 Shareholders' equity 134,047 99,948 130,463 99,861 Common shareholders' equity 132,004 99,677 129,773 99,590 Performance Ratios Return on average assets 1.39% 1.09% 1.44% 1.30% Return on average common shareholders' equity 15.76 14.21 16.27 16.51 Credit Quality Net charge-offs $1,417 $1,648 $4,539 $4,562 Annualized net charge-offs as a % of average loans and leases outstanding 0.82% 1.16% 0.70% 0.85% Managed credit card net losses as a % of average managed credit card receivables 4.56 9.49 3.90 6.92 December 31 2006 2005 Balance Sheet Highlights Loans and leases $706,490 $573,791 Total securities 192,846 221,603 Total earning assets 1,257,274 1,133,234 Total assets 1,459,737 1,291,803 Total deposits 693,497 634,670 Total shareholders' equity 135,272 101,533 Common shareholders' equity 132,421 101,262 Book value per share 29.70 25.32 Tangible equity ratio (2) 4.35 % 4.26 % Risk-based capital ratios: Tier 1 8.64 * 8.25 Total 11.88 * 11.08 Leverage ratio 6.36 * 5.91 Period-end common shares issued and outstanding 4,458,151 3,999,688 Allowance for credit losses: Allowance for loan and lease losses $9,016 $8,045 Reserve for unfunded lending commitments 397 395 Total $9,413 $8,440 Allowance for loan and lease losses as a % of total loans and leases 1.28 % 1.40 % Allowance for loan and lease losses as a % of total nonperforming loans and leases 505 532 Total nonperforming loans and leases $1,787 $1,511 Total nonperforming assets 1,856 1,603 Nonperforming assets as a % of: Total assets 0.13 % 0.12 % Total loans, leases and foreclosed properties 0.26 0.28 Nonperforming loans and leases as a % of total loans and leases 0.25 0.26 Other Data Full-time equivalent employees 203,425 176,934 Number of banking centers - domestic 5,747 5,873 Number of branded ATMs - domestic 17,079 16,785 * Preliminary data Information for periods beginning January 1, 2006 includes the MBNA acquisition; prior periods have not been restated. BUSINESS SEGMENT RESULTS Global Global Global Consumer Corporate Wealth and Small and and Business Investment Investment All Banking Banking Management Other Three Months Ended December 31, 2006 Total revenue (FTE) (3) $10,629 $5,398 $1,988 $806 Net income 2,527 1,571 602 556 Shareholder value added 1,192 484 331 177 Return on average equity 16.27 % 15.33 % 22.80 % n/m Average loans and leases $200,063 $246,608 $64,465 $172,462 Three Months Ended December 31, 2005 Total revenue (FTE) (3) $7,295 $4,958 $1,891 $(91) Net income 1,749 1,282 606 (63) Shareholder value added 1,009 152 322 (437) Return on average equity 22.05 % 11.99 % 21.97 % n/m Average loans and leases $149,251 $228,999 $57,187 $128,152 Year Ended December 31, 2006 Total revenue (FTE) (3) $41,691 $22,691 $7,779 $2,086 Net income 11,171 6,792 2,403 767 Shareholder value added 5,738 2,349 1,340 (306) Return on average equity 17.70 % 16.21 % 23.20 % n/m Average loans and leases $192,072 $243,282 $61,497 $155,566 Year Ended December 31, 2005 Total revenue (FTE) (3) $28,323 $20,600 $7,316 $684 Net income 7,021 6,384 2,316 744 Shareholder value added 4,318 1,966 1,263 (953) Return on average equity 23.73 % 15.28 % 22.52 % n/m Average loans and leases $144,027 $214,818 $54,102 $124,271 n/m = not meaningful Three Months Ended Year Ended December 31 December 31 2006 2005 2006 2005 SUPPLEMENTAL FINANCIAL DATA Fully taxable-equivalent basis data (3) Net interest income $8,955 $8,102 $35,815 $31,569 Total revenue 18,821 14,053 74,247 56,923 Net interest yield 2.75 % 2.82 % 2.82 % 2.84 % Efficiency ratio 48.31 52.09 47.94 50.38 Reconciliation of net income to operating earnings Net income $5,256 $3,574 $21,133 $16,465 Merger and restructuring charges 244 59 805 412 Related income tax benefit (90) (19) (298) (137) Operating earnings $5,410 $3,614 $21,640 $16,740 Reconciliation of average shareholders' equity to average tangible shareholders' equity Average shareholders' equity $134,047 $99,948 $130,463 $99,861 Average goodwill (65,766) (45,305) (66,040) (45,331) Average tangible shareholders' equity $68,281 $54,643 $64,423 $54,530 Operating Basis Diluted earnings per common share $1.19 $0.89 $4.70 $4.11 Return on average assets 1.44 % 1.10 % 1.48 % 1.32 % Return on average common shareholders' equity 16.22 14.36 16.66 16.79 Return on average tangible shareholders' equity 31.44 26.23 33.59 30.70 Efficiency ratio (FTE) (3) 47.02 51.66 46.86 49.66 Reconciliation of net income to shareholder value added Net income $5,256 $3,574 $21,133 $16,465 Amortization of intangibles 433 196 1,755 809 Merger and restructuring charges, net of tax benefit 154 40 507 275 Capital charge (3,659) (2,764) (14,274) (10,955) Shareholder value added $2,184 $1,046 $9,121 $6,594 (1) Certain prior period amounts have been reclassified to conform to current period presentation. (2) Tangible equity ratio equals shareholders' equity less goodwill and intangible assets divided by total assets less goodwill and intangible assets. (3) Fully taxable-equivalent (FTE) basis is a performance measure used by management in operating the business that management believes provides investors with a more accurate picture of the interest margin for comparative purposes. Information for periods beginning January 1, 2006 includes the MBNA acquisition; prior periods have not been restated.
SOURCE: Bank of America
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