Bank of America Reports Third-quarter 2015 Net Income of $4.5 Billion, or $0.37 per Diluted Share

2015 Year-to-date Net Income of $13.2 Billion, or $1.09 per Diluted Share

Continued Business Momentum

  • Total Deposits (EOP) up $50 Billion, or 4 Percent, to $1.16 Trillion
  • Residential Mortgage and Home Equity Loan Originations up 13 Percent to $17 Billion
  • 1.3 Million New Credit Cards Issued, up 5 Percent
  • Number of Mobile Banking Users up 14 Percent to 18.4 Million
  • Merrill Edge Brokerage Assets up 8 Percent to $117 Billion
  • Wealth Management Loan Balances (EOP) up $12 Billion, or 10 Percent, to $135 Billion
  • Global Banking Loan Balances (EOP) up $30 Billion, or 11 Percent, to $315 Billion
  • Investment Bank Generated $391 Million in Advisory Fees, Second-Highest Quarter Since Merrill Lynch Merger

Continued Progress on Expense Management; Credit Quality Remains Strong

  • Noninterest Expense, Excluding Litigation, Down 4 Percent to $13.6 Billion(A)
  • Legacy Assets and Servicing Noninterest Expense, Excluding Litigation, Down 32 Percent to $0.9 Billion(B)
  • Net Charge-offs Down 11 Percent to $932 Million

Record Capital and Liquidity Levels

  • Common Equity Tier 1 Capital (Transition) Increased to $161.6 Billion
  • Common Equity Tier 1 Capital (Fully Phased-in) Increased to Record $153.1 Billion(C)
  • Record Global Excess Liquidity Sources up $70 Billion to $499 Billion; Time-to-required Funding at 42 Months(D)
  • Tangible Book Value per Share up 10 Percent to $15.50 per Share(E)
  • Book Value per Share up 7 Percent to $22.41 per Share
  • Return on Average Assets 0.82 Percent; Return on Average Tangible Common Equity 10 Percent; Return on Average Common Equity 6.97 Percent(F)
  • Returned $3.1 Billion to Common Shareholders Year-to-Date Via Repurchases and Dividends

Note: Dollar and percent changes above compare to third-quarter 2014 unless noted.

CHARLOTTE, N.C.–(BUSINESS WIRE)–Bank of America Corporation today reported net income of $4.5 billion, or $0.37 per diluted share, for the third quarter of 2015, compared to a net loss of $232 million, or $0.04 per share, in the year-ago period.

“We built capital and liquidity to record levels and grew total loans for the second consecutive quarter while continuing to operate within our risk framework.”

“We saw solid results this quarter by continuing to execute our long-term strategy,” said Chief Executive Officer Brian Moynihan. “The key drivers of our business — deposit taking and lending to both our consumer and corporate clients — moved in the right direction this quarter and our trading results on behalf of clients remained fairly stable in challenging capital markets conditions. Our balanced approach to serving customers and clients is on track as the economy continues to move forward.”

“Our results this quarter reflect our ongoing efforts to improve operating leverage while continuing to invest in our business,” said Chief Financial Officer Paul Donofrio. “We built capital and liquidity to record levels and grew total loans for the second consecutive quarter while continuing to operate within our risk framework.”

Selected Financial Highlights

Three Months Ended
(Dollars in millions, except per share data) September 30
2015
June 30
2015
September 30
2014
Net interest income, FTE basis1 $ 9,742 $ 10,716 $ 10,444
Noninterest income 11,171 11,629 10,990
Total revenue, net of interest expense, FTE basis1 20,913 22,345 21,434
Provision for credit losses 806 780 636
Noninterest expense2 13,807 13,818 20,142
Net income (loss) $ 4,508 $ 5,320 $ (232)
Diluted earnings (loss) per common share $ 0.37 $ 0.45 $ (0.04)

1 Fully taxable-equivalent (FTE) basis for the corporation is a non-GAAP financial measure. For more information, see endnote G. Net interest income on a GAAP basis was $9.5 billion, $10.5 billion and $10.2 billion for the three months ended September 30, 2015, June 30, 2015 and September 30, 2014, respectively. Total revenue, net of interest expense, on a GAAP basis was $20.7 billion, $22.1 billion and $21.2 billion for the three months ended September 30, 2015, June 30, 2015 and September 30, 2014, respectively.
2 Noninterest expense includes litigation expense of $231 million, $175 million and $6.0 billion for the three months ended September 30, 2015, June 30, 2015 and September 30, 2014, respectively.

Revenue, net of interest expense, on an FTE basis, was $20.9 billion(G), down $521 million from the third quarter of 2014. This was largely driven by higher negative market-related adjustments on the company’s debt securities portfolio due to lower long-term interest rates, partially offset by higher positive net debit valuation adjustments (DVA), compared to the year-ago quarter. The current quarter included $597 million in negative market-related adjustments and $313 million in positive net DVA.

Net interest income, on an FTE basis, was $9.7 billion in the third quarter of 2015, down 7 percent, or $702 million, from the year-ago quarter. Excluding the impact of market-related adjustments, net interest income was $10.3 billion in the third quarter of 2015, compared to $10.0 billion in the prior quarter and $10.5 billion in the year-ago quarter(G). The decline from the third quarter of 2014 was driven by lower consumer loan balances and lower yields, partially offset by commercial loan growth and lower long-term debt balances.

Noninterest income was up 2 percent, or $181 million, from the year-ago quarter to $11.2 billion. Results for the most recent quarter reflected year-over-year increases in mortgage banking and card income, higher asset management fees and other income, partially offset by lower capital markets revenue and lower equity investment income.

The provision for credit losses increased $170 million from the third quarter of 2014 to $806 million. Net charge-offs were $932 million in the third quarter of 2015, compared to $1.1 billion in the second quarter of 2015 and $1.0 billion in the third quarter of 2014. The net charge-off ratio improved to 0.42 percent in the third quarter of 2015 from 0.46 percent in the year-ago quarter. The decline in net charge-offs was driven primarily by an improvement in consumer portfolio trends, partially offset by higher commercial charge-offs. The net reserve release was $126 million in the third quarter of 2015, compared to a net reserve release of $407 million in the third quarter of 2014.

Noninterest expense declined $6.3 billion, or 31 percent, from the third quarter of 2014 to $13.8 billion. Excluding litigation expense of $231 million in the third quarter of 2015 and $6.0 billion in the year-ago quarter, noninterest expense decreased 4 percent from the year-ago quarter to $13.6 billion, reflecting lower Legacy Assets and Servicing (LAS) expense(A). Continued cost management efforts allowed the company to continue to invest in growth opportunities while keeping expenses relatively flat from the prior quarter.

The effective tax rate for the third quarter of 2015 was 26 percent, which included benefits related to the restructuring of certain non-U.S. subsidiaries.

Business Segment Results

The company reports results through five business segments: Consumer Banking, Global Wealth and Investment Management (GWIM), Global Banking, Global Markets, and Legacy Assets and Servicing (LAS), with the remaining operations recorded in All Other.

Consumer Banking

Three Months Ended
(Dollars in millions) September 30
2015
June 30
2015
September 30
2014
Total revenue, net of interest expense, FTE basis $ 7,832 $ 7,544 $ 7,749
Provision for credit losses 648 506 668
Noninterest expense 4,434 4,318 4,462
Net income $ 1,759 $ 1,706 $ 1,669
Return on average allocated capital1 24 % 24 % 22 %
Average loans $ 206,337 $ 201,703 $ 197,374
Average deposits 548,895 545,454 514,549
At period-end
Brokerage assets $ 117,210 $ 121,961 $ 108,533

1 Return on average allocated capital is a non-GAAP financial measure. The company believes the use of this non-GAAP financial measure provides additional clarity in assessing the results of the segments. Other companies may define or calculate this measure differently. For reconciliation to GAAP financial measures, refer to pages 22-24 of this press release.

Business Highlights

  • Average deposit balances increased $34.3 billion, or 7 percent, from the year-ago quarter to $548.9 billion.
  • The company originated $13.7 billion in first-lien residential mortgage loans and $3.1 billion in home equity loans in the third quarter of 2015, compared to $11.7 billion and $3.2 billion, respectively, in the year-ago quarter.
  • Client brokerage assets increased $8.7 billion, or 8 percent, from the year-ago quarter to $117.2 billion, driven primarily by strong account flows, partially offset by lower market valuations.
  • The company issued 1.3 million new consumer credit cards in the third quarter of 2015, up from 1.2 million cards issued in the year-ago quarter.

Financial Overview

Consumer Banking reported net income of $1.8 billion, up 5 percent from the year-ago quarter. The business saw increased customer activity during the quarter with year-over-year increases in deposits, mortgage originations, credit card issuance and brokerage assets. In addition, the number of mobile banking users increased 14 percent from the year-ago quarter to 18.4 million users.

Revenue was up 1 percent from the third quarter of 2014 to $7.8 billion, as higher noninterest income was largely offset by lower net interest income. Net interest income declined as the benefit from higher deposits was more than offset by the impact of the company’s allocation of asset liability management (ALM) activities and lower card yields. Noninterest income was up 6 percent to $2.8 billion, driven by gains on divestitures and higher card income, partially offset by lower service charges.

The provision for credit losses decreased $20 million from the year-ago quarter to $648 million, driven by continued improvement in credit quality, primarily related to the small business and credit card portfolios.

Noninterest expense decreased 1 percent from the third quarter of 2014 to $4.4 billion, as the company continued to optimize its delivery network and invest some of the savings from these initiatives back into the business by adding sales specialists. Over the last 12 months, the company has added more than 300 mortgage loan officers, financial solutions advisors and small business bankers to help serve customers and deepen relationships.

Driven by the continued growth in mobile banking and other self-service customer touchpoints, the company closed or divested 244 locations and added 38 locations since the third quarter of 2014, resulting in a total of 4,741 financial centers at the end of the third quarter of 2015.

Return on average allocated capital was 24 percent in the third quarter of 2015, compared to 22 percent in the third quarter of 2014.

Global Wealth and Investment Management (GWIM)

Three Months Ended
(Dollars in millions) September 30
2015
June 30
2015
September 30
2014
Total revenue, net of interest expense, FTE basis $ 4,468 $ 4,573 $ 4,666
Provision for credit losses (2 ) 15 (15 )
Noninterest expense 3,447 3,459 3,405
Net income $ 656 $ 689 $ 812
Return on average allocated capital1 22 % 23 % 27 %
Average loans and leases $ 133,168 $ 130,270 $ 121,002
Average deposits 243,980 239,974 239,352
At period-end (dollars in billions)
Assets under management $ 877 $ 930 $ 888
Total client balances2 2,396 2,522 2,462

1 Return on average allocated capital is a non-GAAP financial measure. The company believes the use of this non-GAAP financial measure provides additional clarity in assessing the results of the segments. Other companies may define or calculate this measure differently. For reconciliation to GAAP financial measures, refer to pages 22-24 of this press release.
2 Total client balances are defined as assets under management, client brokerage assets, assets in custody, client deposits and loans (including margin receivables).

Business Highlights

  • The number of wealth advisors increased by 998 advisors from the year-ago quarter to 18,037, due to continued investment within the Advisor Development program, improved competitive recruiting and near historically low advisor attrition levels. This increase includes 174 advisors in Consumer Banking as the company continues to expand its specialist network to broaden and deepen client relationships.
  • Third-quarter 2015 long-term assets under management (AUM) flows of $4.4 billion were the 25th consecutive quarter of positive flows.
  • Average deposit balances increased 2 percent, or $4.6 billion, from the year-ago quarter to $244.0 billion, and average loan balances increased 10 percent from the year-ago quarter to $133.2 billion, marking the 22nd consecutive quarter of loan balance growth.
  • Asset management fees increased 2 percent from the third quarter of 2014 to $2.1 billion.

Financial Overview

Global Wealth and Investment Management reported net income of $656 million, compared to $812 million in the third quarter of 2014. Revenue was down $198 million to $4.5 billion, as higher asset management fees were more than offset by lower transactional revenue and the impact of the company’s allocation of ALM activities on net interest income. This is the continuation of a trend in transactional revenue as clients continue to migrate from brokerage to managed relationships, compounded by lower markets and muted new issue activity.

The third-quarter 2015 pretax margin was 23 percent, down from 27 percent in the year-ago quarter.

Noninterest expense increased slightly from the year-ago quarter to $3.4 billion, as litigation-related costs were higher and the number of wealth advisors grew by 6 percent from the year-ago quarter.

The benefit in the provision for credit losses decreased $13 million from the year-ago quarter to a benefit of $2 million, driven by higher recoveries recorded in the year-ago quarter.

Return on average allocated capital was 22 percent in the third quarter of 2015, compared to 27 percent in the year-ago quarter.

Global Banking

Three Months Ended
(Dollars in millions) September 30
2015
June 30
2015
September 30
2014
Total revenue, net of interest expense, FTE basis $ 4,191 $ 4,106 $ 4,345
Provision for credit losses 179 177 (64)
Noninterest expense 2,020 1,932 2,016
Net income $ 1,277 $ 1,251 $ 1,521
Return on average allocated capital1 14 % 14 % 18 %
Average loans and leases $ 310,043 $ 300,631 $ 283,264
Average deposits 296,321 288,117 291,927

1 Return on average allocated capital is a non-GAAP financial measure. The company believes the use of this non-GAAP financial measure provides additional clarity in assessing the results of the segments. Other companies may define or calculate this measure differently. For reconciliation to GAAP financial measures, refer to pages 22-24 of this press release.

Business Highlights

  • Bank of America Merrill Lynch generated firmwide investment banking fees of $1.3 billion, excluding self-led deals, in the third quarter of 2015, maintaining its No. 3 global ranking(H).
  • Bank of America Merrill Lynch was ranked among the top three global financial institutions in high-yield corporate debt, leveraged loans, mortgage-backed securities, asset-backed securities, convertible debt, investment grade corporate debt, syndicated loans, and debt capital markets during the third quarter of 2015(H).
  • Firmwide advisory fees of $391 million were the second-highest results since the Merrill Lynch merger.
  • Average loan and lease balances increased $26.8 billion, or 9 percent, from the year-ago quarter, to $310 billion, largely due to growth in the commercial and industrial loan portfolio and in the commercial real estate portfolio.

Financial Overview

Global Banking reported net income of $1.3 billion in the third quarter of 2015, compared to $1.5 billion in the third quarter of 2014, as strong loan and deposit growth and higher advisory fees were offset by lower net interest income and lower underwriting fees in line with lower industry volumes.

Net interest income was down $105 million, reflecting the impact of the company’s allocation of ALM activities and liquidity costs, as well as compression in loan spreads. This was offset in part by loan growth. Firmwide investment banking fees, excluding self-led deals, decreased to $1.3 billion in the third quarter from the year-ago quarter of $1.4 billion, with higher advisory fees more than offset by a decline in equity issuance fees.

The return on average allocated capital was 14 percent in the third quarter of 2015, compared to 18 percent in the year-ago quarter.

The provision for credit losses increased $243 million from the year-ago quarter to $179 million, associated with higher loan balances and higher reserve releases in the prior year. Noninterest expense was relatively unchanged from the year-ago quarter at $2.0 billion.

Global Markets

Three Months Ended
(Dollars in millions) September 30
2015
June 30
2015
September 30
2014
Total revenue, net of interest expense, FTE basis $ 4,071 $ 4,267 $ 4,161

Total revenue, net of interest expense, FTE basis, excluding net DVA1

3,758 4,165 3,956
Provision for credit losses 42 6 45
Noninterest expense 2,683 2,732 3,357
Net income $ 1,008 $ 992 $ 371
Return on average allocated capital2 11 % 11 % 4 %
Total average assets $ 597,103 $ 602,735 $ 599,977

1 Represents a non-GAAP financial measure. Net DVA gains were $313 million, $102 million and $205 million for the three months ended September 30, 2015, June 30, 2015 and September 30, 2014, respectively.
2 Return on average allocated capital is a non-GAAP financial measure. The company believes the use of this non-GAAP financial measure provides additional clarity in assessing the results of the segments. Other companies may define or calculate this measure differently. For reconciliation to GAAP financial measures, refer to pages 22-24 of this press release.

Business Highlights

  • Equities sales and trading revenue, excluding net DVA, increased 12 percent from the year-ago quarter to $1.2 billion, driven by a strong performance in derivatives, reflecting favorable market conditions(I).
  • Bank of America Merrill Lynch’s U.S. Equity Research Team was ranked No. 1 in the 2015 All-America Institutional Investor survey.

Financial Overview

Global Markets reported net income of $1.0 billion in the third quarter of 2015, compared to $371 million in the year-ago quarter, as lower noninterest expense, principally litigation, was partially offset by lower Fixed Income, Currencies and Commodities (FICC) sales and trading revenues.

Revenue decreased $90 million, or 2 percent, from the year-ago quarter to $4.1 billion. Excluding net DVA, revenue decreased $198 million, or 5 percent, to $3.8 billion(J). Net DVA gains were $313 million, compared to $205 million in the year-ago quarter.

Sales and trading revenue was relatively unchanged from the year-ago quarter at $3.5 billion. Excluding net DVA, sales and trading revenue was down 4 percent from the third quarter of 2014 to $3.2 billion as higher equities sales and trading revenue was more than offset by lower FICC sales and trading revenue(I).

Fixed Income, Currencies and Commodities sales and trading revenue, excluding net DVA, decreased 11 percent from the year-ago quarter, due to declines in credit-related businesses, offset in part by improvement in rates products(I). Equities sales and trading revenue, excluding net DVA, increased 12 percent from the year-ago quarter, led by a strong performance in derivatives, reflecting favorable market conditions(I).

Noninterest expense of $2.7 billion decreased $674 million from the year-ago quarter, driven by lower litigation expense. The year-ago quarter included approximately $600 million in litigation expense, the majority of which was non-deductible for tax purposes. Excluding litigation, noninterest expense declined 4 percent, driven by lower revenue-related expenses(K).

Return on average allocated capital was 11 percent in the third quarter of 2015.

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