2004 Annual Report: Financial Review: Management's Discussion and Analysis: Credit Risk Management

Credit Risk Management

Credit risk is the risk of loss arising from a borrower’s or counterparty’s inability to meet its obligations. Credit risk exists in our outstanding loans and leases, derivatives, trading account assets and unfunded lending commitments that include loan commitments, letters of credit and financial guarantees. We define the credit exposure to a borrower or counterparty as the loss potential arising from all product classifications, including loans and leases, standby letters of credit and financial guarantees, derivative and trading account assets, assets held-for-sale and commercial letters of credit. For derivative positions, we use the current mark-to-market value to represent credit exposure without giving consideration to future mark-to-market changes. Our consumer and commercial credit extension and review procedures take into account credit exposures that are both funded and unfunded. For additional information on derivatives and credit extension commitments, see Note 4 and Note 12 of the Consolidated Financial Statements.

We manage credit risk based on the risk profile of the borrower or counterparty, repayment sources, the nature of underlying collateral, and other support given current events and conditions. We classify our Loans and Leases as either consumer or commercial and monitor their credit risk separately as discussed below.

Consumer Portfolio Credit Risk Management

Credit risk management for the consumer portfolio begins with initial underwriting and continues throughout a borrower’s credit cycle. Statistical techniques are used to establish product pricing, risk appetite, operating processes and metrics to balance risks and rewards. Consumer exposure is grouped by product and other attributes for purposes of evaluating credit risk. Statistical models are built using detailed behavioral information from external sources such as credit bureaus as well as internal historical experience. These models are essential to our consumer credit risk management process and are used, where applicable, in the determination of credit decisions, collections management procedures, portfolio management decisions, determination of the allowance for consumer loan and lease losses, and economic capital allocation for credit risk.

Table 9 presents outstanding consumer loans and leases for each year in the five-year period ending at December 31, 2004.

Table 9

Outstanding Consumer Loans and Leases

	December 31, 2004 Amount	December 31, 2004 Percent		December 31, 2003 Amount	December 31, 2003 Percent		December 31, 2002 Amount	December 31, 2002 Percent		December 31, 2001 Amount	December 31, 2001 Percent		December 31, 2000 Amount	December 31, 2000 Percent		FleetBoston: April 1, 2004 Amount	FleetBoston: April 1, 2004 Percent
	December 31															FleetBoston April 1, 2004
	2004			2003			2002			2001			2000
(Dollars in millions)	Amount	Percent		Amount	Percent		Amount	Percent		Amount	Percent		Amount	Percent		Amount	Percent
Residential mortgage	$178,103	54.3%percent		$140,513	58.5%percent		$108,197	54.8%percent		$ 78,203	47.3%percent		$ 84,394	44.7%percent		$34,571	55.2%percent
Credit card	51,726	15.8		34,814	14.5		24,729	12.5		19,884	12.0		14,094	7.5		6,848	10.9
Home equity lines	50,126	15.3		23,859	9.9		23,236	11.8		22,107	13.4		21,598	11.5		13,799	22.1
Direct/Indirect consumer	40,513	12.3		33,415	13.9		31,068	15.7		30,317	18.4		29,859	15.8		6,113	9.8
Other consumer (1)	7,439	2.3		7,558	3.2		10,355	5.2		14,744	8.9		38,706	20.5		1,272	2.0
Total consumer loans and leases	$327,907	100.0%percent		$240,159	100.0%percent		$197,585	100.0%percent		$165,255	100.0%percent		$188,651	100.0%percent		$62,603	100.0%percent
(1) Includes consumer finance of $3,395, $3,905, $4,438, $5,331 and $25,799 at December 31, 2004, 2003, 2002, 2001 and 2000, respectively; foreign consumer of $3,563, $1,969, $1,970, $2,092 and $2,308 at December 31, 2004, 2003, 2002, 2001 and 2000, respectively; and consumer lease financing of $481, $1,684, $3,947, $7,321 and $10,599 at December 31, 2004, 2003, 2002, 2001 and 2000, respectively.

Concentrations of Consumer Credit Risk

Our consumer credit risk is diversified through our geographic span, diversity of our franchise and our product offerings. In addition, credit decisions are statistically based with tolerances set to decrease the percentage of approvals as the risk profile increases.

We purchase credit protection on certain portions of our consumer portfolio. Beginning in 2003, we entered into several transactions to purchase credit protection on a portion of our residential mortgage loan portfolio. These transactions are designed to enhance our overall risk management strategy. In 2004, we entered into a similar transaction for a portion of our indirect automobile loan portfolio. At December 31, 2004 and 2003, approximately $88.7 billion and $63.4 billion of residential mortgage and indirect automobile loans were credit protected. Our regulatory risk-weighted assets were reduced as a result of these transactions because we transferred a portion of our credit risk to unaffiliated parties. These transactions had the cumulative effect of reducing our risk-weighted assets by $25.5 billion and $18.6 billion at December 31, 2004 and 2003, respectively, and resulted in 26 bp increases in our Tier 1 Capital ratio at both December 31, 2004 and 2003.

Consumer Portfolio Credit Quality Performance

Credit card charge-offs increased in 2004 as a result of organic card portfolio growth, continued seasoning of accounts and the return of previously securitized loans to the balance sheet. Consumer credit quality remained strong in all other categories.

As presented in Table 10, nonperforming consumer loans and leases increased $100 million to $738 million, and represented 0.23 percent of consumer loans and leases at December 31, 2004 compared to $638 million, representing 0.27 percent of consumer loans and leases at December 31, 2003. The increase in nonperforming consumer loans and leases was driven by loan growth and the addition of $127 million of nonperforming consumer loans and leases on April 1,2004 related to FleetBoston, partially offset by consumer loan sales of $95 million. Broad-based growth in the consumer portfolio more than offset the increase in consumer nonperforming assets, resulting in an improvement in the nonperforming ratios.

Table 10

Nonperforming Consumer Assets (1)

	December 31, 2004		December 31, 2003		December 31, 2002		December 31, 2001		December 31, 2000		FleetBoston: April 1, 2004
	December 31										FleetBoston April 1, 2004
(Dollars in millions)	2004		2003		2002		2001		2000
Nonperforming consumer loans and leases
Residential mortgage	$554		$531		$612		$  556		$  551		$ 55
Home equity lines	66		43		66		80		32		13
Direct/Indirect consumer	33		28		30		27		19		10
Other consumer	85		36		25		16		1,104		49
Total nonperforming consumer loans and leases	738		638		733		679		1,706		127
Consumer foreclosed properties	69		81		99		334		182		-
Total nonperforming consumer assets (2)	$807		$719		$832		$1,013		$1,888		$127
Nonperforming consumer loans and leases as a percentage of   outstanding consumer loans and leases	0.23%percent		0.27%percent		0.37%percent		0.41%percent		0.90%		0.20%percent
Nonperforming consumer assets as a percentage of   outstanding consumer loans, leases and foreclosed properties	0.25		0.30		0.42		0.61		1.00		0.20
(1) In 2004, $40 in Interest Income was estimated to be contractually due on nonperforming consumer loans and leases. (2) Balances do not include $28, $16, $41, $646 and $0 of nonperforming consumer loans held-for-sale, included in Other Assets at December 31, 2004, 2003, 2002, 2001 and 2000, respectively.

Credit card loans are charged off at 180 days past due or 60 days from notification of bankruptcy filing and are not classified as nonperforming. Unsecured consumer loans and deficiencies in non-real estate secured loans and leases are charged off at 120 days past due and not classified as nonperforming. Real estate secured consumer loans are placed on nonaccrual and classified as nonperforming at 90 days past due. The amount deemed uncollectible on real estate secured loans is charged off at 180 days past due.

Table 11 presents the additions and reductions to nonperforming assets in the consumer portfolio during 2004 and 2003.

Table 11

Nonperforming Consumer Assets Activity

(Dollars in millions)	2004	2003
Nonperforming loans and leases, and foreclosed properties
Balance, January 1	$  719	$  832
Additions to nonperforming assets:
FleetBoston balance, April 1, 2004	127	-
New nonaccrual loans and leases, and foreclosed properties	1,476	1,583
Transfers from assets held-for-sale (1)	1	5
Total additions	1,604	1,588
Reductions in nonperforming assets:
Paydowns and payoffs	(376)	(447)
Sales	(219)	(265)
Returns to performing status (2)	(793)	(878)
Charge-offs (3)	(128)	(111)
Total reductions	(1,516)	(1,701)
Total net additions to (reductions in) nonperforming assets	88	(113)
Nonperforming consumer assets, December 31	$  807	$  719
(1) Includes assets held-for-sale that were foreclosed and transferred to foreclosed properties. (2) Consumer loans are generally returned to performing status when principal or interest is less than 90 days past due. (3) Consumer credit card and consumer non-real estate loans and leases are not classified as nonperforming; therefore, the charge-offs on these loans are not included above.

On-balance sheet consumer loans and leases past due 90 days or more and still accruing interest totaled $1.2 billion at December 31, 2004. This amount included $1.1 billion of credit card loans. When the FleetBoston portfolio was acquired on April 1, 2004, it included consumer loans and leases past due 90 days or more and still accruing interest of $116 million including credit card loans of $98 million. At December 31, 2003, the comparable amount was $698 million, which included $616 million of credit card loans.

Nonperforming consumer asset sales in 2004 were $219 million, comprised of $95 million of nonperforming consumer loans and $124 million of consumer foreclosed properties. Nonperforming consumer asset sales in 2003 totaled $265 million, comprised of $141 million of nonperforming consumer loans and $124 million of consumer foreclosed properties.

During the fourth quarter of 2004, we sold $1.1 billion of credit card loans included in our held-for-sale portfolio that were acquired as part of the FleetBoston acquisition.

Table 12 presents consumer net charge-offs and net charge-off ratios for 2004 and 2003.

Table 12

Consumer Net Charge-offs and Net Charge-off Ratios (1)

	2004 Amount	2004 Percent		2003 Amount	2003 Percent
	2004			2003
(Dollars in millions)	Amount	Percent		Amount	Percent
Residential mortgage	$   36	0.02%percent		$   40	0.03%percent
Credit card	2,305	5.31		1,514	5.37
Home equity lines	15	0.04		12	0.05
Direct/Indirect consumer	208	0.55		181	0.55
Other consumer	193	2.51		255	2.89
Total consumer	$2,757	0.93%percent		$2,002	0.91%percent
(1) Percentage amounts are calculated as net charge-offs divided by average outstanding loans and leases during the year for each loan category.

On-balance-sheet credit card net charge-offs increased $791 million to $2.3 billion in 2004. The $6.8 billion of credit card loans acquired from FleetBoston on April 1, 2004 accounted for $320 million in net charge-offs. Other causes of the increase in credit card charge-offs were organic growth, the continued seasoning of accounts, and the return of $4.2 billion of previously securitized loan balances to the balance sheet. Formerly securitized credit card loans are recorded on the balance sheet after the revolving period of the securitization, which has the effect of increasing loans on the balance sheet, increasing Net Interest Income, Provision for Credit Losses and net charge-offs, while reducing Noninterest Income.

Included in Other Assets were consumer loans held-for-sale of $6.1 billion and $6.8 billion at December 31, 2004 and 2003, respectively. Included in these balances were nonperforming consumer loans held-for-sale of $28 million and $16 million at December 31, 2004 and 2003, respectively.

Commercial Portfolio Credit Risk Management

Credit risk management for the commercial portfolio begins with an assessment of the credit risk profile of the borrower or counterparty based on an analysis of the borrower’s or counterparty’s financial position. As part of the overall credit risk assessment of a borrower or counterparty, each commercial credit exposure or transaction is assigned a risk rating and is subject to approval based on defined credit approval standards. Subsequent to loan origination, risk ratings are monitored on an ongoing basis. If necessary, they are adjusted to reflect changes in the borrower’s or counterparty’s financial condition, cash flow or financial situation. We use risk rating aggregations to measure and evaluate concentrations within portfolios. Risk ratings are a factor in determining the level of assigned economic capital and the allowance for credit losses. In making decisions regarding credit, we consider risk rating, collateral, country, industry and single name concentration limits while also balancing the total borrower or counterparty relationship and SVA.

Our lines of business and Risk Management personnel use a variety of tools to continuously monitor a borrower’s or counterparty’s ability to perform under its obligations. Adjustments in credit exposures are made as a result of this ongoing analysis and review. Additionally, we utilize syndication of exposure to other entities, loan sales and other risk mitigation techniques to manage the size and risk profile of the loan portfolio.

Table 13 presents outstanding commercial loans and leases for each year in the five-year period ending at December 31, 2004.

Table 13

Outstanding Commercial Loans and Leases

	December 31, 2004 Amount	December 31, 2004 Percent		December 31, 2003 Amount	December 31, 2003 Percent		December 31, 2002 Amount	December 31, 2002 Percent		December 31, 2001 Amount	December 31, 2001 Percent		December 31, 2000 Amount	December 31, 2000 Percent		FleetBoston: April 1, 2004 Amount	FleetBoston: April 1, 2004 Percent
	December 31															FleetBoston April 1, 2004
	2004			2003			2002			2001			2000
(Dollars in millions)	Amount	Percent		Amount	Percent		Amount	Percent		Amount	Percent		Amount	Percent		Amount	Percent
Commercial - domestic	$122,095	62.9%percent		$ 91,491	69.7%percent		$ 99,151	68.3%percent		$110,981	67.7%percent		$138,367	68.0%percent		$31,796	51.6%percent
Commercial real estate (1)	32,319	16.7		19,367	14.7		20,205	13.9		22,655	13.8		26,436	13.0		9,982	16.2
Commercial lease financing	21,115	10.9		9,692	7.4		10,386	7.2		11,404	7.0		11,888	5.8		10,720	17.4
Commercial - foreign	18,401	9.5		10,754	8.2		15,428	10.6		18,858	11.5		26,851	13.2		9,160	14.8
Total commercial loans and leases	$193,930	100.0%percent		$131,304	100.0%percent		$145,170	100.0%percent		$163,898	100.0%percent		$203,542	100.0%percent		$61,658	100.0%percent
(1) Includes domestic commercial real estate loans of $31,879, $19,043, $19,910, $22,272 and $26,154 at December 31, 2004, 2003, 2002, 2001 and 2000 respectively; and foreign commercial real estate loans of $440, $324, $295, $383 and $282 at December 31, 2004, 2003, 2002, 2001 and 2000 respectively.

Concentrations of Commercial Credit Risk

Portfolio credit risk is evaluated and managed with a goal that concentrations of credit exposure do not result in undesirable levels of risk. We review, measure, and manage concentrations of credit exposure by industry, product, geography and customer relationship. Distribution of Loans and Leases by loan size is an additional measure of the portfolio risk diversification. We also review, measure, and manage commercial real estate loans by geographic location and property type. In addition, within our international portfolio, we evaluate borrowings by region and by country. Tables 14 through 19 summarize these concentrations. These activities play an important role in managing credit risk concentrations and for other risk mitigation purposes.

From the perspective of portfolio risk management, customer concentration management is most relevant in Global Capital Markets and Investment Banking. Within Global Capital Markets and Investment Banking, concentrations continue to be addressed through the underwriting and ongoing monitoring processes, the established strategy of “originate to distribute” and partly through the purchase of credit protection through credit derivatives. We utilize various risk mitigation tools to economically hedge our risk to certain credit counterparties. Credit derivatives are financial instruments that we purchase for protection against the deterioration of credit quality. At December 31, 2004, we had $13.1 billion of credit protection. The total cost of the premium of the credit derivatives portfolio was $84 million and $68 million for 2004 and 2003, respectively. Two widely used tools are credit default swaps and collateralized loan obligations (CLOs) in which a layer of loss is sold to third parties. Earnings volatility increases due to accounting asymmetry as we mark to market the credit default swaps, as required by SFAS 133, and CLOs through Trading Account Profits, while the loans are recorded at historical cost less allowance for credit losses or, if held-for-sale, the lower of cost or market. The cost of credit portfolio hedges including the negative mark-to-market was $144 million and $330 million for 2004 and 2003, respectively.

Table 14 shows commercial utilized credit exposure by industry based on Standard & Poor’s industry classifications and includes commercial loans and leases, SBLCs and financial guarantees, derivatives, assets held-for-sale and commercial letters of credit. As shown in the following table, commercial utilized credit exposure is diversified across a range of industries.

Table 14

Commercial Utilized Credit Exposure by Industry

	December 31, 2004		December 31, 2003		FleetBoston April 1, 2004
	December 31				FleetBoston April 1, 2004
(Dollars in millions)	2004		2003
Real estate (1)	$ 36,672		$ 22,228		$12,957
Diversified financials	25,932		20,427		3,557
Banks	25,265		25,088		1,040
Retailing	23,149		15,152		6,539
Education and government	17,429		13,919		1,629
Individuals and trusts	16,110		14,307		2,627
Materials	14,123		8,860		5,079
Consumer durables and apparel	13,427		8,313		3,482
Leisure and sports, hotels and restaurants	13,331		10,099		2,940
Transportation	13,234		9,355		3,268
Healthcare equipment and services	12,643		7,064		4,939
Capital goods	12,633		8,244		4,355
Commercial services and supplies	11,944		7,206		3,866
Food, beverage and tobacco	11,687		9,134		2,552
Energy	7,579		4,348		2,044
Media	6,232		4,701		2,616
Insurance	5,851		3,638		2,822
Religious and social organizations	5,710		4,272		475
Utilities	5,615		5,012		1,948
Food and staples retailing	3,610		1,837		1,456
Technology hardware and equipment	3,398		1,941		1,463
Software and services	3,292		1,655		770
Telecommunication services	3,030		2,526		883
Automobiles and components	1,894		1,326		746
Pharmaceuticals and biotechnology	994		466		590
Household and personal products	371		302		195
Other	3,132		1,474		3,751
Total	$298,287		$212,894		$78,589
(1) Industries are viewed from a variety of perspectives to best isolate the perceived risks. For purposes of this table, the real estate industry is defined based upon the borrowers' or counterparties' primary business activity using operating cash flow and primary source of repayment as key factors.

Table 15 presents the non-real estate outstanding commercial loans and leases by industry. As shown in the table, the non-real estate commercial loan and lease portfolio is diversified across a range of industries.

Table 15

Non-real Estate Outstanding Commercial Loans and Leases by Industry

	December 31, 2004	December 31, 2003		FleetBoston April 1, 2004
	December 31			FleetBoston April 1, 2004
(Dollars in millions)	2004	2003
Retailing	$ 16,908	$ 11,474		$  4,287
Diversified financials	12,454	6,469		2,135
Individuals and trusts	12,357	10,510		2,681
Transportation	11,135	7,715		2,806
Education and government	10,134	7,874		1,155
Capital goods	9,673	5,729		4,073
Materials	9,547	5,704		4,191
Commercial services and supplies	9,362	5,701		2,876
Food, beverage and tobacco	9,344	6,942		2,326
Leisure and sports, hotels and restaurants	8,987	7,477		2,488
Healthcare equipment and services	7,972	4,052		3,460
Real estate (1)	6,140	4,413		3,608
Energy	4,627	2,516		1,740
Consumer durables and apparel	4,564	2,161		2,269
Media	4,468	2,821		2,566
Religious and social organizations	3,951	2,975		431
Utilities	3,274	2,635		1,431
Food and staples retailing	2,701	1,364		1,349
Technology hardware and equipment	2,482	1,260		1,142
Software and services	2,430	948		713
Telecommunication services	2,382	1,967		812
Banks	2,044	1,199		454
Automobiles and components	1,643	1,029		570
Insurance	1,478	840		492
Other (2)	1,554	6,162		1,621
Total	$161,611	$111,937		$ 51,676
(1) Commercial product loans and leases to borrowers in the real estate industry for which the ultimate source of repayment is not dependent on the sale, lease, rental or refinancing of real estate. (2) Other includes loans and leases to the pharmaceutical, biotechnology, household and personal products industries. Reduction in the Other category was primarily attributable to a revision in the methodology for assigning industries to margin loan and commercial credit card exposure. These exposures were previously assigned to Other.

Table 16 presents outstanding commercial real estate loans by geographic region and by property type. The amounts outstanding exclude commercial loans and leases secured by owner-occupied real estate. Therefore, the amounts exclude outstanding loans and leases that were made on the general creditworthiness of the borrower for which real estate was obtained as security and for which the ultimate repayment of the credit is not dependent on the sale, lease, rental or refinancing of the real estate. As shown in the table, the commercial real estate loan portfolio is diversified in terms of geographic region and property type.

Table 16

Outstanding Commercial Real Estate Loans

	December 31, 2004		December 31, 2003		FleetBoston April 1, 2004
	December 31				FleetBoston April 1, 2004
(Dollars in millions)	2004		2003
By Geographic Region (2)
Northeast	$ 6,700		$   683		$ 3,732
California	6,293		4,705		567
Florida	3,562		2,663		215
Southeast	3,448		2,642		387
Southwest	3,265		2,725		389
Northwest	2,038		1,976		68
Midwest	1,860		1,431		347
Midsouth	1,379		1,139		152
Other states (3)	1,184		448		3,234
Geographically diversified	2,150		631		769
Non-U.S.	440		324		122
Total	$32,319		$19,367		$ 9,982
By Property Type
Residential	$ 5,992		$ 3,631		$   314
Office buildings	5,434		3,431		2,649
Apartments	4,940		3,411		1,687
Shopping centers/retail	4,490		2,295		1,474
Land and land development	2,388		1,494		155
Industrial/warehouse	2,263		1,790		351
Hotels/motels	909		548		531
Multiple use	744		560		269
Resorts	252		261		-
Other	4,907		1,946		2,552
Total	$32,319		$19,367		$ 9,982
(1) For purposes of this table, commercial real estate product reflects loans dependent on the sale, lease or refinance of real estate as the final source of repayment. (2) Distribution is based on geographic location of collateral. Geographic regions are in the U.S. unless otherwise noted. (3) The reduction in Other states subsequent to April 1, 2004 is the result of a more granular distribution of the FleetBoston portfolio to other geographic regions including the Northeast.

Foreign Portfolio

Table 17 sets forth total foreign exposure broken out by region at December 31, 2004 and 2003. Total foreign exposure is defined to include credit exposure, net of local liabilities, plus securities and other investments for all exposure with a country of risk other than the United States.

Table 17

Regional Foreign Exposure

	December 31, 2004		December 31, 2003		FleetBoston April 1, 2004
	December 31				FleetBoston April 1, 2004
(Dollars in millions)	2004		2003
Europe	$62,428		$39,496		$ 5,003
Latin America (2,3)	10,823		5,791		7,568
Asia Pacific (2,4)	10,736		9,547		443
Middle East	527		584		82
Africa	238		108		41
Other (5)	5,327		4,374		865
Total	$90,079		$59,900		$14,002
(1) The balances above reflect the subtraction of local funding or liabilities from local exposures as allowed by the Federal Financial Institutions Examination Council (FFIEC). (2) Exposures for Latin America and Asia Pacific have been reduced by $196 and $14, respectively, at December 31, 2004, and $173 and $13, respectively, at December 31, 2003. Such amounts represent the fair value of U.S. Treasury securities held as collateral outside the country of exposure. (3) Includes Bermuda and Cayman Islands. (4) Includes Australia and New Zealand. (5) Other includes Canada and supranational entities.

Our total foreign exposure was $90.1 billion at December 31, 2004, an increase of $30.2 billion from December 31, 2003. Our foreign exposure was concentrated in Europe, which accounted for $62.4 billion, or 69 percent, of total foreign exposure. The increase in total foreign exposure is due to growth in Europe and the addition of exposure associated with FleetBoston. Growth of exposure in Europe during 2004 was mostly in Western Europe and was distributed across a variety of industries with the largest concentration in the banking sector that accounted for approximately 53 percent of the growth. At December 31, 2004 and 2003, the United Kingdom and Germany were the only countries whose total cross-border outstandings exceeded 0.75 percent of our total assets. Our second largest foreign exposure was in Latin America, which accounted for $10.8 billion, or 12 percent, of total foreign exposure. Growth of exposure in Latin America during 2004 was due to the addition of operations associated with FleetBoston. Latin America, including Brazil and Argentina, may continue to experience economic, political and social uncertainties, which may impact market, credit, and transfer risk of this region. For more information on our Latin America exposure, see the discussion of emerging markets below.

As shown in Table 18, at December 31, 2004 and 2003, Germany had total cross-border exposure of $12.0 billion and $6.9 billion, respectively, representing 1.08 percent and 0.95 percent of total assets, respectively. At December 31, 2004 and 2003, the United Kingdom had total cross-border exposure of $11.9 billion and $10.1 billion, respectively, representing 1.07 percent and 1.41 percent of total assets, respectively. The largest concentration of the exposure to both of these countries was with banks.

Table 18

Cross-border Exposure Exceeding One Percent of Total Assets

(Dollars in millions)	December 31	Public Sector	Banks	Private Sector	Cross- border Exposure	Exposure as a Percentage of Total Assets
Germany	2004	$659	$6,251	$5,081	$11,991	1.08%percent
Germany	2003	441	3,436	2,978	6,855	0.95
Germany	2002	334	2,898	2,534	5,766	0.89
United Kingdom	2004	$ 74	$3,239	$8,606	$11,919	1.07%percent
United Kingdom	2003	143	3,426	6,552	10,121	1.41
United Kingdom	2002	167	2,492	6,758	9,417	1.46
(1) Exposure includes cross-border claims by our foreign offices as follows: loans, accrued interest receivable, acceptances, time deposits placed, trading account assets, securities, derivative assets, other interest-earning investments and other monetary assets. Amounts also include unused commitments, SBLCs, commercial letters of credit and formal guarantees. Sector definitions are based on the FFIEC instructions for preparing the Country Exposure Report. (2) The total cross-border exposure for Germany and United Kingdom at December 31, 2004 includes derivatives exposure of $3,641 and $2,564, respectively, against which we hold collateral totaling $1,477 and $1,788, respectively.

As shown in Table 19, at December 31, 2004, foreign exposure to borrowers or counterparties in emerging markets increased 42 percent to $15.5 billion, or 17 percent, of total foreign exposure, from $10.9 billion, or 18 percent, of total exposure at the end of 2003. At December 31, 2004, 58 percent of the emerging markets exposure was in Latin America compared to 42 percent at December 31,2003. The increase in Latin America was attributable to the addition of the $6.7 billion FleetBoston portfolio on April 1, 2004. This growth was partially offset by continued reductions in Loans and Leases, and trading activity exposure in Argentina, Brazil and Chile. Our 24.9 percent investment in Grupo Financiero Santander Serfin (GFSS) accounted for $1.9 billion of reported exposure in Mexico.

The company’s largest exposure in Latin America was in Brazil. Our exposure in Brazil at December 31, 2004 and 2003, included $1.4 billion and $331 million, respectively, of traditional cross-border credit exposure (Loans and Leases, letters of credit, etc.), and $1.8 billion and $193 million, respectively, of local country exposure net of local liabilities. Nonperforming assets in Brazil were $38 million at December 31, 2004, compared to $39 million at December 31, 2003. For 2004 and 2003, net charge-offs totaled $59 million and $33 million,respectively.

We have risk mitigation instruments associated with certain exposures for Brazil, including structured trade transactions intended to mitigate transfer risk of $950 million and third party funding of $286 million, resulting in our total foreign exposure net of risk mitigation for Brazil of $2.2 billion.

Our exposure in Argentina at December 31, 2004 and 2003, included $286 million and $135 million, respectively, of traditional cross-border credit exposure (Loans and Leases, letters of credit, etc.), and $16 million and $24 million, respectively, of local country exposure net of local liabilities. Also included in Argentina’s December 31, 2004 balance were $89 million of securities. At December 31, 2004, Argentina nonperforming assets, including securities, were $350 million compared to $107 million at December 31, 2003. For 2004, net recoveries for Argentina totaled $3 million compared to net charge-offs of $82 million in 2003.

At December 31, 2004, 41 percent of the emerging markets exposure was in Asia Pacific compared to 55 percent at December 31, 2003.  Asia Pacific emerging markets exposure was largely unchanged. Increases in Taiwan and Hong Kong were offset by decreases in South Korea, Singapore and Other Asia Pacific. The increase in Taiwan was attributable to higher short-term placements with other financial institutions, and commercial loans and leases. The increase in Hong Kong was due to higher swaps and derivatives exposure to other financial institutions. Higher commercial loans and leases also contributed to the increase in Hong Kong.

Table 19 sets forth regional foreign exposure to selected countries defined as emerging markets.

Table 19

Selected Emerging Markets

(Dollars in millions)	Loans and Leases, and Loan Commitments	Other Financing (2)	Derivative Assets	Securities/ Other Investments (3,4)	Total Cross- border Exposure (5)	Local Country Exposure Net of Local Liabilities (6)	Total Foreign Exposure December 31, 2004	Increase/ (Decrease) from December 31, 2003		FleetBoston April 1, 2004
Region/Country
Latin America
Brazil	$1,179	$  268	$   19	$  122	$ 1,588	$1,837	$ 3,425	$2,754		$3,838
Mexico (7)	578	148	136	2,004	2,866	-	2,866	83		570
Chile	215	122	1	3	341	839	1,180	1,049		1,186
Argentina	181	105	-	89	375	16	391	80		542
Other Latin America (8)	311	180	144	248	883	192	1,075	358		579
Total Latin America	2,464	823	300	2,466	6,053	2,884	8,937	4,324		6,715
Asia Pacific
India	311	268	140	225	944	548	1,492	(73)		9
South Korea	290	477	89	213	1,069	314	1,383	(235)		158
Taiwan	214	114	82	42	452	875	1,327	786		26
Hong Kong	225	57	307	129	718	401	1,119	249		6
Singapore	200	23	70	47	340	-	340	(227)		21
Other Asia Pacific (8)	81	80	58	278	497	157	654	(222)		50
Total Asia Pacific	1,321	1,019	746	934	4,020	2,295	6,315	278		270
Central and Eastern Europe (8)	7	30	31	173	241	-	241	(29)		-
Total	$3,792	$1,872	$1,077	$3,573	$10,314	$5,179	$15,493	$4,573		$6,985
(1) There is no generally accepted definition of emerging markets. The definition that we use includes all countries in Latin America excluding Cayman Islands and Bermuda; all countries in Asia Pacific excluding Japan, Australia and New Zealand; and all countries in Central and Eastern Europe excluding Greece. (2) Includes acceptances, SBLCs, commercial letters of credit and formal guarantees. (3) Amounts outstanding for Other Latin America and Other Asia Pacific have been reduced by $196 and $14, respectively, at December 31, 2004 and $173 and $13, respectively, at December 31, 2003. Such amounts represent the fair value of U.S Treasury securities held as collateral outside the country of exposure. (4) Cross-border resale agreements are presented based on the domicile of the counterparty because the counterparty has the legal obligation for repayment. For regulatory reporting under FFIEC guidelines, cross-border resale agreements are presented based on the domicile of the issuer of the securities that are held as collateral. (5) Cross-border exposure includes amounts payable to us by borrowers or counterparties with a country of residence other than the one in which the credit is booked, regardless of the currency in which the claim is denominated, consistent with FFIEC reporting rules. (6) Local country exposure includes amounts payable to us by borrowers with a country of residence in which the credit is booked, regardless of the currency in which the claim is denominated. Management subtracts local funding or liabilities from local exposures as allowed by the FFIEC. Total amount of local country exposure funded by local liabilities at December 31, 2004 was $17,189 compared to $5,336 at December 31, 2003. Local country exposure funded by local liabilities at December 31, 2004 in Latin America and Asia Pacific was $9,098 and $8,091, respectively, of which $4,240 was in Brazil, $3,432 in Hong Kong $2,596 in Singapore, $1,662 in Argentina, $1,210 in Chile and $1,092 in Mexico. There were no other countries with local country exposure funded by local liabilities greater than $500. (7) Includes $1,859 related to GFSS acquired in the first quarter of 2003. (8) Other Latin America, Other Asia Pacific, and Central and Eastern Europe include countries each with total foreign exposure of less than $300.

Commercial Portfolio Credit Quality Performance

Overall commercial credit quality continued to improve in 2004 due to an improving economy and high levels of liquidity in the capital markets. All major commercial asset quality performance indicators showed positive trends. Net charge-offs, nonperforming assets and criticized exposure continued to decline.  As presented in Table 20, commercial criticized credit exposure decreased $2.4 billion, or 19 percent, to $10.2 billion at December 31, 2004. The net decrease was driven by $16.8 billion of paydowns, payoffs, credit quality improvements, loan sales and net charge-offs; partially offset by the addition of $7.1 billion of FleetBoston commercial criticized exposure on April 1, 2004 and $7.3 billion of newly criticized exposure. The decrease in 2004 was centered in Global Capital Markets and Investment Banking, Global Business and Financial Services and Latin America. These businesses combined to reduce commercial criticized exposure by $2.2 billion during 2004, despite the addition of the FleetBoston commercial criticized exposure balance of $6.8 billion on April 1, 2004, related to these businesses. Reductions were concentrated in the utilities, aerospace and defense, and telecommunications industries.

Table 20 presents commercial criticized exposure at December 31, 2004 and 2003.

Table 20

Commercial Criticized Exposure

	December 31, 2004 Amount	December 31, 2004 Percent		December 31, 2003 Amount	December 31, 2003 Percent		FleetBoston: April 1, 2004 Amount	FleetBoston: April 1, 2004 Percent
	December 31						FleetBoston April 1, 2004
	2004			2003
(Dollars in millions)	Amount	Percent (2)		Amount	Percent (2)		Amount	Percent (2)
Commercial - domestic	$ 6,340	3.38%percent		$ 8,044	5.73%		$4,830	9.86%
Commercial real estate	1,028	2.54		983	3.89		406	4.08
Commercial lease financing	1,347	6.38		1,011	10.43		768	5.42
Commercial - foreign	1,534	3.12		2,612	6.97		1,057	10.01
Total commercial criticized exposure	$10,249	3.44%percent		$12,650	5.94%		$7,061	8.44%
(1) Criticized exposure corresponds to the Special Mention, Substandard and Doubtful asset categories defined by regulatory authorities. Exposure amounts include loans and leases, SBLCs and financial guarantees, derivative assets, assets held-for-sale and commercial letters of credit. (2) Commercial criticized exposure is taken as a percentage of total commercial utilized exposure which includes loans and leases, SBLCs and financial guarantees, derivative assets, assets held-for-sale and commercial letters of credit.

We routinely review the loan and lease portfolio to determine if any credit exposure should be placed on nonperforming status. An asset is placed on nonperforming status when it is determined that full collection of principal and/or interest in accordance with its contractual terms is not probable. As presented in Table 21, nonperforming commercial assets decreased $654 million to $1.6 billion at December 31, 2004 due primarily to the $760 million decrease in the nonperforming commercial loans and leases despite the addition of the $944 million FleetBoston nonperforming commercial loans and leases at April 1, 2004. The decrease in 2004 was centered in Latin America, Global Capital Markets and Investment Banking and Global Business and Financial Services. These businesses combined to reduce nonperforming commercial loans and leases by $566 million during 2004, despite the addition of the FleetBoston commercial nonperforming loan and lease balance of $874 million on April 1, 2004, related to these businesses. The decreases in total nonperforming commercial loans and leases resulted from paydowns and payoffs of $1.4 billion, charge-offs of $640 million, loan sales of $515 million and returns to performing status of $348 million, partially offset by new nonaccrual loan inflows of $1.3 billion and the addition of nonperforming loans and leases from the FleetBoston portfolio. Increased levels of paydowns and payoffs compared to 2003 resulted from the improvement in credit quality experienced in 2004.

Nonperforming commercial — domestic loans decreased by $533 million and represented 0.70 percent of commercial — domestic loans at December 31, 2004 compared to 1.52 percent at December 31, 2003. Nonperforming commercial — foreign loans decreased $311 million and represented 1.45 percent of commercial — foreign loans at December 31, 2004 compared to 5.37 percent at December 31, 2003. The improvement in the percentage of nonperforming commercial — domestic loans to the total commercial — domestic loans was driven by the growth in commercial — domestic loans and the addition of the FleetBoston portfolio.

Nonperforming commercial asset sales in 2004 were $601 million, comprised of $515 million of nonperforming commercial loans, $74 million of commercial foreclosed properties and $12 million of nonperforming securities. Nonperforming commercial asset sales in 2003 totaled $1.6 billion,comprised of $1.5 billion of nonperforming commercial loans and $123 million of commercial foreclosed properties.

Table 21 presents nonperforming commercial assets for each year in the five-year period ending at December 31, 2004.

Table 21

Nonperforming Commercial Assets

	December 31, 2004		December 31, 2003		December 31, 2002		December 31, 2001		December 31, 2000		FleetBoston April 1, 2004
	December 31										FleetBoston April 1, 2004
(Dollars in millions)	2004		2003		2002		2001		2000
Nonperforming commercial loans and leases
Commercial - domestic	$  855		$1,388		$2,621		$2,991		$2,715		$  317
Commercial real estate	87		142		164		243		239		80
Commercial lease financing	266		127		160		134		65		51
Commercial - foreign	267		578		1,359		459		482		496
Total nonperforming commercial loans and leases	1,475		2,235		4,304		3,827		3,501		944
Nonperforming securities (2)	140		-		-		-		-		135
Commercial foreclosed properties	33		67		126		68		67		13
Total nonperforming commercial assets (3)	$1,648		$2,302		$4,430		$3,895		$3,568		$1,092
Nonperforming commercial loans and leases as a percentage of   outstanding commercial loans and leases	0.76%percent		1.70%percent		2.96%percent		2.33%percent		1.72%percent		1.53%percent
Nonperforming commercial assets as a percentage of   outstanding commercial loans, leases and foreclosed properties	0.85		1.75		3.05		2.38		1.75		1.77
(1) In 2004, $111 in Interest Income was estimated to be contractually due on nonperforming commercial loans and leases, and troubled debt restructured loans. (2) Primarily related to international securities held in the AFS securities portfolio. (3) Balances do not include $123, $186, $73, $289 and $84 of nonperforming commercial assets, primarily commercial loans held-for-sale included in Other Assets at December 31, 2004, 2003, 2002, 2001 and 2000, respectively.

Table 22 presents the additions and reductions to nonperforming assets in the commercial portfolio during 2004 and 2003.

Table 22

Nonperforming Commercial Assets Activity

(Dollars in millions)	2004	2003
Nonperforming loans and leases, and foreclosed properties
Balance, January 1	$ 2,302	$ 4,430
Additions to nonperforming assets:
FleetBoston balance, April 1, 2004	957	-
New nonaccrual	1,294	2,134
Advances	82	199
Total additions	2,333	2,333
Reductions in nonperforming assets:
Paydowns and payoffs	(1,405)	(1,221)
Sales	(589)	(1,583)
Returns to performing status (1)	(348)	(197)
Charge-offs (2)	(640)	(1,352)
Transfers to assets held-for-sale	(145)	(108)
Total reductions	(3,127)	(4,461)
Total net reductions in nonperforming assets	(794)	(2,128)
Nonperforming securities (3)
Balance, January 1	-	-
Additions to nonperforming assets:
FleetBoston balance, April 1, 2004	135	-
New nonaccrual	56	-
Reductions in nonperforming assets:
Paydowns and payoffs	(39)	-
Sales	(12)	-
Total net securities additions to nonperforming assets	140	-
Nonperforming commercial assets, December 31	$ 1,648	$ 2,302
(1) Commercial loans and leases may be restored to performing status when all principal and interest is current and full repayment of the remaining contractual principal and interest is expected, or when the loan otherwise becomes well secured and is in the process of collection. (2) Certain loan and lease products, including commercial credit card, are not classified as nonperforming; therefore, the charge-offs on these loans are not included above. (3) Primarily related to international securities held in the AFS securities portfolio.

Domestic commercial loans past due 90 days or more and still accruing interest were $121 million at December 31, 2004 compared to $108 million at December 31, 2003. The increase was driven by the addition of the FleetBoston past due portfolio of $28 million on April 1, 2004.

Table 23 presents commercial net charge-offs and net charge-off ratios for 2004 and 2003.

Table 23

Commercial Net Charge-offs and Net Charge-off Ratios

	2004 Amount	2004 Percent		2003 Amount	2003 Percent
	2004			2003
(Dollars in millions)	Amount	Percent		Amount	Percent
Commercial - domestic	$177	0.15 %percent		$  633	0.68%percent
Commercial real estate	(3)	(0.01)		41	0.20
Commercial lease financing	9	0.05		124	1.23
Commercial - foreign	173	1.05		306	2.36
Total commercial	$356	0.20 %percent		$1,104	0.81%percent
(1) Percentage amounts are calculated as net charge-offs divided by average outstanding Loans and Leases during the year for each loan category.

Commercial — domestic loan net charge-offs, as presented in Table 23, decreased $456 million to $177 million in 2004, reflecting overall improvement in the portfolio.

Commercial — foreign loan net charge-offs were $173 million in 2004 compared to $306 million in 2003. The decrease reflected lower net charge-offs in Argentina, the United Kingdom and Italy. The industry with the largest decrease in net charge-offs was utilities. The country with the largest net charge-offs in 2004 was Italy.

At December 31, 2004 and 2003, our credit exposure related to Parmalat Finanziaria S.p.A. and its related entities (Parmalat) was less than $1 million and $274 million, respectively; the latter number included $30 million of derivatives. Nonperforming loans related to Parmalat were less than $1 million and $226 million at December 31, 2004 and 2003, respectively.

Included in Other Assets were commercial loans held-for-sale and leveraged lease partnership interests of $1.3 billion and $198 million, respectively, at December 31, 2004 and $1.6 billion and $332 million, respectively, at December 31, 2003. Included in these balances were nonperforming loans held-for-sale and leveraged lease partnership interests of $100 million and $23 million, respectively, at December 31, 2004 and $183 million and $3 million, respectively, at December 31, 2003.

Provision for Credit Losses

The Provision for Credit Losses was $2.8 billion in 2004, a two percent decline, despite the addition of the FleetBoston portfolio. The consumer portion of the Provision for Credit Losses increased to $3.6 billion in 2004 driven by consumer net charge-offs of $2.8 billion. Organic growth, overall seasoning of credit card accounts, the return of securitized loans to the balance sheet, and increases in minimum payment requirements drove higher consumer net charge-offs and consumer provision. The commercial portion of the Provision for Credit Losses was a negative $623 million in 2004 with commercial net charge-offs of $356 million. The commercial provision decreased due to continued commercial credit quality improvement. The Provision for Credit Losses included a negative $70 million related to changes in the general portion of the Allowance for Loan and Lease Losses due to improved economic conditions. The Provision for Credit Losses also included a negative $99 million related to changes in the reserve for unfunded lending commitments due to continued commercial credit quality improvement and improved economic conditions.

We expect that continued seasoning of credit card accounts, the return of approximately $4.5 billion of securitized loans to the balance sheet in 2005 and increased minimum payment requirements will result in higher levels of consumer net charge-offs in 2005. Commercial net charge-offs may return to more normalized levels during 2005. These anticipated increases in net charge-offs, coupled with less dramatic improvement in commercial credit quality than experienced in 2004, are expected to result in increases in the consumer and commercial portions of the Provision for Credit Losses in 2005.

Allowance for Credit Losses

Allowance for Loan and Lease Losses

The Allowance for Loan and Lease Losses is allocated based on three components. We evaluate the adequacy of the Allowance for Loan and Lease Losses based on the combined total of these three components.

The first component of the Allowance for Loan and Lease Losses covers those commercial loans that are either nonperforming or impaired. An allowance is allocated when the discounted cash flows (or collateral value or observable market price) are lower than the carrying value of that loan. For purposes of computing the specific loss component of the allowance, larger impaired loans are evaluated individually and smaller impaired loans are evaluated as a pool using historical loss experience for the respective product type and risk rating of the loans.

The second component of the Allowance for Loan and Lease Losses covers performing commercial loans and leases, and consumer loans. The allowance for commercial loans and leases is established by product type after analyzing historical loss experience, by internal risk rating, current economic conditions and performance trends within each portfolio segment. The commercial historical loss experience is updated quarterly to incorporate the most recent data reflective of the current economic environment. As of December 31, 2004, this resulted in an immaterial decrease to the commercial allowance for loan losses from updating the historical loss experience. The allowance for consumer loans is based on aggregated portfolio segment evaluations, generally by product type. Loss forecast models are utilized for consumer products that consider a variety of factors including, but not limited to, historical loss experience, estimated defaults or foreclosures based on portfolio trends, delinquencies, economic trends and credit scores. These consumer loss forecast models are updated on a quarterly basis in order to incorporate information reflective of the current economic environment. As of December 31, 2004, this resulted in an immaterial increase to the allowance for consumer loan and lease losses from updating the loss forecast models.

The third, or general component of the Allowance for Loan and Lease Losses is maintained to cover uncertainties that affect our estimate of probable losses. These uncertainties include the imprecision inherent in the forecasting methodologies, as well as domestic and global economic uncertainty and large single name defaults or event risk. We assess these components, and consider other current events, like the Merger, and other conditions, to determine the overall level of the third component. The relationship of the third component to the total Allowance for Loan and Lease Losses may fluctuate from period to period.

We monitor differences between estimated and actual incurred loan and lease losses. This monitoring process includes periodic assessments by senior management of loan and lease portfolios and the models used to estimate incurred losses in those portfolios.

Additions to the Allowance for Loan and Lease Losses are made by charges to the Provision for Credit Losses. Credit exposures deemed to be uncollectible are charged against the Allowance for Loan and Lease Losses. Recoveries of previously charged off amounts are credited to the Allowance for Loan and Lease Losses.

The Allowance for Loan and Lease Losses for the consumer portfolio as presented in Table 25 increased $1.3 billion to $3.8 billion from December 31, 2003 due to the addition of $592 million on April 1, 2004 of FleetBoston allowance for consumer loan and lease losses, and continued organic growth in consumer loans, primarily credit card. The Allowance for Loan and Lease Losses on the credit card portfolio increased $1.2 billion to $2.8 billion driven by the $466 million addition related to the FleetBoston on-balance sheet card portfolio on April 1, 2004, organic credit card portfolio growth, the return of previously securitized credit card balances to the balance sheet and increases in the minimum payment requirements.

The allowance for commercial loan and lease losses as presented in Table 25 was $3.2 billion at December 31, 2004, a $726 million increase from December 31, 2003. This increase was due to the addition on April 1, 2004 of $1.7 billion of FleetBoston allowance for commercial loans and leases to the portfolio partially offset by reductions resulting from improvement in the commercial loan portfolio. Commercial credit quality continues to improve as reflected in the continued declines in both commercial criticized exposure and commercial nonperforming loans and leases. Specific reserves on commercial impaired loans decreased $189 million, or 48 percent, in 2004, reflecting the decrease in our investment in specific loans considered impaired of $910 million to $1.2 billion at December 31, 2004. The net decrease of $910 million included the addition of FleetBoston impaired loans on April 1, 2004 of $914 million offset by net decreases of $1.8 billion in 2004. The decreased levels of criticized, nonperforming and impaired loans, and the respective reserves were driven by overall improvement in commercial credit quality, including paydowns and payoffs, loan sales, net charge-offs and returns to performing status.

The general portion of the Allowance for Loan and Lease Losses increased $438 million during 2004. The addition of FleetBoston general reserves on April 1, 2004 accounted for $508 million of the increase. Although uncertainty regarding the depth and pace of the economic recovery existed early in the year, the fourth quarter demonstrated a strengthening of the economy, which led to a reduction in general reserves of $70 million in 2004.

Reserve for Unfunded Lending Commitments

In addition to the Allowance for Loan and Lease Losses, we also estimate probable losses related to unfunded lending commitments, such as letters of credit and financial guarantees, and binding unfunded loan commitments. Unfunded lending commitments are subject to individual reviews, and are analyzed and segregated by risk according to the Corporation's internal risk rating scale. These risk classifications, in conjunction with an analysis of historical loss experience, current economic conditions and performance trends within specific portfolio segments, and any other pertinent information result in the estimation of the reserve for unfunded lending commitments. The reserve for unfunded lending commitments is included in Accrued Expenses and Other Liabilities on the Consolidated Balance Sheet.

We monitor differences between estimated and actual incurred credit losses. This monitoring process includes periodic assessments by senior management of credit portfolios and the models used to estimate incurred losses in those portfolios.

Additions to the reserve for unfunded lending commitments are made by charges to the Provision for Credit Losses. Credit exposures (excluding derivatives) deemed to be uncollectible are charged against the reserve.

The reserve for unfunded lending commitments decreased $14 million from December 31, 2003, primarily due to improved economic conditions and improvement in the level of criticized letters of credit, partially offset by the addition of $85 million of reserves on April 1, 2004 associated with FleetBoston unfunded lending commitments.

Table 24 presents a rollforward of the allowance for credit losses for five years ending December 31, 2004.

Table 24

Allowance for Credit Losses

(Dollars in millions)	2004		2003		2002		2001		2000
Allowance for loan and lease losses, January 1	$  6,163		$  6,358		$  6,278		$  6,365		$  6,314
FleetBoston balance, April 1, 2004	2,763		-		-		-		-
Loans and leases charged off
Residential mortgage	(62)		(64)		(56)		(39)		(36)
Credit card	(2,536)		(1,657)		(1,210)		(753)		(392)
Home equity lines	(38)		(38)		(40)		(32)		(29)
Direct/Indirect consumer	(344)		(322)		(355)		(389)		(395)
Other consumer (1)	(295)		(343)		(395)		(1,216)		(582)
Total consumer	(3,275)		(2,424)		(2,056)		(2,429)		(1,434)
Commercial - domestic	(504)		(857)		(1,625)		(2,021)		(1,396)
Commercial real estate	(12)		(46)		(45)		(46)		(31)
Commercial lease financing	(39)		(132)		(168)		(99)		(17)
Commercial - foreign	(262)		(408)		(566)		(249)		(117)
Total commercial	(817)		(1,443)		(2,404)		(2,415)		(1,561)
Total loans and leases charged off	(4,092)		(3,867)		(4,460)		(4,844)		(2,995)
Recoveries of loans and leases previously charged off
Residential mortgage	26		24		14		13		9
Credit card	231		143		116		81		54
Home equity lines	23		26		14		13		9
Direct/Indirect consumer	136		141		145		139		149
Other consumer	102		88		99		135		197
Total consumer	518		422		388		381		418
Commercial - domestic	327		224		314		167		122
Commercial real estate	15		5		7		7		20
Commercial lease financing	30		8		9		4		4
Commercial - foreign	89		102		45		41		31
Total commercial	461		339		375		219		177
Total recoveries of loans and leases previously charged off	979		761		763		600		595
Net charge-offs	(3,113)		(3,106)		(3,697)		(4,244)		(2,400)
Provision for loan and lease losses (2)	2,868		2,916		3,801		4,163		2,576
Transfers (3)	(55)		(5)		(24)		(6)		(125)
Allowance for loan and lease losses, December 31	8,626		6,163		6,358		6,278		6,365
Reserve for unfunded lending commitments, January 1	416		493		597		473		514
FleetBoston balance, April 1, 2004	85		-		-		-		-
Provision for unfunded lending commitments	(99)		(77)		(104)		124		(41)
Reserve for unfunded lending commitments, December 31	402		416		493		597		473
Total	$  9,028		$  6,579		$  6,851		$  6,875		$  6,838
Loans and leases outstanding at December 31	$521,837		$371,463		$342,755		$329,153		$392,193
Allowance for loan and lease losses as a percentage   of loans and leases outstanding at December 31	1.65 %		1.66 %		1.85 %		1.91 %		1.62 %
Consumer allowance for loan and lease losses as a percentage   of consumer loans and leases outstanding at December 31	1.17		1.06		0.95		1.12		0.97
Commercial allowance for loan and lease losses as a percentage   of commercial loans and leases outstanding at December 31	1.64		1.87		2.43		2.16		1.81
Average loans and leases   outstanding during the year	$472,645		$356,148		$336,819		$365,447		$392,622
Net charge-offs as a percentage of average loans and leases   outstanding during the year	0.66 %		0.87 %		1.10 %		1.16 %		0.61 %
Allowance for loan and lease losses as a percentage   of nonperforming loans and leases at December 31	390		215		126		139		122
Ratio of the allowance for loan and lease losses at December 31   to net charge-offs	2.77		1.98		1.72		1.48		2.65
(1) Includes $635 related to the exit of the subprime real estate lending business in 2001. (2) Includes $395 related to the exit of the subprime real estate lending business in 2001. (3) Includes primarily transfers to loans held-for-sale.

For reporting purposes, we allocate the allowance for credit losses across products. However, the allowance is available to absorb any credit losses without restriction. Table 25 presents our allocation by product type.

Table 25

Allocation of the Allowance for Credit Losses by Product Type

	December 31,2004 Amount	December 31,2004 Percent		December 31,2003 Amount	December 31,2003 Percent		December 31,2002 Amount	December 31,2002 Percent		December 31,2001 Amount	December 31,2001 Percent		December 31,2000 Amount	December 31,2000 Percent		FleetBoston April 1, 2004 Amount	FleetBoston April 1, 2004 Percent
	December 31															FleetBoston April 1, 2004
	2004			2003			2002			2001			2000
(Dollars in millions)	Amount	Percent		Amount	Percent		Amount	Percent		Amount	Percent		Amount	Percent		Amount	Percent
Allowance for loan and lease losses
Residential mortgage	$  199	2.3%percent		$  149	2.4%percent		$  108	1.7%percent		$  145	2.3%percent		$  151	2.4%percent		$   40	1.4%percent
Credit card	2,757	32.0		1,602	26.0		1,031	16.2		821	13.1		549	8.6		466	16.9
Home equity lines	92	1.1		61	1.0		49	0.8		83	1.3		77	1.2		17	0.6
Direct/Indirect consumer	405	4.7		340	5.5		361	5.7		367	5.8		320	5.0		43	1.6
Other consumer	382	4.4		384	6.2		332	5.2		443	7.1		733	11.5		26	0.9
Total consumer	3,835	44.5		2,536	41.1		1,881	29.6		1,859	29.6		1,830	28.7		592	21.4
Commercial - domestic	1,382	16.0		1,257	20.4		2,231	35.1		1,901	30.3		1,926	30.3		704	25.5
Commercial real estate	505	5.9		413	6.7		439	6.9		905	14.4		980	15.4		264	9.6
Commercial lease financing	365	4.2		207	3.4		n/a	n/a		n/a	n/a		n/a	n/a		84	3.0
Commercial - foreign	926	10.7		575	9.3		855	13.4		730	11.6		778	12.2		611	22.1
Total commercial (1)	3,178	36.8		2,452	39.8		3,525	55.4		3,536	56.3		3,684	57.9		1,663	60.2
General	1,613	18.7		1,175	19.1		952	15.0		883	14.1		851	13.4		508	18.4
Allowance for loan and lease losses	8,626	100.0%percent		6,163	100.0%percent		6,358	100.0%percent		6,278	100.0%percent		6,365	100.0%percent		2,763	100.0%percent
Reserve for unfunded lending commitments	402			416			493			597			473			85
Total	$9,028			$6,579			$6,851			$6,875			$6,838			$2,848
(1) Includes allowance for loan and lease losses of commercial impaired loans of $202 $391, $919, $763 and $640 at December 31, 2004, 2003, 2002, 2001 and 2000 respectively. n/a = Not available; included in commercial - domestic at December 31, 2002, 2001 and 2000.

Problem Loan Management

Banc of America Strategic Solutions, Inc. (SSI) is a majority-owned consolidated subsidiary of Bank of America, N.A., a wholly owned subsidiary of the Corporation, which manages problem asset resolution and the coordination of exit strategies. This may include bulk sales, collateralized debt obligations and other resolutions of domestic commercial distressed assets and, beginning in 2004, certain consumer distressed loans.

During 2004 and 2003, Bank of America, N.A. sold commercial loans with a gross book balance of approximately $1.0 billion and $3.0 billion, respectively, to SSI. In addition, in December of 2004, Bank of America, N.A. and NationsCredit Financial Services Corporation sold manufactured housing loans with a gross book balance of $2.9 billion, to SSI. For tax purposes, under the Code, the sales were treated as a taxable exchange. The sales had no financial statement impact on us because the sales were transfers among entities under common control, and there was no change in the individual loan resolution strategies.