Financial Highlights
Net Interest Income
Net Interest Income on a FTE basis increased $7.4 billion to $29.5 billion in 2004. This
increase was driven by the impact of the Merger, higher asset and liability
management (ALM) portfolio levels (primarily consisting of securities and whole
loan mortgages), the impact of higher rates, growth in consumer loan levels
(primarily credit card and home equity) and higher core deposit funding levels.
Partially offsetting these increases were reductions in the large corporate and
foreign loan balances, lower trading-related contributions, lower mortgage
warehouse levels and the continued runoff of previously exited consumer businesses.
The net interest yield on a FTE basis declined 14 basis
points (bps) to 3.26 percent due to the negative impact of increased
trading-related balances, which have a lower yield than other earning assets.
For more information on Net Interest Income on a FTE basis, see Table I.
Noninterest Income
Noninterest Income
| (Dollars in millions) |
2004 |
|
2003 |
|  |
| Service charges |
$ 6,989 |
|
$ 5,618 |
| Investment and brokerage services |
3,627 |
|
2,371 |
| Mortgage banking income |
414 |
|
1,922 |
| Investment banking income |
1,886 |
|
1,736 |
| Equity investment gains |
861 |
|
215 |
| Card income |
4,588 |
|
3,052 |
| Trading account profits |
869 |
|
409 |
| Other income |
863 |
|
1,127 |
|
| Total noninterest income |
$20,097 |
|
$16,450 |
|
Noninterest Income increased
$3.6 billion to $20.1 billion in 2004, due primarily to the addition of
FleetBoston, which contributed $3.8 billion of Noninterest Income.
- Service Charges grew $1.4 billion driven by
organic account growth and approximately $960 million from the
addition of FleetBoston customers.
- Investment and Brokerage Services increased
$1.3 billion due to approximately $1.1 billion related to the addition
of the FleetBoston business as well as market appreciation.
- Mortgage Banking Income decreased $1.5 billion
caused by lower production levels, a decrease in the gains on sales of
loans to the secondary market and writedowns of the value of Mortgage
Servicing Rights (MSRs).
- Investment Banking Income increased $150
million on increased market share in a variety of products.
- Equity Investment Gains increased $646 million
due to a $576 million increase in Principal Investing gains.
- Card Income increased $1.5 billion due to
increased fees and interchange income, including the $832 million impact
from the addition of the FleetBoston card portfolio.
- Trading Account Profits increased $460 million
due to increased customer activity.
- Other Income decreased $264 million due to the
absence of whole mortgage loan sale gains in 2004, partially offset by the
addition of FleetBoston.
For more information on Noninterest Income, see Business Segment Operations.
Gains on Sales of Debt
Securities
Gains on Sales of Debt Securities
in 2004 were $2.1 billion compared to $941 million in 2003, as we continued to
reposition the ALM portfolio in response to interest rate fluctuations and to
manage mortgage prepayment risk. For more information on Gains on Sales of Debt
Securities, see Market Risk Management.
Provision for Credit Losses
The Provision for
Credit Losses decreased $70 million to $2.8 billion in 2004 driven by lower
commercial net charge-offs of $748 million and continued improvements in credit quality in the
commercial loan portfolio. Offsetting these decreases were increases in the
Provision for Credit Losses in our consumer credit card portfolio. These increases included higher credit card net charge-offs of $791 million, of which $320
million was attributed to the addition of the FleetBoston credit card
portfolio. 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 net charge-offs and Provision for Credit
Losses. For more information on credit quality, see Credit Risk Management.
Noninterest Expense
Noninterest Expense
| (Dollars in millions) |
2004 |
|
2003 |
| |
| Personnel |
$13,473 |
|
$10,446 |
| Occupancy |
2,379 |
|
2,006 |
| Equipment |
1,214 |
|
1,052 |
| Marketing |
1,349 |
|
985 |
| Professional fees |
836 |
|
844 |
| Amortization of intangibles |
664 |
|
217 |
| Data processing |
1,325 |
|
1,104 |
| Telecommunications |
730 |
|
571 |
| Other general operating |
4,439 |
|
2,930 |
| Merger and restructuring charges |
618 |
|
- |
|
| Total noninterest expense |
$27,027 |
|
$20,155 |
|
Noninterest Expense
increased $6.9 billion to $27.0 billion in 2004, due primarily to the addition
of FleetBoston, which contributed $5.0 billion of Noninterest Expense.
- Personnel Expense increased $3.0 billion due to
the $2.3 billion impact of FleetBoston associates.
- Marketing Expense increased $364 million due to
increased advertising for card programs and increased advertising costs
in the Northeast.
- Amortization of Intangibles increased $447
million driven by the amortization of intangible assets acquired in the
Merger.
- Other General Operating Expense increased $1.5
billion related to the $904 million impact of the addition of FleetBoston, $370
million of litigation expenses incurred during 2004 and the $285 million
related to the mutual fund settlement (net of a $90 million reserve established
in 2003). This net settlement expense was divided equally between Global
Capital Markets and Investment Banking and Global Wealth and Investment
Management for business segment reporting purposes.
- Merger and Restructuring Charges, including an
infrastructure initiative, were $618 million in connection with the integration
of FleetBoston’s operations. For more information on Merger and Restructuring
Charges, see Note 2 of the Consolidated Financial Statements.
For more information on Noninterest Expense, see Business Segment Operations.
Income Tax Expense
Income Tax Expense was $7.1 billion, reflecting an effective tax rate of 33.4 percent,
in 2004 compared to $5.1 billion and 31.8 percent, respectively, in 2003. The
difference in the effective tax rate between years resulted primarily from the
application of purchase accounting to certain leveraged leases acquired in the
Merger, an increase in state tax expense generally related to higher tax rates
in the Northeast and the reduction in 2003 of Income Tax Expense resulting from
a tax settlement with the IRS. For more information on Income Tax Expense, see
Note 17 of the Consolidated Financial Statements.
Assets
Average Loans and Leases increased
$116.5 billion, or 33 percent, in 2004. Of this increase, $88.9 billion related
to the addition of FleetBoston. The remaining increase was driven by growth in
our residential mortgage and consumer credit card portfolios of $16.1 billion
and $10.1 billion, respectively. Average Available-for-sale (AFS) Securities
increased $79.7 billion, or 114 percent, as a result of investing excess cash
from deposit growth and repositioning our ALM portfolio. Additionally, average
trading-related assets increased $55.0 billion as we expanded our trading book
to accommodate the needs of our clients. For more information, see
Table I.
Liabilities and Shareholders’ Equity
Average core deposits
increased $130.7 billion, or 36 percent. Of this increase, $95.6 billion is
attributable to the addition of FleetBoston. The remaining increase was
attributable to organic growth which resulted from our continued improvements
in customer satisfaction, new product offerings and our account growth efforts.
At December 31, 2004, our Tier 1 Capital ratio was 8.10 percent, compared to a
ratio of 7.85 percent at December 31, 2003. For more information, see
Table I and Note 14 of the Consolidated Financial Statements.
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