Credit quality
All major commercial asset quality indicators showed positive trends throughout the year. The credit card provision grew as a result of card portfolio growth, the return of previously securitized loans to the balance sheet and increases in minimum payment requirements. Consumer asset quality remained strong in all other categories.
Provision expense was $2.77 billion in 2004, a 2% decline from 2003 despite the addition of Fleet. Net charge-offs totaled $3.11 billion, or 0.66% of loans and leases, compared to $3.11 billion, or 0.87% of loans and leases in 2003.
Nonperforming assets were 0.47% of total loans, leases and foreclosed properties, or $2.46 billion, as of December 31, 2004. This compared to 0.81%, or $3.02 billion, on December 31, 2003.
The allowance for loan and lease losses stood at 1.65% of loans and leases, or $8.63 billion, on December 31, 2004. This compared to 1.66%, or $6.16 billion, on December 31, 2003. Criticized exposure declined from $12.7 billion or 5.9% of total utilized commercial exposure in 2003, to $10.2 billion or 3.4% in 2004.
Capital
Bank of America’s capital position remained strong in 2004. Total shareholders’ equity was $99.6 billion at December 31, 2004, representing 9% of period-end assets of $1.1 trillion. The Tier 1 capital ratio rose to 8.1% from 7.9% at the end of 2003.
Business segments
Global Consumer and Small Business Banking earned $6.55 billion. In addition to adding Fleet, this segment achieved strong growth in checking and savings accounts, which helped to drive double-digit growth in deposit balances. Home equity and credit card loan outstandings grew. Mortgage results were adversely affected by higher interest rates, which significantly reduced refinance volumes, and by adjustments to the value of mortgage servicing rights.
Global Business and Financial Services earned $2.83 billion. The main drivers of this segment’s performance were significant improvements in credit quality, which resulted in negative provision expense. Excluding the impact of Fleet, loans grew modestly during the year and deposits also rose. Treasury management fee growth also contributed to higher net income.
Global Capital Markets and Investment Banking earned $1.95 billion in 2004 and had negative provision expense due to improved credit quality. Excluding the impact of Fleet, investment banking income increased, reflecting the company’s continued buildout of that platform, and trading-related revenue also rose. Results were adversely impacted by the mutual fund settlement.
Global Wealth and Investment Management earned $1.58 billion. Excluding the addition of Fleet, growth in assets under management and earnings was driven by strong performance in the credit portfolios of Premier Banking and The Private Bank and increased market valuations in the asset management portfolio. Results were adversely impacted by the mutual fund settlement.
|
