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In 2005 Bank of America earned a record $16.5 billion,
as revenue growth accompanied by strong operating
leverage drove an 18 percent increase in profit over 2004. Diluted earnings per share rose 11 percent to $4.04. Return on average common equity for the year was 17 percent.
Revenue:Fully taxable-equivalent revenue grew 15 percent to $56.9 billion from $49.7 billion in 2004. Revenue growth was driven by a 21 percent increase in noninterest income to $25.4 billion, including higher equity investment gains, card income and trading account profits and the addition of Fleet, which was acquired on April 1, 2004.
Net interest income on a fully taxable-equivalent basis increased 10 percent to $31.6 billion from $28.7 billion in 2004. The increase was driven by the addition of Fleet, consumer and middle market business loan growth, higher domestic deposit levels and a larger securities portfolio partially offset by the effects of a flattening yield curve and a lower trading-related contribution.
Gains on sales of debt securities were $1.1 billion in 2005, compared to $1.7 billion in 2004.
Efficiency:Noninterest expense increased 6 percent to $28.7 billion from $27.0 billion a year ago, primarily due to the addition of Fleet and an investment in the capital markets business. Included in 2005 expenses were $412 million in pre-tax merger and restructuring charges related to the Fleet merger. Full-year 2005 cost savings from the merger with Fleet were $1.85 billion. The efficiency ratio for 2005 was 50.4 percent, reaching the company’s long-term target of 50 percent.
Credit Quality:Credit costs increased. Provision expense was $4.0 billion in 2005, a 45 percent increase from 2004. Net charge-offs totaled $4.6 billion, or 0.85 percent of loans and leases, compared to $3.1 billion, or 0.66 percent of loans and leases in 2004. The increase in credit costs was primarily driven by the credit card portfolio, including increased bankruptcy filings, and a lower provision benefit from the commercial portfolio as the rate of improvement in credit quality slowed.
Capital Management:For 2005, Bank of America paid $7.7 billion in cash dividends to common shareholders. The company also issued 79.6 million common shares, primarily related to associate stock options and ownership plans, and repurchased 126.4 million common shares for $5.8 billion, resulting in a net decrease of 46.9 million common shares.
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Business Segment Results:Global Consumer and Small Business Banking earned $7.2 billion in 2005, a 20 percent increase from 2004. Revenue grew 15 percent to $28.9 billion, primarily due to continued strong growth in the card business, ongoing deposit account growth, balance growth and increased activity, which generated increased service charge income. Also contributing were significantly higher corporate mortgage banking income, primarily due to a writedown of mortgage servicing rights in 2004, and the addition of Fleet.
Global Business and Financial Services earned $4.6 billion, a 19 percent increase from 2004. Results were driven by strong loan growth across all business lines, which included the purchase of loans from General Motors Acceptance Corp. as well as the addition of Fleet. Loan growth was especially robust in the Northeast. Revenue grew 21 percent to $11.2 billion.
Average loans and leases grew by $28.8 billion, countering the effects of continued spread compression. Strong deposit growth was fueled by increases in Commercial Real Estate and Business Banking.
Global Capital Markets and Investment Banking net income declined 10 percent to $1.7 billion in 2005, primarily due to a decline in the provision benefit as a result of slowing improvement in credit quality. Revenue was essentially unchanged at $9.0 billion in 2005 and 2004. Noninterest income increased 14 percent, led by trading profits and equity commissions that more than offset the decline in trading-related net interest income. Investment banking revenue was down slightly, as were service charges.
Global Wealth and Investment Management increased its net income by 49 percent, driven by the addition of Fleet, higher asset management fees, higher loan volume and higher deposit-related revenue due in part to the migration of Premier Banking relationships from Global Consumer and Small Business Banking. Asset management fees increased 21 percent from 2004 due to the addition of Fleet and the growth of $30.9 billion, or 7 percent, in assets under management from Dec. 31, 2004. Revenue increased 25 percent to $7.4 billion due in part to the migration of relationships from Global Consumer and Small Business Banking. 
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