Bank of America Corporation reported second-quarter 2009 net income of USD3.2 billion. After deducting preferred dividends of USD805 million, including USD713 million paid to the U.S. government, diluted earnings per share were USD0.33.
Those results compared with net income of USD3.4 billion, or diluted earnings per share of USD0.72 during the year-ago period. For the first half of 2009, Bank of America earned USD7.5 billion, or USD0.75 per share.
Results were driven by continued strong revenue performance in the wholesale capital markets businesses as well as in home loans, complemented by the previously announced gains on the sale of China Construction Bank (CCB) shares and the sale of the company’s merchant processing business to a joint venture. These positives were somewhat offset by continuing high credit costs, including additions to the reserve for loan and lease losses, as well as significant negative credit valuation adjustments on certain liabilities including the Merrill Lynch structured notes and the impact of a special Federal Deposit Insurance Corp. (FDIC) assessment.
Bank of America finished the second quarter with its strongest capital position in recent memory, with a Tier 1 Capital ratio of 11.93% as well as a strong liquidity position among global banks.
Second Quarter 2009 Business Highlights
Bank of America increased its Tier 1 common capital by nearly $40 billion through multiple actions during the quarter that included issuing shares of common stock, exchanging certain non-government preferred stock for common stock, and asset sales.
Sales and trading revenue, excluding credit valuation adjustments on derivative liabilities and market disruption charges, rose to a record USD6.7 billion.
During the quarter, Bank of America announced the sale of its merchant processing business to a joint venture, which included First Data Corp. The transaction is expected to deliver next-generation payments solutions to merchants.
Bank of America funded USD110.6 billion in first mortgages, helping nearly 500,000 people either purchase a home or refinance their existing mortgage, including USD24.3 billion in mortgages made to 154,000 low- and moderate-income borrowers. Approximately 29% of first mortgages were for purchases.
Credit extended during the quarter, including commercial renewals of USD55 billion, was more than USD211 billion, compared with USD183 billion in the first quarter. New credit included USD111 billion in mortgages, USD78 billion in commercial non-real estate, approximately USD9 billion in commercial real estate, USD4 billion in domestic and small business card, USD4 billion in home equity products and more than USD5 billion in other consumer credit.
During the second quarter, Small Business Banking extended more than USD580 million in new credit comprised of credit cards, loans and lines of credit to more than 35,000 customers.
To help homeowners avoid foreclosure, Bank of America has provided rate relief or agreed to modifications with approximately 150,000 customers for the first six months of 2009, compared with more than 230,000 for all of 2008 for Bank of America and Countrywide. In addition, approximately 80,000 Bank of America customers are already in a trial period modification or were in the process of responding to an offer under the Making Home Affordable program through mid-July.
Average retail deposits in the quarter increased USD136.3 billion, or 26%, from a year earlier, including USD104.3 billion in balances from Merrill Lynch and Countrywide. Excluding Countrywide and Merrill Lynch, Bank of America grew retail deposits USD32.0 billion, or 6 percent, from the year-ago quarter.
“Having positive net income in an extremely challenging environment speaks to the diversity and strength of our business model as well as the extraordinary effort put forth by all of our associates,” says Kenneth D. Lewis, chief executive officer and president. “Our goals during this difficult time have been to enhance the strength of our balance sheet and capital position and to continue to improve our earning power while dealing with the credit issues facing our industry due to the recession.
“Difficult challenges lie ahead from continued weakness in the global economy, rising unemployment and deteriorating credit quality that will affect our performance for the rest of the year and into 2010. However, we are convinced that Bank of America will weather the storm and emerge as an acknowledged leader in financial services in the United States and around the world. Most importantly, we continue to serve our customers and clients around the world every day, helping them with their accounts, meeting their financial needs and adding new business.”
L.D.