Home » Bank of America’s (BAC) CEO Brian Moynihan on Q3 2014 Results – Earnings Call Transcript

Bank of America’s (BAC) CEO Brian Moynihan on Q3 2014 Results – Earnings Call Transcript

Bank of America Corporation (NYSE:BAC)

Q3 2014 Results Earnings Conference Call

October 15, 2014 08:30 AM ET


Lee McEntire – Investor Relations

Brian Moynihan – Chief Executive Officer

Bruce Thompson – Chief Financial Officer


Betsy Graseck – Morgan Stanley

Glenn Schorr – ISI

Jim Mitchell – Buckingham Research

Jon McDonald – Sanford Bernstein

Mike Mayo – CLSA

Matt O’Connor – Deutsche Bank

Guy Moszkowski – Autonomous Research

Brennan Hawken – UBS

Ken Usdin – Jefferies

Paul Miller – FBR Capital Markets

Matthew Burnell – Wells Fargo

Chris Kotowski – Oppenheimer

Steven Chubak – Nomura


Good day, everyone. And welcome to today’s program. At this time, all participants are in a listen-only mode. Later you’ll have the opportunity to ask questions during the question-and-answer session. (Operator Instructions). Please note this call is being recorded and I will be standing by should you need any assistance.

It is now my pleasure to turn the conference over to Mr. Lee McEntire. Please go ahead, sir.

Lee McEntire – Investor Relations

Good morning. Thanks everybody on the phone as well as the webcast for joining us this morning for our third quarter results. Hopefully you’ve had a chance to review the earnings release documents available on our website.

Before I turn the call over to Brian and Bruce, let me just remind you, we may make some forward-looking statements today. For further information on those, please refer to either our earnings release documents, our website or our other SEC filings.

So with that, let me turn it over to Brian Moynihan, our CEO for some opening comments before Bruce goes through the details.

Brian Moynihan – Chief Executive Officer

Thanks, Lee, and good morning everyone. Thank you for joining us to review our third quarter results. As you know, our bottom-line results were heavily impacted by previously announced settlement with Department of Justice. But given that, I’m still encouraged by what we accomplished this quarter. Our business has generated enough earnings to absorb the $5.3 billion charge and still reported positive net income before preferred dividends.

ALSO READ:   Transcript: Joe Gebbia on How Airbnb Designs for Trust at TED Talk

Now, the themes that we see are consistent with the past several quarters. You can see in our numbers a prudent balance sheet management; you can see in the numbers good core expense control; you can see in the numbers continued credit improvement and you can see in the numbers solid business activity.

Before Bruce takes you through the detail of the quarter, I thought I’d focus quickly on the profitability of our business segments and some of the key statistics that give rise thereto. If you look, we’ve included in the appendix the materials on pages 18 and 20 some information about net income, PPNR and business statistics.

So you step back and look, you can see from our release, the company reported $2.9 billion in year-to-date pretax net income that includes and overcomes 15.6 billion in pretax litigation costs to resolve primarily legacy mortgage issues.

Now we’re not suggesting that we want to incur litigation cost going forward but what this demonstrates is how much progress we’ve made behind the noise of significant legal settlements. So you step back and think about the businesses, you can see on appendix slide 18 a graphic showing year-to-date net income comparative performance by the businesses.

Let’s first focus on our Consumer and Business Banking segment. Year-to-date net income was $5.3 billion in 2014. That compares to $4.6 billion after tax in 2013. The return on average allocated capital in Consumer & Business Banking was 24%. It is our largest business and it’s had a good year. Our Global Wealth and Investment Management business had net income of year-to-date of $2.3 billion in 2014 that’s up 3% from 2013. Now this business, our GWIM business has a pretax margin of 26% and has returns on allocated capital of 25%.

As we move to our Global Banking business, that’s the business provides lending, treasury services, investment banking activities to middle markets and large corporate clients around the world. That business earned $4 billion after tax so far this year, up 8% from 2013 and generated returns on allocated capital of 17%. Those three businesses together have great annuity streams and hold us in good state as we look forward.

ALSO READ:   What They Don't Teach in Business School about Entrepreneurship (Full Transcript)

Our Global Markets business which obviously is more affected by what’s going on in the market on the given quarter has earned $2.9 billion after tax this year and for the first nine months versus $2.7 billion in 2013 when you adjust for DVA and in 2013 you exclude the UK tax changes.

So in total, these four businesses generated $14.5 billion net income after-tax for the first nine months of 2014. That $14.5 billion is up 10% from last year. You can look on slide 19 and you can see on a pretax pre-provision basis which some of you also focus on, we are 4% year-over-year. And you can see on pages 20 and 21 the business statistics over the last couple of years which give rise to these results.

We’ve made real progress in the four businesses and we continue to work on the Consumer Real Estate segment and losses therein. But that real progress shows in the operating leverage profitability of these businesses and we expect that momentum to continue as we move the other side of the mortgage issues.

With that, I’ll turn it over to Bruce.

Bruce Thompson – Chief Financial Officer

Thanks Brian and good morning everyone. This quarter does reflect what we believe is very solid execution and a lot of what we’ve been consistently talking with all of you about. We maintained a strong balance sheet as a foundation to operate from. We continued to rationalize our balance sheet for liquidity, profitability as well as evolving regulatory changes. Our revenue has shown relative stability and our non-litigation expenses continue to be reduced. Charge-offs have continued to come down, and we resolved significant legacy mortgage exposures during the quarter.

Pages: First |1 | ... | | Last | View Full Transcript

Leave a Comment