Bank of America 2002 Annual Report Download - page 27

BANK OF AMERICA 2002 25
Management’s Discussion and Analysis of
Results of Operations and Financial Condition
Bank of America Corporation and Subsidiaries
This report contains certain statements that are forward-looking
within the meaning of the Private Securities Litigation Reform Act of
1995. These statements are not guarantees of future performance and
involve certain risks, uncertainties and assumptions that are difficult
to predict. Actual outcomes and results may differ materially from those
expressed in, or implied by, our forward-looking statements. Words such
as “expects,” “anticipates,” “believes,” “estimates,” other similar
expressions or future or conditional verbs such as “will,” “should,”
“would,” and “could” are intended to identify such forward-looking
statements. Readers of the Corporation’s Annual Report should not
rely solely on the forward-looking statements and should consider all
uncertainties and risks throughout this report. The statements are rep-
resentative only as of the date they are made, and the Corporation
undertakes no obligation to update any forward-looking statement.
Possible events or factors that could cause results or performance
to differ materially from those expressed in our forward-looking state-
ments include the following: changes in general economic conditions
and economic conditions in the geographic regions and industries in
which the Corporation operates which may affect, among other
things, the level of nonperforming assets, charge-offs, and provision
expense; changes in the interest rate environment which may reduce
interest margins and impact funding sources; changes in foreign
exchange rates; adverse movements and volatility in debt and equity
capital markets; changes in market rates and prices which may
adversely impact the value of financial products including securities,
loans, deposits, debt and derivative financial instruments and other
similar financial instruments; unfavorable political conditions includ-
ing acts or threats of terrorism and actions taken by governments in
response to terrorism; litigation liabilities, including costs, expenses,
settlements and judgments; changes in domestic or foreign tax laws,
rules and regulations as well as Internal Revenue Service (IRS) or other
governmental agencies’ interpretations thereof; various monetary and
fiscal policies and regulations, including those determined by the
Federal Reserve Board, the Office of the Comptroller of Currency, the
Federal Deposit Insurance Corporation and state regulators; competi-
tion with other local, regional and international banks, thrifts, credit
unions and other nonbank financial institutions; ability to grow core
businesses; ability to develop and introduce new banking-related prod-
ucts, services and enhancements and gain market acceptance of such
products; mergers and acquisitions and their integration into the
Corporation; decisions to downsize, sell or close units or otherwise
change the business mix of the Corporation; and management’s ability
to manage these and other risks.
The Corporation is headquartered in Charlotte, North Carolina,
operates in 21 states and the District of Columbia, and has offices
located in 30 countries. The Corporation provides a diversified range
of banking and certain non-banking financial services and products
both domestically and internationally through four business seg-
ments: Consumer and Commercial Banking, Asset Management,
Global Corporate and Investment Banking and Equity Investments.
The following Management’s Discussion and Analysis of Results of
Operations and Financial Condition should be read in conjunction
with the Statistical Information beginning on page 56. When a note to
the consolidated financial statements is referred to in Management’s
Discussion and Analysis of Results of Operations and Financial
Condition such as by the word “see,” then such note is incorporated by
reference into Management’s Discussion and Analysis of Results of
Operations and Financial Condition.
Performance Overview
Net income totaled $9.2 billion, or $5.91 per diluted common share
in 2002, compared to $6.8 billion, or $4.18 per diluted common
share in 2001. The return on average common shareholders’ equity
was 19.44 percent in 2002 compared to 13.96 percent in 2001.
Goodwill was not expensed in 2002 as a result of a new rule issued
by the Financial Accounting Standards Board (FASB). During 2001,
we expensed $662 million or $0.38 per diluted common share asso-
ciated with goodwill. Prior year results also included $1.25 billion, or
$0.77 per diluted common share, of after-tax business exit charges in
the third quarter of 2001.
In 2002, we saw continued strong financial performance in our
Consumer and Commercial Banking business segment; however, a
challenging economic environment for our market-sensitive busi-
nesses and credit quality issues in the Global Corporate and
Investment Banking and Asset Management segments negatively
impacted financial results.
In the fourth quarter of 2002, we increased our quarterly divi-
dend to $0.64 per share bringing the 2002 total dividend to $2.44 per
share. Our average total shareholder return (stock price appreciation
and dividends paid) over the past three years was 15.9 percent, rank-
ing us first in our peer group. Our one-year total shareholder return
was 14.1 percent, second in our peer group. In addition, we repur-
chased 109 million shares and issued 50 million shares under
employee plans in 2002, resulting in a net return of capital to our
shareholders of $4.8 billion.
During 2002, we also experienced strong core business funda-
mentals in the areas of customer satisfaction and product/market per-
formance that have created momentum for 2003.
Customer satisfaction continued to increase during the year,
resulting in better retention and increased opportunities to deepen
relationships with our customers. Delighted or highly satisfied cus-
tomers, those who rate us a 9 or 10 on a 10-point scale, increased 10.4
percent from a year ago. An important factor driving the increase was
a 24 percent reduction in errors reported by our customers.