Bank of America 2002 Annual Report Download - page 36

34 BANK OF AMERICA 2002
Assets under management, which consist largely of mutual funds, equi-
ties and bonds, generate fees based on a percentage of their market
value. Compared to the prior year, assets under management remained
relatively flat, as the decline in equity funds due to the weakened eco-
nomic environment was partially offset by an increase in money market
and other short-term fixed income funds. Client brokerage assets, a
source of commission revenue, decreased $8.5 billion, or nine percent,
compared to the prior year. Client brokerage assets consist largely of
investments in bonds, mutual funds, annuities and equities. Assets in
custody represent trust assets managed for customers. Trust assets
encompass a broad range of asset types including real estate, private
company ownership interest, personal property and investments.
Net interest income increased $32 million, or four percent,
primarily due to results of ALM activities, partially offset by the
impact of declines in loan balances and loan yields. Average loans and
leases declined $1.1 billion, or five percent.
Significant Noninterest Income Components
(Dollars in millions) 2002 2001
Asset management fees(1) $ 1,087 $ 1,129
Brokerage income 435 450
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Total investment and brokerage services $ 1,522 $ 1,579
(1) Includes personal and institutional asset management fees, mutual fund fees and
fees earned on assets in custody.
The increase in net interest income was offset by a $108 million, or six
percent, decline in noninterest income. This decline was primarily due
to a decrease in investment and brokerage services activities, which
reflected the current market environment. Declines in personal asset
management fees and brokerage income more than offset an increase
in mutual fund fees.
Provision expense increased $197 million, driven principally by
the charge-off of one large credit in the Private Bank.
The elimination of goodwill amortization of $51 million and lower
revenue-related incentive compensation of $44 million were the pri-
mary drivers of the $64 million, or four percent, decrease in noninterest
expense. These decreases were partially offset by increased expenses
related to the growth of the segment’s distribution capabilities.
Global Corporate and Investment Banking
Global Corporate and Investment Banking provides a broad range of
financial services such as investment banking, capital markets, trade
finance, treasury management, lending, leasing and financial advi-
sory services to domestic and international corporations, financial
institutions and government entities. Clients are supported through
offices in 30 countries in four distinct geographic regions: U.S. and
Canada; Asia; Europe, Middle East and Africa; and Latin America.
Products and services provided include loan origination, merger and
acquisition advisory, debt and equity underwriting and trading, cash
management, derivatives, foreign exchange, leasing, leveraged
finance, structured finance and trade services.
Global Corporate and Investment Banking offers clients a com-
prehensive range of global capabilities through three components:
Global Investment Banking, Global Credit Products and Global
Treasury Services.
Global Investment Banking includes the Corporation’s invest-
ment banking activities and risk management products. Global
Investment Banking underwrites and makes markets in equity securi-
ties, high-grade and high-yield corporate debt securities, commercial
paper, and mortgage-backed and asset-backed securities as well as
provides correspondent clearing services for other securities bro-
ker/dealers and prime-brokerage services. Debt and equity securi-
ties research, loan syndications, mergers and acquisitions advisory
services and private placements are also provided through Global
Investment Banking.
In addition, Global Investment Banking provides risk management
solutions for our global customer base using interest rate, equity, credit
and commodity derivatives, foreign exchange, fixed income and mort-
gage-related products. In support of these activities, the businesses will
take positions in these products and capitalize on market-making activ-
ities. The Global Investment Banking business also takes an active role
in the trading of fixed income securities and is a primary dealer in the
U.S. as well as in several international locations.
Global Credit Products provides credit and lending services for
our clients with our corporate industry-focused portfolios, which also
include leasing. Global Credit Products is also responsible for actively
managing loan and counterparty risk in our portfolios using available
risk mitigation techniques, including credit default swaps.
Global Treasury Services provides the technology, strategies
and integrated solutions to help financial institutions, government
agencies and our corporate clients manage their operations and cash
flows on a local, regional, national and global level.
Total revenue within Global Corporate and Investment Banking
declined $753 million, or eight percent, primarily driven by a decline in
trading–related revenue. Net income decreased $233 million, or 12
percent. The decline in cash basis earnings, partially offset by lower
economic capital due to reductions in loan levels, drove the 19 per-
cent decline in shareholder value added.
Net interest income increased by $265 million, or six percent, as
a result of higher net interest income from trading related activities and
the results of ALM activities. Partially offsetting this increase were
lower levels of commercial loans. Average loans and leases declined
$19.4 billion, or 24 percent to $62.9 billion.
Significant Noninterest Income Components
(Dollars in millions) 2002 2001
Service charges $1,170 $ 1,130
Investment and brokerage services 636 473
Investment banking income 1,481 1,526
Trading account profits 830 1,818