Bank of America 2005 Annual Report Download - page 5

for customers and shareholders in the articles that follow.
First, a review of our key 2005 fi nancial accomplishments.
Strong fi nancial performance. In 2005, we again set
new records for revenue on a fully taxable-equivalent basis,
$56.9 billion, and net income, $16.5 billion, representing
growth of 15 percent and 18 percent, respectively, over last
year. Diluted earnings per share increased to $4.04, an
11 percent rise over 2004. Return on average common share-
holders’ equity rose to 16.51 percent from 16.47 percent.
Our greatest fi nancial challenge in 2005 was the con-
tinuing fl attening of the yield curve, which is the difference
between long- and short-term interest rates. As that differ-
ence shrank, banks, which tend to price deposits based on
short-term rates, were adversely affected. In essence, profi t
margins were compressed. We expect the yield curve to
remain relatively fl at in 2006, providing an opportunity for
well-managed banks to differentiate themselves.
Our strong performance has enabled us to continue our
record of returning capital to shareholders. 2005 was our 28th
consecutive year of raising our quarterly dividend, which in-
creased by 11 percent to $0.50. Over that time, our dividend has
increased at a compound annual growth rate of 13 percent.
As I have always said, the bottom line on our performance
is our stock price. While our total shareholder returns,
which include our dividend, were in line with our peers,
our stock price fell slightly this year as other stocks in our
industry remained fl at. I believe the two factors that weighed
most heavily on our stock were the impact of the yield curve,
which affects all banks, and our acquisition strategy, which
has created uncertainty for some investors.
On the fi rst point, the yield curve is cyclical. It will steepen
again, and net interest yields will rise accordingly. In the
meantime, we have one of the best teams in the business at
managing interest rate risk, and I believe we will continue
to perform well relative to our peers regardless of the interest
rate environment.
The second point raises questions about acquisition
selection, price and risk. We look at companies that can
strengthen our position in a given market, which can be
defi ned by customers, geography or product. We look to
acquire products, technologies, skills or capabilities that
will enhance our value proposition with both customers and
shareholders. Of the many opportunities we have evaluated
over the past several years, we believe that both Fleet and
MBNA met our standards.
Regarding price, we start with a sound financial
analysis, requiring that identifi able cost savings and
projected revenue gains will offset the proposed premium.
From left, Brian T. Moynihan, president, Global Wealth and Investment
Management; Liam E. McGee, president, Global Consumer and Small Business
Banking; and R. Eugene Taylor, president, Global Corporate and Investment
Banking, at the Bank of America Corporate Center in Charlotte.
4 Bank of America 2005