Bank of America 2006 Annual Report Download - page 87

Noninterest Expense. The Provision for Credit Losses increased $912 mil-
lion to $4.2 billion in 2005 mainly due to higher credit card net charge-offs
driven by an increase in bankruptcy-related net charge-offs. In addition, the
provision was impacted by new advances on accounts for which previous
loan balances were sold to the securitization trusts. Noninterest Expense
increased $680 million, or five percent, primarily due to the impact of
FleetBoston and NPC.
Global Corporate and Investment Banking
Net Income increased $468 million, or eight percent, to $6.4 billion in
2005 compared to 2004. Total Revenue increased $1.9 billion, or 10
percent, in 2005 compared to 2004, driven by increases in Net Interest
Income and Noninterest Income. Net Interest Income rose $486 million, or
five percent, due to growth in Average Loans and Leases and Average
Deposits, wider spreads on the deposit portfolio due to higher short-term
interest rates, and the impact of FleetBoston earning assets offset by
spread compression and a flattening yield curve in 2005. Noninterest
Income increased $1.5 billion, or 18 percent, resulting from higher other
noninterest income, Trading Account Profits and Investment and Brokerage
Services. Net Income was also impacted by higher Gains on Sales of Debt
Securities. These increases were partially offset by an increase in Non-
interest Expense and a reduced benefit from Provision for Credit Losses.
The Provision for Credit Losses increased $595 million to negative $291
million in 2005. The negative provision reflected continued improvement in
commercial credit quality although at a slower pace than experienced in
2004. An improved risk profile in Latin America and reduced uncertainties
resulting from the completion of credit-related integration activities for
FleetBoston also contributed to the negative provision. Noninterest
Expense increased by $832 million, or eight percent, driven by higher
performance-based incentive compensation, processing costs and the
impact of FleetBoston, partially offset by nonrecurring charges recognized
in 2004 for the segment’s share of the mutual fund settlement and other
litigation expenses.
Global Wealth and Investment Management
Net Income increased $684 million, or 42 percent, to $2.3 billion in 2005
compared to 2004. Total Revenue increased $1.3 billion, or 22 percent, in
2005. Net Interest Income increased $899 million, or 31 percent, driven
by the addition of the FleetBoston portfolio and organic growth in deposits
and loans in PB&I and The Private Bank.Global Wealth and Investment
Management also benefited from the migration of deposits from Global
Consumer and Small Business Banking. The total cumulative average
impact of migrated balances was $39.3 billion in 2005 compared to
$11.1 billion in 2004. Noninterest Income increased $417 million, or 14
percent, driven by increased Investment and Brokerage Services revenue
primarily due to the impact of FleetBoston. These increases were offset by
higher Noninterest Expense. Noninterest Expense increased $252 million,
or seven percent, related to higher Personnel expense driven by PB&I
growth in the Northeast and the impact of FleetBoston, partially offset by
nonrecurring charges recognized in 2004 for the segment’s share of the
mutual fund settlement and other litigation expenses.
All Other
Net Income increased $112 million, or 18 percent, to $744 million in
2005 compared to 2004. In 2005 compared to 2004, Total Revenue rose
$379 million to $684 million, primarily driven by an increase in Equity
Investment Gains in 2005. Offsetting this increase was a decline in the
fair value of derivative instruments which were used as economic hedges
of interest and foreign exchange rates as part of our ALM activities. Provi-
sion for Credit Losses decreased $277 million to $69 million in 2005,
resulting from changes to components of the formula and other factors
effective in 2004, and reduced credit costs in 2005 associated with pre-
viously exited businesses. These decreases were offset in part by the
establishment of a $50 million reserve for estimated losses associated
with Hurricane Katrina. Gains on Sales of Debt Securities decreased $794
million to $823 million primarily due to lower gains realized in 2005 on
mortgage-backed securities and corporate bonds than in 2004. Merger
and Restructuring Charges decreased $206 million as the FleetBoston
integration was nearing completion and the infrastructure initiative was
completed in the first quarter of 2005. Income Tax Expense decreased
$155 million in 2005, driven by an increase in tax benefits for low-income
housing credits.
Bank of America 2006 85