Bank of America 2008 Annual Report Download - page 46

Treasury Services
Treasury Services provides integrated working capital management and
treasury solutions to clients worldwide through our network of proprietary
offices and special clearing arrangements. Our clients include multina-
tionals, middle-market companies, correspondent banks, commercial real
estate firms and governments. Our products and services include treasury
management, trade finance, foreign exchange, short-term credit facilities
and short-term investing options. Net interest income is derived from
interest-bearing and noninterest-bearing deposits, sweep investments,
and other liability management products. Deposit products provide a rela-
tively stable source of funding and liquidity. We earn net interest spread
revenues from investing this liquidity in earning assets through client-
facing lending activity and our ALM activities. The revenue is attributed to
the deposit products using our funds transfer pricing process which takes
into account the interest rates and maturity characteristics of the depos-
its. Noninterest income is generated from payment and receipt products,
merchant services, wholesale card products, and trade services and is
comprised largely of service charges which are net of market-based earn-
ings credit rates applied against noninterest-bearing deposits.
Net income increased $596 million, or 28 percent, in 2008 compared
to 2007 as an increase in noninterest income combined with a decrease
in noninterest expense was partially offset by lower net interest income.
Net interest income decreased $182 million, or five percent, due to
spread compression in spite of strong average deposit growth of $28.1
billion, or 18 percent, due to organic growth as well as the LaSalle acquis-
ition. Deposit growth was accentuated by our clients’ flight-to-safety,
notably seen in activity of our large corporate and hedge fund clients, and
contributed to overall total deposits growth during the latter part of 2008.
Noninterest income grew $862 million, or 26 percent, driven by increased
service charges of $432 million which was due to organic growth,
changes in our pricing structure, and the LaSalle acquisition. In addition,
noninterest income benefited from the $388 million gain related to
Treasury Services’ allocation of the Visa IPO gain. Noninterest expense
decreased $254 million, or seven percent, due to the impact of certain
benefits associated with the Visa IPO transactions partially offset by the
acquisition of LaSalle.
ALM/Other
ALM/Other includes an allocation of a portion of the Corporation’s net
interest income from ALM activities as well as residual amounts related
to discontinued business activities.
Net income increased $721 million to $480 million in 2008 compared
to 2007 mainly due to an increase in net interest income of $883 million,
resulting from a higher contribution from the Corporation’s ALM activities,
which was due in part to investing the Corporation’s deposits at profitable
spreads. In addition, we sold our equity prime brokerage business to BNP
Paribas which resulted in a gain of $224 million which was recorded in all
other income. This increase was partially offset by the absence of a gain
from the sale of our commercial insurance business that was sold in the
fourth quarter of 2007. Noninterest expense decreased mainly due to the
absence of this commercial insurance business.
44 Bank of America 2008