Bank of America 2013 Annual Report Download - page 123

Bank of America 2013 121
The income tax benefit for 2011 was driven by our recurring
tax preference items, a $1.0 billion benefit from the release of the
remaining valuation allowance applicable to the Merrill Lynch
capital loss carryover deferred tax asset and a benefit of $823
million for planned realization of previously unrecognized deferred
tax assets related to the tax basis in certain subsidiaries. These
benefits were partially offset by a $782 million charge for the two
percent U.K. corporate income tax rate reduction enacted in 2011.
The $3.2 billion of goodwill impairment charges recorded during
2011 were non-deductible.
Business Segment Operations
Consumer & Business Banking
CBB recorded net income of $5.5 billion in 2012 compared to
$7.8 billion in 2011 with the decrease primarily due to lower
revenue and higher provision for credit losses, partially offset by
lower noninterest expense. Net interest income decreased $2.4
billion to $19.9 billion due to lower average loan balances as well
as compressed deposit spreads due to the continued low rate
environment. Noninterest income decreased $1.6 billion to $9.9
billion due to lower interchange fees as a result of implementing
the Durbin Amendment, lower gains on sales of portfolios and the
impact of charges related to our consumer protection products.
The provision for credit losses increased $471 million to $4.1
billion as portfolio trends stabilized during 2012. Noninterest
expense decreased $917 million to $17.0 billion primarily due to
lower FDIC and operating expenses, partially offset by an increase
in litigation expense.
Consumer Real Estate Services
CRES recorded a net loss of $6.4 billion in 2012 compared to
$19.4 billion in 2011 with the decrease in the net loss primarily
driven by mortgage banking income of $5.6 billion in 2012
compared to a loss of $8.1 billion in 2011. The representations
and warranties provision for 2011, which is included in mortgage
banking income, included $8.6 billion related to the settlement
with BNY Mellon and $7.0 billion related to other non-GSE, and to
a lesser extent, GSE exposures. Also contributing to the decrease
in the net loss was a decrease in the provision for credit losses
and a decline in noninterest expense, partially offset by lower other
noninterest income. Mortgage banking income increased $13.7
billion due to an $11.7 decrease in the representations and
warranties provision, and higher servicing income and core
production revenue. The provision for credit losses decreased $3.1
billion to $1.4 billion due to improved portfolio trends and
increasing home prices in both the non-PCI and PCI home equity
loan portfolios. Noninterest expense decreased $4.5 billion to
$17.2 billion due to a decline in litigation expense and lower
mortgage-related assessments, waivers and similar costs related
to foreclosure delays, partially offset by higher default-related
servicing costs and a provision for the 2013 IFR Acceleration
Agreement. Noninterest expense in 2011 included a $2.6 billion
goodwill impairment charge.
Global Wealth & Investment Management
GWIM recorded net income of $2.2 billion in 2012 compared to
$1.7 billion in 2011 with the increase driven by lower noninterest
expense and lower provision for credit losses. Revenue remained
relatively unchanged as an increase in asset management fees
due to higher AUM flows and higher market levels was offset by
lower transactional revenue and lower net interest income due to
the impact of the continued low rate environment. The provision
for credit losses decreased $132 million to $266 million driven
by lower delinquencies and improving portfolio trends within the
residential mortgage portfolio. Noninterest expense decreased
$615 million to $12.7 billion due to lower FDIC expense, lower
litigation costs and other expense reductions, partially offset by
higher production-related expenses.
Global Banking
Global Banking recorded net income of $5.3 billion in 2012
compared to $5.6 billion in 2011 with the decrease primarily driven
by an increase in the provision for credit losses, partially offset by
lower noninterest expense. Revenue remained relatively
unchanged with lower investment banking fees and lower net
interest income as a result of spread compression and the benefit
in the prior year from higher accretion on acquired portfolios, largely
offset by the impact of higher average loan and deposit balances
and gains on liquidation of certain legacy portfolios. The provision
for credit losses was a benefit of $342 million compared to a
benefit of $1.3 billion in 2011 with the reduction in the benefit
reflecting stabilization of asset quality, core commercial loan
growth and the impact of a higher volume of loan resolutions in
the commercial real estate portfolio in the prior year. Noninterest
expense decreased $410 million to $7.6 billion primarily due to
lower personnel and operating expenses.
Global Markets
Global Markets recorded net income of $1.2 billion in 2012
compared to $1.1 billion in 2011. Sales and trading revenue
decreased due to net DVA losses compared to net DVA gains in
the prior year. Excluding net DVA, sales and trading revenue
increased $2.4 billion primarily driven by our FICC business as a
result of improved performance in our rates and currencies, and
credit-related businesses due to an improved global economic
climate, and a gain on the sale of an equity investment. Noninterest
expense decreased $1.6 billion to $11.3 billion due to a reduction
in personnel-related expenses and in brokerage, clearing and
exchange fees, and other operating expenses. Income tax expense
included a $781 million charge for remeasurement of certain
deferred tax assets due to decreases in the U.K. corporate tax
rate compared to a similar charge of $774 million in 2011.
All Other
All Other recorded a net loss of $3.7 billion in 2012 compared to
net income of $4.6 billion in 2011 primarily due to negative fair
value adjustments on structured liabilities of $5.1 billion related
to the improvement in our credit spreads in 2012 compared to
$3.3 billion of positive fair value adjustments in 2011, a $6.0
billion decrease in equity investment income as 2011 included a
$6.5 billion gain on the sale of portion of our investment in CCB,
and lower gains on sales of debt securities. Partially offsetting
these items was a reduction in the provision for credit losses of
$3.6 billion to $2.6 billion. The income tax benefit included $1.7
billion attributable to the excess of foreign tax credits recognized
in the U.S. upon repatriation of the earnings of certain subsidiaries
over the related U.S. tax liability.