Bank of America 2015 Annual Report Download - page 106

104 Bank of America 2015
Noninterest Income
Noninterest income was $44.3 billion in 2014, a decrease of $2.4
billion compared to 2013.
Investment and brokerage services income increased $1.0
billion primarily driven by increased asset management fees
driven by the impact of long-term AUM inflows and higher market
levels.
Equity investment income decreased $1.8 billion to $1.1 billion
in 2014 primarily due to a lower level of gains compared to 2013
and the continued wind-down of GPI.
Trading account profits decreased $747 million, which included
a charge of $497 million in 2014 related to the implementation
of an FVA in Global Markets and net DVA losses on derivatives
of $150 million in 2014 compared to losses of $509 million in
2013.
Mortgage banking income decreased $2.3 billion primarily
driven by lower servicing income and core production revenue,
partially offset by a lower representations and warranties
provision.
Other income (loss) improved $1.3 billion due to an increase of
$1.1 billion in net DVA gains on structured liabilities as our
spreads widened, and gains associated with the sales of
residential mortgage loans, partially offset by an increase in
U.K. consumer PPI costs. Results for 2013 also included a write-
down of $450 million on a monoline receivable.
Provision for Credit Losses
The provision for credit losses was $2.3 billion in 2014, a decrease
of $1.3 billion compared to 2013. The provision for credit losses
was $2.1 billion lower than net charge-offs for 2014, resulting in
a reduction in the allowance for credit losses. The decrease in the
provision from 2013 was driven by portfolio improvement, including
increased home prices in the consumer real estate portfolio and
lower unemployment levels driving improvement in the credit card
portfolios, as well as improved asset quality in the commercial
portfolio. Partially offsetting this decline was $400 million of
additional costs in 2014 associated with the consumer relief
portion of the DoJ Settlement.
Net charge-offs totaled $4.4 billion, or 0.49 percent of average
loans and leases in 2014 compared to $7.9 billion, or 0.87 percent
in 2013. The decrease in net charge-offs was due to credit quality
improvement across all major portfolios and the impact of
increased recoveries primarily from nonperforming and delinquent
loan sales.
Noninterest Expense
Noninterest expense was $75.1 billion in 2014, an increase of
$5.9 billion compared to 2013. The increase was primarily driven
by higher litigation expense. Litigation expense increased $10.3
billion primarily as a result of charges related to the settlements
with the DoJ and the Federal Housing Finance Agency (FHFA). The
increase in litigation expense was partially offset by a decrease
of $3.2 billion in default-related staffing and other default-related
servicing expenses in LAS.
Income Tax Expense
The income tax expense was $2.0 billion on pretax income of $6.9
billion in 2014 compared to income tax expense of $4.7 billion in
2013. The effective tax rate for 2014 was 29.5 percent and was
driven by our recurring tax preference items, the resolution of
several tax examinations and tax benefits from non-U.S.
restructurings, partially offset by the non-deductible treatment of
certain litigation charges.
The effective tax rate for 2013 was 29.3 percent and was driven
by our recurring tax preference items and by certain tax benefits
related to non-U.S. operations, partially offset by the $1.1 billion
negative impact from the U.K. 2013 Finance Act, enacted in July
2013, which reduced the U.K. corporate income tax rate by three
percent. The $1.1 billion charge resulted from remeasuring our
U.K. net deferred tax assets, in the period of enactment, using
the lower rates.
Business Segment Operations
Consumer Banking
Consumer Banking recorded net income of $6.4 billion in 2014
compared to $6.3 billion in 2013 with the increase primarily driven
by lower noninterest expense and provision for credit losses,
partially offset by lower revenue. Net interest income decreased
$442 million to $20.2 billion in 2014 due to lower average card
loan balances and yields, partially offset by the beneficial impact
of an increase in investable assets as a result of higher deposit
balances. Noninterest income decreased $681 million to $10.6
billion in 2014 primarily due to lower mortgage banking income
and lower revenue from consumer protection products, partially
offset by portfolio divestiture gains, and higher service charges
and card income. The provision for credit losses decreased $486
million to $2.7 billion in 2014 primarily as a result of improvements
in credit quality. Noninterest expense decreased $1.0 billion to
$17.9 billion in 2014 primarily driven by lower personnel,
operating, litigation and FDIC expenses.
Global Wealth & Investment Management
GWIM recorded net income of $3.0 billion in both 2014 and 2013
as an increase in noninterest income and lower credit costs were
offset by lower net interest income and higher noninterest
expense. Net interest income decreased $228 million to $5.8
billion in 2014 as a result of the low rate environment, partially
offset by the impact of loan growth. Noninterest income, primarily
investment and brokerage services, increased $842 million to
$12.6 billion in 2014 driven by increased asset management fees
due to the impact of long-term AUM flows and higher market levels,
partially offset by lower transactional revenue. Noninterest
expense increased $615 million to $13.7 billion in 2014 primarily
due to higher revenue-related incentive compensation and support
expenses, partially offset by lower other expenses.
Global Banking
Global Banking recorded net income of $5.8 billion in 2014
compared to $5.2 billion in 2013 with the increase primarily driven
by a reduction in the provision for credit losses and, to a lesser
degree, an increase in revenue, partially offset by higher
noninterest expense. Revenue increased $171 million to $17.6
billion in 2014 primarily from higher net interest income. The
provision for credit losses decreased $820 million to $322 million
in 2014 driven by improved credit quality, and 2013 included
increased reserves from loan growth. Noninterest expense
increased $119 million to $8.2 billion in 2014 primarily from
additional client-facing personnel expense and higher litigation
expense.