Bank of America 2009 Annual Report Download - page 85

Table 34 Commercial Credit Exposure by Industry (1, 2, 3)
December 31
Commercial Utilized Total Commercial Committed
(Dollars in millions) 2009 2008 2009 2008
Diversified financials $ 68,876 $ 50,327 $110,948 $103,306
Real estate
(4)
75,049 79,766 91,479 103,889
Government and public education 44,151 39,386 61,446 58,608
Capital goods 23,834 27,588 47,413 52,522
Healthcare equipment and services 29,584 31,280 46,370 46,785
Consumer services 28,517 28,715 44,164 43,948
Retailing 23,671 30,736 42,260 50,102
Commercial services and supplies 23,892 24,095 34,646 34,867
Individuals and trusts 25,191 22,752 33,678 33,045
Materials 16,373 22,825 32,898 38,105
Insurance 20,613 11,223 28,033 17,855
Food, beverage and tobacco 14,812 17,257 27,985 28,521
Utilities 9,217 8,230 25,229 19,272
Energy 9,605 11,885 23,619 22,732
Banks 20,299 22,134 23,384 26,493
Media 11,236 8,939 22,832 19,301
Transportation 13,724 13,050 19,597 18,561
Religious and social organizations 8,920 9,539 11,371 12,576
Pharmaceuticals and biotechnology 2,875 3,721 10,343 10,111
Consumer durables and apparel 4,374 6,219 9,829 10,862
Technology hardware and equipment 3,135 3,971 9,671 10,371
Telecommunication services 3,558 3,681 9,478 8,036
Software and services 3,216 4,093 9,306 9,590
Food and staples retailing 3,680 4,282 6,562 7,012
Automobiles and components 2,379 3,093 5,339 6,081
Other 3,596 9,962 7,390 12,781
Total commercial credit exposure by industry $494,377 $498,749 $795,270 $805,332
Net credit default protection purchased on total commitments
(5)
$ (19,025) $ (9,654)
(1) Total commercial utilized and total commercial committed exposure includes loans and letters of credit accounted for under the fair value option and are comprised of loans outstanding of $4.9 billion and $5.4 billion,
and issued letters of credit with a notional amount of $1.7 billion and $1.4 billion at December 31, 2009 and 2008. In addition, total commercial committed exposure includes unfunded loan commitments with a
notional amount of $25.3 billion and $15.5 billion at December 31, 2009 and 2008.
(2) Includes small business commercial – domestic exposure.
(3) At December 31, 2009, total commercial utilized and total commercial committed exposure included $88.5 billion and $114.2 billion of exposure due to the acquisition of Merrill Lynch which included $31.7 billion and
$34.7 billion in diversified financials and $12.3 billion and $13.0 billion in insurance with the remaining exposure spread across various industries.
(4) Industries are viewed from a variety of perspectives to best isolate the perceived risks. For purposes of this table, the real estate industry is defined based upon the borrowers’ or counterparties’ primary business
activity using operating cash flow and primary source of repayment as key factors.
(5) Represents net notional credit protection purchased. Refer to the Risk Mitigation discussion beginning on page 83 for additional information.
Risk Mitigation
Credit protection is purchased to cover the funded portion as well as the
unfunded portion of certain credit exposure. To lessen the cost of obtain-
ing our desired credit protection levels, credit exposure may be added
within an industry, borrower or counterparty group by selling protection.
At December 31, 2009 and 2008, we had net notional credit default
protection purchased in our credit derivatives portfolio to hedge our
funded and unfunded exposures for which we elected the fair value option
as well as certain other credit exposures of $19.0 billion and $9.7 billion.
The increase from December 31, 2008 is primarily driven by the acquis-
ition of Merrill Lynch. The mark-to-market impacts, including the cost of
net credit default protection hedging our credit exposure, resulted in net
losses of $2.9 billion in 2009 compared to net gains of $993 million in
2008. The average Value-at-Risk (VAR) for these credit derivative hedges
was $76 million in 2009 compared to $24 million in 2008. The average
VAR for the related credit exposure was $130 million in 2009 compared
to $57 million in 2008. The year-over-year increase in VAR was driven by
the combination of the Merrill Lynch and Bank of America businesses in
2009. There is a diversification effect between the net credit default
protection hedging our credit exposure and the related credit exposure
such that the combined average VAR was $89 million in 2009. Refer to
the Trading Risk Management discussion beginning on page 92 for a
description of our VAR calculation for the market-based trading portfolio.
Bank of America 2009 83