Bank of America : Q4 2018 News Release

Bank of America Reports Record Quarterly Earnings of $7.3 Billion, EPS $0.70

Full-Year Earnings of $28.1 Billion, EPS $2.61; 16 Consecutive Quarters of Positive Operating Leverage

Q4-18 Financial Highlights1

Q4-18 Business Segment Highlights1,3

• • Net income of $7.3 billion rose 208% (39% adjusting for the impact of the Tax Act in 2017)2, driven by continued strong operating leverage and asset quality, as well as the benefit of tax reform impacting 2018

  Consumer Banking

• • Diluted earnings per share of $0.70 rose 250% (49% on an adjusted basis)2

• • Pretax income of $8.7 billion rose 41% (22% on an adjusted basis)2

  • • Net income rose 52% to $3.3 billion

  • • Loans up 5% to $290 billion

  • • Deposits up 3% to $687 billion

  • • Full-year Merrill Edge brokerage client flows of $25 billion

  • • Efficiency ratio improved to 45%

  • • 26.4 million mobile banking users, up 9%

  • • Consumer payments $721 billion, up 7%

• • Revenue, net of interest expense, increased 11% (6% on an adjusted basis)2 to $22.7 billion, led by net interest income (NII), reflecting benefits from higher interest rates as well as loan and deposit growth(A)

  Global Wealth and Investment

  Management

• • Net interest yield (FTE basis) of 2.48%, up 9 bps(A)

• • Provision for credit losses decreased $96 million to $905 million - Net charge-off ratio declined to 0.39%

  • • Net income rose 43% to $1.1 billion

  • • Pretax margin increased to 29%

  • • Full-year client balance flows of $56 billion

  • • Loans increased 4% to $164 billion

  • • 2018 organic growth in net new ML households more than 4 times 2017

  Global Banking

• • Noninterest expense declined $141 million, or 1%, to $13.1 billion; efficiency ratio improved to 58%

• • Average loan and lease balances in business segments rose $25 billion, or 3%, to $881 billion - Loans to consumers up 4% and commercial up 2%

  • • Net income rose 25% to $2.1 billion

  • • Firmwide investment banking fees of $1•.3 billion (excludes self-led)

  • • Loans increased 2% to $357 billion

  • • Deposits increased 9% to $360 billion

  • • Efficiency ratio remained low at 42%

  Global Markets

  • • Net income rose 20% to $493 million

• • Average deposit balances rose $51 billion, or 4%, to $1.3 trillion

• • Repurchased $20.1 billion in common stock and paid $5.4 billion in common dividends during 2018

• • Sales and trading revenue of $2.6 billion, including net debit valuation adjustment (DVA) gains of $52 million

• • Excluding net DVA, sales and trading revenue down 6% to $2.5 billion(B)

  - Equities up 11% to $1.1 billion(B) - FICC down 15% to $1.4 billion(B)

Q4-18 Financial Highlights

($ in billions, except per share data)

Q4-18 vs.

Reported

Q4-17

Excl. Tax Act

Q4-18

Q4-17

% Inc / (Dec)Q4-172,4

% Inc / (Dec)

Total revenue, net of interest expense Pretax income

$22.7

$20.4

8.7

6.2

Net income

7.3

2.4

Diluted earnings per share Return on average assets

$0.70

$0.20

11% 41 208 250

$21.4

6%

7.1 22

5.3 39

$0.47 49

1.24%

0.41%

0.90%

Return on average common shareholders' equity

11.6

3.3

7.8

Return on average tangible common shareholders' equity4 Efficiency ratio

16.3

4.6

10.9

58

65

62

See page 11 for endnotes.

• 1 Financial Highlights and Business Segment Highlights compare to the year-ago quarter unless noted. Loan and deposit balances are shown on an average basis unless noted.

• 2 On December 22, 2017, the Tax Cuts and Jobs Act (the Tax Act) was enacted, which included a lower U.S. corporate tax rate effective in 2018. The Tax Act reduced Q4-17 net income by

  $2.9 billion, or $0.27 per diluted common share, which included a $0.9 billion pretax charge in other noninterest income predominantly related to the revaluation of certain tax-advantaged energy investments, as well as $1.9 billion of tax expense principally associated with the revaluation of certain deferred tax assets and liabilities. Adjusted net income, diluted earnings per share, pretax income and revenue are non-GAAP financial measures and exclude the Q4-17 impact of the enactment of the Tax Act.

• 3 The Corporation reports the results of operations of its four business segments and All Other on a fully-taxable equivalent (FTE) basis.

• 4 Represents a non-GAAP financial measure. For additional information (including reconciliation information), see endnotes C and D on page 11 and page 19.

Full-Year Financial Highlights ($ in billions, except per share data) ReportedFY 2018 vs.FY 2017 Excl. Tax Act	FY 2018 Reported vs. FY 2017 Excl. Tax Act
FY 2018 FY 2017 % Inc / (Dec)FY 20171,2 % Inc / (Dec)

Total revenue, net of interest expense	$91.2	$87.4	4%	$88.3	3%
Pretax income	34.6	29.2	18	30.2	15
Net income	28.1	18.2	54	21.1	33
Diluted earnings per share	$2.61	$1.56	67	$1.83	43
Return on average assets	1.21%	0.80%	0.93%
Return on average common shareholders' equity	11.0	6.7	7.9
Return on average tangible common shareholders' equity2	15.5	9.4	11.0
Efficiency ratio	59	63	62
CEO Commentary

"I am proud of our teammates who produced record earnings for the quarter and the year by driving responsible growth. Our teammates worked for our customers and delivered solid loan and deposit growth, and other activity, while managing risk well. Operating leverage based on disciplined expense management while investing in our future, solid asset quality, and loan and deposit growth drove this quarter's results. In addition to lending and investing activities, we shared success in many ways: returning nearly $26 billion in capital to our shareholders; a second bonus since U.S. tax reform passed last year, impacting 95% of our teammates, to share success from our performance and the benefits of tax reduction; and more than $200 million of philanthropic giving to our communities.

"Through the trillions of dollars of consumer transactions we process and from the steady confidence and activity of our small business and commercial clients, we see a healthy consumer and business climate driving a solid economy. Each of our businesses faces opportunities to grow even more. We are well positioned to serve clients, teammates, and communities by listening to their answer when we ask them: 'What would you like the power to do?'"

- Brian Moynihan, Chairman and Chief Executive Officer

CFO Commentary

"We have now seen 16 consecutive quarters of positive operating leverage, enabled by responsible growth. Our net income grew robustly and our EPS grew faster as we invested part of our profits in share repurchases. We significantly improved our returns in the fourth quarter, with a 1.24% return on average assets and a 16.3% return on average tangible common shareholders' equity. Each line of business contributed to these results. With a strong balance sheet, we're ready to deliver again in 2019."

- Paul Donofrio, Chief Financial Officer

• 1 On December 22, 2017, the Tax Act was enacted, which included a lower U.S. corporate tax rate effective in 2018. The Tax Act reduced 2017 net income by $2.9 billion, or $0.27 per diluted common share, which included a $0.9 billion pretax charge in other noninterest income predominantly related to the revaluation of certain tax-advantaged energy investments, as well as $1.9 billion of tax expense principally associated with the revaluation of certain deferred tax assets and liabilities.

• 2 Represents a non-GAAP financial measure. For additional information (including reconciliation information), see endnotes C and D on page 11 and page 19.

.

Consumer Banking

Financial Results1

• • Net income of $3.3 billion, up $1.1 billion or 52%

• • Revenue increased $922 million, or 10%, to $9.9 billion. NII increased $777 million, or 12%, driven by higher interest rates and deposit and loan growth. Noninterest income included higher card income and service charges

• • Provision for credit losses increased $29 million to $915 million

  • - Net charge-offs increased due to credit card portfolio seasoning and loan growth

  • - Net charge-off ratio was 1.22% compared to 1.21%

• • Noninterest expense decreased $26 million, or 1%, to $4.5 billion as investments for business growth were more than offset by improved productivity and lower FDIC expense

Business Highlights1,2

• • Average deposits grew $21 billion, or 3%; average loans grew $14 billion, or 5%

• • Merrill Edge brokerage assets grew $9 billion, or 5%, to $186 billion, as $25 billion in client flows more than offset lower market valuations

• • Combined credit/debit card spending up 6%

• • Digital usage continued to grow - 26.4 million active mobile banking users, up 9% - Digital sales were 27% of all Consumer Banking sales

  -

  Mobile channel usage up 16%

  - 51.6 million person-to-person payments through Zelle®, more than double the year-ago quarter

• • Efficiency ratio improved to 45% from 50%

($ in millions)

Total revenue2

Provision for credit losses Noninterest expense Pretax income Income tax expense Net income

Three months ended

12/31/2018 9/30/2018 12/31/2017

$9,877 $9,403 $8,955

915 870 886

4,483 4,354 4,509

4,479	4,179	3,560
1,141	1,066	1,364
$3,338	$3,113	$2,196

• 1 Comparisons are to the year-ago quarter unless noted.

• 2 Revenue, net of interest expense. Tax expense compared to prior year impacted by a lower U.S. corporate tax rate.

Three months ended

($ in billions)

Average deposits Average loans and leases Brokerage assets (EOP)

Active mobile banking users (MM)

Number of financial centers Efficiency ratio

Return on average allocated capital

12/31/2018 9/30/2018 12/31/2017

$686.8 $687.5 $665.5

289.9 285.0 275.7

185.9 203.9 177.0

26.4 25.9 24.2

4,341 45% 36

Total U.S. Consumer Credit Card2

Average credit card outstanding balances

Total credit/debit spend Risk-adjusted margin

151.9 8.8%

• 1 Comparisons are to the year-ago quarter unless noted.

  4,385 46%

  $94.7 $93.5

  146.4 143.4

  8.2% 8.7%

• 2 The U.S. consumer credit card portfolio includes Consumer Banking and GWIM.

4,477 50%

Global Wealth and Investment Management

Financial Results1

• • Record net income of $1.1 billion, up $318 million or 43%

• • Revenue increased $307 million, or 7%, primarily driven by higher net interest income and higher asset management fees as well as a small gain on sale of a non-core asset, partially offset by lower transactional revenue

• • Noninterest expense increased 2% as higher revenue-related incentives, as well as investments for business growth, were partially offset by continued expense discipline

($ in millions)

Total revenue2

Provision for credit losses Noninterest expense Pretax income Income tax expense Net income

Three months ended 12/31/2018 9/30/2018 12/31/2017 $4,990 $4,783 $4,683 23 13 6

3,542 1,425 363 $1,062

• 1 Comparisons are to the year-ago quarter unless noted.

  3,414 3,470

  1,356 1,207

  346 463

  $1,010 $744

• 2 Revenue, net of interest expense. Tax expense compared to prior year impacted by a lower U.S. corporate tax rate.

Business Highlights1

• • Total client balances decreased $131 billion, or 5%, to $2.6 trillion, as positive client flows of $56 billion were more than offset by impact of lower market valuations

• • Average loans and leases grew $6 billion, or 4%, driven by mortgages and custom lending

• • Pretax margin improved to 29%

• • Wealth advisors up 1% to 19,4592

• • Accelerated organic wealth management household growth

  • - Net new Merrill Lynch relationships up more than 4 times the 2017 level

  • - U.S. Trust new relationships up 9% in 2018

($ in billions)

Average deposits Average loans and leases Total client balances (EOP) AUM flows

Pretax margin

Return on average allocated capital

Three months ended 12/31/2018 9/30/2018 12/31/2017 $247.4 $238.3 $240.1

163.5

2,620.9 2,841.4 2,751.9

(6.2) 29% 29

• 1 Comparisons are to the year-ago quarter unless noted.

  161.9

  157.1

  7.6 18.2

  28% 26%

  28

• 2 Includes financial advisors in Consumer Banking of 2,722 and 2,402 in Q4-18 and Q4-17.

21

Global Banking

Financial Results1

• • Record net income of $2.1 billion, up $426 million or 25%

• • Record revenue of $5.1 billion, up $31 million or 1%

  - Reflects higher NII from the benefit of higher interest rates and growth in deposits

  - Noninterest income includes lower investment banking fees

• • Provision improved to $85 million, primarily driven by the absence of the prior year's single-name non-U.S. commercial charge-off2

• • Noninterest expense fell 2%, primarily due to lower FDIC expense, partially offset by continued investment in the business

Business Highlights1,2

• • Average deposits increased $30 billion, or 9%, to $360 billion

• • Average loans and leases grew $7 billion, or 2%, to $357 billion

• • Total firmwide investment banking fees (excluding self-led deals) decreased 5% to $1.3 billion, driven primarily by lower debt underwriting and advisory fees

• • Efficiency ratio remained low at 42%

($ in millions)

Total revenue2,3

Provision for credit losses Noninterest expense Pretax income Income tax expense Net income

Three months ended 12/31/2018 9/30/2018 12/31/2017 $5,050 $4,738 $5,019 85 (70) 132

2,119 2,846 740 $2,106

• 1 Comparisons are to the year-ago quarter unless noted.

  2,121 2,161

  2,687 2,726

  699 1,046

  $1,988 $1,680

• 2 Global Banking and Global Markets share in certain deal economics from investment banking, loan origination activities, and sales and trading activities.

• 3 Revenue, net of interest expense. Tax expense compared to prior year impacted by a lower U.S. corporate tax rate.

($ in billions)

Average deposits Average loans and leases

Total Corp. IB fees (excl. self-led)2

Global Banking IB fees2 Business Lending revenue

Global Transaction Services revenue

Efficiency ratio

Return on average allocated capital

Three months ended 12/31/2018 9/30/2018 12/31/2017 $359.6 $337.7 $329.8

357.4

0.8 2.2 2.1

42% 20

• 1 Comparisons are to the year-ago quarter unless noted.

  352.7 350.3

  0.6 0.8

  2.1 2.3

  2.0 1.9

  45% 43%

  19

  17

• 2 Global Banking and Global Markets share in certain deal economics from investment banking, loan origination activities, and sales and trading activities.