Financial Analysis of Bank of America

Fiscal report Analysis of Bank of America Group 1 Chen, Yelin Dong, Xiaoxu Gransbach, Jennifer Shuai, Wang Weiss, Charles 1Financial Statements of Bank of America1 1. 1Balance sheet1 1. 2Income statement2 1. 3Regulatory capital ratios2 1. 4Investment portfolio2 1. 5Impact of the FSP FAS 115-2 and FAS 124-2 on OTTI3 1. 5. 1Bank of America3 1. 5. 2JP Morgan Chase3 1. 5. 3Citi Group3 1. 6Netting Financial Instruments3 1. 6. 1Bank of America4 1. 6. 2Comparable banks4 1. 6. 3Analysis of the impact4 2Fair Value Accounting for Financial Instruments4 2. Reasonable worth accounting4 Table 6 Summary of the Fair Value Income5 2. 2Opinions about reasonable worth accounting5 3Interest Rate Risk and Net Interest Earnings6 3. 1Net intrigue margin6 3. 2Interest rate risk7 4Credit Risk and Losses7 4. 1Main misfortune save ampleness ratios8 4. 2Policy to assign past due advances as non-performing8 4. 3Adequacy of the bank’s recompense for advance losses8 4. 4Disclosure approaches identifying wi th loans8 5Appendix9 * Part 1 Financial Statements of Bank of America . 1. 1 Balance sheetBank of America’s accounting report has absolute resources of $2,129,046 million of every 2011, which is not exactly last year’s $2,264,909 million, a genuinely huge decrease. There are a couple of essential resources on the asset report. The biggest resource is credits and rents which makes up 41. 92% of the all out resources. The following biggest resource was Available-For-Sale protections making up 12. 97% of complete resources. Absolute liabilities on the asset report were $1,898,945 million, with the essential risk being stores in U. S. workplaces both enthusiasm bearing and noninterest bearing, at 50. 4% of absolute liabilities. The following biggest obligation was long haul obligation at 19. % of complete liabilities. In millions| 2011| % of complete assets| 2010| % of all out assets| % chg from 2010-2011| Total asset| 2,029,046 | 100. 00%| 2,264,909 | 100. 00%| - 10. 41%| Loans and leases| 892,417 | 43. 98%| 898,555 | 39. 67%| - 0. 68%| Available-for-sale| 276,151 | 13. 61%| 337,627 | 14. 91%| - 18. 21%| Total liabilities| 1,898,945 | 93. 59%| 2,036,661 | 89. 92%| - 6. 76%| Total deposits| 1,033,041 | 50. 91%| 1,010,430 | 44. 61%| 2. 24%| Deposits in U. S. offices| 957,042 | 47. 17%| 930,913 | 41. 10%| 2. 81%| Long-term debt| 372,265 | 18. 35%| 448,431 | 19. 80%| - 16. 98%| Leverage ratio| 14. 0 | ? | 8. 92 | ? | 63. 58%| Table 1 Selected Financial Data from Balance Sheet of Bank of America Chase and Citi are genuinely comparative in size and conveyance of their accounting reports. Pursue and Citi have absolute resources of 2,265,792 and 1,873,878( ) separately, both with somewhat lower credits as a level of complete resources at marginally over 30%, while AFS protections are around 16% of all out resources for each. Liabilities are likewise fundamentally the same as, with Chase having all out liabilities of $2,082,219 million and Citi $1,694,305 mi llion. The essential details are likewise fundamentally the same as by and by with Chase’s absolute stores 54. 6% and long haul obligation 22. 77% of all out liabilities, while Citi has stores 51. 11% and long haul obligation of 19. 09%. As indicated by the stores in U. S. workplaces, BOA concentrate more in U. S market and Citi center more around advertise outside U. S. In millions| Bank of America| % of all out assets| JP Morgan Chase| % of all out assets| Citi Group| % of all out assets| Total asset| 2,129,046 | 100. 00%| 2,265,792 | 100. 00%| 1,873,878 | 100. 00%| Loans and leases| 892,417 | 41. 92%| 696,111 | 30. 72%| 617,127 | 32. 93%| Available-for-sale| 276,151 | 12. 97%| 364,793 | 16. 10%| 293,413 | 15. 66%| ? | ? | ? | ? | ? | ? | ? |In millions| Bank of America| % of all out liabilities| JP Morgan Chase| % of all out liabilities| Citi Group| % of absolute liabilities| Total liabilities| 1,898,945 | 100. 00%| 2,082,219 | 100. 00%| 1,694,305 | 100. 00%| Total deposit s| 1,033,041 | 54. 40%| 1,127,806 | 54. 16%| 865,936 | 51. 11%| Long-term debt| 372,265 | 19. 60%| 256,775 | 22. 77%| 3,235,050 | 190. 94%| Leverage ratio| 8. 25 | ? | 11. 34 | ? | 9. 44 | ? | In millions| Bank of America| % of absolute deposits| JP Morgan Chase| % of all out deposits| Citi Group| % of complete deposits| Deposits in U. S. offices| 957,042 | 92. 64%| 851,534 | 75. 0%| 343,288 | 39. 64%| Table 2 Selected Financial Data from Balance Sheets of Three Banks in 2011 in case of a bank run, Bank of America will be in a difficult situation because of its high influence, like numerous banks. Bank of America has stores of $1,033,041 million, among which fluid resources just have $314,425 million, including money and money reciprocals of $120,102 million, time stores and other transient ventures of $26,004 million and exchanging resources of $169,319 million. Indeed, even with the capacity to sell those non-money resources, it will at present just have the option to respect some what over 30% of its depositors.Income articulation The essential detail on Bank of America’s pay explanation is net gain of $1,446 million, which expanded contrasted with a total deficit of 2,238 out of 2010. Intrigue salary was $66,236 million, down from $75,497 million out of 2010. Absolute intrigue cost was $21,620 million, which causes the net intrigue salary to become $44,616 million, down 13. 4% from the earlier year. In conclusion, complete noninterest salary was $48,838 million, diminished by 16. 8% from 2010. This is halfway because of the enormous loss of home loan banking pay, diminishing from $2,734 million of every 2010 to $(8,830) million in 2011.Chase and Citi had comparable patterns, both marginally expanding their primary concern while having net premium pay decline somewhat. Administrative capital proportions 2011| Bank of America| JP Morgan Chase| Citi Group| To be well capitalized| Leverage ratio| 7. 53%| 6. 80%| 7. 19%| 5%| Tier 1 hazard based capital ra tio| 12. 40%| 12. 30%| 13. 55%| 6%| Total hazard based| 16. 75%| 15. 40%| 16. 99%| 10%| Table 3 Regulatory Capital Ratios of Three Banks in 2011 In 2011, Bank of America was viewed as very much promoted for every one of the three administrative ratiosâ€Tier 1 capital, chance based capital and leverage.Bank of America somewhat expanded the entirety of its proportions from 2010 to 2011. Its level 1 capital proportion was 12. 4% while 6% is viewed as all around promoted, its hazard based capital proportion was 16. 75% while 10% is viewed as very much promoted, and its influence proportion was 7. 53% while 5% is viewed as very much promoted. ( Table 4, Table 3) Chase and Citi had fundamentally the same as proportions to Bank of America. Pursue was marginally underneath Bank of America and Citi for every one of the three proportions yet at the same time well over the floor to be well capitalized.Citi had a somewhat lower influence proportion and marginally higher level 1 capital and h azard based capital proportions. Administrative proportions are genuinely significant; anyway there are a few issues with them. The proportions are in reverse looking, so there could be a lot of progress since in the numbers. There are likewise heaps of changes made by the organization to the various numbers that make up the proportion that probably won't bode well, for example, overlooking AFS misfortunes. The present hazard weighting is additionally shortsighted right now and probably won't mirror the real danger of the assets.One significant thing to note is that the recently discharged Basel III standards by Basel Committee on Banking Supervision (BCBS) would require a higher administrative capital proportion on banks. It is suggested that Basel III be executed by January 1, 2015. As indicated by the new guidelines, the compulsory Tier 1 regular capital proportion would be 7%. Banks ought to keep up protection cradle of 2. 5% and saves adding up to 8. 5% of advantages. Along the se lines, all together for Bank of America to meet the future necessities and be all around promoted in face of potential money related emergencies, it should hold more and better quality capital, convey progressively fluid ssets, and breaking point influence. ( , ) Investment portfolio The net undiscovered gains on HTM protections of $177 million = $181 million + ($4) million that have not been perceived in OCI as of the finish of 2011 are inferable from HTM protections that have not been regarded other than briefly (OTT) debilitated, so that amortized cost is the conveying esteem. Amortized cost is an exceptionally restricted valuation reason for dangerous protections. There was next to no specify of renaming in Bank of America’s 10-K. There was a notice of a renaming of $26. billion basically due to noninterest gaining value protections being moved from exchanging account advantages for different resources, however no notice of whatever else. Effect of the FSP FAS 115-2 an d FAS 124-2 on OTTI Bank of America According to FSP FAS 115-2 and FAS 124-2, banks are permitted to report non-credit related OTTI in Other Comprehensive Income (OCI). Just credit-related OTTI is perceived in overall gain. The Total OTTI misfortunes (hidden and acknowledged) for 2011 is $360 million, and part of other-than-transitory impedance misfortunes perceived in other far reaching pay is about $61 millions.The net sum is $299 million which is perceived in profit on AFS obligation protections in 2011, contrasted with $970 million on AFS obligation and attractive value protections in 2010. At the point when we process the administrative Tier One Capital, the undiscovered misfortunes on AFS speculations are (included back) avoided. In this way, the $61 million is added back to compute the Tier One Capital. With including back, Tier 1 hazard based capital proportion is 12. 40% as appeared on 2011 Y9C. Without including back, the proportion is (159,231,999-61,000)/1,284,466,933=12 . 39%. JP Morgan Chase For JP Morgan Chase, the10K shows Total other-than-impermanent hindrance misfortunes for are 27, 94, nd 946 million for year 2011, 2010 and 2009 separately. ( ) However, it doesn’t separate these sums into credit-related segment and non-credit related bit. In light of the other two banks models, we can surmise that the Tier One Capital for JP Morgan Chase will go up after selection. Citi Group Citigroup likewise received similar standards above in first quarter of 2009. Because of the FSP, Company’s Consolidated Statement of Income mirrors the full disability on obligation protections that the Company plans t