Bank of America Corporation — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. The filing also reports fourth-quarter 2022 results. Bank of America is a diversified financial holding company with Consumer Banking, Global Wealth & Investment Management (GWIM), Global Banking and Global Markets segments.
Financial performance and position
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue, net of interest expense | $95.0 billion | $89.1 billion |
| Net interest income | $52.5 billion | $42.9 billion |
| Noninterest income | $42.5 billion | $46.2 billion |
| Provision for credit losses | $2.5 billion expense | $4.6 billion benefit |
| Noninterest expense | $61.4 billion | $59.7 billion |
| Net income | $27.5 billion | $32.0 billion |
| Net income applicable to common shareholders | $26.0 billion | $30.6 billion |
| Diluted EPS | $3.19 | $3.57 |
| Efficiency ratio | 64.71% | 67.03% |
| Return on average assets | 0.88% | 1.05% |
Net interest yield on a fully taxable-equivalent basis rose to 1.96% from 1.66%. Fourth-quarter revenue was $24.5 billion, net income $7.1 billion, net income applicable to common shareholders $6.9 billion and diluted EPS $0.85.
- Balance sheet: Total assets were $3.05 trillion, down 4% year over year. Loans and leases rose 7% to $1.05 trillion; deposits fell 6% to $1.93 trillion.
- Credit: Allowance for credit losses was $14.2 billion, up from $13.8 billion. Net charge-offs were $2.2 billion, and nonperforming loans, leases and foreclosed properties were $4.0 billion, down from $4.7 billion.
- Debt and capital: Long-term debt was $276.0 billion, down from $280.1 billion. Standardized CET1 capital ratio was 11.2%, versus 10.6%; the Corporation and its banking affiliates reported well-capitalized status.
- Liquidity: Average Global Liquidity Sources in the fourth quarter were $868 billion, compared with $1.16 trillion a year earlier. Average consolidated LCR was 120%, versus 115%; the Corporation reported compliance with the NSFR.
- Cash flow: Operating cash flow was negative $6.3 billion; investing cash flow was negative $2.5 billion and financing cash flow negative $106.0 billion. Cash and cash equivalents ended the year at $230.2 billion, down $118.0 billion.
Material changes versus FY2021
- Higher interest rates and loan growth increased net interest income by $9.5 billion, while funding costs also rose sharply.
- Lower investment banking activity, lower wealth-management market valuations and pricing, and changes to overdraft and non-sufficient-funds policies contributed to lower noninterest income. Improved market-making revenue partly offset these declines.
- The provision shifted from a $4.6 billion benefit to a $2.5 billion expense, reflecting loan growth and a weaker macroeconomic outlook, partly offset by reduced pandemic uncertainty.
- Net income fell 14% and diluted EPS declined from $3.57 to $3.19. Expenses increased 3%, including technology and people investments and litigation and regulatory costs.
- GWIM client balances fell 12% to $3.39 trillion, largely due to market declines, partly offset by positive net client flows. Total commercial committed credit exposure rose 6% to $1.20 trillion.
Outlook, commentary, risks and unusual items
- Outlook: No specific company earnings or revenue guidance is provided in the supplied filing text. Management’s year-end credit-loss outlook weighted scenarios 95% toward a recessionary environment in 2023; it forecast U.S. GDP contraction of 0.4% in 2023 and growth of 1.2% in 2024, with unemployment above 5.5% by fourth-quarter 2023.
- Rate sensitivity: The Corporation remained asset-sensitive. Its estimated pretax banking-book NII impact over the next 12 months was +$3.8 billion for an instantaneous parallel +100-basis-point shift and −$4.6 billion for a −100-basis-point shift. These scenarios assume no management response and no change in deposit mix or balances.
- Funding and securities risk: Deposits declined amid increased customer spending and a shift toward higher-yielding accounts. Rising rates reduced the value of securities: held-to-maturity securities had a $524.3 billion fair value against $632.9 billion amortized cost at year-end. AFS securities had $4.8 billion of gross unrealized losses. Rate changes may affect accumulated OCI, capital and future NII.
- Legal and regulatory matters: Litigation and regulatory investigation-related expense was $1.2 billion in 2022, versus $164 million in 2021, excluding legal service-provider expenses. Management estimated reasonably possible losses of $0–$0.8 billion in excess of accrued liabilities for disclosed matters and representations-and-warranties exposures; outcomes and timing remain uncertain. The filing cites legacy mortgage claims, pandemic-program-related litigation and other regulatory matters.
- Other unusual items: Higher expenses included settlement expense for legacy monoline insurance litigation and expense related to certain regulatory matters. The effective tax rate was 11.1%; the filing says it would have been approximately 25% absent ESG tax credits and discrete tax benefits.
- Capital returns: The Corporation repurchased $5.1 billion of common stock in 2022 and paid $0.86 per share in common dividends. The board declared a $0.22 quarterly dividend in February 2023. The stress capital buffer rose to 3.4%; the G-SIB surcharge is expected to rise to 3.0% in 2024, potentially affecting capital distributions.
Most important facts for investors to verify
- How deposit balances, customer mix and funding costs evolve, and whether liquidity metrics remain resilient as rates and competition change.
- Whether credit performance and provisions track management’s recession-weighted outlook, particularly in credit cards, commercial real estate and office lending.
- The extent and duration of unrealized securities losses, their effect on capital and liquidity, and the assumptions behind any securities-sale decisions.
- Whether higher net interest income can offset weaker fee income, ongoing expense growth and lower wealth-management asset valuations.
- Developments in litigation, regulatory matters, legacy mortgage claims and the disclosed possible-loss range.
- Capital requirements, including the higher stress capital buffer and anticipated G-SIB surcharge, and their effect on dividends and repurchases.