Bank of America Corporation — 2023 Form 10-K
Business context and reporting period. This is the annual report for the fiscal year ended December 31, 2023, not a quarterly filing; selected fourth-quarter results are also disclosed. Bank of America is a diversified U.S. and international financial institution with Consumer Banking, Global Wealth & Investment Management (GWIM), Global Banking, Global Markets and All Other operations. It reported $3.18 trillion in assets and approximately 213,000 employees at year-end.
Financial performance and position
| Metric | 2023 | 2022 |
|---|---|---|
| Total revenue, net of interest expense | $98.6 billion | $95.0 billion |
| Net interest income | $56.9 billion | $52.5 billion |
| Noninterest income | $41.7 billion | $42.5 billion |
| Provision for credit losses | $4.4 billion | $2.5 billion |
| Noninterest expense | $65.8 billion | $61.4 billion |
| Net income | $26.5 billion | $27.5 billion |
| Diluted earnings per share | $3.08 | $3.19 |
| Net interest yield, FTE basis | 2.08% | 1.96% |
| Efficiency ratio | 66.79% | 64.71% |
| Return on average assets | 0.84% | 0.88% |
| Return on average common equity | 9.75% | 10.75% |
Net income applicable to common shareholders was $24.9 billion, down from $26.0 billion. The effective tax rate was 6.4%, versus 11.1%; management attributes the low rates primarily to tax credits from affordable-housing and renewable-energy investments. Excluding tax credits and discrete benefits, the company estimates a rate of approximately 25% in both years.
Cash flow and balance sheet. Cash and cash equivalents were $333.1 billion, up $102.9 billion. 2023 cash flows were $45.0 billion provided by operating activities, $35.4 billion used in investing activities and $93.3 billion provided by financing activities. Total assets rose 4% to $3.18 trillion. Loans and leases were $1.05 trillion, up modestly, while deposits declined $6.5 billion to $1.92 trillion. Long-term debt increased $26.2 billion to $302.2 billion; total liabilities were $2.89 trillion.
Average Global Liquidity Sources were $897 billion in fourth-quarter 2023. Average consolidated high-quality liquid assets were $590 billion and the average liquidity coverage ratio was 115%, compared with 120% a year earlier. Estimated uninsured deposits were $606.8 billion in the U.S. and $116.6 billion outside the U.S. Year-end regulatory capital ratios included CET1 of 11.8%, Tier 1 of 13.5% and total capital of 15.2%; the company reported that it and its banking affiliates met applicable well-capitalized requirements.
Material changes versus the prior comparable period
- Annual revenue increased 4%, principally because net interest income rose $4.5 billion, reflecting higher rates and loan growth. Higher deposit and wholesale funding costs partly offset the benefit.
- Net income fell 4%, as higher credit-loss provisions and expenses outweighed higher net interest income. Noninterest expense increased 7%, including investment in people and technology and higher FDIC costs.
- Net charge-offs rose to $3.8 billion from $2.2 billion; the ratio increased to 0.36% from 0.21%. Consumer credit cards were a major driver: credit-card net charge-offs increased to $2.6 billion from $1.3 billion.
- Commercial credit indicators weakened in specific areas. Nonperforming commercial loans and leases increased to $2.8 billion from $1.1 billion, primarily due to commercial real estate. Commercial criticized exposure rose to $23.3 billion from $19.3 billion.
- Segment results varied: Global Banking net income rose 31% to $10.2 billion; Consumer Banking fell 7% to $11.6 billion; GWIM fell 16% to $3.9 billion; and Global Markets rose 12% to $4.7 billion. All Other recorded a $4.0 billion net loss, versus $1.7 billion.
- Common equity rose to $33.34 per share of book value from $30.61; tangible book value was $24.46 versus $21.83. Common stock repurchases totaled $4.6 billion, and dividends paid per share increased to $0.92 from $0.86.
Outlook, management commentary, risks and unusual items
- Outlook: The filing gives no formal earnings or revenue guidance. For credit-loss estimation, management’s weighted economic outlook assumed a mild U.S. recession in the first half of 2024, unemployment just below 5% in the fourth quarters of 2024 and 2025, and GDP growth of 0.3% in 2024 and 1.4% in 2025. These are model assumptions, not company guidance.
- Interest-rate sensitivity: The company describes its banking book as asset-sensitive. Its model estimated that an immediate parallel 100-basis-point rate increase would raise pretax net interest income over the next 12 months by $3.5 billion; a 100-basis-point decrease would reduce it by $3.1 billion. The analysis assumes no management response and fixed deposit size and mix; actual results could differ.
- Unusual fourth-quarter items: The company recorded $2.1 billion of noninterest expense for its estimated FDIC special assessment following the failures of Silicon Valley Bank and Signature Bank. It also recognized an approximately $1.6 billion pretax, non-cash charge related to the announced cessation of the Bloomberg Short-Term Bank Yield Index (BSBY). Together, these items materially affected fourth-quarter results.
- Fourth-quarter performance: Revenue was $22.0 billion, versus $24.5 billion in fourth-quarter 2022; net income was $3.1 billion, versus $7.1 billion. Fourth-quarter net income included the unusual items above. The quarter’s effective tax benefit was also affected by related tax impacts.
- Credit and securities risks: Management highlighted rising consumer delinquencies and credit-card losses, and commercial real estate office exposure. Office loans were 25% of commercial real estate loans; $5.5 billion of office exposure was criticized, and approximately $7.6 billion was scheduled to mature by the end of 2024. The filing also reports held-to-maturity securities with a fair value of $496.6 billion against amortized cost of $594.6 billion at year-end.
- Funding, regulation and legal matters: Risks include deposit migration to higher-yielding alternatives, funding costs, market-rate changes, proposed capital-rule changes, cyber and third-party disruptions, and litigation or regulatory actions. The filing estimates reasonably possible litigation and representations-and-warranties losses of up to $0.8 billion in excess of accrued liabilities, while noting actual losses could differ materially. The G-SIB surcharge increased to 3.0% on January 1, 2024; regulatory changes could constrain future capital distributions.
- Audit and controls: The auditor issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded internal controls were effective as of year-end.
Important facts for investors to verify
- How much 2024 earnings and net interest income depend on deposit pricing, customer deposit mix and interest-rate changes.
- Whether consumer delinquencies, credit-card charge-offs and commercial real estate criticized or nonperforming loans continue to rise, and whether the allowance remains adequate.
- The realized liquidity and capital impact of the securities portfolio, including the held-to-maturity fair-value gap, and the effect of higher wholesale funding and repurchase activity.
- Whether the $2.1 billion FDIC assessment changes and whether BSBY-related hedge effects or other unusual items recur.
- Potential effects of proposed regulatory capital requirements and ongoing legal or regulatory matters on expenses, capital returns and operations.