Financial Analysis of Bank of America

Budget summary 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 hold sufficiency ratios8 4. 2Policy to assign past due credits as non-performing8 4. 3Adequacy of the bank’s recompense for credit losses8 4. 4Disclosure strategies identifying w ith 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 critical 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 complete resources. The following biggest resource was Available-For-Sale protections making up 12. 97% of absolute resources. Complete liabilities on the accounting 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 all out liabilities. The following biggest obligation was long haul obligation at 19. % of all out liabilities. In millions| 2011| % of absolute 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 comparable in size and dispersion of their monetary records. Pursue and Citi have absolute resources of 2,265,792 and 1,873,878( ) individually, both with somewhat lower credits as a level of all out 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 absolute liabilities of $2,082,219 million and Citi $1,69 4,305 million. The essential details are additionally fundamentally the same as by and by with Chase’s all out stores 54. 6% and long haul obligation 22. 77% of absolute 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 complete assets| JP Morgan Chase| % of absolute 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 complete liabilities| Total liabilities| 1,898,945 | 100. 00%| 2,082,219 | 100. 00%| 1,694,305 | 100. 00%| Total deposits| 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 all out 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 counterparts of $120,102 million, time stores and other momentary ventures of $26,004 million and exchanging resources of $169,319 million. Indeed, even with the capacity to exchange those non-money resources, it will in any case just have the opt ion to respect marginally over 30% of its depositors.Income proclamation The essential detail on Bank of America’s salary articulation is total compensation 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 of every 2010. All out intrigue cost was $21,620 million, which causes the net intrigue pay to become $44,616 million, down 13. 4% from the earlier year. Finally, complete noninterest pay was $48,838 million, diminished by 16. 8% from 2010. This is somewhat because of the large loss of home loan banking salary, diminishing from $2,734 million out of 2010 to $(8,830) million in 2011.Chase and Citi had comparative patterns, both marginally expanding their main concern while having net premium pay decline marginally. 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 ratio| 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, hazard based capital and leverage.Bank of America marginally expanded the entirety of its proportions from 2010 to 2011. Its level 1 capital proportion was 12. 4% while 6% is viewed as very much 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 all around promoted. ( Table 4, Table 3) Chase and Citi had fundamentally the same as proportions to Bank of America. Pursue was marginally beneath Bank of America and Citi for each of the three proportions yet well over the floor to be well capitalized.Citi had a somewhat lower influence proportion and somewhat higher level 1 capital and haz ard 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 loads 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 extremely shortsighted as of now and probably won't mirror the genuine 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 per the new standards, the compulsory Tier 1 normal capital proportion would be 7%. Banks ought to keep up preservation cradle of 2. 5% and holds adding up to 8. 5% of advantages. Along t hese 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 owing to HTM protections that have not been regarded other than incidentally (OTT) weakened, so that amortized cost is the conveying esteem. Amortized cost is a profoundly restricted valuation reason for unsafe protections. There was almost no notice of renaming in Bank of America’s 10-K. There was a notice of a renaming of $26. billion essentially due to noninterest winning value protections being moved from exchanging account resources for different resources, however no notice of whatever else. Effect of the FSP FAS 115-2 and 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 total compensation. The Total OTTI misfortunes (undiscovered and acknowledged) for 2011 is $360 million, and bit of other-than-impermanent disability misfortunes perceived in other thorough salary 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 register the administrative Tier One Capital, the undiscovered misfortunes on AFS speculations are (included back) avoided. Subsequently, the $61 million is added back to ascertain 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 debilitation misfortunes for are 27, 94, nd 946 million for year 2011, 2010 and 2009 separately. ( ) However, it doesn’t isolate these sums into credit-related part and non-credit related segment. In light of the other two banks models, we can surmise that the Tier One Capital for JP Morgan Chase will go up after appropriation. Citi Group Citigroup likewise embraced similar principles above in first quarter of 2009. Because of the FSP, Company’s Consolidated Statement of Income mirrors the full hindrance on obligation protections that the Company plans t