Balance Sheet Analysis
December 31 | Average Balance | |||
---|---|---|---|---|
(Dollars in millions) | 2006 | 2005 | 2006 | 2005 |
Assets | ||||
Federal funds sold and securities purchased under agreements to resell |
$ |
$ |
$ |
$ |
Trading account assets | 153,052 | 131,707 | 145,321 | 133,502 |
Debt securities | 192,846 | 221,603 | 225,219 | 219,843 |
Loans and leases, net of allowance for loan and lease losses | 697,474 | 565,746 | 643,259 | 528,793 |
All other assets | 280,887 | 222,962 | 277,548 | 218,622 |
Total assets |
$ |
$ |
$ |
$ |
Liabilities | ||||
Deposits |
$ |
$ |
$ |
$ |
Federal funds purchased and securities sold under agreements to repurchase |
217,527 | 240,655 | 286,903 | 230,751 |
Trading account liabilities | 67,670 | 50,890 | 64,689 | 57,689 |
Commercial paper and other short-term borrowings | 141,300 | 116,269 | 124,229 | 95,657 |
Long-term debt | 146,000 | 100,848 | 130,124 | 97,709 |
All other liabilities | 58,471 | 46,938 | 57,278 | 55,793 |
Total liabilities | 1,324,465 | 1,190,270 | 1,336,218 | 1,170,031 |
Shareholders' equity | 135,272 | 101,533 | 130,463 | 99,861 |
Total liabilities and shareholders' equity |
$ |
$ |
$ |
$ |
At December 31, 2006, Total Assets were $1.5 trillion, an increase of $167.9 billion, or 13 percent, from December 31, 2005. Average Total Assets in 2006 increased $196.8 billion, or 15 percent, from 2005. Growth in period end and average Total Assets was primarily attributable to the MBNA merger, which had $83.3 billion of Total Assets on January 1, 2006. The increase in Loans and Leases was also attributable to organic growth. In addition, market-based earning assets increased $42.2 billion and $46.9 billion on a period end and average basis due to continued growth and build out in the Capital Markets and Advisory Services business within Global Corporate and Investment Banking.
At December 31, 2006, Total Liabilities were $1.3 trillion, an increase of $134.2 billion, or 11 percent, from December 31, 2005. Average Total Liabilities in 2006 increased $166.2 billion, or 14 percent, from 2005. Growth in period end and average Total Liabilities was primarily attributable to increases in Deposits and Long-term Debt, due to the assumption of liabilities in connection with the MBNA merger and the net issuances of Long-term Debt. Funding requirements related to the support of growth in assets, including the financing needs of our trading business, resulted in increases in certain other funding categories.
Period end and average Shareholders' Equity increased primarily from the issuance of stock related to the MBNA merger.
Federal Funds Sold and Securities Purchased under Agreements to Resell
The Federal Funds Sold and Securities Purchased under Agreements to Resell average balance increased $6.2 billion, or four percent, in 2006 compared to the prior year. The increase was from activities in the trading businesses, primarily in interest rate and equity products, as a result of expanded activities related to a variety of client needs.
Trading Account Assets
Trading Account Assets consist primarily of fixed income securities (including government and corporate debt), equity and convertible instruments. The average balance increased $11.8 billion to $145.3 billion in 2006, which was due to growth in client-driven market-making activities in interest rate, credit and equity products. For additional information, see Market Risk Management.
Debt Securities
Available-for-sale (AFS) Debt Securities include fixed income securities such as mortgage-backed securities, foreign debt, asset-backed securities, municipal debt, U.S. Government agencies and corporate debt. We use the AFS portfolio primarily to manage interest rate risk and liquidity risk and to take advantage of market conditions that create more economically attractive returns on these investments. The average balance in the securities portfolio increased $5.4 billion from 2005 primarily due to the increase in the AFS portfolio in the first half of the year partially offset by the sale of mortgage-backed securities of $43.7 billion in the third quarter of 2006. For additional information, see Market Risk Management.
Loans and Leases, Net of Allowance for Loan and Lease Losses
Average Loans and Leases, net of Allowance for Loan and Lease Losses, was $643.3 billion in 2006, an increase of 22 percent from 2005. The consumer loan and lease portfolio increased $83.9 billion primarily due to higher retained mortgage production and the MBNA merger. The commercial loan and lease portfolio increased $31.3 billion due to organic growth and the MBNA merger, including the business card portfolio. For a more detailed discussion of the loan portfolio and the allowance for credit losses, see Credit Risk Management and Note 6 and Note 7 of the Consolidated Financial Statements.
Deposits
Average Deposits increased $40.6 billion to $673.0 billion in 2006 compared to 2005 due to a $24.2 billion increase in average foreign interest-bearing deposits and a $14.0 billion increase in average domestic interest-bearing deposits primarily due to the assumption of liabilities in connection with the MBNA merger. We categorize our deposits as core or market-based deposits. Core deposits are generally customer-based and represent a stable, low-cost funding source that usually react more slowly to interest rate changes than market-based deposits. Core deposits include savings, NOW and money market accounts, consumer CDs and IRAs, and noninterest-bearing deposits. Core deposits exclude negotiable CDs, public funds, other domestic time deposits and foreign interest-bearing deposits. Average core deposits increased $11.0 billion to $574.6 billion in 2006, a two percent increase from the prior year. The increase was distributed between consumer CDs and noninterest-bearing deposits partially offset by decreases in NOW and money market deposits, and savings. The increase in consumer CDs was impacted by the shift of deposit balances from NOW and money market deposits and savings to consumer CDs as a result of the favorable rates offered on consumer CDs. Average market-based deposit funding increased $29.6 billion to $98.4 billion in 2006 compared to 2005 due to increases of $24.2 billion in foreign interest-bearing deposits and $5.3 billion in negotiable CDs, public funds and other time deposits related to funding of growth in core and market-based assets.
Federal Funds Purchased and Securities Sold under Agreements to Repurchase
The Federal Funds Purchased and Securities Sold under Agreements to Repurchase average balance increased $56.2 billion to $286.9 billion in 2006 as a result of expanded trading activities within interest rate and equity products related to client activities.
Trading Account Liabilities
Trading Account Liabilities consist primarily of short positions in fixed income securities (including government and corporate debt), equity and convertible instruments. The average balance increased $7.0 billion to $64.7 billion in 2006, which was due to growth in client-driven market-making activities in equity products, partially offset by a reduction in interest rate products. For additional information, see Market Risk Management.
Commercial Paper and Other Short-term Borrowings
Commercial Paper and Other Short-term Borrowings provide a funding source to supplement Deposits in our ALM strategy. The average balance increased $28.6 billion to $124.2 billion in 2006, mainly due to the increase in Federal Home Loan Bank advances to fund core asset growth, primarily in the ALM portfolio.
Long-term Debt
Period end and average Long-term Debt increased $45.2 billion and $32.4 billion. The increase resulted from the funding of core asset growth, the addition of MBNA and the issuance of subordinated debt to support Tier 2 capital. For additional information, see Note 12 of the Consolidated Financial Statements.
Shareholders' Equity
Period end and average Shareholders' Equity increased $33.7 billion and $30.6 billion primarily due to the issuance of stock related to the MBNA merger. This increase along with Net Income and issuances of Preferred Stock, was partially offset by cash dividends, net share repurchases of Common Stock and redemption of Preferred Stock.
(Dollars in millions, except per share information) | 2006 | 2005 | 2004 | 2003 | 2002 |
---|---|---|---|---|---|
Income statement | |||||
Net interest income |
$ |
$ |
$ |
$ |
$ |
Noninterest income | 38,432 | 25,354 | 21,005 | 17,329 | 14,874 |
Total revenue | 73,023 | 56,091 | 48,965 | 37,834 | 34,991 |
Provision for credit losses | 5,010 | 4,014 | 2,769 | 2,839 | 3,697 |
Gains (losses) on sales of debt securities | (443) | 1,084 | 1,724 | 941 | 630 |
Noninterest expense | 35,597 | 28,681 | 27,012 | 20,155 | 18,445 |
Income before income taxes | 31,973 | 24,480 | 20,908 | 15,781 | 13,479 |
Income tax expense | 10,840 | 8,015 | 6,961 | 5,019 | 3,926 |
Net income | 21,133 | 16,465 | 13,947 | 10,762 | 9,553 |
Average common shares issued and outstanding (in thousands) |
4,526,637 | 4,008,688 | 3,758,507 | 2,973,407 | 3,040,085 |
Average diluted common shares issued and outstanding (in thousands) |
4,595,896 | 4,068,140 | 3,823,943 | 3,030,356 | 3,130,935 |
Performance ratios | |||||
Return on average assets |
1.44 % |
1.30 % |
1.34 % |
1.44 % |
1.46 % |
Return on average common shareholders' equity | 16.27 | 16.51 | 16.47 | 21.50 | 19.96 |
Total ending equity to total ending assets | 9.27 | 7.86 | 9.03 | 6.76 | 7.92 |
Total average equity to total average assets | 8.90 | 7.86 | 8.12 | 6.69 | 7.33 |
Dividend payout | 45.66 | 46.61 | 46.31 | 39.76 | 38.79 |
Per common share data | |||||
Earnings |
$ |
$ |
$ |
$ |
$ |
Diluted earnings | 4.59 | 4.04 | 3.64 | 3.55 | 3.05 |
Dividends paid | 2.12 | 1.90 | 1.70 | 1.44 | 1.22 |
Book value | 29.70 | 25.32 | 24.70 | 16.86 | 17.04 |
Average balance sheet | |||||
Total loans and leases |
$ |
$ |
$ |
$ |
$ |
Total assets | 1,466,681 | 1,269,892 | 1,044,631 | 749,104 | 653,732 |
Total deposits | 672,995 | 632,432 | 551,559 | 406,233 | 371,479 |
Long-term debt | 130,124 | 97,709 | 92,303 | 67,077 | 65,550 |
Common shareholders' equity | 129,773 | 99,590 | 84,584 | 50,035 | 47,837 |
Total shareholders' equity | 130,463 | 99,861 | 84,815 | 50,091 | 47,898 |
Asset Quality | |||||
Allowance for credit losses |
$ |
$ |
$ |
$ |
$ |
Nonperforming assets | 1,856 | 1,603 | 2,455 | 3,021 | 5,262 |
Allowance for loan and lease losses as a percentage of total loans and leases outstanding |
1.28 % |
1.40 % |
1.65 % |
1.66 % |
1.85 % |
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases |
505 | 532 | 390 | 215 | 126 |
Net charge-offs |
$ |
$ |
$ |
$ |
$ |
Net charge-offs as a percentage of average loans and leases |
0.70 % |
0.85 % |
0.66 % |
0.87 % |
1.10 % |
Nonperforming loans and leases as a percentage of total loans and leases outstanding |
0.25 | 0.26 | 0.42 | 0.77 | 1.47 |
Nonperforming assets as a percentage of total loans, leases, and foreclosed properties |
0.26 | 0.28 | 0.47 | 0.81 | 1.53 |
Ratio of the allowance for loan and lease losses at December 31 to net charge-offs |
1.99 | 1.76 | 2.77 | 1.98 | 1.72 |
Capital ratios (period end) | |||||
Risk-based capital: | |||||
Tier 1 |
8.64 % |
8.25 % |
8.20 % |
8.02 % |
8.41 % |
Total | 11.88 | 11.08 | 11.73 | 12.05 | 12.63 |
Tier 1 Leverage | 6.36 | 5.91 | 5.89 | 5.86 | 6.44 |
Market capitalization |
$ |
$ |
$ |
$ |
$ |
Market price per share of common stock | |||||
Closing |
$ |
$ |
$ |
$ |
$ |
High closing | 54.90 | 47.08 | 47.44 | 41.77 | 38.45 |
Low closing | 43.09 | 41.57 | 38.96 | 32.82 | 27.08 |