Picking Part Bank Of America's Incredibly Opaque Earnings Report

On the surface, Bank of America reported a profit in the quarter, but there were tons of adjustments, and the announcement does a horrible job breaking it all out, and giving clean numbers.

But here’s some simple maths.

On the P&L statement, it says that pre-tax net income was $7.43 billion.

BACQ32011Items

Photo: Bank of America

But, here are all the big adjustments from the press release:

There were a number of significant items that affected results in both periods. The most recent quarter included, among other things, $4.5 billion (pretax) in positive fair value adjustments on structured liabilities, a pretax gain of $3.6 billion from the sale of shares of China Construction Bank (CCB), $1.7 billion pretax gain in trading Debit Valuation Adjustments (DVA), and a pretax loss of $2.2 billion related to private equity and strategic investments, excluding CCB. The fair value adjustment on structured liabilities reflects the widening of the company’s credit spreads and does not impact regulatory capital ratios. The year-ago quarter included a $10.4 billion goodwill impairment charge. Details on the significant items are included in the revenue and expense section of this press release.

If you take $7.43 billion, subtract the positive $4.5 billion adjustment on structured liabilities, and the $3.6 billion on the CCB sale, and the $1.7 billion gain in debit value adjustments, while adding back in the $2.2 billion related to various investments, you actually end up with a tiny loss.

However…

If you go into the investor presentation, you get a ton of other items that get you to a pre-tax income of $3.1 billion.  This is not a loss, but it’s less than half of the unadjusted GAAP pre-tax income of $7.7billion. See the slide:

BACQ32011Items

Photo: Bank of America

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