Financial Analysis: ROTCE, Basel III Ratios, and Leverage of Tangible Equity, Study notes of Financial Statement Analysis

Download Financial Analysis: ROTCE, Basel III Ratios, and Leverage of Tangible Equity and more Study notes Financial Statement Analysis in PDF only on Docsity! 1 Return on Average Tangible Common Shareholders’ Equity (ROTCE) ($ in millions) ROTCE is computed by dividing annualized net earnings applicable to common shareholders by average monthly tangible common shareholders' equity. Management believes that ROTCE is meaningful because it measures the performance of businesses consistently, whether they were acquired or developed internally. ROTCE is a non-GAAP measure and may not be comparable to similar non-GAAP measures used by other companies. Three Months Ended March 2014 Year Ended December 2013 ROTCE (1) 11.6 % 11.7 % _________________________ (1) The table below presents the reconciliation of average total shareholders’ equity to average tangible common shareholders’ equity. Average for the Three Months Ended March 2014 Year Ended December 2013 Total shareholders' equity $ 78,907 $ 77,353 Preferred stock (7,200) (6,892) Common shareholders' equity $ 71,707 $ 70,461 Goodwill and identifiable intangible assets (4,394) (4,624) Tangible common shareholders’ equity $ 67,313 $ 65,837 For further information, see the firm’s Quarterly Report on Form 10-Q for the period ended March 31, 2014 2 Tangible Common Shareholders’ Equity, Tangible Book Value Per Common Share, and Selected Regulatory Capital and Leverage Information ($ in millions, except per share amounts) The table below presents information on the firm's common shareholders’ equity, book value per common share, and selected regulatory capital and leverage information. March 2014 December 2013 Common shareholders’ equity $ 71,899 $ 71,267 Tangible common shareholders’ equity (1) 67,413 66,891 Book value per common share (2) $ 154.69 $ 152.48 Tangible book value per common share (1)(2) 145.04 143.11 Basel III Advanced RWAs (fully phased-in basis) (3) $ 597,406 $ 594,662 Basel III Advanced Common Equity Tier 1 (CET1) ratio (fully phased-in basis) (3)(4) 9.7 % 9.8 % Standardized RWAs (transitional basis) (3) 620,603 629,268 Standardized CET1 ratio (transitional basis) (3)(5) 10.9 % Not disclosed Standardized RWAs (fully phased-in basis) (3) 624,188 635,092 Standardized CET1 ratio (fully phased-in basis) (3)(4) 9.3 % 9.2 % Supplementary leverage ratio (6) 4.2 % Not disclosed Supplementary leverage ratio, including the capital impact of reducing the firm’s fund investments to comply with the Volcker Rule (7) 4.7 % Not disclosed ______________________ Basel III Advanced RWAs on a fully phased-in basis, Basel III Advanced CET1 ratio on a fully phased-in basis, Standardized RWAs on a transitional and fully phased-in basis, Standardized CET1 ratio on a transitional and fully phased-in basis, supplementary leverage ratio and supplementary leverage ratio, including the capital impact of reducing the firm’s fund investments to comply with the Volcker Rule, in the table above are non-GAAP measures and may not be comparable to similar non-GAAP measures used by other companies. Management believes that these estimated ratios and amounts are meaningful because they are measures that the firm, its regulators and investors use to assess capital adequacy. These estimates are based on the firm’s current interpretation, expectations and understanding of the Revised Capital Framework and, for the supplementary leverage ratios, the U.S. federal bank regulatory agencies’ proposal to further revise the definition of the leverage exposure measure issued in April 2014 (April 2014 proposal) and may evolve as we discuss their interpretation with our regulators. (1) Tangible common shareholders' equity equals total shareholders' equity less preferred stock, goodwill and identifiable intangible assets. Tangible book value per common share is computed by dividing tangible common shareholders' equity by common shares outstanding, including restricted stock units (RSUs) granted to employees with no future service requirements. Management believes that tangible common shareholders' equity and tangible book value per common share are meaningful because they are measures that the firm and investors use to assess capital adequacy. Tangible common shareholders’ equity and tangible book value per common share are non-GAAP measures and may not be comparable to similar non-GAAP measures used by other companies. The table below presents the reconciliation of total shareholders' equity to tangible common shareholders' equity. March 2014 December 2013 Total shareholders’ equity $ 79,099 $ 78,467 Deduct: Preferred stock (7,200) (7,200) Common shareholders’ equity 71,899 71,267 Deduct: Goodwill and identifiable intangible assets (4,486) (4,376) Tangible common shareholders’ equity $ 67,413 $ 66,891 (2) The table below presents common shares outstanding, including RSUs granted to employees with no future service requirements. March 2014 December 2013 (in millions) Common shares outstanding, including RSUs granted to employees with no future service requirements 464.8 467.4