Though mired along with the rest of the financial sector in the blow-off from the housing market collapse, the mortgage-backed securities tsunami, and what looks to be a global economic cooling, Bank of America has avoided the big losses experienced by some other institutions. Global risk officer Amy Woods Brinkley has played a key part in maintaining the bank's relatively positive balance sheet performance, measuring the risks and rewards in a turbulent market.
Certainly BofA's net income has been drained by increases in loan loss reserves and charge-offs related to the sagging housing and real estate markets, falling 40.8 percent to $3.41 billion in the second quarter from a record $5.76 billion in second-quarter 2007.
Yet many measures have held up well on a year-over-year basis: BofA's second-quarter revenues hit a record $20.63 billion, a three percent increase from $20.0.2 billion in the second quarter of 2007; the bank's net assets climbed to $1.72 trillion at the end of the second quarter, up from $1.56 trillion a year earlier; its Tier 1 capital ratio stood at 8.25 percent compared with 8.52 percent, while Tier 1 leverage was 6.09 percent versus 6.33 percent; and the ratio of the allowance for loan and lease losses to annualized net charge-offs declined to 1.18 from 1.51. Other metrics have improved after a harrowing two quarters. Return on average assets recovered to 0.78 percent from 0.28 percent in the first quarter and 0.06 percent in fourth-quarter 2007, for example, while return on average shareholders' equity rebounded to 9.25 percent from 2.9 percent and 0.6 percent, respectively.
Brinkley leads a risk group of 4,500 associates as they manage credit, market, and operational risk across BofA's lines of business, and assess potential growth spots. Her team is also responsible for handling the bank's corporate audit, legal, regulatory relations, compliance, and corporate security risk assessment needs. A current focus is improving the way the bank deals with low-probability-but-high-impact tail risks and how these risks spill over and amplify market, credit, and operational risks.
"Managing risk and reward is both art and science," Brinkley says. "We have to navigate by facts, data, instinct and experience. We have to balance all of our analytical power with good, old-fashioned common sense."
(c) 2008 U.S. Banker and SourceMedia, Inc. All Rights Reserved. http://www.americanbanker.com/usb.html/
