financial overview/capital/balance sheet
DESCRIPTION
TRANSCRIPT
Financial Management Joe PriceChief Financial Officer
Chan MartinTreasurer
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Forward Looking StatementsThis presentation contains forward-looking statements, including statements about the financial conditions, results of operations and earnings outlook of Bank of America Corporation. The forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results or earnings to differ materially from such forward-looking statements include, among others, the following: 1) projected business increases following process changes and other investments are lower than expected; 2) competitive pressure among financial services companies increases significantly; 3) general economic conditions are less favorable than expected; 4) political conditions including the threat of future terrorist activity and related actions by the United States abroad may adversely affect the company’s businesses and economic conditions as a whole; 5) changes in the interest rate environment reduce interest margins and impact funding sources; 6) changes in foreign exchange rates increases exposure; 7) changes in market rates and prices may adversely impact the value of financial products; 8) legislation or regulatory environments, requirements or changes adversely affect the businesses in which the company is engaged; 9) changes in accounting standards, rules or interpretations, 10) litigation liabilities, including costs, expenses, settlements and judgments, may adversely affect the company or its businesses; 11) mergers and acquisitions and their integration into the company; and 12) decisions to downsize, sell or close units or otherwise change the business mix of any of the company. For further information regarding Bank of America Corporation, please read the Bank of America reports filed with the SEC and available at www.sec.gov.
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Bank of America Financial Management
• Generate diverse revenue stream through customer/client activity
• Manage resulting interest rate risk in changing environment
• Maintain capital and liquidity strength
• Manage capital advantageously
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Financial Strength
Earnings
Liquidity Capital
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44%56%
Net Interest Income Noninterest Income
2001$36B*
52%48%
2006$74B*
Diverse Revenue Sources
* GAAP, FTE basis
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History of Revenue Growth
* 2001 – 2003 reflect summation of line items from former Fleet, MBNA and Bank of America financial statements. For 2004 – 2005 please refer to the Form 8-K filed April 10, 2006.
4% CAGR
7% CAGR
Pro Forma FTE Revenue
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
2001 2002 2003 2004 2005 2006
$ m
illio
ns
Net Interest Income Noninterest Income
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Noninterest Revenue Diversity – 2006 $38 Billion
Mortgage Banking Income
1%
Service Charges
21%
Card Income38%
Other6%Equity Gains
8%
Investment Banking
6%
Trading8%
Investment & Brokerage
12%
Global Corporate & Investment
Banking31%
Global Wealth &
Investment Management
10%
Global Consumer &
Small Business
54%
Other5%
Noninterest Revenue by Product/Activity
Noninterest Revenue by Segment
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Where We’ve Come From
*Pro Forma Basis
Held Core NII Trends* vs Market Spread Compression
-
2,000
4,000
6,000
8,000
10,0001Q
04
2Q04
3Q04
4Q04
1Q05
2Q05
3Q05
4Q05
1Q06
2Q06
3Q06
4Q06
Cor
e N
II ($
Mill
ions
)
(50 bps.)
50 bps.
150 bps.
250 bps.
350 bps.
5-Year CMS vs. 3-month LiborCombined Core NII
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2006 Revenue Growth
Pro Forma FTE Revenue
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
2001 2002 2003 2004 2005 2006
$ m
illio
ns
Net Interest Income Noninterest Income
3%
18%
2006 Growth
* 2001 – 2003 reflect summation of line items from former Fleet, MBNA and Bank of America financial statements. For 2004 – 2005 please refer to the Form 8-K filed April 10, 2006.
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How Environment has Changed
• Abundant liquidity
• Productivity and technology impacts
• Innovative financial products
• Greater financial transparency
• Monetary policy
• Term structure of rates
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Interest Rate Risk Management
• Interest rate sensitivity
• Mortgage balances
• Proprietary information
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Positioning Bank of America for Success
• Diversity of revenue provides stability through cycles
• Focused on growing across enterprise to drive revenue
• Manage revenue stream holistically
• Achieving results from integrated banking
13 2006
104,879
155,233
2005
48%
22%
Better
Revenue Growth
8%
Better
Deposits
60%
Better
Credit Growth
159%
Better
Investment Growth
YOY Revenue
Growth Lift
Dual Coverage Momentum
CMAS
Treasury Services
Business Lending
+33% GrowthProduct Mix and Revenue Growth
+80%
+18%
+12%27%
41%
32%
23%
36%
41%
2005 2006
Client Improvement After Premier Banking Acceptance
GWIM Converted Client Referrals
Integrated Banking Coming to Life
• Migrating Premier relationships to GWIM
• Consumer channel diversification
• Originations distributed through GCIB
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Our Positioning for Tomorrow
• Pressure on 2007 NII growth
• Strength of businesses sustainable
• Value of diverse revenue mix
Liquidity and Capital Strength
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Liquidity – Time to Required Funding
Time to Required Funding
15
18
21
24
27
30
3320
01
2002
2003
2004
2005
2006
Mon
ths
Bef
ore
Mar
ket A
cces
s is
Req
uire
d
Time to Required Funding Maximum Target Minimum Target
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Diversity of Debt Issuance
Long-Term Debt Portfolio
2001 2006
InstitutionalUSD86%
InstitutionalNon-USD
8%Retail
6%
InstitutionalNon-USD
34%
Retail22%
InstitutionalUSD44%
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Capital Strength and Ratios
Total Assets $1,460 $1,292
Total Shareholders’ Equity $135 $102
Tier 1 Capital Ratio 8.64% 8.25%
Tier 1 Leverage Ratio 6.36% 5.91%
Number Common Shares O/S 4.46 4.00
2006 2005
(in billions, as of 12/31)
Capital Usage
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BusinessGrowth
Capital Usage
Strong Balance Sheet
Share Repurchases
Acquisitions
Dividends
$27 Billion Cash Flow
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Making Good Capital Decisions
Enhance multicultural strategy
Gain scale in merchant services business
Capital Investment Primary Advantage
Tap into tremendous growth of Chinese economy
Complete national franchise and entry into NE wealth markets
Enhance capability to serve high-net worth
Become premier payments provider and leverage products and distribution
U.S. Trust
MBNA
Fleet
China Construction Bank
National Processing
Santander Serfin
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Actively Managing Excess Capital
• Returned more than $80 billion in capital since 1998
• Repurchases plus dividends have averaged 80% of net income
($ in millions)
$35,611
$44,626
1998 1999 2000 2001 2002 2003 2004 2005 2006 Cumulative
Tier 1 7.06%
Tier 1 8.64%
$80,237
Capital returned as % of earnings 88 84 96 89 91 636358 91 80
Dividends Repurchases
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Longer-term Financial Objectives
10% EPS growth to be driven by:
• 6% to 9% revenue growth
• 2% to 4% operating leverage
• Manageable credit costs
• Advantageous capital management
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Summary
• Generate diverse revenue stream through customer / client activity
• Manage resulting interest rate risk in changing environment
• Maintain capital and liquidity strength
• Manage capital advantageously