Download - Lehman Brothers 4th Annual Conference
Bank of AmericaGrowth Opportunities in Consumerand Small Business Banking
Liam McGeePresidentGlobal Consumer & Small Business Banking
Lehman BrothersSeptember 13, 2006
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Forward Looking Statements
This 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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Global Consumer & Small Business Banking
1. Size and scale matter
2. Track record of growth
3. We will continue to grow
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Geographic Diversity – Across U.S. Growth Markets
Size & Scale Matter
2Q06 YTD Earnings of $5.8 billion
West 17%
Southwest 13%
Community11%
East 22%
Northeast 15%
Out of Footprint 18%
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Earnings Diversity – Strong Foundation for Growth
Size & Scale Matter
Card Services51% Home
Equity4%
Mortgage2%
Deposits42%
Other1%
2Q06 YTD Earnings of $5.8 billion
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Channel Diversity – Any Way Customers Choose
Size & Scale Matter
Customers& Clients
BankingCenters
Phone
ATM
e-Commerce
AffinityGroups
SalesForces
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Pricing/Value – Ability to Price Below Average and Grow
Size & Scale Matter
Growing Deposits WhileLagging Rates Paid
0%
3%
6%
9%
12%
15%
Q304 Q404 Q105 Q205 Q305 Q405 Q106 Q2060%
20%
40%
60%
80%
100%
Cumulative consumer deposit growth
% of Fed Funds hikes passed on – cumulative
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Efficiency – Economies of Scale Achieved While Growing
53%
50%
45%
40%
45%
50%
55%
YTD 2004 YTD 2005 YTD 2006
Pro forma Global Consumer & SmallBusiness Banking efficiency ratio
Size & Scale Matter
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Resources – Capacity to Invest in People, Productivity
ATMCheck
Imaging Online BankingEnhancements
New andRefurbished
Stores
Size & Scale Matter
10
Information & Innovation – Anticipating Customer Needs
Size & Scale Matter
11
Brand – Critical to Growing a Retail Business
Bank of America Unaided Awareness
FortuneMost Admired (Megabanks)
• 2005 1st
• 2004 2nd
• 2003 3rd
• 2002 6th
Source: Enterprise Analytics, Fortune, FT
2000
23% 2005
41%
• Wells Fargo – 23%• Citibank – 18%• Wachovia – 16%• Chase – 11%
Size & Scale Matter
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Payments – We Are Positioned to Lead
No. 1 Share in Fastest Growing Payment Types
Customers & Clients
No. 1Debit Card
15.7% Share
No. 1Credit Card
21.5% Share
No. 1Online Bill Pay
54.8% Share
• #1 Credit Card
• #1 Debit Card
• #1 Check Processor
• #1 Online Banking/Bill Pay
• #1 Cash Management
• #1 ACH Receiver
• #2 MerchantAcquiring
Size & Scale Matter
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Growing Customer Relationships
Track Record of Growth
2002 2003 2004 2005 2QYTD062002 2003 2004 2005 2QYTD06
Net New Checking Accounts New Debit Cards
443,000
1,192,000
2,063,0002,300,000
1,304,0002,500,000
3,200,000
4,100,0004,829,000
2,603,000
2002 2003 2004 2005 2QYTD06 2002 2003 2004 2005 2QYTD06
Home Equity Production (in $ billions) New Franchise Consumer Credit Cards
30.038.0
61.072.0
39.7 1,250,0001,565,000
1,784,000
2,196,000
1,554,000
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Top Line and Bottom Line GrowthPro forma with Fleet and MBNA ($ in billions)
18.0 18.920.7
$10
$15
$20
$25
1st Half 2004 1st Half 2005 1st Half 2006
14.2%15.8%
18.1%
0%
5%
10%
15%
20%
1st Half 2004 1st Half 2005 1st Half 2006
$4.2$4.6
$5.8
$3
$4
$5
$6
1st Half 2004 1st Half 2005 1st Half 2006
7% CAGR
17% CAGR
Revenue Return on Equity
Net Income
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Growth Opportunities
• Market optimization
• Mass market small business
• Consumer credit continuum
• Credit card
• Affinity banking
• Online banking / channel diversification
We Will Continue to Grow
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Optimizing Market Opportunities
‘1 HH penetration equal to HHs with BAC deposit acct. divided by number of HHs in market
61
55 53 53
4642 41 40 40
32
23
LA Seattle Miami San Fran Boston Phoenix Dallas Atlanta DC Houston NY
% Household Penetration Share 1
17‘1 Checking HH penetration equal to HHs with BAC checking acct. divided by number of HHs in market
‘2 Defined as BAC HELOC production divided by Total HELOC Market
Optimizing Market Opportunities
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25 26
21
2523 23
18 18
1416
LA Seattle Miami San Fran Boston Phoenix Dallas Atlanta DC Houston NY
54 5148 48
42 39 38 37 37
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20
LA Seattle Miami San Fran Boston Phoenix Dallas Atlanta DC Houston NY
% Home Equity Penetration 2
% Checking Penetration 1
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We Manage to Market-Specific Growth Potential
*** YTD Q2 2006
0%
10%
20%
30%
40%
50%
60%
Checking HH Penetration HELOC Share0%
10%
20%
30%
40%
50%
60%
Checking HH Penetration HELOC Share
37%
18%
29%
14%
54%
41%
54%
41%17%
23%
25%
27%
Washington, DC Houston
If D.C. achievesL.A. and Miami penetration levels:
• Incremental 309K HHs
If Houston achievesL.A. and Miami penetration levels:
• Incremental 432K HHs
• Incremental $527M in HELOC production • Incremental $59M in HELOC production
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Small Business Banking Growth Opportunity
Growing credit share to match market penetration
=Additional $20 Billion
in balances
8%
22%
Credit Share Market Penetration
Bank of America Small Business
Customer Penetration
18.2%20.8%
22.4%
2003 2004 2005
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Momentum in Growing Mass Market Small Business($ in billions)
Revenue
Pro forma with MBNA
• Small Business credit growth of 22%
• Total deposit growth of $3.2B (7%)
• Small Business sales growth of 24 %
Net Income
$0.80
$0.90
$1.00
$1.10
$1.20
$1.30
$1.40
2Q 2005 2Q 2006
21% growth
$0.40
$0.50
$0.60
$0.70
$0.80
2Q 2005 2Q 2006
29% growth
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Consumer Credit Continuum
Customer credit needs
Relationship-based Common Decision Engine
Unsecured Lines
StudentLending
Unsecured Credit Card
FirstMortgage
Home Equity
SecuredCredit Card
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Home Equity Leader With Room To Grow
$27
$44$58
$71
2002 2003 2004 2005
Home Equity Balances($in billions)
#1
Matching 8.6%home equity
market shareto 13.5%
retail deposits share
=$43 billion in
incremental balances
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Other Consumer Credit Opportunities
• Mortgage– 5th largest originator in U.S.– $41 billion originations YTD 2Q06
• Unsecured credit– Successful MBNA product– Pilot in L.A., Chicago, Boston
• Student lending– Government guaranteed– Private market
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Card Services Transition
• Transition on target
– Continuing to meet revenue and expense targets
– Affinity card sales now in all BAC channels
• September and October
– Integrated card platform release and customer migration
• Leveraging MBNA judgmental lending and collectionsbest practices
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Card Services Growth in 2006 – Managed Basis
2006 2006June YTD YOY Change (1)
Total Revenue $ 12.2 7%
Provision for Credit Losses 3.5 (24%)
Total Non-Interest Expense 3.9 (10%)
Net Income $ 3.0 91%
Key Measures:Charge-Offs % 3.24% (193) bpsDelinquencies:
30 Day 4.56% 19 bps90 Day 2.20% 18 bps
Risk Adjusted Margin (2) 9.94% 217 bps
($ in billions)
(1) YOY growth is pro forma with MBNA
(2) RAM in managed basis for US Card
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Card Services – Our Unique Model
• Distribution diversity
• Efficiency
• Pricing
• Risk/reward – risk adjusted margin
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Affinity Banking – a New Growth Engine
• More than 5,000 organizations endorse our products including:
– 1,400 professional organizations
– 900 colleges and universities
– 600 sports related organizations
Bank of America Retail Products and Distribution
NewAffinity Banking Model
+ =MBNA Affinity Relationships
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Online Banking: A Growing Competitive Advantage
Active Online CustomersAre Much More Profitable*
DepositBalances
LoanBalances
Profitability
15%
28% 27%
* Three years after going online, combined access-onlyand bill pay customers
** Q206 includes MBNA
4.06.6 7.4 9.43.2
5.8 7.310.4
Q4 2003 Q4 2004 Q4 2005 Q2 2006
Bill Pay users
7.2
12.414.7
19.8**
19.8 Million OnlineBanking Active Users
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Diversifying Sales & Service Delivery Channels
Product Sales Mix % by Channel(Units Millions)
15.3% 11.6% 13.7%
11.7% 7.7%
13.5%
64.5%
68.4%
68.1%
7.2%
12.3%
4.7%
0
4
8
12
16
20
24
28
32
36
40
44
48
2004 2005 2006Est
Direct Mail
Banking Center
E-Commerce
Other
Channel Diversification
3032
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Card Sales Mix By Channel
20% 20% 16%
2% 7%8%
22%
34%52%
56%
39%
24%
2004 2005 1Q 06
Optimizing Origination Costs
$30
$140
$50
$113 $98 $78
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In Summary
• Our size and scale is an advantage
• We have grown the business organically
• We are relentlessly focused on continuing to grow