Citigroup 2007 Financial Services Conference
- 1. Bank of America Opportunities For Growth Ken Lewis Chairman, President and Chief Executive Officer Citigroup Financial Services Conference January 31, 2007
- 2. 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. 2
- 3. Summary Earnings Statement – Annual Comparison ($ in millions) Proforma 1 GAAP 2006 2005 % Change 2005 Core net interest income (FTE) $ 34,164 $ 32,925 4% $ 29,631 Market-based net interest income 1,651 1,938 1,938 Net interest income (FTE) 35,815 34,863 3% 31,569 Noninterest income 38,432 32,647 18 % 25,354 Total revenue (FTE) 74,247 67,510 10 % 56,923 Provision for credit losses 5,010 5,082 (1 %) 4,014 Gains (losses) on sales of debt securities (443) 1,084 NM 1,084 Noninterest expense (excl merger charges) 34,792 34,411 1% 28,269 Merger charge 805 1,179 412 Noninterest expense 35,597 35,590 28,681 Pre-tax income 33,197 27,922 25,312 Income tax expense 12,064 9,765 8,847 Net income 21,133 18,157 16 % 16,465 Merger & restructuring charges (after-tax) 507 771 275 Net Income before merger charges $ 21,640 $ 18,928 14 % $ 16,740 Diluted EPS reported $ 4.59 $ 4.04 Merger charge impact .11 .07 Diluted EPS (excl. merger charge) 4.70 4.11 Impact of intangibles amortization .24 .13 1 Proforma results include MBNA 3
- 4. 2006 Business Results ($ in millions) REVENUE (FTE) EARNINGS Change vs. Proforma1 2005 Change vs. Proforma1 2005 2006 Amt. % Change 2006 Amt. % Change Global Consumer $ 41,691 $ 2,844 7% $ 11,171 $ 1,785 19 % & Small Business Global Corporate & 22,691 1,992 10 % 6,792 358 6% Investment Bank Global Wealth & 7,779 410 6% 2,403 55 2% Investment Mgmt All Other 2,086 1,491 NM 767 778 NM Total $ 74,247 $ 6,737 10 % $ 21,133 $ 2,976 16 % 1 Proforma results include MBNA 4
- 5. Short-term Outlook • Continuing flat yield curve environment • Expect GDP growth around 3% • Core net interest income growth in low single digits • Reduced equity investment gains • Credit costs continue to season and normalize • Positive operating leverage 5
- 6. Achieving Growth in a Challenging Environment Proforma highlights on a Diluted EPS excluding merger managed basis 1 and restructuring charges 2 2005 2006 Revenue growth (FTE) 5% 7% Net interest income (FTE) 1% 1% Noninterest income 12 % 16 % $4.70 $4.11 $3.75 Expense growth: - 1% (excl. merger charges) Credit costs 12 % (16 %) 2004 2005 2006 Securities gains/(losses) (39 %) NM Achieved While Completing 2 of Industry’s Largest Acquisitions 1 Managed basis treats securitized loan receivables as if they were still on the balance sheet and presents the earnings on the sold loan receivables as if they were not sold. Managed Noninterest Income includes the impact of the gains recognized on securitized loan principal receivables in accordance with SFAS No. 140. 2 Excludes merger and restructuring charges of $.11, $.07 and $.11 6 in 2004, 2005 and 2006, respectively
- 7. Consistent Attractive Earnings Growth Diluted EPS $4.70 ow th $4.11 nd Gr pou C om $3.75 11% $3.55 $3.05 $2.55 $2.88 2000 2001 2002 2003 2004 2005 2006 2000 - $2.26 reported EPS has been adjusted to exclude $.10 impact of restructuring charges as well as $.19 goodwill amortization expense eliminated in 2002 for comparability to other periods. 2001 - $2.30 reported EPS has been adjusted to exclude $.39 impact of business exit costs as well as $.19 goodwill amortization expense eliminated in 2002 for comparability to other periods. 2004 - $3.64 reported EPS has been adjusted $. 11 to exclude charges for merger and restructuring costs. 2005 - $4.04 reported EPShas been adjusted $.07 to excludes charges for merger and restructuring costs 2006 - $4.59 reported EPShas been adjusted $.11 to excludes charges for merger and restructuring costs 7
- 8. Operating Leverage Provides Good Returns Compound Annual Growth Rates $20.00 On a per share basis $15.89 Revenue 8% $15.00 $9.89 $10.00 $7.57 $5.24 Expense 6% $5.00 $4.70 Earnings 11% $2.55 $0.00 2000 2001 2002 2003 2004 2005 2006 Revenue per share Expense per share Earnings per share Based on originally reported results on a per share basis excluding goodwill amortization expense in 2000 and 2001 and merger and restructuring charges in all periods 8
- 9. Effectively Managing Costs Efficiency Ratio 55% 54% 53% 53% 52% 49% 47% 2000 2001 2002 2003 2004 2005 2006 Excludes merger & restructuring charges 9
- 10. Making Good Capital Decisions Capital Investment Primary Advantage • Santander Serfin Enhance multicultural strategy • National Processing Gain scale in merchant services business • China Construction Bank Tap into tremendous growth of Chinese economy • Fleet Complete national franchise and entry into NE wealth markets • MBNA Become premier payments provider and leverage products and distribution 10
- 11. Providing Good Returns Bank of America 15% JP Morgan US Bancorp 13% KBW Bank Wachovia 12% S & P 500 Index Wells Fargo 11% 10% 10% 10% Citigroup Dow 9% 8% Total Annualized Shareholder Return From 12/31/03 Bank of America 20% Wachovia 16% US Bancorp KBW Bank 12% Index Wells Fargo 8% Citigroup Dow 7% JP Morgan 6% S & P 500 5% 5% 3% Total Annualized Shareholder Return From 12/31/00 11
- 12. 29 Consecutive Years of Dividend Increases $2.12 Dividend Yield 4.30% wth ed gr o z uali ann 13% 1977 2006 Yield based on annualized dividend and price as of 1/26/07 12
- 13. Aggressively Managing Excess Capital $ in millions • Including net share repurchases and dividends, returned more than $80 billion in capital since 1998 $80,237 • Since 1998, net share repurchases plus dividends have averaged 80% of net income. $44,626 $35,611 Repurchases Dividends 1998 1999 2000 2001 2002 2003 2004 2005 2006 Cumulative Capital returned as % 58 % 88 % 84 % 96 % 89 % 91 % 63 % 63 % 91 % 80 % of earnings Tier 1 Tier 1 7.06% 8.64% 13
- 14. Bank of America Differentiating Factors Ubiquitous franchise • Vast customer base • Unparalleled customer convenience • Market and product leadership positions • Information and innovation Demonstrated ability to execute • Leverage franchise capabilities • Provide innovative customer solutions • Superior integration expertise Opportunities for continued organic growth • Retail banking penetration • Capturing the wealth opportunity • Commercial banking client expansion 14
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