Acquisition Project


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Acquisition Project

  1. 1. Acquisition of National City by Bank of America Presented by: Bianca Butts Craig Daugherty Matt Dunson Tameka Foster March 7, 2005
  2. 2. Agenda <ul><li>Current State of Bank of America </li></ul><ul><li>Current State of National City Corporation </li></ul><ul><li>Benefits of Acquisition </li></ul><ul><li>Financing the Deal </li></ul><ul><li>Closing the Deal: A Snapshot of Bank of America </li></ul>
  3. 3. Bank of America <ul><li>One of largest banks in the United States </li></ul><ul><ul><li>Approximately 190.35 billion in market capitalization </li></ul></ul><ul><li>Operates primarily in twenty-nine states and the District of Columbia </li></ul><ul><ul><li>Very little presence in the Midwest </li></ul></ul>
  4. 4. Bank of America Cont’d <ul><li>Four main business lines </li></ul><ul><ul><li>Consumer and small business banking </li></ul></ul><ul><ul><li>Commercial banking </li></ul></ul><ul><ul><li>Global corporate and investment banking </li></ul></ul><ul><ul><li>Wealth and investment management </li></ul></ul>
  5. 5. Bank of America Key Financials <ul><li>Total cash is $28.94 billion </li></ul><ul><li>EPS is 2.7 </li></ul><ul><li>Earnings growth of 9.5 percent projected for next five years </li></ul><ul><li>P/E ratio of 12.33 </li></ul>
  6. 6. Bank of America Technology <ul><li>11.8 million active users of its website </li></ul><ul><li>The pioneering company behind debit cards and is the number one issuer of debit cards world wide </li></ul><ul><li>The largest ATM network in the United States </li></ul>
  7. 7. National City Corporation <ul><li>One of largest banks in the Midwest </li></ul><ul><ul><li>Approximately 23.39 billion in market capitalization </li></ul></ul><ul><li>Primary banking markets are in Ohio, Indiana, Illinois, Kentucky, Michigan and Pennsylvania </li></ul>
  8. 8. National City Cont’d <ul><li>Core Business lines </li></ul><ul><ul><li>Commercial and retail banking </li></ul></ul><ul><ul><li>Consumer finance </li></ul></ul><ul><ul><li>Asset management </li></ul></ul><ul><ul><li>Mortgage financing and servicing </li></ul></ul><ul><ul><li>Payment processing </li></ul></ul>
  9. 9. National City Key Financials <ul><li>Cash of $3.83 billion and total stock holder equity of $12.8 billion </li></ul><ul><li>P/E ratio of 8.33 </li></ul><ul><li>Estimated growth is 8% for next five years </li></ul><ul><li>EPS is 4.3 </li></ul>
  10. 10. National City Key Financials Cont’d <ul><li>2004 2003 </li></ul><ul><li>ROA 2.0% 1.86% </li></ul><ul><li>ROE 21.7% 22.7% </li></ul><ul><li>NI 2.8 Billion 2.1 Billion </li></ul>
  11. 11. National City Technology <ul><li>Awarded #1 easiest banking site to use </li></ul><ul><li>7 th overall best banking site </li></ul><ul><li>2 nd best small business banking site </li></ul>
  12. 12. Benefits of Acquisition <ul><li>Geography </li></ul><ul><ul><li>Only operations in Illinois and Pennsylvania overlap with National City </li></ul></ul><ul><ul><li>Decrease risk </li></ul></ul><ul><ul><li>Decrease competition </li></ul></ul>
  13. 13. Benefits of Acquisition Cont’d <ul><li>Increase size and power of Bank of America </li></ul><ul><ul><li>Gain important physical assets and intangible assets </li></ul></ul><ul><ul><li>Cut overlapping departments/personnel </li></ul></ul><ul><ul><li>Allocate more funding to important departments and positions within the company, especially in Midwest </li></ul></ul><ul><ul><li>Increase technology and larger accounts for future technological growth </li></ul></ul>
  14. 14. Benefits of Acquisition Cont’d <ul><li>Ease of Acquisition </li></ul><ul><ul><li>Size of Bank of America vs. National City </li></ul></ul><ul><ul><li>Companies offer similar product lines </li></ul></ul><ul><ul><li>P/E ratios of the companies allow both sets of stockholders to realize gains </li></ul></ul><ul><ul><li>National City has many benefits related to the benefits of Bank of America </li></ul></ul>
  15. 15. Financing the Deal <ul><li>Purchase – of – Stock Method </li></ul><ul><li>Advantages versus Disadvantages </li></ul>
  16. 16. Advantages <ul><li>Purchase of Stock Method </li></ul><ul><li>Bank of America assumes all of National City’s assets and liabilities </li></ul><ul><li>Stock transactions are not subject to taxation until the stock is sold </li></ul><ul><li>Usually National City’s stock will increase in value, if the merger is completed successfully </li></ul>
  17. 17. Disadvantages <ul><li>Purchase of Stock Method </li></ul><ul><li>We assume all of National City’s liabilities </li></ul><ul><li>There is a chance that National City’s stock may diminish in value </li></ul>
  18. 18. The Deal…. <ul><li>Purchase – of – Stock Method </li></ul><ul><li>National City’s current stock price - $35.69 </li></ul><ul><li>Premium of $5 OR 114% per share </li></ul><ul><li>National City’s New Stock Price - $40.69 </li></ul><ul><li>Exchange each share of National City for .88 of a share of Bank of America </li></ul><ul><li>Approximately 5.7 million new shares of Bank of America </li></ul>
  19. 19. Future Projections <ul><li>Technology is a driving force behind the banking and financial industries </li></ul><ul><li>Together the two banks could potentially form one of the most technologically advanced banks in America </li></ul><ul><li>National City is a premier investor in FTVentures, the first venture capital firm in the U.S. to focus on technologies that benefit the global financial services industry. FTVentures now has over $623 million in total capital under management and is a leading investor in information technologies </li></ul>
  20. 20. Projections, Cont. <ul><li>Because of Bank of America’s lack of presence in the Midwest, we believe that few jobs will have to be lost </li></ul><ul><li>The executive officers will remain in Charlotte as well as departments such as marketing and public relations </li></ul><ul><li>Retail branches in Pennsylvania and Illinois may be eliminated </li></ul><ul><li>Many departments may be combined, reduced, or completely removed </li></ul>
  21. 21. Key Financial Statistics <ul><li>Total assets are predicted to reach $990.7 billion next year, an increase of about 4.3% </li></ul><ul><li>Total liabilities are expected to be close to $930 billion next year, up nearly 14% </li></ul><ul><li>Total revenue is projected at $120.5 billion next year, an increase of 33% from closing </li></ul><ul><li>Net income should reach $163 billion, up 16% </li></ul>
  22. 22. Closing <ul><li>4.6 billion shares of Bank of America Stock </li></ul><ul><li>Net Income of $13 million </li></ul><ul><li>Decrease in earnings per share $2.94 from $7.27 </li></ul><ul><li>Earnings are expected to increase 8.9% per year </li></ul>
  23. 23. Final Remarks <ul><li>Gain the Midwestern Market </li></ul><ul><li>Decrease Competition </li></ul><ul><li>Higher Return on Assets and Return on Equity </li></ul><ul><li>Expand Business Lines </li></ul>
  24. 24. Questions ??