Lehman Brothers 4th Annual Conference

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Lehman Brothers 4th Annual Conference

  1. 1. Bank of America Growth Opportunities in Consumer and Small Business Banking Liam McGee President Global Consumer & Small Business Banking Lehman Brothers September 13, 2006
  2. 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. 3. Global Consumer & Small Business Banking 1. Size and scale matter 2. Track record of growth 3. We will continue to grow 3
  4. 4. Size & Scale Matter Geographic Diversity – Across U.S. Growth Markets 2Q06 YTD Earnings of $5.8 billion Out of Footprint West 18% Northeast 17% 15% Community 11% Southwest East 13% 22% 4
  5. 5. Size & Scale Matter Earnings Diversity – Strong Foundation for Growth 2Q06 YTD Earnings of $5.8 billion Mortgage 2% Card Services 51% Home Equity 4% Other Deposits 1% 42% 5
  6. 6. Size & Scale Matter Channel Diversity – Any Way Customers Choose Banking Centers Affinity ATM Groups Customers & Clients Sales e-Commerce Forces Phone 6
  7. 7. Size & Scale Matter Pricing/Value – Ability to Price Below Average and Grow Growing Deposits While 15% Lagging Rates Paid 100% 12% 80% 9% 60% 6% 40% 3% 20% 0% 0% Q304 Q404 Q105 Q205 Q305 Q405 Q106 Q206 Cumulative consumer deposit growth % of Fed Funds hikes passed on – cumulative 7
  8. 8. Size & Scale Matter Efficiency – Economies of Scale Achieved While Growing Pro forma Global Consumer & Small Business Banking efficiency ratio 55% 53% 50% 50% 45% 45% 40% YTD 2004 YTD 2005 YTD 2006 8
  9. 9. Size & Scale Matter Resources – Capacity to Invest in People, Productivity New and Refurbished Stores ATM Check Imaging Online Banking Enhancements 9
  10. 10. Size & Scale Matter Information & Innovation – Anticipating Customer Needs 10
  11. 11. Size & Scale Matter Brand – Critical to Growing a Retail Business Bank of America Unaided Awareness 41% 2005 • Wells Fargo – 23% 23% • Citibank – 18% 2000 • Wachovia – 16% • Chase – 11% Fortune Most Admired (Megabanks) • 2005 1st • 2004 2nd • 2003 3rd • 2002 6th 11 Source: Enterprise Analytics, Fortune, FT
  12. 12. Size & Scale Matter Payments – We Are Positioned to Lead • #1 Credit Card • #1 Debit Card No. 1 • #1 Check Processor Online Bill Pay 54.8% Share • #1 Online Banking/Bill Pay • #1 Cash Management • #1 ACH Receiver Customers & Clients • #2 Merchant Acquiring No. 1 No. 1 Debit Card Credit Card 15.7% Share 21.5% Share No. 1 Share in Fastest Growing Payment Types 12
  13. 13. Track Record of Growth Growing Customer Relationships Net New Checking Accounts New Debit Cards 2,300,000 2,063,000 4,829,000 4,100,000 1,304,000 3,200,000 1,192,000 2,603,000 2,500,000 443,000 2002 2003 2004 2005 2QYTD06 2002 2003 2004 2005 2QYTD06 Home Equity Production (in $ billions) New Franchise Consumer Credit Cards 2,196,000 72.0 61.0 1,784,000 1,565,000 1,554,000 39.7 1,250,000 38.0 30.0 2002 2003 2004 2005 2QYTD06 2002 2003 2004 2005 2QYTD06 13
  14. 14. Top Line and Bottom Line Growth Pro forma with Fleet and MBNA ($ in billions) Revenue Return on Equity $25 7% CAGR 20% 18.1% 15.8% 20.7 15% 14.2% $20 18.9 18.0 10% $15 5% $10 0% 1st Half 2004 1st Half 2005 1st Half 2006 1st Half 2004 1st Half 2005 1st Half 2006 Net Income $6 $5.8 17% CAGR $5 $4.6 $4.2 $4 $3 1st Half 2004 1st Half 2005 1st Half 2006 14
  15. 15. We Will Continue to Grow Growth Opportunities • Market optimization • Mass market small business • Consumer credit continuum • Credit card • Affinity banking • Online banking / channel diversification 15
  16. 16. Optimizing Market Opportunities % Household Penetration Share 1 61 55 53 53 46 42 41 40 40 32 23 LA Seattle Miami San Fran Boston Phoenix Dallas Atlanta DC Houston NY 16 ‘1 HH penetration equal to HHs with BAC deposit acct. divided by number of HHs in market
  17. 17. Optimizing Market Opportunities 54 51 % Checking Penetration 1 48 48 42 39 38 37 37 29 20 LA Seattle Miami San Fran Boston Phoenix Dallas Atlanta DC Houston NY % Home Equity Penetration 2 26 25 25 23 23 21 20 18 18 16 14 LA Seattle Miami San Fran Boston Phoenix Dallas Atlanta DC Houston NY 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
  18. 18. We Manage to Market-Specific Growth Potential Washington, DC Houston 60% 54% 60% 54% 50% 50% 17% 41% 41% 40% 40% 25% 30% 37% 23% 30% 27% 20% 20% 29% 18% 10% 10% 14% 0% 0% Checking HH Penetration HELOC Share Checking HH Penetration HELOC Share If D.C. achieves If Houston achieves L.A. and Miami penetration levels: L.A. and Miami penetration levels: • Incremental 309K HHs • Incremental 432K HHs • Incremental $527M in HELOC production • Incremental $59M in HELOC production 18 *** YTD Q2 2006
  19. 19. Small Business Banking Growth Opportunity Bank of America Small Business Growing credit share to Customer Penetration match market penetration 20.8% 22.4% = Additional $20 Billion 18.2% in balances 22% 8% 2003 2004 2005 Credit Share Market Penetration 19
  20. 20. Momentum in Growing Mass Market Small Business ($ in billions) Revenue Net Income $1.40 $0.80 21% growth 29% growth $1.30 $0.70 $1.20 $1.10 $0.60 $1.00 $0.50 $0.90 $0.80 $0.40 2Q 2005 2Q 2006 2Q 2005 2Q 2006 • Small Business credit growth of 22% • Total deposit growth of $3.2B (7%) • Small Business sales growth of 24 % 20 Pro forma with MBNA
  21. 21. Consumer Credit Continuum Customer credit needs Student Secured Unsecured First Home Unsecured Lending Credit Card Credit Card Mortgage Equity Lines Relationship-based Common Decision Engine 21
  22. 22. Home Equity Leader With Room To Grow Home Equity Balances ($in billions) Matching 8.6% home equity market share #1 to 13.5% $71 retail deposits share $44 $58 = $43 billion in $27 incremental balances 2002 2003 2004 2005 22
  23. 23. Other Consumer Credit Opportunities • Mortgage – 5th largest originator in U.S. – $41 billion originations YTD 2Q06 • Unsecured credit – Successful MBNA product – Pilot in L.A., Chicago, Boston • Student lending – Government guaranteed – Private market 23
  24. 24. Card Services Transition • Transition on target – Continuing to meet revenue and expense targets – Affinity card sales now in all BAC channels • September and October – Integrated card platform release and customer migration • Leveraging MBNA judgmental lending and collections best practices 24
  25. 25. Card Services Growth in 2006 – Managed Basis ($ in billions) 2006 2006 June 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) bps Delinquencies: 30 Day 4.56% 19 bps 90 Day 2.20% 18 bps Risk Adjusted Margin (2) 9.94% 217 bps (1) YOY growth is pro forma with MBNA (2) RAM in managed basis for US Card 25
  26. 26. Card Services – Our Unique Model • Distribution diversity • Efficiency • Pricing • Risk/reward – risk adjusted margin 26
  27. 27. 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 New MBNA Affinity Relationships + Retail Products and Distribution Affinity Banking Model 27
  28. 28. Online Banking: A Growing Competitive Advantage 19.8 Million Online Active Online Customers Banking Active Users Are Much More Profitable* 19.8** 28% 27% 14.7 12.4 10.4 7.3 15% 7.2 5.8 3.2 9.4 6.6 7.4 4.0 Q4 2003 Q4 2004 Q4 2005 Q2 2006 Deposit Loan Profitability Balances Balances Bill Pay users * Three years after going online, combined access-only and bill pay customers ** Q206 includes MBNA 28
  29. 29. Diversifying Sales & Service Delivery Channels Channel Diversification Optimizing Origination Costs 48 $113 $98 $78 44 40 24% $140 36 36 Direct Mail 39% 32 4.7% 56% 32 30 7.2% 28 12.3% Banking Center 24 68.1% 52% $50 34% 20 64.5% E-Commerce 16 68.4% 22% 12 Other 2% 7% 8% $30 8 13.5% 11.7% 4 7.7% 20% 20% 16% 11.6% 15.3% 13.7% 0 2004 2005 2006Est 2004 2005 1Q 06 Product Sales Mix % by Channel Card Sales Mix By Channel (Units Millions) 29
  30. 30. In Summary • Our size and scale is an advantage • We have grown the business organically • We are relentlessly focused on continuing to grow 30

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