Bank Of America Corporation · NYSE:BAC
Bank Of America — Bank of America Corp /De/ (Bac, Bac-Pb, Bac-Pe, Bac-Pk, Bac-Pl, Bac-Pm, Bac-Pn, Bac-Po, Bac-Pp, Bml-Pg, Bml-Ph, Bml-Pj, Bml-Pl) — Q4 2011 Earnings Presentation
40 slides from Bank Of America's earnings presentation, Jan 19, 2012
Slide 1: Bank of America 4Q11 Financial Results
Bank of America 4Q11 Financial Results January 19, 2012
Slide 2: Forward-looking statements
Bank of America and its management may make certain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forw
Slide 3: Important Presentation Format Information
• This information is preliminary and based on company data available at the time of the presentation • Certain prior period amounts have been reclassified to conform to current period presentation • Certain financial measures contained herein represent non-GAAP financial measures. For more informat
Slide 4: Key Takeaways
Key Takeaways • Significant progress made on company transformation • Tier 1 common equity ratio improved 126 bps in 2011 from 8.60% to 9.86% • Incurred significant mortgage-related costs in 2011 – $15.6B representations and warranties provision – $6.3B mortgage-related litigation expense and assess
Slide 5: Client Flows
Consumers Client Flows 5 • Referrals across business lines in 2011 grew 36% over 2010 • Total average deposits increased $47B, or 5% in 2011 • Long-term assets under management flows of $28B in 2011 • Added 1,700 financial advisors • Completed over 1 million consumer real estate loan modifications •
Slide 6: Summary Income Statement and Selected Items
Summary Income Statement and Selected Items Selected Items in 4Q11 Results ($B) 3 6 4Q11 Summary Income Statement ($B) ____________________ 1 Fully taxable-equivalent (FTE) basis. 2 Represents a non-GAAP financial measure. On a GAAP basis, total revenue, net of interest expense, and income tax expen
Slide 7: Balance Sheet Highlights
____________________ 1 Represents a non-GAAP financial measure. 2 For reconciliation to GAAP financial measures, see the accompanying reconciliations in the earnings press release and other earnings-related information. 3 Excluding recoveries related to the bulk sale of previously charged-off U.K. c
Slide 8: Tier 1 Common Equity Ratio Improved in 4Q11
Tier 1 Common Equity Ratio Improved 121 bps in 4Q11 8.65 9.86 0.29 0.24 0.07 0.21 0.18 0.10 0.12 3Q11 Preferred exchange CCB sale Canadian consumer card sale Net income and DTA Reductions in market risk Asset sales and change in loans Other RWA declines - net 4Q11 • Tier 1 common equity ratio increa
Slide 9: Funding and Liquidity
Funding and Liquidity • Global Excess Liquidity Sources increased $15B vs. 3Q11 to $378B ‒ Parent company liquidity strong at $125B, up $6B ‒ Parent company debt reduced $17B in 4Q11 ‒ Time-to-required funding at 29 months ‒ Includes more than $60B of parent company unsecured debt that matures in 20
Slide 10: Net Interest Income
10 ____________________ 1 FTE basis. Represents a non-GAAP financial measure. On a GAAP basis, net interest income was $10.7B, $10.5B, $11.2B, $12.2B and $12.4B for 4Q11, 3Q11, 2Q11, 1Q11 and 4Q10, respectively. For reconciliation to GAAP financial measures, see the accompanying reconciliations in t
Slide 11: Deposits
11 • Net income of $141MM was down $135MM from 3Q11 driven by elevated FDIC expense • Average deposit balances decreased 1.2% compared to the third quarter driven by a decline in non-core higher interest time deposits • Rate paid on deposits declined 2bps to 0.23% due to pricing discipline and shift
Slide 12: Card Services
12 • Net income of $1.0B was down $241MM compared to 3Q11. • Revenue declined as a result of the implementation of the Durbin Amendment which became effective on October 1, 2011 and had a $430MM impact • End of period loans declined $1.6B from 3Q11 due to divestitures and the run-off of non-core por
Slide 13: Global Wealth & Investment Management
13 • Net income of $249MM was down $98MM from 3Q11 on lower market driven revenue and higher expenses • Reduced revenue due to lower investment and brokerage income driven by suppressed 3Q11 market levels and lower transactional activity • Client balances increased 3.5% driven by higher 4Q11 market
Slide 14: Global Commercial Banking
14 • Net income of $1.0B was flat to 3Q11 • Average deposits were up $2.2B • Average loans were flat to 3Q11 – Commercial and Industrial loan growth of $1.7B, or 1.6%, was offset by declines in Commercial Real Estate of $1.9B driven primarily through management of criticized assets – Lower average b
Slide 15: Global Banking & Markets
15 • 4Q11 had a net loss of $433MM compared to a net loss of $302MM in 3Q11 due to lower sales and trading revenues. 3Q11 results included DVA gains of $1.7B versus 4Q11 DVA losses of $474MM • Revenue declined $1.5B driven by the $2.2B change in DVA – Excluding DVA, sales and trading revenue of $1.9
Slide 16: Global Banking & Markets Revenue
Global Banking & Markets Revenue ($MM) 16 4Q11 3Q11 4Q10 Sales and trading revenue Fixed income, currency and commodities $723 ($1,097) ($944) Equity income 660 (300) (127) Total sales and trading revenue $1,383 ($1,397) ($1,071) Sales and trading revenue (excluding DVA) Fixed income, currency and c
Slide 17: Consumer Real Estate Services (CRES)
17 ____________________ 1 Represents a non-GAAP financial measure. 2 FTE basis. 3 Items shown are on a pre-tax basis. • 4Q11 net loss of $1.5B was an increase of $322MM over 3Q11 • 4Q11 included selected items of $1.7B, including $1.5B in litigation expense and $263MM in representations and warranti
Slide 18: Legacy Asset Servicing (within CRES)
18 Legacy Asset Servicing (within CRES) ____________________ 1 Serviced by LAS associates. 2 Selected items include litigation expense and assessments and waivers costs. These items are listed on slide 17. 3 Staffing includes ending full-time equivalent associates, offshore associates and contractor
Slide 19: All Other
• Net income of $1.4B was primarily driven by increased equity investment income and the $1.2B gain on exchanges of trust preferred securities, partially offset by the loss on the fair value of structured liabilities • Revenue was impacted by the following selected items: • Equity investment income
Slide 20: Noninterest Expense
20 Noninterest Expense ($MM) 4Q11 3Q11 Inc/(Dec) Noninterest expense Personnel 8,761$ 8,865$ (104)$ Occupancy 1,131 1,183 (52) Equipment 525 616 (91) Marketing 523 556 (33) Professional fees 1,032 937 95 Amortization of intangibles 365 377 (12) Data processing 688 626 62 Telecommunications 386 405 (
Slide 21: New BAC – Managing Costs Across the Company
“New BAC” – Managing Costs Across the Company 21 • Implementation began end of 2011 • Goal of annual cost savings of $5B, about 18% of the total Phase 1 base • Goal of full annualized run-rate expected by end of 2013 • Previous guidance expected 20% achievement in 2012 • Work is well underway and ah
Slide 22: Credit Quality
• Net charge-offs declined $937MM in 4Q11 compared to 3Q11 – Driven primarily by continued improvement in the U.S. credit card and consumer real estate portfolios – 4Q11 decline includes recoveries of approximately $375MM from the sale of previously charged-off U.K. credit card loans and lien protec
Slide 23: Residential Mortgage and Home Equity 30+ Days Performing Delinquencies
23 ____________________ 1 Excludes FHA-insured loans and other loans individually insured under long-term standby agreements. 2 Excludes PCI loans. Residential Mortgage, 30+ Days Performing Past Due ($B,%) 1, 2 Home Equity, 30+ Days Performing Past Due ($B,%) 2 Residential Mortgage and Home Equity 3
Slide 24: Consumer Nonperforming Loans, Leases and Foreclosed Properties
24 Residential Mortgage NPAs ($MM) Home Equity NPAs ($MM) Consumer Nonperforming Loans, Leases and Foreclosed Properties (NPAs) $4,942 $4,790 $4,607 $4,584 $4,613 $13,734 $13,703 $13,364 $13,092 $12,783 $18,676 $18,493 $17,971 $17,676 $17,396 $0 $5,000 $10,000 $15,000 $20,000 $25,000 4Q10 1Q11 2Q11
Slide 25: Commercial Credit Trends
• Net charge-offs decreased $95MM in 4Q11 compared to 3Q11 – Driven by the absence of a commercial real estate bulk sale in 3Q11 • Nonperforming loans, leases and foreclosed properties decreased $1.1B (13%) from 3Q11 and $3.6B (34%) from 4Q10 – 8th consecutive quarter with declines; 48% decline from
Slide 26: Basel III
3.5% 4.0% 4.5% 4.5% 4.5% 4.5% 4.5% 0.6% 1.25% 1.9% 2.5% 3.5% 4.0% 4.5% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 2013 2014 2015 2016 2017 2018 2019 SIFI up to 250 bps Capital Conservation Buffer Tier 1 Common Minimum 1/1/2013 0% 1/1/2014 20% 1/1/2015 40% 1/1/2016 60% 1/1/2017 80% 1/1/2018 100% 1/1/2019 100% Ca
Slide 27: 2012 Commentary
2012 Commentary 27 • Headwinds of global economies, housing prices, interest rates and Eurozone debt crisis persist • Net interest income expected to remain muted ‒ Modest core loan growth expected to partially offset divestitures and run-off portfolios ‒ Compression as higher yielding assets mature
Slide 28: Appendix
Appendix
Slide 29: Full-Year Income Statement
Full-Year Income Statement 29 FY2011 FY2010 Inc/(Dec) Revenue, net of interest expense (FTE) 1, 2 $94.4 $111.4 ($17.0) Provision for credit losses 13.4 28.4 (15.0) Noninterest expense 3 80.3 83.1 (2.8) Pre-tax income (loss) 0.7 (0.1) 0.8 Income tax expense (benefit) (FTE) 1, 4 (0.7) 2.1 (2.8) Net in
Slide 30: Regulatory Capital
30 Risk-weighted Assets ($B) Tier 1 Common Equity Ratio and Tier 1 Capital Ratio Regulatory Capital 8.60% 8.64% 8.23% 8.65% 9.86% 11.24% 11.32% 11.00% 11.48% 12.40% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% 13.0% 4Q10 1Q11 2Q11 3Q11 4Q11 Tier 1 common equity ratio Tier 1 capital ratio $1,456 $1,433 $1,393 $1
Slide 31: 4Q11 Results by Business Segment
____________________ 1 FTE basis. FTE basis for the Total Corporation and pre-tax, pre-provision are non-GAAP financial measures. 2 For reconciliations to GAAP financial measures, see the accompanying reconciliations in the earnings press release and other earnings-related information. 31 4Q11 Resul
Slide 32: CRES Financial Results
32 ____________________ 1 The Other component within CRES includes the results of certain MSR activities, including net hedge results, together with any related assets or liabilities used as economic hedges. 2 FTE basis. 3 Economic capital represents allocated equity less goodwill and a percentage o
Slide 33: Representations and Warranties Information
Representations and Warranties Information
Slide 34: Representations and Warranties Provision and Exposure
• Total representations and warranties provision for the quarter was $263MM primarily related to the GSEs which is consistent with 3Q11 • Estimated range of possible loss related to non-GSE representations and warranties exposure could be up to $5B over existing accruals at December 31, 2011. The co
Slide 35: Representations and Warranties Range of Possible Loss
• Does not include litigation reserves established • Estimated Range of Possible Loss (RPL) above accruals up to $5B for non-GSE exposures at December 31, 2011 • Exposures identified above relate to repurchase claims associated with purported representations and warranties breaches in RMBS transacti
Slide 36: Additional Asset Quality Information
Additional Asset Quality Information
Slide 37: Impact of FHA and Other Fully Insured Home Loans on Delinquencies
37 ____________________ 1 Includes FHA-insured loans and loans individually insured under long-term standby agreements. 2 Excludes PCI loans. FHA and Other Fully Insured Home Loans ($MM) • During 4Q11, our 30+ days performing delinquency trends continued to improve – Total consumer 30+ days performi
Slide 38: Home Loans Asset Quality Key Indicators
38 ____________________ 1 Excludes FVO loans. 2 Loan-to-value (LTV) calculations apply to the residential mortgage portfolio. Combined loan-to-value (CLTV) calculations apply to the home equity portfolio. Home Loans Asset Quality Key Indicators ($MM) As Reported Excluding Countrywide Purchased Credi
Slide 39: Home Equity
39 Home Equity ($B) • Of the $88.2B second-lien positions, approximately 40%, or $35.2B, have CLTV>100% – Does not mean entire second-lien position is necessarily a loss in the event of default – Assuming proceeds of 85% of the collateral value, we estimate collateral value of $9.0B available for se
Slide 40: Slide 40