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) — Q3 2012 Earnings Presentation
41 slides from Bank Of America's earnings presentation, Oct 17, 2012
Slide 1: Bank of America 3Q12 Financial Results
October 17, 2012 Bank of America 3Q12 Financial Results
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 Information
• The information contained herein is preliminary and based on company data available at the time of the earnings presentation. It speaks only as of the particular date or dates included in the accompanying slides. Bank of America does not undertake an obligation to, and disclaims any duty to, updat
Slide 4: 3Q12 Summary Income Statement
3Q12 Earnings Results 4 3Q12 Summary Income Statement ($B except EPS) ____________________ 1 Fully taxable-equivalent (FTE) basis. Represents a non-GAAP financial measure. 2 On a GAAP basis, total revenue, net of interest expense, and income tax expense were $20.4B and $770MM for 3Q12. For reconcili
Slide 5: Core Earnings Focus Producing Results
Core Earnings Focus Producing Results 5 • Ending deposits grew $28B, or 2.7% (11% annualized) over 2Q12, and rates paid declined 2bps to 18bps • Net interest income improved as liability management actions continue to bring down funding costs • First-lien mortgage production increased 13% over 2Q12,
Slide 6: Selected Balance Sheet and Capital Metrics
$ in billions, except per share amounts 3Q12 2Q12 3Q11 Total assets $2,166.2 $5.3 ($53.5) Total risk-weighted assets 1,195.7 2.3 (163.8) Total deposits 1,063.3 28.1 22.0 Long-term debt 286.5 (15.3) (112.4) Tangible common shareholders' equity 1 145.3 2.8 11.3 Tangible common equity ratio 1 6.95% 12b
Slide 7: Capital Improvement Further Strengthens Balance Sheet
Capital Improvement Further Strengthens Balance Sheet 7 $118 $127 $132 $134 $136 8.65% 9.86% 10.78% 11.24% 11.41% 0% 4% 8% 12% 16% $0 $40 $80 $120 $160 3Q11 4Q11 1Q12 2Q12 3Q12 Tier 1 common capital Tier 1 common capital ratio Tier 1 Common Capital ($B) Risk-weighted Assets ($B) $1,360 $1,284 $1,221
Slide 8: Funding and Liquidity
Funding and Liquidity • Long-term debt down $15B while overall Global Excess Liquidity Sources increased modestly – Long-term debt 3Q12 highlights $6.2B of liability management actions completed which consisted primarily of parent redemptions of TRUPs and subordinated debt $12B parent company co
Slide 9: Net Interest Income
• 3Q12 net interest income and net interest yield increased $0.4B and 11bps from 2Q12, partially due to less negative market-related impacts of premium amortization expense on securities and hedge ineffectiveness • 3Q12 adjusted net interest income of $10.5B increased $0.2B and net interest yield im
Slide 10: Consumer & Business Banking (CBB)
10 • Net income of $1.3B increased $130MM from 2Q12 • Net interest income of $4.7B decreased modestly due to compressed deposit spreads • Noninterest income decreased $202MM due to the 3Q12 impact of our consumer protection products and, to a lesser degree, gains from loan portfolio divestitures in
Slide 11: Deposits, Card Services and Business Banking
11 Deposits • Average deposits increased $2.9B from 2Q12 • Average rate paid held steady with 2Q12 at 20bps and improved 5bps from 3Q11 • Mobile Banking customers of 11.1MM, up 8% from 2Q12 and 30% from 3Q11 – 1.7MM checks deposited utilizing Mobile Check Deposits, a capability introduced in 3Q12 •
Slide 12: Consumer Real Estate Services (CRES)
12 ____________________ 1 FTE basis. 2 CRES includes Home Loans and Legacy Assets & Servicing. The results of certain mortgage servicing right activities, including net hedge results which were previously included in Home Loans, together with any related assets or liabilities used as economic hedges
Slide 13: Legacy Assets & Servicing (within CRES)
13 Legacy Assets & Servicing (within CRES) 1 ____________________ 1 The results of certain mortgage servicing right activities, including net hedge results which were previously included in Home Loans, together with any related assets or liabilities used as economic hedges are included in Legacy Ass
Slide 14: Representations and Warranties Claims
Representations and Warranties Claims 1 14 • New claims declined compared to 2Q12 as we received fewer claims related to private-label securitizations and from the GSEs, and rescinded claims improved from settlements and other activity • Outstanding claims from GSEs increased due to our ongoing disa
Slide 15: Global Wealth & Investment Management (GWIM)
15 • Net income of $542MM • Pre-tax margin of 20.1%, in line with 2Q12 • Revenue declined $39MM due to the absence of 2Q seasonal items partially offset by the impact of long-term AUM flows and market origination revenue • Expense decrease driven by lower support and personnel costs, partially offse
Slide 16: Global Banking
16 • 3Q12 net income of $1.3B decreased $112MM vs. 2Q12 but increased $89MM from 3Q11 • Revenue, net of interest expense, decreased $139MM from 2Q12 due primarily to gains on liquidation of legacy portfolios in prior quarter • Corporation-wide investment banking fees of $1.3B, excluding self-led, in
Slide 17: Investment Banking Fees
Investment Banking Fees $ in millions 2Q12 3Q11 Products Advisory $221 ($119) ($52) Debt 867 220 356 Equity 279 87 (41) Gross IB fees (incl. self-led) 1,367 188 263 Self-led 31 (2) (131) Net Corporation-wide fees (excl. self-led) $1,336 $190 $394 Regions U.S./Canada $1,131 $166 $271 International 23
Slide 18: Global Markets
18 • 3Q12 net loss of $359MM included – A $0.8B charge related to the remeasurement of the DTA triggered by the enactment of the U.K. Finance Act of 2012 – DVA loss in 3Q12 of $0.6B vs. a loss of $0.2B in 2Q12 and a gain in 3Q11 of $1.7B • Excluding the DVA impact and DTA charge, 3Q12 net income was
Slide 19: All Other
• Net loss of $1.5B increased $1.2B from 2Q12, driven by a negative FVO adjustment on structured liabilities related to improvements in our own credit spreads • Revenue was impacted by the following selected items • Provision for credit losses declined $146MM from 2Q12, driven primarily by continued
Slide 20: Noninterest Expense
Noninterest Expense Noninterest Expense ($B) 20 288.7 281.8 278.7 275.5 272.6 251.8 242.3 236.9 233.4 230.9 36.9 39.5 41.8 42.1 41.7 0 50 100 150 200 250 300 350 3Q11 4Q11 1Q12 2Q12 3Q12 Total FTEs FTEs (excluding LAS) LAS FTEs Full-time equivalent employees (# in thousands) $17.6 $17.0 $17.5 $12 $1
Slide 21: Noteworthy Credit Items for 3Q12
Noteworthy Credit Items for 3Q12 21 $0.7 $1.6 $3.8 $4.1 $0.7 $0.8 $2.9 $3.2 $0 $1 $2 $3 $4 $5 Residential Mortgage Home Equity Total Consumer Total Corporation Reported NCOs NCOs adj. for BK/NMS Net Charge-offs ($B) 1.12% 5.55% 2.64% 1.86% 1.04% 2.59% 2.00% 1.45% 0% 2% 4% 6% Residential Mortgage Hom
Slide 22: Asset Quality Trends Continued to Improve
Asset Quality Trends Continued to Improve 22 • As previously mentioned on slide 21, 3Q12 results included new regulatory guidance charging off to collateral value loans discharged as part of a Chapter 7 bankruptcy and impacts from the National Mortgage Settlement activity Excluding the above changes
Slide 23: Business Metrics Reflect Good Progress Across Entire Customer Base
Business Metrics Reflect Good Progress Across Entire Customer Base 23 Consumers • Ending deposits across CBB and GWIM are up $11.3B, or 1.5% from 2Q12 and have grown $25.9B or 3.6% from 3Q11 • Client brokerage assets rose $3.6B in the Consumer business from 2Q12 and are up 23% from 3Q11 • Mortgage p
Slide 24: Appendix
Appendix
Slide 25: 3Q12 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. 25 3Q12 Resul
Slide 26: CBB Financial Results
26 ____________________ 1 FTE basis. 2 Return on average economic capital is calculated as net income, adjusted for cost of funds and earning credits and certain expenses related to intangibles, divided by average economic capital. Economic capital represents allocated equity less goodwill and a per
Slide 27: CRES Financial Results
27 ____________________ 1 The results of certain mortgage servicing right activities, including net hedge results which were previously included in Home Loans, together with any related assets or liabilities used as economic hedges are included in Legacy Assets & Servicing. 2 FTE basis. 3 Economic c
Slide 28: Representations and Warranties Information
Representations and Warranties Information
Slide 29: Representations and Warranties Exposure Commentary
• Does not include litigation reserves established • Exposures identified above relate only to repurchase claims associated with purported representations and warranties breaches in RMBS transactions. They do not include any exposures associated with related litigation matters; separate foreclosure
Slide 30: Representations and Warranties Liability Rollforward
30 Representations and Warranties Liability Rollforward $ in millions 3Q11 4Q11 1Q12 2Q12 3Q12 Beginning balance $17,780 $16,271 $15,858 $15,746 $15,943 Additions for new sales 3 7 5 7 8 Provision 278 263 282 395 307 (Charge-offs)/recoveries (1,790) (683) (399) (205) 11 Ending balance $16,271 $15,85
Slide 31: Additional Asset Quality Information
Additional Asset Quality Information
Slide 32: Consumer Credit Quality Commentary
• Net charge-offs increased $519MM in 3Q12 compared to 2Q12 driven by the change in treatment of loans discharged in Chapter 7 bankruptcy 5 ($478MM) and National Mortgage Settlement activity ($435MM) – Excluding these items, net charge-offs declined $394MM due to continued improvements in U.S. credi
Slide 33: Consumer Nonperforming Loans, Leases and Foreclosed Properties
33 Residential Mortgage NPAs ($MM) Home Equity NPAs ($MM) Consumer Nonperforming Loans, Leases and Foreclosed Properties (NPAs) $4,584 $4,613 $4,649 $4,629 $5,394 $13,092 $12,783 $11,728 $10,847 $10,101 $17,676 $17,396 $16,377 $15,476 $15,495 $0 $5,000 $10,000 $15,000 $20,000 $25,000 3Q11 4Q11 1Q12
Slide 34: Residential Mortgage and Home Equity 30+ Days Performing Delinquencies
34 ____________________ 1 Excludes FHA-insured loans and other loans individually insured under long-term standby agreements. 2 Excludes PCI loans. 3 During 3Q12, we reclassified to nonperforming $83MM of residential mortgages that were 30+ days performing past due as a result of the change in treat
Slide 35: FHA and Other Fully-insured Consumer Real Estate Loans
35 ____________________ 1 Includes FHA-insured loans and loans individually insured under long-term standby agreements. 2 Excludes PCI loans. FHA and Other Fully-insured Consumer Real Estate Loans • During 3Q12, our 30+ days performing delinquency trends continued to improve – Total consumer 30+ day
Slide 36: Home Loans Asset Quality Key Indicators
36 ____________________ 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 As Reported Excluding Countrywide Purchased Credit- imp
Slide 37: Home Equity
37 Home Equity • Of the $80.7B second-lien positions, approximately 37%, or $30.2B, have CLTVs>100% – Does not mean entire second-lien position is a loss in the event of default – Assuming proceeds of 85% of the collateral value, we estimate collateral value of $8.8B available for second-liens – Of
Slide 38: Commercial Credit Trends
• Net charge-offs in 3Q12 decreased slightly compared to 2Q12, but were $259MM (42%) lower than 3Q11 • Nonperforming loans, leases and foreclosed properties decreased $775MM (15%) from 2Q12 and $3.6B (45%) from 3Q11 – 11th consecutive quarter with declines; 68% decline from 4Q09 peak • Reservable cr
Slide 39: Basel 1 to Basel 3 (Fully Phased-In)
Basel 1 to Basel 3 (Fully Phased-In) 1 39 $ in millions Regulatory Capital Basel 1 to Basel 3 (fully phased-in) Basel 1 Tier 1 Capital $163,063 $164,665 Deduction of preferred stock, non-qualifying preferred stock and minority interest in equity accounts of consolidated subsidiaries (26,657) (30,583
Slide 40: Asset Quality Trends Excluding National Mortgage Settlement and Bankruptcy Impacts
Asset Quality Trends Excluding National Mortgage Settlement and Bankruptcy Impacts 40 Credit Metrics ($ in millions) 3Q12 National Mortgage Settlement Bankruptcy Impact Adjusted 3Q12 Net charge-offs 1 $4,122 $435 $478 $3,209 Net charge-off ratio 1 1.86% 20bps 21bps 1.45% Provision expense $1,774 $-
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