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) — Q2 2012 Earnings Presentation
42 slides from Bank Of America's earnings presentation, Jul 18, 2012
Slide 1: Bank of America 2Q12 Financial Results
Bank of America 2Q12 Financial Results July 18, 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 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: 2Q12 Summary Income Statement
2Q12 Earnings Results 4 2Q12 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 $22.0B and $684MM for 2Q12. For reconcili
Slide 5: Key Takeaways for 2Q12 Results
Key Takeaways for 2Q12 Results • Earnings of $2.5B or $0.19 per diluted share • Capital continues to strengthen; Tier 1 common capital of $134.1B and ratio now at 11.24% – Tier 1 common capital ratio under Basel 3 at 6/30/12 estimated at 8.10% 1 • Long-term debt down $53B from 1Q12 driven by maturit
Slide 6: Basel Regulatory Capital Improvement Continues
Basel 1 Regulatory Capital Improvement Continues 6 $115 $118 $127 $132 $134 8.23% 8.65% 9.86% 10.78% 11.24% 0% 4% 8% 12% 16% $0 $40 $80 $120 $160 2Q11 3Q11 4Q11 1Q12 2Q12 Tier 1 common capital Tier 1 common capital ratio Tier 1 Common Capital ($B) Risk-weighted Assets ($B) $1,393 $1,360 $1,284 $1,22
Slide 7: Basel 3 Update
SIFI (to be determined) Capital Conservation Buffer (2.5%) Regulatory Minimum (4.5%) Transition provisions under the proposed U.S. Basel 3 rules require a 3.5% minimum Tier 1 common capital ratio in 2013, increasing 50bps annually to 4.5% in 2015 A Capital Conservation Buffer of 62.5bps is introduce
Slide 8: Funding and Liquidity
Funding and Liquidity • Long-term debt down $53B while overall Global Excess Liquidity Sources declined only $28B – Long-term debt 2Q12 activity $34B parent company maturities including $24B related to the Temporary Liquidity Guarantee Program All TLGP debt has been repaid $5.5B liability manage
Slide 9: Selected Balance Sheet and Capital Metrics
1Q12 2Q11 Total assets $2,160.9 ($20.6) ($100.5) Total risk-weighted assets 1,193.4 (27.4) (199.3) Total deposits 1,035.2 (6.1) (3.2) Long-term debt 301.8 (53.1) (124.8) Tangible common shareholders' equity 1, 2 142.5 3.8 14.2 Tangible common equity ratio 1, 2 6.83% 25bps 96bps Common shareholders'
Slide 10: Net Interest Income
• Net interest income and net interest yield decreased $1.3B and 30bps from 1Q12 primarily due to unfavorable market- related impacts of higher premium amortization on securities and hedge ineffectiveness • Excluding these impacts, net interest income and net interest yield decreased $0.4B and 10bps
Slide 11: Loan Activity
Loan Activity 11 $589.4 $575.3 $4.4 $4.4 $3.4 $1.9 1Q12 Run-off portfolio Residential mortgages Asset sales Other activity 2Q12 Consumer Loans & Leases ($B) • Ending consumer loans declined $14.1B from 1Q12 • Run-off loan portfolio declined $4.4B • Residential mortgage loans excluding the run-off po
Slide 12: Consumer & Business Banking
12 • Net income of $1.2B decreased $299MM compared to 1Q12 due to lower net interest income, higher provision and higher noninterest expense, partially offset by higher noninterest income • Net interest income decreased $376MM primarily due to lower average loans and rates • Noninterest income incre
Slide 13: Deposits, Card Services and Business Banking
13 Deposits • Average deposits increased $9.8B from 1Q12 driven by strong seasonal growth during a stable rate environment • Average rate paid declined 1bp from 1Q12 and 9bps from 2Q11 • Focus on banking center optimization continues as we closed a net of 57 branches • In 2Q12, we surpassed 10MM Mob
Slide 14: Consumer Real Estate Services
14 ____________________ 1 FTE basis. 2 Effective January 1, 2012, servicing activities previously recorded in Home Loans were moved to Legacy Assets & Servicing, and results of MSR activities, including net hedge results, and goodwill were moved from Other to Legacy Assets & Servicing. • 2Q12 net lo
Slide 15: Legacy Assets & Servicing
15 Legacy Assets & Servicing (within CRES) 1 ____________________ 1 Effective January 1, 2012, servicing activities previously recorded in Home Loans were moved to Legacy Assets & Servicing, and results of MSR activities, including net hedge results, and goodwill were moved from Other to Legacy Asse
Slide 16: Representations and Warranties
Representations and Warranties 1 16 • FNMA’s repurchase requests, standards for rescission of repurchase requests and resolution processes continue to be inconsistent with their own past conduct and our interpretation of our contractual obligations. These developments have resulted in an increase in
Slide 17: Global Wealth & Investment Management
17 • Net income of $543MM, with pre-tax margin of 20.0%, was in line with 1Q12 as lower revenue was largely offset by lower expenses • Revenue declined $43MM driven by lower net interest income, primarily from continued low rate environment, offset by increased noninterest income – Record asset mana
Slide 18: Global Banking
18 • Net income of $1.4B decreased $184MM from 1Q12 and $515MM from 2Q11 • Revenue decreased $165MM from 1Q12 – Decline in net interest income of $215MM primarily due to lower rates • Corporation-wide investment banking fees, including self- led, decreased $106MM from 1Q12 – Lower debt and equity un
Slide 19: Investment Banking Fees
Investment Banking Fees $ in millions 2Q12 1Q12 2Q11 Products Advisory $340 $137 ($42) Debt 647 (130) (292) Equity 192 (113) (230) Gross IB fees (incl. self-led) 1,179 (106) (564) Self-led (32) 37 27 Net Corporation-wide fees (excl. self-led) $1,147 ($69) ($537) Regions U.S./Canada $965 $14 ($346) I
Slide 20: Global Markets
20 • Net income of $462MM decreased $336MM from 1Q12 – Results include DVA losses of $156MM in 2Q12, $1.4B in 1Q12 and gains of $123MM in 2Q11 • Sales and trading revenue of $3.2B decreased $573MM from 1Q12 and decreased $542MM from 2Q11 – Excluding DVA, sales and trading decreased $1.9B from season
Slide 21: Sales and Trading Revenue
2Q12 1Q12 2Q11 Sales and trading revenue, excluding DVA Fixed income, currency and commodities $2,555 ($1,575) $5 Equity income 778 (276) (268) Total sales and trading revenue, excluding DVA $3,333 ($1,851) ($263) Sales and trading revenue Fixed income, currency and commodities $2,418 ($425) ($224)
Slide 22: All Other
• Net loss of $336MM improved $2.3B from 1Q12 driven by a lower negative valuation adjustment on structured liabilities • Revenue was impacted by the following selected items: • Provision for credit losses declined $710MM from 1Q12 resulting from a lower provision related to the PCI portfolio and im
Slide 23: Reducing Expenses
Reducing Expenses Noninterest Expense ($B) 23 288 279 275 253 237 233 35 42 42 0 50 100 150 200 250 300 350 2Q11 1Q12 2Q12 Total FTEs FTEs (excluding LAS) LAS FTEs Full-time equivalent employees (# in thousands) $22.9 $19.1 $17.0 $20.3 $18.2 $17.0 $0 $5 $10 $15 $20 $25 2Q11 1Q12 2Q12 Total nonintere
Slide 24: New BAC – Managing Costs
• 1,600 ideas accepted as initiatives • Focused on consumer based businesses and support staff ‒ Excludes delinquent mortgage servicing areas (LAS) • Expect $5B annualized cost savings upon completion by the end of 2014 • Expect to eliminate 18% of beginning cost base of targeted areas • On track to
Slide 25: Asset Quality Trends Continue to Improve
Asset Quality Trends Continue to Improve 25 • Provision expense of $1.8B declined $645MM from 1Q12 ‒ Net charge-offs of $3.6B improved $430MM or 11% from 1Q12 Consumer net charge-offs improved $436MM while commercial was relatively flat compared to 1Q12 ‒ Loan loss allowance decreased to $30.3B, c
Slide 26: Transforming Company and Focused on Earnings Power
Transforming Company and Focused on Earnings Power • Simplified the company • Restructured balance sheet fortifying capital and liquidity • Repositioned consumer businesses • Focused on risk culture • Managed through U.S. and company specific debt downgrades • Began extensive cost saving initiatives
Slide 27: Appendix
Appendix
Slide 28: 2Q12 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. 28 2Q12 Resul
Slide 29: CBB Financial Results
29 ____________________ 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 perc
Slide 30: CRES Financial Results
30 ____________________ 1 Effective January 1, 2012, servicing activities previously recorded in Home Loans were moved to Legacy Assets & Servicing, and results of MSR activities, including net hedge results, and goodwill were moved from Other to Legacy Assets & Servicing. 2 FTE basis. 3 Economic ca
Slide 31: Representations and Warranties Information
Representations and Warranties Information
Slide 32: Representations and Warranties Reserves and 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 June 30, 2012 • Exposures identified above relate to repurchase claims associated with purported representations and warranties breaches in RMBS transactions.
Slide 33: Representations and Warranties New Claim Trends
33 Representations and Warranties New Claim Trends 1 $ in millions 2Q11 3Q11 4Q11 1Q12 2Q12 Mix 2 Pre 2005 $214 $95 $77 $86 $117 2% 2005 441 668 751 516 619 12% 2006 780 925 1,400 2,302 3,768 38% 2007 1,784 1,493 2,168 1,382 2,752 36% 2008 398 451 331 264 412 7% Post 2008 162 164 126 193 545 5% New
Slide 34: Additional Asset Quality Information
Additional Asset Quality Information
Slide 35: Consumer Credit Quality
• Net charge-offs decreased $436MM in 2Q12 compared to 1Q12 – Driven primarily by improvement in the consumer real estate and U.S. credit card portfolios • 30+ days performing delinquencies (excluding fully-insured consumer real estate loans) down $590MM from 1Q12 • Nonperforming loans and foreclose
Slide 36: Consumer Nonperforming Loans, Leases and Foreclosed Properties
36 Residential Mortgage NPAs ($MM) Home Equity NPAs ($MM) Consumer Nonperforming Loans, Leases and Foreclosed Properties (NPAs) $4,607 $4,584 $4,613 $4,649 $4,629 $13,364 $13,092 $12,783 $11,728 $10,847 $17,971 $17,676 $17,396 $16,377 $15,476 $0 $5,000 $10,000 $15,000 $20,000 $25,000 2Q11 3Q11 4Q11
Slide 37: Residential Mortgage and Home Equity 30+ Days Performing Delinquencies
37 ____________________ 1 Excludes FHA-insured loans and other loans individually insured under long-term standby agreements. 2 Excludes PCI loans. 3 During 1Q12, we reclassified to nonperforming $264 million of junior-lien loans that were previously 30+ days performing past due but had a first-lien
Slide 38: Commercial Credit Trends
• Net charge-offs in 2Q12 were relatively unchanged compared to 1Q12, but were $128MM (25%) lower than 2Q11 • Nonperforming loans, leases and foreclosed properties decreased $1.1B (18%) from 1Q12 and $3.6B (41%) from 2Q11 – 10th consecutive quarter with declines; 62% decline from 4Q09 peak • Reserva
Slide 39: Impact of FHA and Fully-insured Loans on Delinquencies
39 ____________________ 1 Includes FHA-insured loans and loans individually insured under long-term standby agreements. 2 Excludes PCI loans. FHA and Other Fully-insured Consumer Real Estate Loans ($MM) • During 2Q12, our 30+ days performing delinquency trends continued to improve – Total consumer 3
Slide 40: Home Loans Asset Quality Key Indicators
40 ____________________ 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 41: Home Equity
41 Home Equity • Of the $83.5B second-lien positions, approximately 43%, or $35.7B, 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 $10.0B available for second- liens – O
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