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 2012 Earnings Presentation
41 slides from Bank Of America's earnings presentation, Jan 17, 2013
Slide 1: Bank of America 4Q12 Financial Results
January 17, 2013 Bank of America 4Q12 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: Delivering for Shareholders in 2012
Delivering for Shareholders in 2012 • Liability management actions continue to benefit the stability of net interest income • Global Excess Liquidity Sources remain near historically high levels • Further optimized balance sheet; RWA / assets improved to 55% vs. 60% in 4Q11 • Allowance for loan and
Slide 5: Delivering for Shareholders in 2012
Delivering for Shareholders in 2012 • Ending CBB deposits of $498.7B at 4Q12 grew 7.4% from prior year • Retail mortgage production growth exceeded 10% on average for the past 3 quarters • Mobile banking users of 12.0MM, up 31% from 4Q11 • Specialty sales force of nearly 6,200 grew by 1,400, or 29%
Slide 6: 4Q12 Results
Provision for FNMA representations and warranties ($2.5) Independent Foreclosure Review acceleration agreement ($1.1) rovision for obligations related to mortgage insurance rescissions (0.5) Total litigation expense (0.9) Positive MSR valuation related to servicing sales 0.3 Provision for FNMA compe
Slide 7: Balance Sheet and Capital Summary
$ in billions, except per share amounts Total assets $2,210.0 $43.8 $80.9 Total risk-weighted assets 1,205.7 9.9 (78.8) Total deposits 1,105.3 42.0 72.2 Long-term debt 275.6 (10.9) (96.7) Tangible common shareholders' equity 1 144.0 (1.4) 7.5 Tangible common equity ratio 1 6.74 % (21) bps 10 bps Com
Slide 8: Basel 1 Capital
Basel 1 Capital 8 $126.7 $131.6 $134.1 $136.4 $133.4 9.86% 10.78% 11.24% 11.41% 11.06% 0% 4% 8% 12% 16% $0 $40 $80 $120 $160 4Q11 1Q12 2Q12 3Q12 4Q12 Tier 1 common capital Tier 1 common capital ratio Basel 1 Tier 1 Common Capital ($B) • Tier 1 common capital ratio decreased 35bps to 11.06% from 3Q12
Slide 9: Basel 3 Capital
Basel 3 Capital 9 • Tier 1 common capital ratio estimated to be 9.25% at 4Q12, an improvement of 28bps over the 3Q12 estimate of 8.97%, on a fully phased-in basis under the final U.S. market risk rules and U.S. Basel 3 NPRs 1 – Estimated Tier 1 common capital declined $6.0B to $128.6B at 4Q12 $1.9
Slide 10: Funding and Liquidity
Funding and Liquidity • Reduced long-term debt by $11B in 4Q12 – $5.3B of liability management actions completed which consisted primarily of parent redemptions of TRUPs and subordinated debt; recorded $110MM loss upon redemption which was partially offset by related net interest income (NII) benefi
Slide 11: Net Interest Income
• 4Q12 reported NII and net interest yield increased $0.4B and 3bps from 3Q12 due to the following: – Less negative impact from market-related premium amortization expense and hedge ineffectiveness – Benefit from reductions in long-term debt including liability management actions – Improved trading-
Slide 12: Consumer & Business Banking
12 • Net income of $1.4B increased $143MM, or 11% compared to 3Q12 and 15% over 4Q11 • Net interest income of $4.7B remained relatively flat compared to 3Q12 • Noninterest income increased $96MM primarily due to the charge related to our consumer protection products in 3Q12, partially offset by lowe
Slide 13: CBB Key Indicators
13 Deposits • Average deposits increased $5.7B from 3Q12 and $25.3B from 4Q11 • Average rate paid decreased 3bps from 3Q12 and 6bps from 4Q11 • 12MM Mobile Banking users, up 8% from 3Q12 and 31% from 4Q11 • Number of banking centers was reduced as we continue to optimize our delivery network around
Slide 14: Summary of Previously Announced Significant Mortgage Items
14 Summary of Previously Announced Significant Mortgage Items • Reached agreements with FNMA to resolve substantially all agency mortgage repurchase claims on loans originated and sold directly by legacy Countrywide and Bank of America, N.A. to FNMA from 2000 through 2008 (represents $1.4T UPB of or
Slide 15: Consumer Real Estate Services
15 $ in millions Net interest income 2 $348 $12 ($36) Noninterest income 904 61 368 Total revenue, net of interest expense 2 1,252 73 332 Provision for credit losses 77 100 15 Noninterest expense 740 (43) 14 Income tax expense 2 154 (1) 104 Net income $281 $17 $199 Key Indicators ($ in billions) Ave
Slide 16: Legacy Assets & Servicing
16 Legacy Assets & Servicing (within CRES) 1 ____________________ 1 The results of certain mortgage servicing rights 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 A
Slide 17: Representations and Warranties Claims
Representations and Warranties Claims 1 17 • New claims declined compared to 3Q12 as we received fewer claims across all counterparty segments • A significant portion of the outstanding claims from GSEs for loans sold directly to them (approximately $12.2B UPB) were settled in January 2013 • Private
Slide 18: Global Wealth & Investment Management
18 • Net income of $578MM, with a pre-tax margin of 21.2% • Revenue increased $111MM over 3Q12, driven by higher net interest income from solid deposit and loan growth, while noninterest income reflects benefits of increased market and flows • Provision for credit losses increased $51MM to $112MM dr
Slide 19: Global Banking
19 • 4Q12 net income increased $136MM, or 10% compared to 3Q12 • Revenue increased $180MM from 3Q12 on strong loan and deposit growth as well as higher investment banking fees • Strong performance in investment banking driven by record debt issuance fees and growth in advisory revenues resulted in a
Slide 20: Investment Banking Fees
Investment Banking Fees $ in millions 3Q12 4Q11 Products Advisory $301 $80 $28 Debt 1,078 213 491 Equity 250 (29) (18) Gross IB fees (incl. self-led) 1,629 264 501 Self-led 29 - (86) Net Corporation-wide fees (excl. self-led) $1,600 $264 $587 Regions U.S./Canada $1,313 $182 $395 International 316 82
Slide 21: Global Markets
21 • Excluding DVA impact and 3Q12 U.K. tax charge, 4Q12 net income of $326MM decreased $463MM vs. 3Q12 and increased $794MM vs. 4Q11 2 – DVA loss in 4Q12 was $276MM vs. a loss of $582MM in 3Q12 and a loss of $474MM in 4Q11 • Excluding DVA, sales and trading revenue of $2.5B decreased $748MM, or 23%
Slide 22: All Other
• Net income of $864MM increased $2.4B from 3Q12 driven by the tax benefit from recognition of foreign tax credits, and $0.8B lower negative FVO adjustments on structured liabilities related to improvements in our own credit spreads • Results were impacted by the following selected items • Nonintere
Slide 23: Noninterest Expense
Noninterest Expense 23 281.8 278.7 275.5 272.6 267.2 242.3 236.9 233.4 230.9 228.5 150 200 250 300 4Q11 1Q12 2Q12 3Q12 4Q12 Total FTEs FTEs (excluding Legacy Assets & Servicing) $18.9 $17.5 $18.4 $0 $3 $6 $9 $12 $15 $18 $21 4Q11 3Q12 4Q12 All other expenses Total litigation & 4Q12 IFR acceleration a
Slide 24: Asset Quality Trends Continued to Improve
Asset Quality Trends Continued to Improve 24 • Net charge-offs declined $0.1B, or 3.3% from adjusted 3Q12 levels – 3Q12 results included new regulatory guidance which required charging off to collateral value loans discharged in Chapter 7 bankruptcy and impacts from the National Mortgage Settlement
Slide 25: Appendix
Appendix
Slide 26: Results by Business Segment
____________________ 1 FTE basis. FTE basis for the Total Corporation and pre-tax, pre-provision earnings 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. 26 R
Slide 27: CBB Financial Results
27 ____________________ 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 28: CRES Financial Results
28 ____________________ 1 The results of certain mortgage servicing rights 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
Slide 29: Representations and Warranties Information
Representations and Warranties Information
Slide 30: Representations and Warranties Information
• 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 31: Additional Asset Quality Information
Additional Asset Quality Information
Slide 32: Consumer Credit Trends
• Net charge-offs decreased $917MM in 4Q12 compared to 3Q12 primarily due to the absence of 3Q12 charge-offs from the change in treatment of loans discharged in Chapter 7 bankruptcy 5 ($478MM) and National Mortgage Settlement activity ($435MM) – Excluding these 3Q12 items and the $73MM related to th
Slide 33: Consumer Nonperforming Loans, Leases and Foreclosed Properties
33 Residential Mortgage NPAs ($MM) Home Equity NPAs ($MM) Consumer Nonperforming Loans, Leases and Foreclosed Properties (NPAs) $4,613 $4,649 $4,629 $5,686 $6,119 $12,783 $11,728 $10,847 $10,101 $9,188 $17,396 $16,377 $15,476 $15,787 $15,307 $0 $5,000 $10,000 $15,000 $20,000 4Q11 1Q12 2Q12 3Q12 4Q12
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 4Q12, 30+ days performing delinquency trends continued to improve – Total consumer 30+ days pe
Slide 36: Home Loans Asset Quality Key Indicators
36 ____________________ 1 Excludes FVO loans. 2 4Q12 and 3Q12 exclude write-offs of consumer PCI loans of $1.1B and $1.7B related to home equity. 3 Loan-to-value (LTV) calculations apply to the residential mortgage portfolio. Combined loan-to-value (CLTV) calculations apply to the home equity portfo
Slide 37: Home Equity
37 Home Equity • Less than 10% of the remaining PCI loans are 180 days past due • The corresponding decreases in PCI loans and allowance during the fourth quarter reflect forgiveness of approximately $900MM of severely delinquent loans in connection with the National Mortgage Settlement activity • O
Slide 38: Commercial Credit Trends
• Net charge-offs in 4Q12 decreased $101MM compared to 3Q12, and were $265MM (51%) lower than 4Q11 with the lowest rate since 4Q06 • Nonperforming loans, leases and foreclosed properties decreased $899MM (21%) from 3Q12 and $3.5B (50%) from 4Q11, primarily in Commercial Real Estate – 12th consecutiv
Slide 39: Asset Quality Trends Excluding National Mortgage Settlement and Bankruptcy Impacts
Asset Quality Trends Excluding National Mortgage Settlement and Bankruptcy Impacts – 3Q12 Reconciliation 39 Credit Metrics ($ in MM) Net charge-offs 1 $4,122 $435 $478 $3,209 Net charge-off ratio 1 1.86 % 20 bps 21 bps 1.45 % Provision expense $1,774 $- $339 $1,435 Allowance for loans and leases 26,
Slide 40: Basel 1 to Basel 3 (Fully Phased-In)
Basel 1 to Basel 3 (Fully Phased-In) 1 40 $ in millions Regulatory Capital – Basel 1 to Basel 3 (fully phased-in) Basel 1 Tier 1 capital $155,461 $163,063 $164,665 Deduction of preferred stock, non-qualifying preferred stock and minority interest in equity accounts of consolidated subsidiaries (22,0
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