Microsoft PowerPoint - Goldman Sachs Presentation_WEB

Goldman Sachs Banking andFinancial Services Conference

December 6, 2000

Goldman Sachs Banking andFinancial Services Conference

December 6, 2000

Ken LewisKen LewisPresident & Chief Operating OfficerPresident & Chief Operating Officer

Jim HanceJim HanceVice Chairman & Chief Financial OfficerVice Chairman & Chief Financial Officer

Forward Looking StatementsForward Looking Statements

This presentation contains forward looking statements with respect to the financialconditions and results of operations of Bank of America, including, without limitation,statements relating to the earnings outlook of the company.These forward looking statements involve certain risks and uncertainties. Factorsthat may cause actual results to differ materially from those contemplated by suchforward looking statements include, among others, the following possibilities: (1)projected business increases following process changes and other investments arelower than expected; (2) competitive pressure among financial services companiesincreases significantly; (3) costs or difficulties related to the integration ofacquisitions or expenses in general are greater than expected; (4) general economicconditions, either internationally or nationally or in the states in which the companydoes business, are less favorable than expected; (5) changes in the interest rateenvironment reduce interest margins and affect funding sources; (6) changes inmarket rates and prices may adversely affect the value of financial products; (7)legislation or regulatory requirements or changes adversely affect the businesses inwhich the company is engaged; and (8) decisions to downsize, sell or close units orotherwise change the business mix of the company. For further information pleasesee Bank of America’s reports filed with the SEC pursuant to the Securities ExchangeAct of 1934 which are available at the SEC’s website (www.sec.gov) or at Bank ofAmerica’s website (www.bankofamerica.com)

This presentation contains forward looking statements with respect to the financialconditions and results of operations of Bank of America, including, without limitation,statements relating to the earnings outlook of the company.These forward looking statements involve certain risks and uncertainties. Factorsthat may cause actual results to differ materially from those contemplated by suchforward looking statements include, among others, the following possibilities: (1)projected business increases following process changes and other investments arelower than expected; (2) competitive pressure among financial services companiesincreases significantly; (3) costs or difficulties related to the integration ofacquisitions or expenses in general are greater than expected; (4) general economicconditions, either internationally or nationally or in the states in which the companydoes business, are less favorable than expected; (5) changes in the interest rateenvironment reduce interest margins and affect funding sources; (6) changes inmarket rates and prices may adversely affect the value of financial products; (7)legislation or regulatory requirements or changes adversely affect the businesses inwhich the company is engaged; and (8) decisions to downsize, sell or close units orotherwise change the business mix of the company. For further information pleasesee Bank of America’s reports filed with the SEC pursuant to the Securities ExchangeAct of 1934 which are available at the SEC’s website (www.sec.gov) or at Bank ofAmerica’s website (www.bankofamerica.com)

Today’s TopicsToday’s Topics

• Business strategy– Current trends– Growth engines– Business transformation

• Financial initiatives and outlook– Credit quality– New financial measurements– Balance sheet & capital management– Outlook

• Business strategy– Current trends– Growth engines– Business transformation

• Financial initiatives and outlook– Credit quality– New financial measurements– Balance sheet & capital management– Outlook

Long and Short Term ChallengesLong and Short Term Challenges

Grow core earnings

Manage credit

2000 2001 2004………………..2002 2003

Changing the ModelChanging the Model

5%

1%

7%

4%

9%8%

0%

3%

5%

8%

10%

Scenario 1 Scenario 2 Scenario 3

Revenue growth Expense growth

Revenue growth allows for investments in the futureRevenue growth allows for investments in the future

All scenarios yield double digit core earnings growthAll scenarios yield double digit core earnings growth

1995-1999 CAGR

Revenue - 8%

Expense - 5%

Strong Core BusinessesStrong Core Businesses

Global Markets

19%

Global Treasury Services

15%

Global Capital Raising

33%

Global Credit

Products33%

Banking Regions

58%

Consumer Products

27%

Commercial15%

Asset Management

7%

Equity Investing

4%

Other1% Global

Corporate & Investment

Banking28%

Consumer and

Commercial Banking

60%

9 mos. YTD 20009 mos. YTD 2000Bank of America RevenuesBank of America Revenues

$25.2 billion$25.2 billion

Revenue Per ShareRevenue Per Share

6.695.91

8.337.84

0.010.13

0

4

8

12

16

9 mos.YTD 99

9 mos.YTD 00

$ pe

r sha

re

Noninterest income Net interest income Securities Gains

Net interestNet interestincome growth -income growth -

6%6%

NoninterestNoninterestincome growth -income growth -

13%13%

13.8813.8815.0315.03

Total revenue per share growth – 8%Total revenue per share growth – 8%

Fee-Based Revenue Per ShareFee-Based Revenue Per Share

0.280.65

2.291.61

4.12

3.65

$0

$2

$4

$6

$8

9 mos. YTD 99 9 mos. YTD 00

$ pe

r sha

re

Other income Market-sensitive fees Non-market sensitive fees

Non-market sensitiveNon-market sensitiverevenue growth – 13%revenue growth – 13%

Market-sensitiveMarket-sensitiverevenue growth - 42%revenue growth - 42%

5.915.91

6.696.69

Total noninterest revenue per shareTotal noninterest revenue per sharegrowth, excluding “other income” – 22%growth, excluding “other income” – 22%

Consumer & Commercial BankingMomentumConsumer & Commercial BankingMomentum

5,0295,317

4,000

5,000

6,000

1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00

Revenue ($ in millions)

13%14%

16% 16% 16%

10%

8%

11%

14%

17%

20%

2Q99 3Q99 4Q99 1Q00 2Q00 3Q00

Linked-quarter Annualized Loan Growth

Asset Management MomentumAsset Management Momentum

490

555

400

500

600

1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00

Revenue ($ in millions)

235

69

275

100

0

75

150

225

300

1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00

Assets Under Management($ in billions)

Total Assets Under Management Mutual Fund Assets

Asset Profile - As of 9/30/00$275 billion

36%48%

16%

Equity Fixed Income Cash

Global Corporate & Investment BankingMomentumGlobal Corporate & Investment BankingMomentum

1%

7%

YTD99 YTD00

#20#20

#10#10

Mergers and Acquisitions

1%

3%

YTD99 YTD00

Equity Underwriting

#14#14

#10#10

11% Revenue Growth

37% 33%

17% 15%

22% 19%

24% 33%

0%

20%

40%

60%

80%

100%

YTD 99 YTD 00

Global Capital RaisingGlobal Capital Raising

Global MarketsGlobal Markets

Global Treasury ServicesGlobal Treasury Services

Global Credit ProductsGlobal Credit Products

$6.25 billion$6.25 billion $6.94 billion$6.94 billion

Revving the Growth EnginesRevving the Growth Engines

• Asset management• Card services / payments• E-commerce• Investment banking• National brand

• Asset management• Card services / payments• E-commerce• Investment banking• National brand

Transforming Bank of AmericaTransforming Bank of America

0%

40%

80%

120%

160%

1994 1995 1996 1997 1998 1999 2000

Bank deposits Money funds

Money funds CAGR – 16%

Bank deposits CAGR – 5%

Financial Initiatives and OutlookFinancial Initiatives and Outlook

• Credit quality• New financial measurements• Balance sheet & capital management• Outlook

• Credit quality• New financial measurements• Balance sheet & capital management• Outlook

Appropriate Reserve LevelsAppropriate Reserve Levels

Reserve Allocations

Other Consumer

17%

Card7%Mortgage &

Home Equity4%

Commercial & Comm'l

R/E55%

$6.7 Billion as of 9/30/00

Unassigned 17%

Reserve Allocations

Other Consumer

17%

Card7%Mortgage &

Home Equity4%

Commercial & Comm'l

R/E55%

$6.7 Billion as of 9/30/00

Unassigned 17%

Loan Portfolio Breakdown

Other Consumer

17%

Card3%

Mortgage & Home Equity

29%

Commercial & Comm'l

R/E51%

$403 Billion as of 9/30/00Loan Portfolio Breakdown

Other Consumer

17%

Card3%

Mortgage & Home Equity

29%

Commercial & Comm'l

R/E51%

$403 Billion as of 9/30/00

Comparative Reserve AdequacyComparative Reserve Adequacy

Bank of America Loan Mix

Other Consumer

17%

Card3%

Mortgage & Home Equity

29%Commercial

R/E7%

Commercial44%

Peer* Loan Mix

Other Consumer

15%

Card4%

Mortgage & Home Equity

21%

Commercial R/E12%

Commercial48%

1.67%

1.77%

1.92%

1.50%

1.75%

2.00%

Allowance as a % of Loans

Bank ofAmericaReserve

Coverage

Peer*Reserve

Coverage

Peer* additionalrequired reservelevels to match

Bank of Americacoverage

Peer* group includes 9 large regional banks andChase Manhattan

Loan Portfolio DiversityLoan Portfolio Diversity

Other Consumer13%

Autos2%

Retail2%

Agribusiness2%

Telecom2%

Health Care2%

Equipment and genl mfg2%

Bankcard3%

Consumer Finance Real Estate Secured

4%

Residential Real Estate Secured

29%

Other Comm'l < 2%25%

Business services2%

Real Estate7%

Transportation3%

Media2%

Commercial 51%Consumer 49%

Total Loans $403 BillionTotal Loans $403 Billion

New Corporate ScorecardNew Corporate Scorecard

BusinessSegment

FinancialMeasures

RevenueRevenue

growthgrowthChange inChange in

SVASVAReturn onReturn on

EquityEquity

Corporate

FinancialMeasures

RevenueRevenue

growthgrowthChange inChange in

SVASVA ROEROE

LoanLoan

mixmixTier 1Tier 1

CapitalCapitalLoan lossLoan lossreservereserve

EPSEPS

growthgrowth

NetNetcharge-charge-

offsoffs

Balance Sheet TacticsBalance Sheet Tactics

• Reduce– Low margin / non-strategic corporate loans– Mortgage loans– Trading account assets

• Replace– Maturing securities with off-balance sheet

instruments• Grow

– Credit card loans– Other consumer loans– Small business / middle market loans

• Reduce– Low margin / non-strategic corporate loans– Mortgage loans– Trading account assets

• Replace– Maturing securities with off-balance sheet

instruments• Grow

– Credit card loans– Other consumer loans– Small business / middle market loans

Capital ManagementCapital Management

• Substantial earnings and capital generation– Cash flow of approximately $12 billion

• Refinement of capital allocations• Limited increase in risk-weighted assets• Excess capital after funding growth

businesses– Dividend increase averaged 13% over the past 20

years– Share repurchases

• Repurchased 128 million shares in 15 months• New 100 million share program approved in July 2000

• Substantial earnings and capital generation– Cash flow of approximately $12 billion

• Refinement of capital allocations• Limited increase in risk-weighted assets• Excess capital after funding growth

businesses– Dividend increase averaged 13% over the past 20

years– Share repurchases

• Repurchased 128 million shares in 15 months• New 100 million share program approved in July 2000

Grow core earnings

Manage credit

2000 2001 2004………………..2002 2003

Long and Short Term ChallengesLong and Short Term Challenges

Fourth Quarter IssuesFourth Quarter Issues

Continued momentum in core businessesdampened by two issues:Continued momentum in core businessesdampened by two issues:• Credit quality

– FFIEC– Exposure to large credit– Additional deterioration

• Capital markets volatility– Syndications– Underwriting– Trading– Equity investments

• Credit quality– FFIEC– Exposure to large credit– Additional deterioration

• Capital markets volatility– Syndications– Underwriting– Trading– Equity investments

2001 Outlook2001 Outlook

• Soft landing scenario• Continued progress in majority of core

businesses• Higher credit costs• Lackluster capital markets environment

• Soft landing scenario• Continued progress in majority of core

businesses• Higher credit costs• Lackluster capital markets environment

Positioned for Future GrowthPositioned for Future Growth

• 1 out of every 4 households• 2 million businesses• 2.8 million online customers• Banking relationships with 85% of Fortune

500• Serve customers in 190 countries

• 1 out of every 4 households• 2 million businesses• 2.8 million online customers• Banking relationships with 85% of Fortune

500• Serve customers in 190 countries

• #1 in top 4 growth states• #1 or 2 in 16 of 21 franchise states• Franchise population growth nearly 3

times remainder of U.S.• Online customer growth 69% since

9/30/99• Opening 250,000 checking accounts

monthly

• #1 in top 4 growth states• #1 or 2 in 16 of 21 franchise states• Franchise population growth nearly 3

times remainder of U.S.• Online customer growth 69% since

9/30/99• Opening 250,000 checking accounts

monthly

• 4,500 banking centers• 14,000 ATMs• 600 in-store branches• 1.5 million telephone banking calls per

day• 145,000 associates• 8.5 million monthly visits to

BankofAmerica.com• Touch customers 7 million times daily

• 4,500 banking centers• 14,000 ATMs• 600 in-store branches• 1.5 million telephone banking calls per

day• 145,000 associates• 8.5 million monthly visits to

BankofAmerica.com• Touch customers 7 million times daily

• Consumer• Asset

management• Card products• Consumer

finance• Mortgage• Small business

lending

• Consumer• Asset

management• Card products• Consumer

finance• Mortgage• Small business

lending

• Corporate• Debt & equity

underwriting• Foreign exchange• M & A advisory• Real estate finance• Syndicated lending• Treasury services

• Corporate• Debt & equity

underwriting• Foreign exchange• M & A advisory• Real estate finance• Syndicated lending• Treasury services

Growth Franchise:Growth Franchise: Customer Base:Customer Base:

Delivery Superiority:Delivery Superiority: Product Depth:Product Depth: