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Transcript of 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: