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Slide 1: Bank of America Growth Opportunities in Consumer and Small Business Banking Liam McGee President Global Consumer & Small Business Banking Lehman Brothers September 13, 2006
Slide 2: Forward Looking Statements This presentation contains forward-looking statements, including statements about the financial conditions, results of operations and earnings outlook of Bank of America Corporation. The forwardlooking statements involve certain risks and uncertainties. Factors that may cause actual results or earnings to differ materially from such forward-looking statements include, among others, the following: 1) projected business increases following process changes and other investments are lower than expected; 2) competitive pressure among financial services companies increases significantly; 3) general economic conditions are less favorable than expected; 4) political conditions including the threat of future terrorist activity and related actions by the United States abroad may adversely affect the company’s businesses and economic conditions as a whole; 5) changes in the interest rate environment reduce interest margins and impact funding sources; 6) changes in foreign exchange rates increases exposure; 7) changes in market rates and prices may adversely impact the value of financial products; 8) legislation or regulatory environments, requirements or changes adversely affect the businesses in which the company is engaged; 9) changes in accounting standards, rules or interpretations, 10) litigation liabilities, including costs, expenses, settlements and judgments, may adversely affect the company or its businesses; 11) mergers and acquisitions and their integration into the company; and 12) decisions to downsize, sell or close units or otherwise change the business mix of any of the company. For further information regarding Bank of America Corporation, please read the Bank of America reports filed with the SEC and available at www.sec.gov. 2
Slide 3: Global Consumer & Small Business Banking 1. Size and scale matter 2. Track record of growth 3. We will continue to grow 3
Slide 4: Size & Scale Matter Geographic Diversity – Across U.S. Growth Markets 2Q06 YTD Earnings of $5.8 billion Out of Footprint 18% West 17% Northeast 15% Community 11% Southwest 13% East 22% 4
Slide 5: Size & Scale Matter Earnings Diversity – Strong Foundation for Growth 2Q06 YTD Earnings of $5.8 billion Mortgage 2% Card Services 51% Home Equity 4% Other 1% Deposits 42% 5
Slide 6: Size & Scale Matter Channel Diversity – Any Way Customers Choose Banking Centers Affinity Groups ATM Customers & Clients e-Commerce Sales Forces Phone 6
Slide 7: Size & Scale Matter Pricing/Value – Ability to Price Below Average and Grow 15% 12% 9% 6% 3% 0% Growing Deposits While Lagging Rates Paid 100% 80% 60% 40% 20% 0% Q304 Q404 Q105 Q205 Q305 Q405 Q106 Q206 Cumulative consumer deposit growth % of Fed Funds hikes passed on – cumulative 7
Slide 8: Size & Scale Matter Efficiency – Economies of Scale Achieved While Growing Pro forma Global Consumer & Small Business Banking efficiency ratio 55% 53% 50% 50% 45% 45% 40% YTD 2004 YTD 2005 YTD 2006 8
Slide 9: Size & Scale Matter Resources – Capacity to Invest in People, Productivity New and Refurbished Stores ATM Check Imaging Online Banking Enhancements 9
Slide 10: Size & Scale Matter Information & Innovation – Anticipating Customer Needs 10
Slide 11: Size & Scale Matter Brand – Critical to Growing a Retail Business Bank of America Unaided Awareness 41% 23% 2005 2000 • • • • Wells Fargo – 23% Citibank – 18% Wachovia – 16% Chase – 11% Fortune Most Admired (Megabanks) • • • • 2005 2004 2003 2002 1st 2nd 3rd 6th 11 Source: Enterprise Analytics, Fortune, FT
Slide 12: Size & Scale Matter Payments – We Are Positioned to Lead • #1 Credit Card • #1 Debit Card • #1 Check Processor • #1 Online Banking/Bill Pay • #1 Cash Management • #1 ACH Receiver • #2 Merchant Acquiring No. 1 Debit Card 15.7% Share No. 1 Online Bill Pay 54.8% Share Customers & Clients No. 1 Credit Card 21.5% Share No. 1 Share in Fastest Growing Payment Types 12
Slide 13: Track Record of Growth Growing Customer Relationships Net New Checking Accounts 2,063,000 1,192,000 443,000 2,300,000 New Debit Cards 4,829,000 4,100,000 1,304,000 3,200,000 2,500,000 2,603,000 2002 2003 2004 2005 2QYTD06 2002 2003 2004 2005 2QYTD06 Home Equity Production (in $ billions) 61.0 30.0 38.0 72.0 New Franchise Consumer Credit Cards 2,196,000 1,784,000 1,565,000 1,250,000 1,554,000 39.7 2002 2003 2004 2005 2QYTD06 2002 2003 2004 2005 2QYTD06 13
Slide 14: Top Line and Bottom Line Growth Pro forma with Fleet and MBNA ($ in billions) Revenue $25 $20 $15 $10 1st Half 2004 1st Half 2005 1st Half 2006 Return on Equity 20% 7% CAGR 18.0 18.9 20.7 15% 10% 5% 0% 14.2% 15.8% 18.1% 1st Half 2004 1st Half 2005 1st Half 2006 Net Income $6 $5 17% CAGR $5.8 $4.2 $4 $3 1st Half 2004 $4.6 1st Half 2005 1st Half 2006 14
Slide 15: We Will Continue to Grow Growth Opportunities • Market optimization • Mass market small business • Consumer credit continuum • Credit card • Affinity banking • Online banking / channel diversification 15
Slide 16: Optimizing Market Opportunities % Household Penetration Share 1 61 55 53 53 46 42 41 40 40 32 23 LA Seattle Miami San Fran Boston Phoenix Dallas Atlanta DC Houston NY 16 ‘1 HH penetration equal to HHs with BAC deposit acct. divided by number of HHs in market
Slide 17: Optimizing Market Opportunities 54 51 48 48 % Checking Penetration 1 42 39 38 37 37 29 20 LA Seattle Miami San Fran Boston Phoenix Dallas Atlanta DC Houston NY % Home Equity Penetration 2 25 20 26 21 25 23 23 18 18 14 16 LA 17 Seattle Miami San Fran Boston Phoenix Dallas Atlanta DC Houston NY ‘1 Checking HH penetration equal to HHs with BAC checking acct. divided by number of HHs in market ‘2 Defined as BAC HELOC production divided by Total HELOC Market
Slide 18: We Manage to Market-Specific Growth Potential Washington, DC 60% 50% 40% 30% 20% 10% 0% Checking HH Penetration HELOC Share Houston 60% 54% 17% 54% 25% 41% 23% 50% 40% 41% 27% 37% 18% 30% 20% 10% 0% 29% 14% Checking HH Penetration HELOC Share If D.C. achieves L.A. and Miami penetration levels: • Incremental 309K HHs • Incremental $527M in HELOC production 18 If Houston achieves L.A. and Miami penetration levels: • Incremental 432K HHs • Incremental $59M in HELOC production *** YTD Q2 2006
Slide 19: Small Business Banking Growth Opportunity Bank of America Small Business Customer Penetration 22.4% Growing credit share to match market penetration Additional $20 Billion in balances 22% 8% 18.2% 20.8% = 2003 2004 2005 Credit Share Market Penetration 19
Slide 20: Momentum in Growing Mass Market Small Business ($ in billions) Revenue $1.40 $1.30 $1.20 $1.10 $1.00 $0.90 $0.80 2Q 2005 2Q 2006 Net Income $0.80 $0.70 $0.60 $0.50 $0.40 2Q 2005 2Q 2006 21% growth 29% growth • Small Business credit growth of 22% • Total deposit growth of $3.2B (7%) • Small Business sales growth of 24 % 20 Pro forma with MBNA
Slide 21: Consumer Credit Continuum Customer credit needs Student Lending Secured Credit Card Unsecured Credit Card First Mortgage Home Equity Unsecured Lines Relationship-based Common Decision Engine 21
Slide 22: Home Equity Leader With Room To Grow Home Equity Balances ($in billions) #1 $71 $58 $44 $27 2002 2003 2004 2005 Matching 8.6% home equity market share to 13.5% retail deposits share $43 billion in incremental balances = 22
Slide 23: Other Consumer Credit Opportunities • Mortgage – 5th largest originator in U.S. – $41 billion originations YTD 2Q06 • Unsecured credit – Successful MBNA product – Pilot in L.A., Chicago, Boston • Student lending – Government guaranteed – Private market 23
Slide 24: Card Services Transition • Transition on target – Continuing to meet revenue and expense targets – Affinity card sales now in all BAC channels • September and October – Integrated card platform release and customer migration • Leveraging MBNA judgmental lending and collections best practices 24
Slide 25: Card Services Growth in 2006 – Managed Basis ($ in billions) 2006 June YTD Total Revenue Provision for Credit Losses Total Non-Interest Expense Net Income $ 12.2 3.5 3.9 $ 3.0 2006 YOY Change (1) 7% (24%) (10%) 91% Key Measures: Charge-Offs % Delinquencies: 30 Day 90 Day Risk Adjusted Margin (2) 3.24% 4.56% 2.20% 9.94% (193) bps 19 bps 18 bps 217 bps (1) (2) YOY growth is pro forma with MBNA RAM in managed basis for US Card 25
Slide 26: Card Services – Our Unique Model • Distribution diversity • Efficiency • Pricing • Risk/reward – risk adjusted margin 26
Slide 27: Affinity Banking – a New Growth Engine • More than 5,000 organizations endorse our products including: – 1,400 professional organizations – 900 colleges and universities – 600 sports related organizations MBNA Affinity Relationships + Bank of America Retail Products and Distribution = New Affinity Banking Model 27
Slide 28: Online Banking: A Growing Competitive Advantage 19.8 Million Online Banking Active Users 19.8** 12.4 7.2 3.2 4.0 Active Online Customers Are Much More Profitable* 28% 15% 27% 14.7 7.3 7.4 10.4 5.8 6.6 9.4 Q4 2003 Q4 2004 Q4 2005 Q2 2006 Deposit Balances Loan Balances Profitability Bill Pay users * Three years after going online, combined access-only and bill pay customers ** Q206 includes MBNA 28
Slide 29: Diversifying Sales & Service Delivery Channels Channel Diversification 48 44 40 36 32 28 24 20 16 12 8 4 0 7.7% 11.6% 11.7% 15.3% 13.5% 13.7% 68.4% 64.5% Optimizing Origination Costs $113 $98 $78 24% 36 30 12.3% 68.1% $140 32 7.2% 4.7% Direct Mail 56% 39% Banking Center 52% $50 E-Commerce 22% 34% Other 2% 20% 7% 20% 8% 16% $30 2004 2005 (Units Millions) 2006Est 2004 2005 1Q 06 Product Sales Mix % by Channel Card Sales Mix By Channel 29
Slide 30: In Summary • Our size and scale is an advantage • We have grown the business organically • We are relentlessly focused on continuing to grow 30