2017 Annual Meeting of Stockholders

Transcription

1 2017 Annual Meeting of Stockholders Brian Moynihan, Chairman and CEO April 26, 2017

2 At Bank of America, we live our values, deliver our purpose and drive responsible growth through our eight lines of business Our values Our purpose Responsible growth Eight lines of business Deliver together To help make financial lives We must grow and win in the Serving the core financial Act responsibly Realize the power of our people better, through the power of every connection market no excuses We must grow with our customer-focused strategy needs of people, companies and institutional investors through eight lines of business Trust the team We must grow within our risk framework We must grow in a sustainable manner We re better when we re connected 2

3 Integrated Business Model Focused on Responsible Growth and Sustainable Returns Consumer Banking Global Wealth & Investment Management Global Banking Global Markets Retail Preferred & Small Business Merrill Lynch U.S. Trust Business Banking Global Commercial Banking Global Corporate & Investment Banking Global Markets 47MM Consumer and Small Business relationships 31MM Retail customers <$50K household income 11MM Preferred customers >$75K HHI / >$100K in assets 3MM Small Business customers 22.2MM mobile customers 34.5MM active digital users Nearly 1MM high net worth households >$250K in assets (ML) >$3MM in assets (UST) Nearly $2.6T client assets $152B loans and leases 1 $255B deposits 19K primary sales professionals, including 17K financial advisors 2 ~37K clients $5MM $50MM in revenue Primarily small and mid-sized U.S. domiciled clients ~15K clients $50MM $2B in revenue Primarily U.S. domiciled middle market clients and int l subs. ~5K clients >$2B in revenue Operations in more than 35 countries Largest global corporates, FI s, gov t. ~8K clients 35 trading locations ~640 research analysts 1 Includes margin receivables which are classified in customer and other receivables on the consolidated balance sheet. 2 Includes Financial Advisors in the Consumer Banking segment of 2,092. 3

4 Significant Earnings Improvement Net Income ($B) $15.8 $17.9 $10.5 $3.9 $

5 Improved Results Across Business Segments, Each Earning Above Cost of Capital Net Income (Loss) ($B) Consumer Banking Global Wealth & Investment Management Global Banking Global Markets All Other $6.6 $7.2 $5.3 $5.7 8% $2.6 $2.8 7% $2.4 $3.8 8% 58% ROAAC 1 21% 21% 15% 10% Efficiency 2 56% 75% 46% 63% ($1.1) ($1.6) 1 ROAAC defined as return on average allocated capital. 2 Efficiency ratio shown on a fully taxable-equivalent (FTE) basis. 5

6 Operating Leverage Driving Results 2016 Business Segment Operating Leverage 1 Consumer Banking: +6% GWIM: +3% 2 Global Banking: +5% Global Markets: +18% 1% 5% 7% (2%) Revenue growth (6%) Expense reduction Revenue: Revenue +5% growth Expense: 0% (5%) Expense reduction Revenue growth 0% Expense growth Revenue growth (11%) Expense reduction Revenue: +7% Expense: (11%) Total Corporation 1% Revenue Growth and 5% Expense Reduction = 6% Operating Leverage Note: Amounts may not total due to rounding. 1 Operating leverage calculated as the year-over-year percentage change in revenue, net of interest expense, less the percentage change in noninterest expense. 2 GWIM defined as Global Wealth & Investment Management. 6

7 Diluted Earnings Per Share Earnings Are Less Volatile and More Consistent EPS Volatility ( ) 1 EPS Stabilization ( YTD) $0.28 $0.27 ($0.16) $0.17 $0.56 $0.19 $0.10 $0.32 $0.20 $0.15 $0.03 $0.00 $0.03 $0.29 ($0.03) $0.20 ($0.04) $0.28 $0.38 $0.27 $0.38 $0.27 $0.28 $0.41 $0.41 $0.40 $0.41 ($0.77) ($0.90) 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q Q17 1 Periods shown after 4Q14 reflect the change in accounting method for the amortization of premium and accretion of discount related to certain debt securities carried at fair value and held-to-maturity. For additional information regarding this change in accounting, please see the 8-K filed on 10/4/16. 7

8 Progress Against Financial Targets Return on Average Assets Return on Average Tangible Common Equity % 0.82% 0.88% 9.1% 9.5% 10.3% 0.49% 6.4% 0.18% 0.26% 1.7% 4.2% 3.0% 6.2% 6.7% 7.3% 1.1% 2.0% Q Q17 Return on average common equity Estimated cost of capital 1 Represents a non-gaap financial measure. For important presentation information, see slide 35. 8

9 Increased Shareholder Value Book Value and Tangible Book Value Per Share 1 $20.24 $20.69 $21.32 $22.53 $24.04 $24.36 Up 20% since 2012 $13.36 $13.77 $14.43 $15.62 $16.95 $17.23 Up 29% since Q17 Tangible book value per share Book value per share 1 Tangible book value per share represents a non-gaap financial measure. For important presentation information, see slide 35. 9

10 Improved Shareholder Return Total Stockholder Return 1 1Q17 (12/31/16 3/31/17) 1 Year (12/31/15 12/31/16) 3 Year (12/31/13 12/31/16) 5 Year (12/31/11 12/31/16) 7% 33% 47% 315% 6% 25% 25% 38% 37% 4% 29% 168% 179% 2% 8% 12% 11% 104% 98% 1% BAC Peer avg US G- SIB avg All G- SIB avg S&P 500 Index BAC Peer avg US G- SIB avg All G- SIB avg S&P 500 Index BAC Peer avg US G- SIB avg All G- SIB avg S&P 500 Index BAC Peer avg US G- SIB avg All G- SIB avg S&P 500 Index Note: Peer bank average includes C, JPM, MS, GS and WFC. G-SIB represents Globally Systemically Important Banks as defined by the FSB. 1 Total stockholder return includes stock price appreciation and dividends paid. 10

11 Returned More Capital to Shareholders BAC Common Dividends ($B, except per share) Returns Through Net Common Share Repurchases ($B) $3 $0.8 $2.6 $4.0 $2 $1.3 $2.1 $0.6 $0.4 $2.8 $1.8 $2.4 $1 $0.4 $0.4 $0.12 $0.20 $0.25 $0.2 $0 $0.04 $ $0.0 $ Dividends Dividends per share 11

12 Third Largest Financial Institution in the World by Market Value Source: FactSet and Bloomberg. Market data as of 3/31/17. Note: Market cap based on fully diluted shares outstanding. 1Q17 change based on respective stock price and prior quarter average diluted share count. 12

13 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 Despite Lower Market Price, Company s Market Value at All-time High BAC Fully-diluted Market Capitalization and Stock Price 1 $300 $250 $53.39 $242B $257B $60 $50 $200 $40 $150 $100 $23.59 $30 $20 $50 $10 $0 $0 Market Cap 1 Stock Price 1 Market capitalization presented on a fully diluted basis and calculated as the reported average diluted common shares outstanding during the respective period multiplied by the closing common stock price at the end of each period. 13

14 Working to Reduce Crisis-related Shares Average Diluted Common Shares Outstanding (in billions) Crisis- and acquisition-related issuance 9.8 Build for new capital requirements Peak Q17 1 For 2014 and 2012, 700 million average dilutive potential common shares associated with the Series T Preferred Stock were not included in the diluted share count because the result would have been antidilutive under the if-converted method. 14

15 Pillars of Responsible Growth We must grow and win in the market no excuses We must grow with our customer-focused strategy We must grow within our risk framework We must grow in a sustainable manner

16 Loan Growth Outpacing Legacy Run-off Average Total Loans & Leases ($B) 1 Average Loans & Leases in All Other ($B) 1 $906 $914 $867 $893 $914 $242 $212 $165 $118 $95 1Q13 1Q14 1Q15 1Q16 1Q17 1Q13 1Q14 1Q15 1Q16 1Q17 1 1Q17 includes $9.4B of non-u.s. consumer credit card loans, which are included in assets of business held for sale on the consolidated balance sheet at March 31,

17 Strong Deposit Growth Average Deposits ($B) $1, $1,118 $1, $1, $1, Q13 1Q14 1Q15 1Q16 1Q17 Noninterest-bearing Interest-bearing (excl. CDs/IRAs) Consumer CDs/IRAs Note: Amounts may not total due to rounding. 17

18 Pillars of Responsible Growth We must grow and win in the market no excuses We must grow with our customer-focused strategy We must grow within our risk framework We must grow in a sustainable manner

19 Industry Leading Positions Across Our Businesses Consumer Banking GWIM Global Banking Global Markets #1 U.S. Retail Deposit Market Share 1 #1 Home Equity Lender (Inside Mortgage Finance, 2016) #2 bank for Retail Mortgage Origination Volume 2 #3 in U.S. Credit Card Balances 2 #1 in Prime Auto Credit distribution of new originations among peers 3 #2 Small Business Lender (FDIC, 3Q16) #1 in Online Banking Functionality (Keynote, 2016) #1 in Mobile Banking Functionality (Forrester, 2016) #1 U.S. wealth management market position across client assets, deposits and loans 2 #1 in personal trust assets under management 4 #1 in Barron s U.S. high net worth client assets (2016) #1 in Barron s Top 1,200 ranked Financial Advisors (2016) and Top 100 Women Advisors (2016) #1 U.S. Market Penetration for Large Corporate Banking, Cash Management and Trade Finance (Greenwich Associates, 2016) Best Bank for Global Cash Management (The Banker, 2016) Global Bank of the Year for Payments & Collections (Treasury Management International, 2016) World s Best Bank for Financing and Diversity (Euromoney, 2016) Relationships with 80% of the Global Fortune 500; 96% of the U.S. Fortune 1,000 #1 Global Research Firm for 6 th consecutive year (Institutional Investor, 2016) #1 All-Europe Research Team for 2 nd consecutive year (Institutional Investor, 2017) #2 All-America Fixed Income Sales Team (Institutional Investor, 2016) #1 U.S. Investors Equity Trading Share Leader (Greenwich, 2016) 2016 U.S. Fixed Income Quality Leader in Credit and Emerging Markets (Greenwich, 2016) Equity Derivatives House of the Year (Risk Magazine, 2016) 1 Source: June 2016 FDIC deposit data, adjusted to remove commercial balances. 2 Source: Competitor 4Q16 earnings releases. 3 Largest percentage of 740+ Scorex customers among key competitors as of August Source: Total Units Experian Autocount Risk Loan Analysis Scorex + (Loans, New & Used, Franchised Dealers). 4 Source: FDIC, December 31,

20 Client Satisfaction Continues to Climb Client Sentiment (Top 2 Box) 1 Client Experience (Top 2 Box) Measures % of clients giving us a 9 or 10 when asked how they feel about Bank of America overall Measures % of clients giving us a 9 or 10 after using our channels or products or interacting with our reps 56% Preferred 80% Financial Center Client Professionals Mobile Banking Retail 77% 79% 81% 46% Online Banking Client Service Reps (Contact Center) Client Service Reps (Financial Center) Interactive Voice Response 85% 80% 70% 75% 1 Consumer and Small Business sentiment (top 2 box out of 10). 20

21 Digital Adoption and Leading Capabilities Aiding Customer Satisfaction Mobile Banking Active Users (MM) Strong Innovation Pipeline for the Future % % % % % 1Q13 1Q14 1Q15 1Q16 1Q17 30% 25% 20% 15% 10% 5% 0% Chat Bots for Servicing ARTIFICIAL INTELLIGENCE Automated Investing Trusted & Predictive Engagements SOCIAL MEDIA INTEGRATION Social Media Notifications Social Media Payment CONTACTLESS INTERACTIONS Wearable Point of Sale Digital Disbursement Smartphone at ATM PAYMENTS & OTHER Emerging Interaction Point Integration Smartphone Point of Sale Real-time P2P Payments Mobile banking active users Mobile % of total deposit transactions Integrating wholesale needs with consumer needs 21

22 Leveraging Digital Technology to Develop Solutions for our Clients Virtual Account Management Digital Disbursement Digital Trade CashPro Mobile Receipt Payment $ Blockchain Technology Physical Account (USD, EUR or GBP) Single Method of Transfer Confirmation Advice Negotiation VA VA VA Additional Payment Types Digital Wallets & Card Networks Buyer Contract Supplier Simplify Management of Accounts Provide Flexible Payment Options Streamline Processes Enable Anywhere, Anytime Execution 22

23 Pillars of Responsible Growth We must grow and win in the market no excuses We must grow with our customer-focused strategy We must grow within our risk framework We must grow in a sustainable manner

24 Credit Risk - Asset Quality Remains Strong Consumer Net Charge-Offs ($B) Commercial Net Charge-Offs ($B) $ % $18.5 $ % $ % 2.36% $ % $4.1 $3.9 $ % 0.84% 0.74% Net charge-offs Net charge-off ratio $ % $ % $0.7 $0.3 $0.4 $ % 0.08% 0.10% 0.11% Net charge-offs Net charge-off ratio 24

25 Solid Results with Lower Market Risk BAC Trading Portfolio Average VaR ($MM) Sales & Trading Revenue per $ of Average VaR ($MM) 2 $300 $250 $200 Reduction of ~85% from historical peak to December 2016 $700 $600 $500 $609 $467 $400 $150 $100 $300 $200 $306 $230 $50 $100 $ $0 BAC JPM MS GS 1 VaR model uses historical simulation approach based on three years of historical data and an expected shortfall methodology equivalent to a 99% confidence level. 2 Represents 2016 reported sales and trading revenue divided by average VaR of the trading portfolio using a 95% confidence level. Citi is not shown as only discloses average VaR using a 99% confidence level. 25

26 Managing Operational and Reputational Risk Operating Scale - A Year in the Life of BAC Serving the core financial needs of people, companies and institutional investors ~47MM Consumer and Small Business Relationships Relationships with 80% of the Global Fortune 500 and 96% of the U.S. Fortune 1,000 Serving 1 in 3 U.S. Middle Market Companies Serving 1 in 5 U.S. Business Banking Companies Operations in more than 35 countries Payments Processed: Retail payments processed: 70MM ($79B) U.S. ACH payments processed: 4.4B ($14.2T) Wire payments processed: 108MM ($351T) Bill payments executed through Online Banking & Mobile Banking Channels: 552MM Deposits Processed: Deposits made in a Financial Center: 170MM Deposits made using an ATM: 288MM Checks deposited using the Mobile channel: 108MM Purchases on Credit and Debit Cards: $517B Global Markets trades processed of securities, derivatives, futures and traded loans: 6.8B Mobile logins to Consumer Banking application: 3.9B Data Centers Managed: 29 Anti-money laundering cases investigated: 158K 26

27 Pillars of Responsible Growth We must grow and win in the market no excuses We must grow with our customer-focused strategy We must grow within our risk framework We must grow in a sustainable manner

28 Insert Agenda Slide Sustainability Driven Along Many Dimensions Our people Our local communities Our global community Our franchise investment Our brand Our governance 28

29 Insert Agenda Slide Significantly Improved Cost Structure Noninterest Expense ($B) 1 $ $72.1 $ $ $ $ Noninterest expense excluding litigation Litigation expense 1 Noninterest expense in 2011 includes goodwill impairment of $3.2B. Excluding goodwill impairment, expense in 2011 was $77.1B. 29

30 Driving a Culture of Efficiency Simplify the work across the company to increase client and employee satisfaction Increase productivity and efficiency Ensure sustainable cultural change Cost Mgmt SIM Org Health Transparency into Cost of the Work Redesign How we Work Realign Management of the Work Understand the work, who does it and what it costs Identify efficiency opportunities Drive Organizational Effectiveness 30

31 Consistently Investing for the Future Consumer Investing in new digital capabilities Real-time P2P payments (Zelle) Free FICO scores Launched Spanish mobile app Introduced artificial intelligence functionality ( Erica ) 8,500+ cardless-enabled ATMs (launched in 1Q16) Deployed 3,500+ digital ambassadors in financial centers Enhanced interactive voice response (IVR) capabilities to improve client experience Targeted banking center entry (e.g. Denver, Minneapolis, Indianapolis) Wealth Management Multi-year investment in Merrill Lynch One (feebased advisory platform) Launched Merrill Edge Guided Investing online investing + professional portfolio management Investment in Practice Management & Development (PMD) program (new advisor training) Increased wealth advisors by nearly 700 since 2014 Banking and Markets Invested more than $1B in GTS over last 4 years to enhance functionality and strengthen our core treasury business Improved local coverage in Global Commercial Banking and Business Banking Increased percentage of clients served by a local market coverage officer from 59% to 90% Established a centralized Wholesale Credit function to drive efficiencies Migrating to new trading platform with enhanced functionality Electronic trading enhancements Have invested ~$3B annually on technology initiatives Made significant investments in cybersecurity, compliance and regulatory functions while replacing many enterprise platforms Added >1,000 primary sales associates year-over-year across Consumer Banking, GWIM, and Global Banking 31

32 Responsible Growth Panel Anne Finucane, Vice Chairman Sheri Bronstein, Global Human Resources Executive D. Steve Boland, Consumer Lending Executive Andrew Plepler, Global ESG Executive

33 Insert Agenda Slide Takeaways Delivering responsible growth Made progress against financial targets Improved shareholder returns Serving the financial needs of our customers and clients 33

34 Forward-Looking Statements Bank of America Corporation (the Company ) and its management may make certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as anticipates, targets, expects, hopes, estimates, intends, plans, goals, believes, continue and other similar expressions or future or conditional verbs such as will, may, might, should, would and could. Forward-looking statements represent the Company's current expectations, plans or forecasts of its future results, revenues, expenses, efficiency ratio, capital measures, and future business and economic conditions more generally, and other future matters. These statements are not guarantees of future results or performance and involve certain known and unknown risks, uncertainties and assumptions that are difficult to predict and are often beyond the Company's control. Actual outcomes and results may differ materially from those expressed in, or implied by, any of these forward-looking statements. You should not place undue reliance on any forward-looking statement and should consider the following uncertainties and risks, as well as the risks and uncertainties more fully discussed under Item 1A. Risk Factors of our 2016 Annual Report on Form 10-K and in any of the Company s subsequent Securities and Exchange Commission filings: potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation and regulatory proceedings, including the possibility that amounts may be in excess of the Company s recorded liability and estimated range of possible loss for litigation exposures; the possibility that the Company could face increased servicing, securities, fraud, indemnity, contribution or other claims from one or more counterparties, including trustees, purchasers of loans, underwriters, issuers, other parties involved in securitizations, monolines or private-label and other investors; the possibility that future representations and warranties losses may occur in excess of the Company s recorded liability and estimated range of possible loss for its representations and warranties exposures; the Company s ability to resolve representations and warranties repurchase and related claims, including claims brought by investors or trustees seeking to avoid the statute of limitations for repurchase claims; uncertainties about the financial stability and growth rates of non-u.s. jurisdictions, the risk that those jurisdictions may face difficulties servicing their sovereign debt, and related stresses on financial markets, currencies and trade, and the Company s exposures to such risks, including direct, indirect and operational; the impact of U.S. and global interest rates, currency exchange rates and economic conditions; the potential impact of any future government shutdown and/or debt ceiling impasse; the impact on the Company's business, financial condition and results of operations of a potential higher interest rate environment; the possibility that future credit losses may be higher than currently expected due to changes in economic assumptions, customer behavior, adverse developments with respect to U.S. or global economic conditions, and other uncertainties; the impact on the Company s business, financial condition and results of operations from a protracted period of lower oil prices or ongoing volatility with respect to oil prices; the Company's ability to achieve its expense targets or net interest income or other projections; adverse changes to the Company s credit ratings from the major credit rating agencies; estimates of the fair value of certain of the Company s assets and liabilities; uncertainty regarding the content, timing and impact of regulatory capital and liquidity requirements, including the approval of our internal models methodology for calculating counterparty credit risk for derivatives; the potential impact of total loss-absorbing capacity requirements; potential adverse changes to our global systemically important bank (G-SIB) surcharge; the impact of Federal Reserve actions on the Company s capital plans; the possible impact of the Company's failure to remediate shortcomings identified by banking regulators in the Company's Resolution plan; the impact of implementation and compliance with U.S. and international laws, regulations and regulatory interpretations, including, but not limited to, recovery and resolution planning requirements, Federal Deposit Insurance Company (FDIC) assessments, the Volcker Rule, fiduciary standards and derivatives regulations; a failure in or breach of the Company s operational or security systems or infrastructure, or those of third parties, including as a result of cyber attacks; the impact on the Company's business, financial condition and results of operations from the planned exit of the United Kingdom (U.K.) from the European Union (EU); and other similar matters. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the date the forward-looking statement was made. 34

35 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, update any of the information provided. The Company may present certain key performance indicators and ratios excluding certain items (e.g., DVA) which result in non-gaap financial measures. The Company believes the use of these non- GAAP financial measures provides additional clarity in understanding its results of operations and trends. For more information about the non-gaap financial measures contained herein, please see the presentation of the most directly comparable financial measures calculated in accordance with GAAP and accompanying reconciliations in the earnings press release for the quarter ended March 31, 2017 and other earnings-related information available through the Bank of America Investor Relations web site at: The Company views net interest income and related ratios and analyses on a fully taxable-equivalent (FTE) basis, which when presented on a consolidated basis, are non-gaap financial measures. The Company believes managing the business with net interest income on an FTE basis provides investors with a more accurate picture of the interest margin for comparative purposes. The Company believes that the presentation allows for comparison of amounts from both taxable and tax-exempt sources and is consistent with industry practices. The Company s fully phased-in Basel 3 estimates and the supplementary leverage ratio are based on the Standardized and Advanced approaches under Basel 3 and supplementary leverage ratio final rules. Under the Basel 3 Advanced approaches, risk-weighted assets are determined primarily for market risk and credit risk, similar to the Standardized approach, but also incorporate operational risk and a credit valuation adjustment component. Market risk capital measurements are consistent with the Standardized approach, except for securitization exposures, where the Supervisory Formula Approach is also permitted. Credit risk exposures are measured using internal ratings-based models to determine the applicable risk weight by estimating the probability of default, loss given default and, in certain instances, exposure at default. The internal analytical models primarily rely on internal historical default and loss experience. The calculations under Basel 3 require management to make estimates, assumptions and interpretations, including the probability of future events based on historical experience. Actual results could differ from those estimates and assumptions. These Basel 3 fully phased-in Advanced approaches estimates assume approval by U.S. banking regulators of our internal models methodology (IMM) for calculating counterparty credit risk regulatory capital for derivatives. As of March 31, 2017, we did not have regulatory approval of the IMM model. Our estimates under the Basel 3 Advanced approaches may be refined over time as a result of further rulemaking or clarification by U.S. banking regulators. The Company allocates capital to its business segments using a methodology that considers the effect of regulatory capital requirements in addition to internal risk-based capital models. The Company's internal risk-based capital models use a risk-adjusted methodology incorporating each segment's credit, market, interest rate, business and operational risk components. Allocated capital is reviewed periodically and refinements are made based on multiple considerations that include, but are not limited to, risk-weighted assets measured under Basel 3 Standardized and Advanced approaches, business segment exposures and risk profile and strategic plans. As a result of this process, in the first quarter of 2017, the Company adjusted the amount of capital being allocated to its business segments. 35

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