Bank of America Positioned For Success Ken Lewis Chairman, President and Chief Executive Officer Citigroup Financial Services Conference February 1, 2006
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 forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results or earnings to differ materially from such forwardlooking 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) litigation liabilities, including costs, expenses, settlements and judgments, may adversely affect the company or its businesses; and 10) 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
Differentiating Characteristics Franchise. Operating Excellence. Track Record.. 3
Differentiating Characteristics Franchise. Operating Excellence. Track Record.. 4
Coast to Coast Retail Footprint Bank of America stores Bank In Bank of America of America Franchise Markets 5 93% 76% of U.S. Hispanic population 86% 38 million of Asians BAC consumer households 77% 3.3 million of African-Americans BAC small business customers
Focused Where Growth Opportunities Are Greatest Seattle Portland San Francisco Chicago St. Louis Boston New York Philadelphia Baltimore/D.C. Los Angeles San Diego Las Vegas Dallas/ Ft. Worth Atlanta Charlotte Phoenix Orlando Bank of America Franchise 16 of 20 fastest growing states 20%+ retail deposit market share in top 30 markets Houston Tampa/ St. Petersburg Miami/ Ft. Lauderdale 6
Focused Where Growth Opportunities Are Greatest Seattle Portland San Francisco Chicago St. Louis Boston New York Philadelphia Baltimore/D.C. Los Angeles San Diego Las Vegas Dallas/ Ft. Worth Atlanta Charlotte Phoenix Orlando Bank of America Franchise 93% of Hispanic 86% of Asians 77% of African-Americans Houston Tampa/ St. Petersburg Miami/ Ft. Lauderdale 7
Unparalleled Distribution and Convenience Stores Online Banking ATMs Telephone 5,873 stores 29 states + D.C. 600 million customer visits annually 1 billion face-toface teller transactions Ranked #1 for customer experience (Vividence) #1 small business website (Gomez) 52% bill pay market share 16,785 ATMs 70%+ of customer households are active users 1.1 billion transactions 155 million deposit transactions 700 million calls 85% delight with phone representatives 8
Competitive Advantages in Wholesale Banking Leading Market Position, Industry Expertise and Local Delivery Relationships with 200,000 clients, including 97% of U.S. Fortune 500 companies Leading commercial bank in the U.S., serving one in four midsize companies Leading Positions and Strong Momentum in Investment banking: #1 U.S. High Yield Corporate Debt Underwriting #1 lead arranger for U.S. loan syndications (by # of deals) #1 U.S. Commercial Mortgage-backed Securities Underwriting #1 U.S. Private Placements Fixed Income Quality of Service (U.S.) ranked #5 in 2005 vs. #8 in 2004 (#13 in 2003) Listed trading market share of 6.7%; ranking 5 th 2Q 2005 vs. 7 th 2Q 2004 NASDAQ market share of 6.1%; ranking 4 th 2Q 2005 vs. 12 th 2Q 2004 30,000 associates worldwide 5,000 sales professionals National Market President network providing local market leadership and accountability 9
Growing Global Capabilities Global Capabilities... Operations in 31 countries Relationships with 79% of Global Fortune 500 companies 10
A Diverse Business Mix Based on 2005 Earnings (Adding MBNA acquired 1/01/06) Global Wealth & Investment Management 14% Other 7% Global Consumer & Small Business 42% BAC Card services 9% Global Corporate & Investment Banking 10% MBNA 10% Global Business & Financial Services 27% GCSB (excl Card services) 23% 11
Unmatched Scale and Scope #1 US deposit market share #1 debit card market share #1 home equity lender #1 small business lender #1 consumer credit card lender #6 retail mortgage originator Top 10 private bank Top 10 wealth manager #1 middle market lender #1 bank-owned asset-based lender #1 treasury services provider Top foreign exchange dealer #2 in loan syndications Top 5 US capital markets debt capabilities Top 10 equity and M & A platform 12
Opportunity to Create a Truly Integrated Bank 13 Capital & Liquidity Users Corporations Financial Institutions Investors Consumer Borrowers Small Businesses Commercial Borrowers Auto Purchasers Homebuyers REACH 97% U.S. Fortune 500 200,000+ Commercial & Large Corporate Clients 3 MM Small Business Clients #1 SBA Lender 38 MM Households Nearly 6,000 Banking Centers Bank of America Advise Originate Structure Distribute Make Markets Trade Service Our Competitive Advantages Capital & Liquidity Providers Bank of America Pension Funds Insurance companies Hedge Funds Mutual Funds Private Equity Funds STRENGTHS Large Capital Base Large Liquidity Base High Credit Rating Low Cost of Funds
Differentiating Characteristics Franchise. Operating Excellence. Track Record.. 14
Execution is Driving Organic Growth Innovation Use Scale to Be A Low Cost Provider Organic Growth Build a Strong Brand Risk Management As A Competitive Advantage Improve the Customer Experience 15
Our Brand Has Come A Long Way Bank of America Unaided Awareness (2000) 23% Bank of America Unaided Awareness (2005) 41% Wells Fargo 23% Citibank 18% Wachovia 16% Chase 11% Fortune Most Admired Corporations (Megabanks) 2005 1 st 2004 2 nd 2003 3 rd 2002 6 th Financial Times Worlds Most Respected Companies (Financial Companies) 2004 5 th 2001 7 th 2000 12 th 16 Source: Enterprise Analytics, Fortune, FT
Driving Results Through Process Improvement Customer 53.2% all-time high (legacy BAC) 47.3% all-time high (legacy FBF) Attracting attention across the industry Associate 4,700 Green Belts internally certified 290 Black Belts; 71 Master Black Belts Over 70,000 associates introduced to quality principles Six Sigma experts gaining banking business acumen Quality overview added to new-hire training Business leaders gaining Six Sigma skills Shareholder Savings reinvested in businesses Several processes at Six Sigma quality 17
Strong Credit Culture 2001-2005: Built Core Competency Comprehensive risk coverage Stronger risk disciplines Enhanced tools and processes Increased executive ownership and partnership 2006 & Beyond: To Competitive Advantage Increased predictive capabilities Greater external focus to influence our destiny Escalation & response Deeper organizational understanding and ownership Through Structure, Culture and Accountability, every associate is a manager of risk/reward 18
A History of Strong Cost Control 61% Efficiency Ratio 55% 54% 55% 53% 52% 53% 49% 1998 1999 2000 2001 2002 2003 2004 2005 19 Excludes merger & restructuring charges
Voice of the Customer Drives Product Innovation A Customer WOW Today Becomes the Norm Tomorrow. Rewards & Product Innovation Record Keeping Mini Card Cobranded Automotive Cards Safety & Security Online Banking Convenience Photo Security Intraday Balance And Activity Cobranded Airline Cards Broad Network Affiliations Debit Card Introduction History of Delivering Value to Customers 20
Keep the Change TM Rolled out in October 2005 Total enrollments already over 1 million Average of more than 90,000 new enrollments weekly More than 207,500 new checking accounts and More than 331,600 new savings accounts. Every time you buy something with a Bank of America Visa debit card, we'll round up your purchase to the nearest dollar amount and transfer the difference from your checking to your savings account free of charge 21
Online Banking More than Just Checking Balances Bank of America remains industry leader with more than 14 million customers More than 7 million billpay customers (52% market share) Online Channel represents 12% of total product sales vs. 7% in 2004 Innovation and enhanced protection such as SiteKey provides an extra level of authentication to prevent fraud 22
SafeSend Key Benefits Wherever you are: Send money wherever you are and whenever (24/7) Real fast: The money gets there in less than 6 minutes In their hands: Recipients have direct access to their money 24/7 at one of 26,000 ATMs Make purchases: Recipients can make purchases at more than 120,000 establishments that accept Visa Electron (no fee) No ATM fees: There are no ATM fees at Santander Serfin ATMs No monthly or annual fees The first transfer is free Guaranteed by Bank of America 23
Differentiating Characteristics Franchise. Operating Excellence. Track Record.. 24
Consumer Sales Activity Product Sales (in millions) 2004 2005 Change % Checking 5.8 6.5 11% Savings 7.4 7.8 6% Credit card 6.2 5.6 (10%) Debit card 4.1 4.8 18% Online banking 3.8 4.4 17% Mortgage fundings.5.4 (13%) Home equity fundings.7.7 5% Protection products 1.1 2.0 80% Total 29.6 32.2 9% 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 Net New Checking Accounts 2,300,000 2,063,000 1,253,000 528,000 2002 2003 2004 2005 Consumer Card Account Growth Net New Savings Accounts 7,500,000 6,237,000 5,616,000 2,500,000 2,000,000 2,593,000 1,850,000 5,000,000 4,277,000 1,500,000 2,500,000 2,665,000 1,000,000 500,000 640,000 0 0 2002 2003 2004 2005-500,000 (265,000) 2002 2003 2004 2005 25
Success With Affluent Customers Premier Banking Growing Relationships and Investments Premier Banking Relationships 575,000 785,452 Premier Relationship Households with Bank of America Investment Services Relationships 220,905 37% 148,736 49% 2004 2005 2004 2005 26
Columbia Management: Driving AUM and Fund Performance Assets Under Management ($ in billions) $482 $456 $452 82% of the assets in Columbia Management's equity, fixed income and money market funds are in the 35th percentile or better among their peer groups 1 2003 2004 2005 Asset Management Fees ($ in millions) 79% of active equity funds surpassed their benchmark, based on 1-year performance as of 12/31/05, up from 25% in 2004 and 13% in 2003 $2,139 $2,377 $2,529 2003 2004 2005 1) as measured by Lipper, based on funds with three-year annualized total returns as of 12/31/05. Lipper Inc. is an independent mutual fund performance monitor. Lipper ranks mutual funds total performance (assuming reinvestment of distributions) against other funds having similar investment objectives and strategies. Lipper makes no adjustment for the effect of sales loads. 27
Effective Use of Capital Santander Serfin Capital Investment Primary Advantage Enhance multicultural strategy National Processing Gain scale in merchant services business China Construction Bank Tap into tremendous growth of Chinese economy Fleet Complete national franchise and entry into NE wealth markets MBNA Become premier payments provider and leverage products and distribution 28
Integration Expertise Recap of successful key Fleet transition events: Met or exceeded financial commitments Converted 6 million retail accounts to Model Bank platform 21 million customer records 2,200 associates on conversion team 900,000 programming hours, 750,000 training hours Opened over 380,000 net new checking accounts in Northeast More than 2.5 million unit sales of all products so far in 2005 Installed 20,866 signs in 2,191 locations Converted 10.6 million cardholder accounts Converted 902,000 Quick & Reilly accounts Placed 455 Premier bankers in Northeast markets Welcomed 187,000 Premier customers Opened 5 Premier banking and investment centers Installed Loan Solutions capabilities in 1,500 banking centers Achieved total cost savings of $1.85 billion in 2005 During this period of transition we continued customer growth in both legacy franchises 29
MBNA Brings Together Superior Distribution With Products MBNA Brings Best-in-class credit quality International presence Leading market positions in Canada, UK, Ireland and Spain Affinity Relationships More than 5,000 affinity partners worldwide Experienced management team Proven marketing skills Service focus Unparalleled Distribution and Convenience Stores Online Banking ATMs Telephone 30
Earnings Highlights 2005 Record earnings of $16.9 billion grew 19% over 2004. Excluding $275 million merger charges earnings grew 18%. On a proforma basis, including Fleet 1Q04 earnings grew 13%, 12% excluding merger charges. 2005 highlighted by strong consumer growth while completing Fleet transition and preparation for MBNA integration 2005 also included return of strength in commercial lending. 2005 earnings growth despite headwinds of $1.2 billion higher provision costs and $1.0 billion fewer securities gains Revenue growth on a proforma basis of 9% led by noninterest income growth while net interest income grew 2%. 19% noninterest income growth over proforma 2004 led by mortgage and card income, equity gains and trading profits. Expenses were down 1% from proforma 2004 driving the efficiency ratio below the company s 50% target. 31
2006 Outlook Bank of America standalone Expect GDP growth of 3 3.5% Core net interest income growth of 3-4% Total revenue growth expected at low end of 6-9% long-term target range Minimal securities gains planned in 2006 vs. $1.1 bb in 2005 Consumer credit stable Commercial credit moving toward normalcy Positive operating leverage MBNA MBNA impact expected to be neutral in 2006 32
Consistent Attractive Earnings Growth Diluted EPS 11% Compound Growth $3.57 $3.80 $4.21 $2.55 $2.67 $2.95 2000 2001 2002 2003 2004 2005 33 2000 - $2.26 reported EPS has been adjusted to exclude $.10 impact of restructuring charges as well as $.19 goodwill amortization expense eliminated in 2002 for comparability to other periods. 2001 - $2.09 reported EPS has been adjusted to exclude $.39 impact of business exit costs as well as $.19 goodwill amortization expense eliminated in 2002 for comparability to other periods. 2004 - $3.69 reported EPS has been adjusted $. 11 to exclude charges for merger and restructuring costs. 2005 - Reported EPS $4.15 excluding $.06 merger and restructuring charges
28 Consecutive Years of Dividend Increases Dividend Yield 4.5% 13% annualized growth $1.90 $0.07 1977 2005 34 Yield based on annualized dividend and price as of 1/25/06
Aggressive Capital Management $ in millions Returned $79 billion in capital since 1998 Since 1998, net share repurchases plus dividends have averaged 80% of net income. $7,683 $5,765 $78,828 $34,964 Repurchases Dividends $43,864 1998 1999 2000 2001 2002 2003 2004 2005 Cumulative EOP Common Shares 3,448 3,354 3,228 3,118 3,002 2,882 4,047 4,000 Tier 1 7.06% Tier 1 8.21% 35
Steady Strong Shareholder Returns Bank of America S & P 500 Index Bank Index Dow 19.5% 18.9% 11.6% 14.3% 14.4% 14.1% 2.5% 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 10 Yr 15 Yr TSR is the annulaized total shareholder return including dividends 36
Energized Focus on Customer in 2000 was Watershed Event CAGR 2000-2005 Revenue Per Share 7 % Diluted EPS 11 % Dividends per share 13 % Total Share return 20 % 37 Total share return includes dividends as of 12/31/05
Growing America s Premier Financial Services Company Leveraging scale of national franchise Committed to operational excellence Innovating processes and products Producing strong earnings and capital returns 38
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Additional Disclosures Additional disclosures to consider regarding slide 27 of this presentation Please consider the investment objectives, risks, charges and expenses of Columbia funds carefully before investing. Contact your financial advisor for a prospectus which contains this and other important information about the fund. Read it carefully before you invest. An investment in money market mutual funds is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market mutual funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in money market mutual funds. 40