President, Consumer & Small Business Banking

Transcription

1 Consumer & Small Business Banking Joe Price President, Consumer & Small Business Banking

2 Key Takeaways Our Opportunity Deepen and acquire relationships through customer segment strategies that meet their financial needs How we will grow Leverage best consumer franchise Transform business model to customer segment strategies Retail (Mass Market) priorities: A foundation of quality service Relationship deepening through segment-based solutions that deliver appropriate value exchange Aligning cost-to-serve with segment economics Preferred (Mass Affluent and Small Business) priorities: A platform of differentiated sales and service Delivering advice and guidance through a broad range of experts and product solutions Critical enablers: Analytics that support segment-based strategies Repositioning of the card business to deepen relationships while effectively managing risk and volatility Continued investment in infrastructure to support customer strategies 2

3 Leading U.S. Consumer Banking Presence Leading Market Position #1 World s Most Valuable Banking Brand #1 U.S. deposit #1 Debit cards #1 Affinity cards #1 Europe credit card #1 Primary small business provider #2 First mortgage originator #2 Home equity #3 U.S. credit card #5 Online brokerage Broad Customer Coverage 80% of U.S. population 75% of small businesses 90% of Hispanic households 88% of Asians 75% of African-Americans 20% BAC deposit share in top 25 fastest growing large MSAs Powerful Distribution 5,800+ banking centers 750 Home Loan retail offices 18,000 ATMs; 80% image enabled #1 Online banking capabilities #1 Mobile bank 1,600+ Domestic Affinity Groups 3

4 Leading Brand Position World s Most Valuable Banking Brand 1 Notes: 1. BrandFinance Global Banking 500, February Advertising and Brand Tracker, December

5 Unmatched Consumer Capabilities 5,800+ Banking Centers.8 B Teller Transactions 6.5+ MM Mobile Users.4 B Mobile Sessions 18,000 Total ATMs 80% Deposit Imaging ATM s 1.2 B Transactions Annually Affinity Groups 1.3 B Transactions Over 12,000 followers >100 tweets/day and growing 5,300 Mortgage Loan Officers 29 MM Active Online Users 2.6 B Online Sessions $500B in client balances.7 B Call Center contacts $90B in assets; 1.4 MM clients 15,500 Financial Advisors 8 B Merchant Transactions 5 Numbers for Transactions and Online Sessions are annualized as of December 31, 2010.

6 Delivering the Franchise to our Customers 2010 Consumer referrals to Merrill Edge: 120,000 Investments 2010 referrals from GWIM: 345,000 Mortgage 2010 originations generated from Consumer referrals: $18B Consumer & Small Business Banking Commercial Banking 2010 annualized Consumer referrals to Global Commercial Banking: 85, Dealer Financial Services applications from Consumer referrals: 36,000 6

7 Consumer & Small Business Banking 2010 Results 2010 Financial Summary 2010 CSBB Revenue Mix-Business Lines CSBB Revenue $38.8B, 35% of BAC 2010 Balance Sheet Highlights Notes: 1 The 2010 period is presented in accordance with new consolidation guidance. 2 Excludes Q3-10 goodwill impairment of $10.4B. 3 Fully taxable-equivalent basis. 4 Period-end balances as of December 31, Additional financial information is provided in the appendix on page 39. 7

8 Changing Revenue Profile Pre-crisis revenues impacted by: Significant economic disruption Extended low interest rate environment Mandated regulatory reform Exiting non-core lending businesses Changes to a customer-centriccentric business model Going forward revenue impacts: Exit from non-core lending businesses Rising rate environment Full-year impact of overdraft policy changes Durbin and other mitigation Notes: results exclude goodwill impairment charge of $10.4B results adjusted for continuing impact of regulatory reform (Durbin $2.0B and the incremental impact of overdraft policy changes $1.7B) Prior periods ( ) presented on a managed basis for comparison purposes. 8

9 Total U.S. Household Financial Assets and Liabilities Demographics Financial Distribution Industry Profit Pool 84MM U.S. Households Average Age 46 Average Income - $54K $7.6T Total U.S. Financiali Assets & Liabilities 7% of U.S. Financial Assets 53% of U.S. Liabilities $10B $39B 16MM U.S. Households Average Age 54 Average Income - $99K $4.6T Total U.S. Financial Assets & Liabilities 12% of U.S. Financial Assets 19% of U.S. Liabilities $14B $28B 33MM U.S. Small Businesses Average Annual Sales - $178K $1.3T Total U.S. Financial Assets & Liabilities 3% of U.S. Financial Assets 4% of U.S. Liabilities $4B $22B Note: Profit Pool not adjusted for expected impact of Durbin Amendment. Recovery of profit pools from 10 to 13 driven by significant reduction on cash-basis credit losses. 9

10 Our Customers Note: Totals will not equal 100% due to exclusion of Single-Service Affinity, International, etc. 10

11 Significant Market Opportunities With Our Customer Base Opportunities Deposits Investment First Mortgage Card 11

12 12 Consumer & Small Business Banking Organization Overview

13 Transforming the Consumer Banking Model Unit sales Pre-2010 New account generation One-size-fits-all service model Product-driven silos and analytics Future State Deepen existing customer relationships Quality/primary customer acquisition Differentiated-service model by segment Relationship-based analytics Breadth of the franchise leveraged to meet customer needs Complex pricing practices: - Back-end fees (late fees, overdraft) - Card re-pricing High volume sales drove account churn and requisite costs Risk practices led to higher revenue and higher h volatility Transparent pricing All customers pay fair price for value received Cost structure matched with customer preference and revenue Lower risk appetite results in less volatility 13

14 Consumer Value Proposition What Customers Want From Their Financial Lives What Customers Want Their Bank to Deliver To rebuild their damaged sense of financial well being Easy-to-use, clear and straightforward banking Continued drive toward clarity and transparency from their financial service providers Friendly and knowledgeable employees in their community To avoid unnecessary risk Reliable products and services To develop sense of empowerment or self sufficiency Security Increased responsiveness from their financial partners and brands Accessibility to financial products and services so they feel in control of their financial i decisions. i 14

15 Consumer Key Focus Areas Deliver a foundational high-quality, consistent, no surprises customer experience: To deepen relationships with existing customers and acquire new quality relationships Through segment-based solutions that meet customer needs and provide transparent value exchange By building proficiency in needs-based customer engagement While right-sizing cost-to-serve with segment economics 15

16 Transforming Customer Experience Customer Service Launched GUEST program to customer-facing employees, establishing consistent customer treatment standards Launched Commit problem management tool in Banking Centers. Expanding Commit capabilities and extending to Contact Centers in Customer Acquisition and Deepening Deployed Building Relationships with Customers training program to Personal Bankers Transforming our approach from unit sales to needs assessment and relationship deepening Customer Delight with Professional Treatment Primary Relationships Customers with core deposit and transaction products Problem Handling gsatisfaction with Commit 16

17 Responding to Our Customers Pricing/Transparency Fee-related Complaints (Deposits and Card) Bringing clarity, choice and control to our customers: Checking Account Closures Eliminated overdrafts at point of sale for debit cards Increased customer choices for overdraft protection Provide emergency cash capabilities through industry leading ATM network Eliminated credit card overlimit fees and low-balance late fees Introduced d Clarity Commitment t for credit card, mortgages and small business loans 17

18 Deepening Customer Relationships Through Customer Solutions Premium Platinum Privileges TM Essentials Customer needs: Simplicity Learning the basics Help avoiding mistakes Key Benefits: Checking, Debit Card, Online/Mobile/Text Banking, Keep the Change, Alerts, Overdraft Protection Access, Total Security Protection Ways to Pay: Monthly Fee ebanking Customer needs: Easy to use Available on their terms Protection from mistakes Key Benefits: Essentials plus Online/Mobile Bill Pay Ways to Pay: Monthly Fee -or- Self Service Enhanced Customer needs: Help building a budget Help stretching every dollar Help making goals achievable Key Benefits: ebanking plus Affinity Banking, Extra Checking, Up to 2 Savings/ MMS Accounts Ways to Pay: Monthly Fee -or- Minimum Incoming Deposits -or- Minimum Balance -or- Active Credit Card Customer needs: Relationship recognition Help getting started with investing Key Benefits: Enhanced plus Up to 4 Checking (w/interest), Up to 4 Savings/MMS accounts, No Transfer Fee, Overdraft Protection, Some Value Added Deposits Included Ways to Pay: Monthly Fee -or- Minimum Combined deposit and investment balances -or- BofA Mortgage g Customer needs: Help building a personal financial strategy Relationship rewards Key Benefits: Relationship Pricing, Enhanced Service Levels, Home Loans Benefits, Mass Affluent Credit Card, Merrill Edge/Investments Recognition Ways to Pay: $ Minimum Combined deposit and investment balances -and- Transaction Account Every Bank of America relationship includes: 5,800+ Banking centers 18,000 ATMs Customer Service via phone or online $0 Liability on credit or debit purchases Next-day credit in cases of fraud Photo Security on credit and debit card Transaction Focus Wealth Focus 18

19 Customer Solutions Card Product Continuum Clear, Straightforward, Easy to Use: fundamental to all of our cards Offerings are integrated with Customer Solutions Range of cards delivers core segment needs Access, Cash, Travel and Rewards Basic Cash Rewards Private Wealth Management Partially/Fully Secured Power Rewards /Affinity Platinum Privileges Accolades Retail Preferred Affluent High Net Worth Simple and straight-forward banking Access to credit at fair, clear prices Simple, straight-forward banking + extras Flexible rewards for responsible use Higher service levels across my banking relationship Flexible rewards and redemption options, Traveler Privileges Exclusive, personalized service and experiences Rewards and access beyond what money can buy 19

20 Leveraging Affinity Partnership to Build Customer Relationships Affinity customers represent one-third of card assets and one-half of Card 2010 NIBT Affinity Value Continue to leverage Affinity partnerships to deepen existing relationships and acquire new customers 1,600+ U.S. Affinity Groups with access to high-quality members 150 partners that offer both credit and deposit products Differentiated behavior and lower credit risk Access to Affinity partner channels to deepen relationships Ability to deepen relationships with existing BAC customers who are affiliated with Affinity partners Affinity customers are more engaged with Checking products NIBT/Household 20

21 As Part of our Integrated Customer Strategy, Card is Focused on Deepening Relationships and Managing Risk and Volatility Pre-2010 Future State Business Model Monoline business model Higher revenue and earnings volatility with reliance on repricing, penalty and cash fees New account acquisition unit focus Affinity strategy focused on quantity of partners Unsecured consumer lending (debt consolidation $29B at peak) Fully integrated into customer-centric consumer bank Measured growth, consistent profitability and lower volatility New account acquisition quality based Affinity model focused on key partner relationships Exiting debt consolidation business ($12B YE 2010) Credit Risk Management Overweight in < 700 FICO Higher than industry line assignments Limited investment in data and analytics Collection efforts back-end focused Inconsistent monitoring, control and governance Balanced risk distribution across low and high FICO ranges Active management of open to buy and risk-based line assignments Significant investment in underwriting platform, data and tools Collection efforts more balanced across front and back end Value Proposition Limited consideration of relationship and customer affluence Primary offer was balance transfer Unclear pricing/value proposition One-size-fits-all service Robust Risk Control Framework to manage policy and credit strategies, volatility and geographic concentration Differentiated value prop for Retail/Preferred and relationship customers Greater retail focus and customer engagement Transparent value exchange with relationship benefits Service differentiation based on full banking relationship 21

22 Credit and Portfolio Trends U.S. Card Balances Trend Open to Buy Trend Average Line by FICO Net Credit Loss and 30+ Day Retail/Cash Volume Mix % of Accounts with DDA Relationship Delinquency Rate Notes: Prior periods presented on a managed basis for comparison purposes. 22

23 Customers Perform Service Activities Across All Channels Customers use all channels for service transactions Service activities are shifting to electronic channels (mobile, online, ATM, automated phone) as customers increase adoption and utilization of new capabilities 82% of all 2010 service transactions occurred within self-service channels Customers prefer associate engagement through Phone and Banking Centers to address problems and engage in deepening conversations Effective problem handling is key to providing a quality service experience and foundation to deepening efforts 23

24 Banking Centers are Critical to Relationship Deepening Customers use multiple channels to purchase new products and services Customers use online for researching and shopping, but will engage phone and banking center employees to discuss options In most cases, customers will finalize their purchases within banking centers; increasingly online Aligning customer service and sales activities across channels to deliver an integrated experience based on how customers want to do business with us 24

25 Banking Center Profitability and Optimization Principal target for consolidation or closure Only 10% of stores have 36% or higher concentration of low-/unprofitable customers Household profitability does not vary widely across geography There are profitable customers in every banking center Store optimization will focus on: - Smaller floor plan - Activities focused on relationship deepening - More automated service options - More financial specialists available (as local market dictates) Banking centers continue to be an important platform for franchise clients: - Wealth Management (personal banking needs, etc.) - Commercial Banking (payroll services, treasury services, Bank at Work, etc.) - Corporate Banking (payroll services, treasury services, Bank at Work, etc.) 25

26 Aligning Cost Structure to Segment Economics Service Interactions by Channel CSBB FTE Operating Expenses as a % of Deposit Balances 1 Additional cost actions through banking center rationalization, non-customer facing infrastructure reductions, etc. Notes: 1 For comparability purposes, expenses exclude Q litigation expenses of $0.5B. 26

27 Preferred Value Proposition: Rewarding Customers with Differentiated Products and Services What Customers Want From Their Financial Lives What Customers Want Their Bank to Deliver Convenience and ability to both bank and invest wherever and however they choose Integrated view and multipoint access to all accounts Financial thought leadership and advice Access to local experts and tools and guidance to maximize their financial goals Full suite of financial solutions and value for their relationship Customized products and rewards programs that recognize full relationship Differentiated service experience that t recognizes who they are and rewards the depth of their relationship Priority and individualized customer service experience through dedicated specialists so they feel in control of their financial i decisions. i 27

28 Preferred Key Focus Areas Develop a scalable platform to provide advice and guidance across a full range of solutions to Mass Affluent clients. Platinum Privileges TM, our relationship value bundle Merrill Edge integrated investment platform Dedicated Financial Solutions Advisors and specialty stores Deepen and grow Small Business relationships. Dedicated local small business experts and expanded phone-based outreach capabilities Best in franchise solutions delivered d through h Wealth Management and Commercial Bank Consistently deliver a differentiated priority level of service to our valued clients. 28

29 Grow, Deepen and Retain Clients Through Platinum Privileges Strong Sales Results Privileges Card Sales Investment Referrals Fully integrated banking, investments and service offerings Highly engaged and knowledgeable employees Provides customers a tangible reason to bring more of their relationship to us Dedicated Platinum Service Center provides enhanced service for qualifying Preferred customers Strong Service Results 29

30 Integrated Banking and Investing Experience Through Merrill Edge Accelerating Growth of Edge Platform Total Brokerage Assets Total Brokerage Accounts #5 online brokerage with ~$90B in assets (brokerage and banking) and ~1.4MM clients Unrivaled capabilities that set us apart in the industry: Full range of financial solutions Convenience and flexibility Enterprise Referrals To Merrill Edge Professional advice and guidance with self-directed online capabilities Merrill Lynch intellectual capital and research Relationship pricing via Platinum Privileges 30

31 Specialized Advice and Guidance to Preferred Customers Financial Solutions Advisor 1,065 Registered Advisors provide personalized advice and guidance Available in stores, phones and online Referrals to GWIM for high-net- worth clients Small Business Banker 1,100 Small Business Bankers Bankers are external hires with years of industry experience Referrals to GWIM and to Commercial as customer needs dictate Mortgage Loan Specialist 1,740 Mortgage Loan Officers Available in stores, phones and online Referrals for banking and investments as customer needs dictates Financial Solutions Advisor Growth Small Business Banker Growth Branch-Aligned Mortgage Specialists Growth 31

32 At the Leading Edge Video Teller Machine (VTM) Mobile Payments Enhanced Mobile Banking Targeted Retail Coupon Program 32

33 33 Investing in Infrastructure for Our Customers

34 Long Term View Key Drivers Economic Growth Customer Behavior Interest Rates Retail Revenue growth just above GDP Scale costs to match revenue Preferred Revenue at GDP + 2 3% Investments to support growth and customer segmentation opportunity Regulatory Environment Employment Lower Cost to Serve Return on Tangible Equity 25% - 30% Delivering the Franchise 34

35 Key Takeaways Our Opportunity Deepen and acquire relationships through customer segment strategies that meet their financial needs How we will grow Leverage best consumer franchise Transform business model to customer segment strategies Retail (Mass Market) priorities: A foundation of quality service Relationship deepening through segment-based solutions that deliver appropriate value exchange Aligning cost-to-serve with segment economics Preferred (Mass Affluent and Small Business) priorities: A platform of differentiated sales and service Delivering advice and guidance through a broad range of experts and product solutions Critical enablers: Analytics that support segment-based strategies Repositioning of the card business to deepen relationships while effectively managing risk and volatility Continued investment in infrastructure to support customer strategies 35

36 Appendix 2011 Investor Conference

37 Changes to Our Business Model and Regulatory Reform Our business model is built on listening to our customers and giving them choices in how they bank with us, as well as clarity in our pricing and practices. In that spirit, we are supportive of financial reform and have gone beyond the law in many areas: Eliminating point-of-sale overdrafts, over-limit and low-balance fees for credit cards Issuing Clarity Commitments for all of our consumer lending products Still, the effect of regulatory reforms will have significant financial impact. Limits pricing changes on existing accounts Modifies account management and fee practices around payment allocation and minimum payments Financial impact reflected in Q4 results Disallowed overdraft fees on one-time debit transactions without opt-in No industry-wide standards for caps or posting order Financial impact reflected in Q4 results Significant changes in the pricing of products and services Biggest impact seen in lower Mass Market etcustomers s Financial impact begins Q Note: Impact of CARD Act is shown net of mitigation. 37

38 Durbin Implications The Durbin rules, as currently written, will substantially reduce interchange revenue, increase the cost of using debit cards, limit payment choices and impact fraud protections for consumers. If the Durbin rules are implemented, as drafted: Large retail chains will disproportionately benefit Banking industry profitability will be significantly impacted by $12-14B, forcing banks to recover lost revenue in other ways, including: - Increased consumer costs - Reduced consumer debit card benefits - Reduced merchant debit acceptance benefits Many consumers will face new restrictions on banking services and may choose higher-cost alternative financial solutions Alternative payment solutions under consideration: Restructure debit product and other payment products benefits and features that align with post-durbin economics (evaluate zero liability fraud protection and merchant guaranteed payments, limit debit transactions, reduce savings/reward programs, etc.) Fair value exchange for the services we provide (pricing, etc.) Provide payment alternatives (prepaid card, charge card, etc.) 38

39 39 Consumer & Small Business Banking 2010 Results

40 Bank of America 2011 Investor Conference