Bank of America Corporation (BAC)
Q2 2009 Earnings Call Transcript
July 17, 2009 9:30 a.m. ET

Executives

Kevin Stitt – Director, Investor Relations
Kenneth D. Lewis – President, Chief Executive Officer & Director
Joe L. Price – Chief Financial Officer

Analysts

Meredith Whitney – Meredith Whitney Advisory Group
Adam Hirsch
Matthew O''Connor – Deutsche Bank
Paul Miller – FBR Capital Markets
Michael Mayo – CLSA
Edward Najarian – ISI Group
Betsy Graseck – Morgan Stanley
Jefferson Harralson – Keefe, Bruyette, & Woods
Joe Morford – RBC Capital Markets
Christopher Kotowski – Oppenheimer & Co.
Nancy Bush – NAB Research, LLC

Presentation

Operator

Welcome to today''s teleconference. At this time, all participants are in listen-only mode. You may register to ask a question at any time during today’s call by pressing the star and one on your touchtone phone. We’ll take questions in turn following the presentation. Please note today’s call may be recorded. It''s now my pleasure to turn the program over to Kevin Stitt. Please begin, sir.

Kevin Stitt

Good morning. Before Ken Lewis and Joe Price begin their comments, let me remind you that this presentation does contain some forward-looking statements regarding both our financial condition and financial results and that these statements involve certain risks that may cause actual results in the future to be different from our current expectations.

These factors include among other things, changes in economic conditions, changes in interest rates, competitive pressures within the financial services industry, and legislative or regulatory requirements that may affect our businesses and for additional factors, please see our press release and SEC documents. And with that, let me turn it over to Ken Lewis.

Kenneth D. Lewis

Good morning, and thanks for joining our earnings review. The past several quarters have been quite tumultuous given the economic headwinds. For the first time in a while, we feel less constrained by economic events and more capable of demonstrating progress and momentum.

Driving this attitude were several accomplishments this quarter in areas of balance sheet strength, solid core operating performance and ongoing integration and positioning of our businesses.

During the quarter, we increased our Tier 1 common equity by more than $34 billion and the total results of our capital actions, approximately $40 billion exceeded the capital buffer required by the Supervisory Capital Assessment Program by approximately 17%, all while again, substantially adding to our credit reserves.

In addition, there were several discernable positive trends in many of our businesses including robust activity in mortgage lending, investment banking and capital markets along with strong deposit growth. Much like our first quarter results, we were able to generate earnings in the second quarter from various businesses and investments to offset the significant impact from abnormally high credit costs and the negative accounting impact from the improvement in our credit spreads.

On the credit spread point I won''t go into my opinion here on the counterintuitive accounting of certain liabilities, but suffice to say I''m pleased with both the improvements in the markets and the progress we''ve made that enabled us to benefit from this increased market confidence, and I would rather see the operating improvements and take the accounting loss that comes with our company''s success.

For the second quarter of 2009, Bank of America earned $3.2 billion before preferred dividends, or $0.33 per diluted share after deducting preferred dividends of approximately $800 million. Total revenue on an FTE basis was in excess of $33 billion while pre-tax pre-provision income was approximately $16 billion.

Positive drivers in the quarter include a particularly favorable capital markets environment which produced a 56% increase in investment banking revenue versus the first quarter and clearer trading results that exceeded strong first quarter results. Mortgage banking income remained elevated due to high levels of home loan production.

Benefits were recognized from the partial sale of our investment China Construction Bank and again from the sale of our Merchant processing business to a joint venture with First Data Corporation.