Bank of America Corporation (BAC)
Q4 2009 Earnings Conference Transcript
January 20, 2010 9:30 a.m ET

Executive

Kevin Stitt - Investor Relations
Brian T. Moynihan - President and Chief Executive Officer
Joe L. Price - Chief Financial Officer

Analysts

Glenn Schorr - UBS
Matthew O''Connor - Deutsche Bank
Edward Najarian - ISI Group
Betsy Graseck - Morgan Stanley
Paul Miller - FBR Capital Markets
Jefferson Harralson - Keefe, Bruyette & Woods
Michael Mayo - CLSA
John McDonald - Sanford Bernstein
Moshe Orenbuch - Credit Suisse

Presentation

Operator

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

Kevin Stitt

Good morning. Before Brian Moynihan 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. For additional factors, please see our press release and SEC documents.

And with that, let me turn it over to Brian.

Brian T. Moynihan

Good morning, and thank you for joining us on this busy day on our earnings call. Over the past several years I''ve met or spoken with many of you regarding the various businesses that I''ve run within Bank of America and in my new role as CO, I would tell you that I''m honored to serve this company, its customers, associates and importantly, its shareholders. I firmly believe that we have built one of the best franchises in the industry, if not the best, with the ability to serve customers and clients of all types on a global basis. My team and I plan on leveraging our leading market positions with capabilities that we believe match or exceed our competitors. Our goal is to refocus our efforts here at Bank of America, refocus our efforts and attention on those core capabilities that will make Bank of America a winner in the years ahead, drawing on our long tradition of operational excellence and strong execution.

I know there''s several banks and several companies reporting this morning, so I know that you''re anxious to get directly to the numbers. So for the first -- fourth quarter of 2009, Bank of America had a net loss of $194 million before the $5 billion impact of preferred dividends and repayment of TARP, which results in a loss of about $0.60 per diluted share. Included in the $5 billion was $4.6 billion related to TARP-preferred stock, including the $4 billion associated with repurchasing TARP-preferred, as the book value of our preferred was less than the amount paid.

For the full year 2009, before preferred dividends, net income was $6.3 billion or a loss of $0.29 per diluted share after deducting preferred dividends and TARP repayment. TARP dividends and the TARP repayment for all of 2009 represented $0.94 per diluted share.

The financial crisis has taken its toll on our company in many ways during 2009. With respect to our investment by the government during 2009, we repaid the $45 billion of preferred stock, we paid dividends of $2.6 billion, we paid termination fees on a proposed asset wrap of $425 million, we paid about $3 billion in various insurance fees, including our normal FDIC expense and we prepaid billions in FDIC premiums.

In addition, we issued the government warrants to buy 122 million and 150 million shares of our company at $30.79 and $13.30 respectively. In summary, these are heavy costs and representing just some of the challenge that our associates had to contend with in 2009 as they competed in the market, but with these behind us, we clearly look forward to 2010.

Moving to the revenue, total revenue for the fourth quarter of 2009 on an FTE basis was in excess of $25 billion, while pretax pre-provision income was approximately $9 billion, even after the impact of some unusual items that Joe will detail a little bit later. There were several positive trends in the quarter.

First, credit quality appears to be stabilizing, if not improving. Net credit losses in dollar terms decreased $1.6 billion from the third quarter of 2009, supporting our comments in October that overall credit costs were peaking.

Second, the capital markets environment reflect a strong investment banking revenue, up substantially from our third quarter, which was already a strong quarter in the business and we retained our second place position in that business.