Bank of America Corporation (BAC)
Q4 2008 Earnings Call Transcript
January 16, 2008 7:00 a.m. ET

Executives

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

Analysts

Matthew D. O’Connor - UBS
Nancy Bush - NAB Research, LLC
Michael L. Mayo - Deutsche Bank North America

Presentation

Operator

Welcome to today’s quarterly earnings announcement 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 “*1” on your touchtone phone. We’ll take questions in turn following the presentation. Please note this call may be recorded. It is now my pleasure to turn the program over to Kevin Stitt. Please begin Sir.

Kevin Stitt

Good morning. This is Kevin Stitt, Bank of America Investor Relations. 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. For additional factors please see our press release and SEC documents.

With that, let me turn it over to Ken Lewis.

Kenneth D. Lewis

Good morning. I don’t need to tell you what extraordinary times we are experiencing. The economy and subsequently the credit markets literally hit a wall starting in September and culminating late in December with the greatest impact of my almost 40 years in banking. As you have seen in earnings reports so far, nobody operating in the capital markets or lending to the consumer has been immune.

While 2008 was a very disappointing year, we still made a $4 billion profit even as we experienced more than $10 billion in capital market losses and $27 billion in credit costs. We suffered as the economy slowed materially as we are a long credit risk and our core activities of commercial and consumer lending as well as in our capital markets businesses. So the question on my mind and your minds is what are we doing about it?

We managed our risk position down during 2008, reducing wherever we could the relevant positions in every area. Due to illiquidity we could not get that risk down far enough. We continued to re-work our credit risk appetite and consumer. We have instituted LTV, debt-to-income ratios and other restrictions which are more prudent in light of the times we are facing. This approach raises concerns with legislators and other constituencies that we may be pulling back on credit when consumers, small businesses and commercial customers need it most.

There is no doubt our overall appetite on credit risk is greatly reduced. Given the right costs and provisions here and throughout the industry how could it be otherwise? Nonetheless, as you will see in a few minutes, even while we seek to reduce risk we continue to offer loans and credit to individuals and small businesses and corporate customers. We originated $115 billion in new credit during the fourth quarter alone.

In our core company we have revisited and revised our unsecured underwriting terms and our card terms, focusing on the programs which will produce better charge off results. In our commercial areas we continue to aggressively work on credit book to reduce our exposures. During the last two years we have purchased sizeable credit exposures in our acquisitions of Countrywide and LaSalle which have added to our credit positions but we continue to restructure these operations and work to reduce risk levels.

We have been working on the integration plans for Merrill since September and are now carrying through those plans. So where does that leave us?

The core businesses at Bank of America continue to operate quite well. We continue to grow our franchise focusing on customers and associates. We have had healthy growth in checking accounts and deposits. Customers continue to seek us out as a company of strength. Metrics on customer favorability, brand awareness, customer satisfaction and purchase consideration all improved last year and we continue to be a leader in helping to find solutions to the credit crisis.