Bank of America 2008 Annual Report Download - page 16

Q. What actions have you taken to
improve results in underperforming
business units?
A. In Capital Markets & Advisory
Services, we reduced our exposures
in certain higher-risk securities as
markets allowed, and we have exited
some securities markets. These
actions reduced the amount of
capital at risk in the business.
We have taken a number of steps
to deal with rising loan losses.
While we continue to extend credit
across our businesses, we also have
tightened our underwriting require-
ments for higher-risk segments,
and we are using more judgmental
underwriting in determining credit-
worthiness of applicants. We are
also reaching out to customers who
appear to be struggling.
In the mortgage area, historically
low rates are generating customer
applications for mortgage financing
at more than double the levels that
existed before the government
announced its intention in November
to buy mortgage-backed securities.
The capabilities and capacity added
through Countrywide are helping us
respond to this high customer demand,
and we’re taking additional steps to
further expand our capacity in sales
and fulfillment as demand warrants.
Q. How do the recent acquisitions
of Countrywide and Merrill Lynch
fi t into your strategy?
A. Our long-term strategy is to have
leading positions in the four corner-
stone products of a consumer relation-
ship — deposits, credit and debit
cards, mortgages and investments —
either through organic growth or
through acquisitions.
We have long been one of the
leaders in deposits and, more recently,
credit cards. The acquisition of
Countrywide gives us mortgage
capabilities and scale that are critical
to our consumer relationships. We
were able to acquire the best mortgage
platform in the business, with state-
of-the-art technology systems, at an
attractive price, immediately becoming
the No. 1 provider of both mortgage
originations and servicing. As a
combined company, we believe
we will be recognized as a responsible
lender who is committed to helping our
customers be successful homeowners.
The acquisition of Merrill Lynch
makes us a leading U.S. wealth
management firm, with more than
18,000 financial advisors and more
than $1.8 trillion in total client assets.
As investment advice and expertise
continue to grow in importance to our
huge customer base, we now have the
scale to better serve the millions of
affluent customers who already bank
with us, and to help attract new
customers with our comprehensive
banking and investment solutions. In
addition, Merrill Lynch’s global reach
and strong markets capabilities will
enhance what we can offer our
business clients and provide us
with greater geographic diversity.
Q. How does the fi nancial crisis and
the changing competitive landscape
alter the bank’s revenue and earnings
opportunities?
A. Earnings are expected to be
pressured in the near term as we work
our way through the current recession.
There is no question that the entire
industry will be smaller, with simpler,
more transparent products. However,
in the longer term we believe we are
remarkably well-positioned to benefit
when the economic outlook improves.
For our retail customers, we offer
industry-leading products, convenience
and access. And we believe our
size and scale enable us to offer
consumers better value.
For our business clients, we provide
a complete range of banking and
investment banking products and
services. We can deliver the full power
of a combined commercial and
14 Bank of America 2008