Acquisition of National City by Bank of America

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Acquisition of National City by Bank of America

• Presented by
• Bianca Butts
• Craig Daugherty
• Matt Dunson
• Tameka Foster

March 7, 2005
2
Agenda

• Current State of Bank of America
• Current State of National City Corporation
• Benefits of Acquisition
• Financing the Deal
• Closing the Deal A Snapshot of Bank of America

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Bank of America

• One of largest banks in the United States
• Approximately 190.35 billion in market
  capitalization
• Operates primarily in twenty-nine states and the
  District of Columbia
• Very little presence in the Midwest

4
Bank of America Contd

• Four main business lines
• Consumer and small business banking
• Commercial banking
• Global corporate and investment banking
• Wealth and investment management

5
Bank of America Key Financials

• Total cash is 28.94 billion
• EPS is 2.7
• Earnings growth of 9.5 percent projected for next
  five years
• P/E ratio of 12.33

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Bank of America Technology

• 11.8 million active users of its website
• The pioneering company behind debit cards and is
  the number one issuer of debit cards world wide
• The largest ATM network in the United States

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National City Corporation

• One of largest banks in the Midwest
• Approximately 23.39 billion in market
  capitalization
• Primary banking markets are in Ohio, Indiana,
  Illinois, Kentucky, Michigan and Pennsylvania

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National City Contd

• Core Business lines
• Commercial and retail banking
• Consumer finance
• Asset management
• Mortgage financing and servicing
• Payment processing

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National City Key Financials

• Cash of 3.83 billion and total stock holder
  equity of 12.8 billion
• P/E ratio of 8.33
• Estimated growth is 8 for next five years
• EPS is 4.3

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National City Key Financials Contd

• 2004 2003
• ROA 2.0 1.86
• ROE 21.7 22.7
• NI 2.8 Billion 2.1 Billion

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National City Technology

• Awarded 1 easiest banking site to use
• 7th overall best banking site
• 2nd best small business banking site

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Benefits of Acquisition

• Geography
• Only operations in Illinois and Pennsylvania
  overlap with National City
• Decrease risk
• Decrease competition

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Benefits of Acquisition Contd

• Increase size and power of Bank of America
• Gain important physical assets and intangible
  assets
• Cut overlapping departments/personnel
• Allocate more funding to important departments
  and positions within the company, especially in
  Midwest
• Increase technology and larger accounts for
  future technological growth

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Benefits of Acquisition Contd

• Ease of Acquisition
• Size of Bank of America vs. National City
• Companies offer similar product lines
• P/E ratios of the companies allow both sets of
  stockholders to realize gains
• National City has many benefits related to the
  benefits of Bank of America

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Financing the Deal

• Purchase of Stock Method
• Advantages versus Disadvantages

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Advantages

• Purchase of Stock Method
• Bank of America assumes all of National Citys
  assets and liabilities
• Stock transactions are not subject to taxation
  until the stock is sold
• Usually National Citys stock will increase in
  value, if the merger is completed successfully

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Disadvantages

• Purchase of Stock Method
• We assume all of National Citys liabilities
• There is a chance that National Citys stock may
  diminish in value

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The Deal.

• Purchase of Stock Method
• National Citys current stock price - 35.69
• Premium of 5 OR 114 per share
• National Citys New Stock Price - 40.69
• Exchange each share of National City for .88 of a
  share of Bank of America
• Approximately 5.7 million new shares of Bank of
  America

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Future Projections

• Technology is a driving force behind the banking
  and financial industries
• Together the two banks could potentially form one
  of the most technologically advanced banks in
  America
• National City is a premier investor in
  FTVentures, the first venture capital firm in the
  U.S. to focus on technologies that benefit the
  global financial services industry. FTVentures
  now has over 623 million in total capital under
  management and is a leading investor in
  information technologies

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Projections, Cont.

• Because of Bank of Americas lack of presence in
  the Midwest, we believe that few jobs will have
  to be lost
• The executive officers will remain in Charlotte
  as well as departments such as marketing and
  public relations
• Retail branches in Pennsylvania and Illinois may
  be eliminated
• Many departments may be combined, reduced, or
  completely removed

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Key Financial Statistics

• Total assets are predicted to reach 990.7
  billion next year, an increase of about 4.3
• Total liabilities are expected to be close to
  930 billion next year, up nearly 14
• Total revenue is projected at 120.5 billion next
  year, an increase of 33 from closing
• Net income should reach 163 billion, up 16

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Closing

• 4.6 billion shares of Bank of America Stock
• Net Income of 13 million
• Decrease in earnings per share 2.94 from 7.27
• Earnings are expected to increase 8.9 per year

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Final Remarks

• Gain the Midwestern Market
• Decrease Competition
• Higher Return on Assets and Return on Equity
• Expand Business Lines

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Questions ??