B of A Details Its Deal-Free Growth Plan

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PONTE VEDRA BEACH, Fla. — Bank of America Corp. on Tuesday said it would look to grab market share from competitors to meet revenue growth targets for the next five years that would rely on organic growth rather than large-scale acquisitions.

At its first investor day since November 2001, executives described some of the ways the $1.46 trillion-asset company would look to boost market share and set revenue targets for some business lines. The broad strategy includes a plan by the consumer and small-business banking division to woo some of the business its customers have at other institutions and a bid by the investment banking arm to take market share from other companies.

R. Eugene Taylor, a vice chairman and the president of global corporate and investment banking, said his division would try to increase annual revenue by $10 billion in the next five years and earnings by $3 billion through taking market share in the United States and expansion efforts in Europe and Asia. Last year the division's revenues rose 10% from a year earlier, to $22.7 billion, and it posted net income of $6.8 billion, up 6%.

In the investment banking arm, the Charlotte company projected that it would glean the most growth from its global markets business, where it is predicting $4 billion of revenue gains by applying its U.S. investment banking techniques to European and Asian markets. Executives projected that a further $3.5 billion would come from global commercial banking and another $2.5 billion from corporate and investment banking.

Echoing CEO Kenneth D. Lewis' stated desire to pursue "embedded opportunities" within the company, Mr. Taylor said the objective in the United States is to mine existing client relationships. "We're not trying to be No. 1 in the league tables," he said during his presentation. "We want to be the essential banking partner for our clients."

Liam E. McGee, the company's president of consumer and small-business banking, delivered a similar message, pointing to credit cards, mortgages, and home equity lines as areas ripe for growth. Some of that opportunity lies in the $250 billion of card balances B of A cardholders have with competitors — and in the $1 trillion of mortgages the company's customers hold elsewhere, he said.

Bruce Hammonds, the head of B of A's card unit and former chief executive of MBNA, said the company could encourage customers to bring external accounts to B of A by issuing a rewards credit card for existing mortgage customers or creating a credit card adaptation of its Keep the Change program, which rounds debit card purchases up to the nearest dollar and then deposits the difference into a savings account.

B of A is not the first company to aggressively target assets its customers have at other institutions.

In January 2003, Merrill Lynch & Co. Inc. kicked off an effort to boost its retail banking business by targeting assets its clients had on deposit elsewhere. Since then its deposits have grown about 30%, from $65 billion to $84.1 billion at the end of 2006.

At B of A, attracting more loans and deposits would further boost revenues in the unit, Mr. McGee said. The company's consumer arm reported revenue of $41.7 billion in 2006, up 47% from a year earlier, and net income of $11.2 billion last year was up 59%, mostly thanks to its January 2006 purchase of card issuer MBNA Corp.

Mr. McGee cited the example of a cash-rich market like Washington, where he said that bringing in $1 billion in deposits could add $30 million of revenue in the first year. Adding $1 billion of loans in a market like Los Angeles would translate into $25 million in annual revenues.

The company is pilot testing a program in Los Angeles that offers credit cards to customers with either a taxpayer identification card or a Social Security number and no credit history, which has caused some controversy because of concern that it may be targeting illegal immigrants. On Tuesday Mr. Lewis, who is also B of A's chairman and president, conceded that the program has drawn some negative reactions from customers.

"We do know of some people who have closed accounts because of this," he said, "and we have received letters with chopped up credit cards. But in the aggregate nobody's profit plan has changed because of this."

Commenting on the broad push to boost consumer business, Mr. McGee said, "We are not satisfied with market leadership alone. Since we have almost unlimited opportunities with our own customers, there is more work to be done," he said during his presentation. In an interview afterward he explained that revenue gains would come solely from spread income and that the revenue projections would be "a very conservative estimate" since they exclude any financial benefits that might come from fees.

During his opening remarks Monday night, Mr. Lewis stressed that growth is more likely to come from existing relationships than from bringing in new customers. "We all know it is easier and more profitable to expand existing relationships than to build new ones," he said. "Our customers will differentiate us," he added. "We've proven that we can execute" on any objective set.

Some of the projections caused mixed reactions among analysts and some asked whether challenges such as thinner margins or deteriorating credit quality might prevent the company from hitting its targets. Mr. Taylor responded by saying, "You don't overpromise and then underdeliver to Mr. Lewis."

In an interview Keith Horowitz, an analyst at Citigroup Inc., commended Bank of America's effort to "peel the onion back" on its operations and its goal to create heightened accountability for its business heads. Though reluctant to weigh in the company's ability to meet its objectives, he said that Mr. Lewis has shown in the past that he can deliver on his promises.

"They have a better opportunity to execute today than they did three years ago," Mr. Horowitz said, due largely to investments the company has made in technology improvements and gains from its acquisitions of FleetBoston Financial Corp. and MBNA Corp.

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