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					                                                                            MORGAN            STANLEY              RESEARCH
                                                                            NORTH          AMERICA


                                                                            Morgan Stanley & Co. Incorporated   Betsy L. Graseck, CFA
                                                                                                                Betsy.Graseck@morganstanley.com
                                                                                                                +1 (1)212 761 8473

                                                                                                                Cheryl M. Pate, CFA
                                                                                                                Cheryl.Pate@morganstanley.com
                                                                                                                +1 (1)212 761 3324

                                                                                                                Michael J. Cyprys, CFA, CPA
                September 1, 2010                                                                               Michael.Cyprys@morganstanley.com
                                                                                                                +1 (1)212 761 7619


Stock Rating    Bank of America
Overweight

Industry View
                Cheap with Catalysts
Attractive
                Skewed to 2011                                              Key Ratios and Statistics
                                                                            Reuters: BAC.N Bloomberg: BAC US
                                                                            Banking - Large Cap Banks / United States of America
                Investment conclusion: We are overweight BAC as             Price target                                                       $25.00
                we expect lower credit costs and capital management to      Shr price, close (Aug 31, 2010)                                    $12.45
                drive up ROE (12.5% in 2013). Key debates in the stock      Mkt cap, curr (mm)                                              $125,827
                are impact of lower rates, mortgage exposure (including     52-Week Range                                                $19.82-12.18
                reps/warranties & litigation), timing/size of excess
                capital and level/timing of normalized ROA & ROE.           Fiscal Year ending                     12/09    12/10e    12/11e     12/12e
                                                                            ModelWare EPS ($)                     (0.40)      1.27       1.83      2.65
                What's new: We met with 6 members of the BAC                Prior ModelWare EPS ($)                    -         -          -         -
                management team on August 31: Brian Moynihan, CEO,          P/E                                      NM        9.8        6.8       4.7
                                                                            Consensus EPS ($)§                    (0.29)      0.97       1.64      2.32
                Chuck Noski, CFO, Mark Linsz, Treasurer, David
                                                                            Div yld (%)                              0.3       0.3        2.4       6.0
                Darnell, President, Global Commercial Banking, Joe          Unless otherwise noted, all metrics are based on Morgan Stanley ModelWare
                                                                            framework (please see explanation later in this note).
                Price, President, Consumer and Small Business               § = Consensus data is provided by FactSet Estimates.
                Banking, Susan Faulkner, Consumer Sales and Service         e = Morgan Stanley Research estimates

                Executive, and Greg Gobby, CFO, Mortgage Business.
                                                                            Quarterly ModelWare EPS
                Key Takeaways:                                                                                    2010e     2010e     2011e       2011e
                                                                            Quarter                     2009       Prior Current        Prior Current
                •   Profit focus over size.                                 Q1                           0.32           -   0.36a            -          -
                                                                                                       (0.41)           -   0.24a            -          -
                •   Levers include more efficient balance sheet and         Q2
                                                                            Q3                         (0.12)           -    0.29            -          -
                    operations, deeper client relationships.
                                                                            Q4                         (0.13)           -    0.39            -          -
                •   Expect normalized ROA of at least 1%, goal of           e = Morgan Stanley Research estimates, a = Actual company reported data

                    1.25%, low teens ROE and low 20s ROTE. Would
                    like to lift dividend payout ratio ultimately to ~30%
                    and initiate share buybacks as soon as possible.

                Normalized Earnings (2013): Our $25 target price is
                based on normalized 2013E ROE of 12.5%, cost of
                equity of 10.9% and a 9% Common Tier 1 ratio. We
                forecast 2012E EPS of $2.65 and 2013E EPS of $3.42.
                EPS could dip a bit given decline in long-end, but BAC
                looks cheap at 1.0x TBV, 0.6x BV and 3.6x 2013E EPS,
                vs. target multiples of 1.4x TBV, 0.9x BV of 7.3 2013E
                EPS.
                                                                            Morgan Stanley does and seeks to do business with
                                                                            companies covered in Morgan Stanley Research. As
                What’s next: September 15 master trust data. BAC’s          a result, investors should be aware that the firm may
                July ncos down 59 bp m/m and total del down 25 bp.          have a conflict of interest that could affect the
                Expect more improvement given relatively stable jobless     objectivity of Morgan Stanley Research. Investors
                claims.                                                     should consider Morgan Stanley Research as only a
                                                                            single factor in making their investment decision.
                                                                            For analyst certification and other important
                                                                            disclosures, refer to the Disclosure Section,
                                                                            located at the end of this report.
                                                                                              MORGAN                      STANLEY              RESEARCH

                                                                                              September 1, 2010
                                                                                              Bank of America




Risk-Reward Snapshot: Bank of America (BAC, Overweight, PT $25)
Risk-Reward Looks Attractive
    $45                                                                                                                                    Investment Thesis

     40                                                                                                                                   •We believe BAC will be a long-term
                                                                                                                                           winner in Large Cap Banks. We expect
     35
                                                                                                                                           BAC will emerge from the credit cycle a
     30                                                                                           $30.00 (+141%)                           dominant player in domestic retail
     25                                                                                           $25.00 (+101%)
                                                                                                                                           broking and international investment
                                                                                                                                           banking, and mortgage servicing.
     20

     15                                                                      $ 12.46                                                      •High exposure to early cycle credit
                                                                                                                                           (~18% of loans are credit card), low
     10                                                                                             $10.00 (-20%)
                                                                                                                                           exposure to late cycle credit (7% of
      5                                                                                                                                    loans are CRE) means BAC’s credit
                                                                                                                                           losses should decline faster than
      0
      Aug-08             Feb-09          Aug-09              Feb-10          Aug-10         Feb-11                    Aug-11               median large cap banks in 2010.
          Price Target (Aug-11)               Historical Stock Performance             Current Stock Price
                                                                                                         WARNINGDONOTEDIT_RRS4RL~BAC.N~




Source: Morgan Stanley Research estimates, FactSet
                                                                                                                                           Key Value Drivers
  Price Target $25                            Based on blend of valuation methodologies: residual income and
                                              target PE and PB ratios
                                                                                                                                          • Credit card charge-offs expected to fall
  Bull            Residual Income             Sharp Economic Recovery. Credit improves more rapidly                                         from 12.2% in 2Q10 to 10.25% in 4Q10
  Case            1.9x 2011 Bull              than our base case. Valuation based on bull case residual                                     given the sharp decline in delinquencies
  $30             Case Tangible BV            income.                                                                                       over the past quarter (7.1% in April to
                                                                                                                                            6.2% in June).

  Base            Blended valuation           Modest “U” Recovery. NPLs peak in 1Q10. Unemployment           • NPL q/q decline expected going forward
  Case            methodologies               rate remains around 10% in 2010. Valuation based on a blend of   2010.
  $25             1.7x 2011 Base              valuation methodologies, residual income and target PE and PB
                  Case Tangible BV            ratios.
                                                                                                                                          • Continued reserve release.

                                                                                                                                          • Expect certainty on capital rules to be a
  Bear            0.7x 2011                   Double Dip Recession. Fading stimulus is not replaced by
  Case            Bear Case                   corporate reinvestment or consumer demand. Unemployment
                                                                                                                                            catalyst for capital management
  $10             Tangible BV                 increases to 12%. Market does not look through to normalizing                                 beginning in 2011.
                                              EPS, nor does it discount strategic options. Valuation based on
                                              bear case TBV.




                                                                                                                                                                                2
                                                                    MORGAN                    STANLEY                  RESEARCH

                                                                    September 1, 2010
                                                                    Bank of America




Investment Case
Summary & Conclusions                                               Implications of Lower Long Bond
We are overweight BAC on improving credit and capital
management that should drive ROE higher and to levels over
                                                                    Compression in long bond is a challenge for all banks as it
its cost of equity. BAC’s stock at 0.6.x book and 1.0x tangible
                                                                    drives lower reinvestment rates in RMBS and, to a lesser
book suggests BAC will not be able to generate returns in
                                                                    extent, in first lien mortgages (less because there are more
excess of cost of equity, which we conservatively peg at 10.9%.
                                                                    adjustables in bank-owned portfolios). These are the two asset
We disagree and expect ROE to increase to 12.5% by 2013,
                                                                    classes most impacted by the decline in the long bond.
and ROTE to increase to 22% in 2013 driven by improving
credit, improving expense management and capital
                                                                    BAC’s residential mortgage exposure is only slightly above the
management.
                                                                    median for both of these metrics for our large cap bank
                                                                    coverage group.
Key debates for the stock:
                                                                    Exhibit 1
    •    Implications of a lower long bond.                         RMBS and First Lien Mortgage % of Earn Assets,
                                                                    Coverage Group
    •    How far along on cleaning up mortgages?                    BAC only Slightly above Median
                                                                                               LC Banks - RMBS as a % of Total Earning Assets
    •    Size/Timing of excess capital and level/timing of            25%

         normalized ROA/ROE.                                          20%


                                                                      15%
Catalysts (brackets below show Morgan Stanley estimates on
timing):                                                              10%


                                                                       5%
    •    Declining credit losses, in particular in card, which we
         expect over the next year in monthly master trust             0%
                                                                            KEY




                                                                                                                                   JPM

                                                                                                                                         Median



                                                                                                                                                         FITB
                                                                                                     BK



                                                                                                                 USB




                                                                                                                                                  STI




                                                                                                                                                                           NTRS




                                                                                                                                                                                              AXP

                                                                                                                                                                                                        DFS
                                                                                  STT

                                                                                         RF

                                                                                               COF



                                                                                                           BBT



                                                                                                                       PNC

                                                                                                                             BAC




                                                                                                                                                                      C



                                                                                                                                                                                  BPFH

                                                                                                                                                                                         WL
                                                                                                                                                                WFC
         installments (on-going).

    •    Disclosure on roll-off portfolios helping investors to
                                                                                    LC Banks - RMBS & Resi Mortg as a % of Total Earning Assets
         see core earnings power (2H10).                              40%



    •    Resolution of $3 bill gains needed to satisfy regulator      30%

         requests (at $1.9b currently. We have modeled
                                                                      20%
         remainder as stock issuance in 4q10).
                                                                      10%
    •    Capital management (dividend hike and share
         buybacks) (2q11/3q11).                                        0%
                                                                                                                                         Median




                                                                                                                                                                JPM
                                                                            BBT




                                                                                               RF




                                                                                                                             COF




                                                                                                                                                         STT
                                                                                                           STI

                                                                                                                 KEY




                                                                                                                                                                                                        AXP
                                                                                  BPFH




                                                                                                                       BAC



                                                                                                                                   PNC




                                                                                                                                                                                  C
                                                                                                     USB




                                                                                                                                                  FITB




                                                                                                                                                                      BK

                                                                                                                                                                           NTRS




                                                                                                                                                                                              DFS
                                                                                                                                                                                         WL
                                                                                         WFC




    •    NII stabilization (1H11 on core business if rates don’t
         change much from here).                                    Source: Company data, Morgan Stanley Research



    •    Loan stabilization (2H11 on core business).                Compared to the more pure play banks (excluding processors
                                                                    and card companies), BAC is in-line with the median. This
    •    Expense Ratio Improvement (2011 on improving               suggests that NIM pressures are more likely to be in-line with
         efficiencies, 2012 on lower credit related costs).         the group rather than an outlier for BAC.




                                                                                                                                                                                                    3
                                                                                                           MORGAN            STANLEY               RESEARCH

                                                                                                           September 1, 2010
                                                                                                           Bank of America




Exhibit 2                                                                                                  Exhibit 3
RMBS and First Lien Mortgage % of Earn Assets,                                                             BAC has successfully managed NIM through prior
Coverage Group ex. Processors/Cards                                                                        periods of rate volatility
BAC in Line with Median                                                                                    1Q04 through 4q11e
              LC Banks ex. Processors/ Cards - RMBS as a % of Total Earning Assets                             6%
  25%                                                                                                          5%
  20%
                                                                                                               4%
  15%
                                                                                                               3%
  10%
                                                                                                               2%
   5%
                                                                                                               1%
   0%
        KEY




                                    USB




                                                               JPM
                                          PNC


                                                BAC


                                                      Median




                                                                                         C


                                                                                               BPFH
                 RF


                        COF




                                                                     STI


                                                                           FITB
                              BBT




                                                                                  WFC




                                                                                                      WL
                                                                                                               0%
                                                                                                              -1%




                                                                                                                                                                               4E

                                                                                                                                                                               3E

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                                                                                                                                                                     20
               LC Banks ex. Processors/ Cards - RMBS & Resi Mortg as a % of Total




                                                                                                                                                                         20

                                                                                                                                                                         20

                                                                                                                                                                         20
                                        Earning Assets
  40%                                                                                                                         10 Yr Treas Less FF                      3m LIBOR
  30%                                                                                                                         BAC NIM                                  10 Yr Treas Less 2 Yr Treas

  20%                                                                                                      Source: Company data, Morgan Stanley Research; E = Morgan Stanley Research estimates

  10%

   0%
                                                                                                           Exhibit 4
                                                KEY
                                    USB
                 BPFH




                                                      Median


                                                               BAC




                                                                           PNC




                                                                                               C
                              RF




                                                                     COF




                                                                                  FITB


                                                                                         JPM
        BBT




                                          STI
                        WFC




                                                                                                      WL




                                                                                                           Changes in NIM q/q have been less volatile than
                                                                                                           changes in 10s-2s TSY spread
Source: Company data, Morgan Stanley Research
                                                                                                           4Q01 through 2Q10
BAC has been able to drive a fairly consistent NIM in volatile                                             Q/Q Change in BAC's NIM vs. Change in 10s-2s Spread
                                                                                                            1.5%                                              Change in 10s-2s Spread   Change in BAC's NIM
rate environments over the past several years. Part of this is
changing business models and part of this is changing
                                                                                                            1.0%
investment strategy.
                                                                                                            0.5%
We expect that BAC will be able to mitigate some of the yield
curve pressure on its NIM through reducing higher cost of                                                   0.0%

funds as its balance sheet shrinks (Mark Linsz suggested a $95
                                                                                                           -0.5%
billion long-term debt decline at 3% swap adjusted cost of
funds yielding a 15bp positive impact, all other things equal, or
                                                                                                           -1.0%
5% to NIM over next 10 quarters), reinvesting in AFS loans
                                                                                                            20 4

                                                                                                            20 2

                                                                                                            20 4

                                                                                                            20 2

                                                                                                            20 4

                                                                                                            20 2

                                                                                                            20 4

                                                                                                            20 2

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                                                                                                                 Q

                                                                                                                 Q

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                                                                                                                 Q

                                                                                                                 Q

                                                                                                                 Q

                                                                                                                 Q

                                                                                                                 Q

                                                                                                                 Q

                                                                                                                 Q

                                                                                                                 Q

                                                                                                                 Q

                                                                                                                 Q
rather than securities, reinvesting liquidity as Basel 3 rules
                                                                                                              01

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                                                                                                            20




known, etc.
                                                                                                           Source: Company data, Morgan Stanley Research


However, the mitigants are over time, while the sharp decline in
the long bond will negatively impact NII over the next few                                                 BAC’s quarterly bubble charts estimate the impact to its net
quarters. We are modeling a q/q decline in NIM of 2% and 3%                                                interest income given changes in the yield curve. A 100 bp
in 3q and 4q driving a $420 million and $610 million sequential                                            compression in the yield curve driven by a decline in the long
decline in NII. We may lower NII a bit more given degree of                                                end results in a $846m decline in NII over a 12 month period,
long bond decline. Another 10 bp decline would lower EPS by                                                which we suggest means an 18 bp decline in NIM or a 5c
12c in each of 2011 and 2012. Levers do exist. For example, a                                              decline in EPS over a rolling forward 12 month period. We feel
100 bp lower-than-expected expense ratio would offset 7-8c of                                              we have this in our estimates as our forward NII is down $1.3
this pressure.                                                                                             bill over the next 2 quarters.




                                                                                                                                                                                                         4
                                                                                           MORGAN           STANLEY            RESEARCH

                                                                                           September 1, 2010
                                                                                           Bank of America




Exhibit 5                                                                                  Exhibit 7
Est NIM in Yield Curve Flattening & Steepening                                             NIM Sensitivity: 2011
Scenarios, Impact over 12 month forward look                                               Boxed Shows Current Estimates
100 bp Flatter Curve Drives Est 18 bp lower NIM                                                                                      NIM Sensitivity - 2011
   Curve Flattening       Bubble size represents NIM Sensatvitity to Yield Curve Changes                                   -20 bp        -10 bp     2.68%           +10 bp
                                                                     33 bp                 Earning         -400 bp          (0.31)        (0.19)     (0.07)          0.04
 300
                                                                                           Asset           -300 bp          (0.28)        (0.16)     (0.04)          0.08
 200                                                     21 bp
                                            5 bp                                           Growth          -180 bp          (0.24)        (0.12)      0.00           0.12
 100                          -18 bp                                                                       -100 bp          (0.22)        (0.10)      0.03           0.15
                                                                                           Source: Company data, Morgan Stanley Research estimates
    0                                                                                      Note: Current forecast show in box
                -36 bp
 -100                                                    14 bp

 -200                                       -7 bp
                              -24 bp                                                       Quarter to date, the yield curve (10yr - FF) has flattened 55 bp
 -300                                                                                      and the 2/10 curve has flattened 37 bp. .
     -300        -200          -100           0           100         200          300
                                                                  Curve Steepening         Exhibit 8
                                                                                           Yield Curve Movement QTD
Source: Company data, Morgan Stanley Research estimates
                                                                                                                                                     Change
                                                                                                                      2Q10           Current            QTD
                                                                                           10-Yr Treas               3.02%            2.49%           -53 bp
Exhibit 6                                                                                  2-Yr Treas                0.63%            0.47%           -16 bp
Est NIM in Yield Curve Flattening & Steepening                                             Fed Funds (FF)            0.17%            0.19%             2 bp
Scenarios, Impact over 12 month forward look
100 bp Flatter Curve Drives Est 5c lower EPS                                               10 Yr less 2 Yr Treas Spread                               -37 bp
                                                                                           10 Yr Treas less FF Spread                                 -55 bp
   Curve Flattening       Bubble size represents EPS Sensatvitity to Yield Curve Changes
                                                                      $0.10                Source: Company data, Morgan Stanley Research
 300

 200                                                     $0.06
                                            $0.02
                                                                                           Exhibit 9
 100                           $(0.05)
                                                                                           Expense management is another lever available.
    0                                                                                      100bp improvement is 7c accretive to our 2011
                $(0.11)                                                                    estimate and offsets 6bp of NIM compression
 -100                                                     $0.04
                                                                                           Boxed Shows Current Estimates
 -200                                        $(0.02)                                                                  EPS Impact of Expense Ratio Sensitivity - 2011
                               $(0.07)
                                                                                                                         -200 bp        -100 bp            56%      100 bp
 -300
                                                                                           Revenue         -2.0%           0.10             0.03          (0.05)     (0.12)
     -300        -200          -100           0           100          200          300
                                                                                           Growth          -3.1%           0.15             0.07          0.00       (0.07)
                                                                  Curve Steepening
                                                                                                           -4.0%           0.18             0.11          0.04       (0.04)
Source: Company data, Morgan Stanley Research estimates
                                                                                                           -5.0%           0.23             0.15          0.08        0.01


                                                                                                                                   Expense Ratio Sensitivity
We expect that NIM will be a bigger driver of EPS volatility than                                                             Offsets NIX Compression - 2011
changes in asset volumes. A 3.5% change in NIM vs. our 2011                                                              -200 bp        -100 bp            56%      100 bp
and 2012 estimate (10 bp) would lower EPS by 3.5-4.5% (12c                                 Revenue         -2.0%           -8 bp            -2 bp              NA      NA
in each year). A doubling in the rate of earning asset shrinkage                           Growth          -3.1%          -12 bp            -6 bp         -0 bp        NA
only drives a 6c decline in EPS in 2011.                                                                   -4.0%          -15 bp            -9 bp         -3 bp        NA
                                                                                                           -5.0%          -19 bp           -13 bp         -7 bp       -1 bp
                                                                                           Source: Company data, Morgan Stanley Research estimates




                                                                                           BAC can also reinvest liquidity. Cash and due from banks is
                                                                                           currently 8% of earning assets, up from 3% in pre-crisis 2q07.




                                                                                                                                                                         5
                                                                                           MORGAN        STANLEY      RESEARCH

                                                                                           September 1, 2010
                                                                                           Bank of America




Reinvesting one-third of this liquidity into first lien mortgages
                                                                                           How far along on cleaning up
with a 4.5% yield would add 12bp to NIM and 15c per share to
EPS. We do not model this, but expect that as liquidity will be                            mortgages?
put to work as Basel 3 is known, credit improves, ratings
stabilize, etc. This would be upside to our estimates, which
                                                                                           The second key debate revolves around BAC's mortgage
currently do not redeploy high liquidity levels.
                                                                                           exposure. We estimate that BAC is farther along on realizing
Exhibit 10
                                                                                           losses associated with its mortgage loans (82% vs. 75% for its
Sensitivity Analysis: Reinvesting 33% of Cash in 1st                                       average loan book). This is largely a function of the purchase
Lien Mtgs at 4.5% Adds 12 bp to NIM and 15c to EPS                                         accounting skew in the mortgage book.
($ millions)
                                                                                           The key debate now has shifted to the ultimate size of the
                                                           2Q07                  2Q10
Cash & due from banks                                     35,499               151,034
                                                                                           estimated reps and warranties cost. On reps and warranties,
Earning Assets                                         1,322,397             2,009,253     we estimate that BAC is about 20% through its cleanup. We
Cash as & of Earning Assets                                2.7%                  7.5%      have baked in our estimates for remaining reps and warranties
                                                                                           costs of $16 billion in our model through 2014. This is higher
Reinvestment Scenario                                                                      than what management is guiding towards (it suggests an
Liquidity to reinvest (%)                                                       33.3%      average of $750 mill per quarter, with volatility likely between
Liquidity to reinvest ($)                                                       50,345     $500mill to $1bill, no time frame given on end dates). Our
Reinvestment Yield - 1st Lien Mtgs                                              4.50%      base/bull/bear range is $16b, $6b, $38b. If we use
                                                                                           management estimates of $750 mill per quarter for our
Incremental NIM                                                                 0.12%      estimated 14 quarters of expenses, this would drive a $10 bill
EPS Impact                                                                      $0.15      total forward R&W expense, 38% below our $16 bill base case.
Source: Company data, Morgan Stanley Research estimates
                                                                                           Our R&W estimates are based on several assumptions. While
                                                                                           there is a wide confidence band around these inputs, we
Last, BAC could cut its tail risk by recognizing bond gains to                             expect to be able to tighten these ranges as BAC gives more
offset forward losses. We estimate that if BAC realized all its                            information going forward on this topic.
bond gains today, that could offset ~18% of 12-month forward
losses.                                                                                    We start with mortgage originations that BAC, CFC, and MER
                                                                                           originated in 2005-2008 and that First Franklin originated from
Exhibit 11                                                                                 3q06 and adjust for estimated paydowns/refis. If we were to
Rising unrealized AFS gains could provide BAC an                                           exclude the 2005 vintage on the basis that a R&W claim is less
opportunity to reduce forward losses by realizing                                          likely to be accepted, we would need to boost our severity
gains to neutralize troubled asset sales                                                   assumptions too.
 Unrealized AFS Gain as % of 12m Forward Losses
 50%                                                                                       There are important limitations to our analysis. We don’t have
 40%                                                                                       the details that BAC does on probability of the GSEs or MIs or
 30%                                                                                       private investors to file a repurchase request, probability of
 20%                                                                                       BAC payouts, severities, etc. Any information from BAC on
 10%                                                                                       these differences would help tighten our estimates. Also, BAC
  0%                                                                                       suggested that any private investor repurchase request is likely
-10%                                                                                       to be dealt with as securities litigation. We believe we have
-20%                                                                                       captured this risk in our R&W expenses.
-30%

-40%
    Sep-     Dec-   Mar-   Jun-   Sep-   Dec-   Mar-    Jun-   Sep-   Dec-   Mar-   Jun-
     07       07     08     08     08     08     09      09     09     09     10     10

Source: Company data, Morgan Stanley Research




                                                                                                                                                         6
                                                                                           MORGAN              STANLEY          RESEARCH

                                                                                           September 1, 2010
                                                                                           Bank of America




Exhibit 12                                                                                 Exhibit 14
Cum Loss Recognition on Mortgage Loans:                                                    Reps/Warranty Losses Through 2Q10:
We estimate BAC is 82% of the way through                                                  20% Down, 80% To Go
cleaning up resi mtg loan exposures                                                                             BAC Reps/ Warranty Losses ($M): 2008 - 2014E
                                                                                             $4,500
             Cum Losses 3Q07 - 2Q10 as % of Total Cum Loss Est
                                                                                             $4,000

  Total Resi Real Estate                                                 81%                 $3,500

                                                                                             $3,000
               2nd Liens                                                    84%                                               9%
                                                                                             $2,500
               Subprime                                               74%
                                                                                             $2,000                                                   19%         19%
                                                                                                                                                                         17%
                Neg Am                                                              100%                                                  16%
                                                                                             $1,500

                   ARMs                                         66%                          $1,000                9%         9%
                                                                                              $500
                           0%          20%     40%        60%         80%         100%
                                                                                                         1%
                                                                                                 $0
Source: Company data, Morgan Stanley Research estimates                                                 2008      2009       2010E       2011E       2012E       2013E   2014E

                                                                                                                    R/ W Losses Taken To Date    Remaining R/ W Losses

                                                                                           Source: Company data, Morgan Stanley Research; E = Morgan Stanley Research estimates
Exhibit 13
Credit Losses Through 2Q10: 75% Down, 25% to Go
                           BAC Cum Losses ($M): 2H07 - 2011E
  $60,000


  $50,000


  $40,000

                                 9%
  $30,000
                                                 32%             9%
  $20,000

                                18%                                               16%
  $10,000                                                       12%

                 4%
       $0
                2H07            2008            2009            2010E           2011E

                Losses Taken To Date    Remaining Cum Losses   Purchase Accounting Adj.

Source: Company data, Morgan Stanley Research; E = Morgan Stanley Research estimates




                                                                                                                                                                                 7
                                                                                         MORGAN           STANLEY            RESEARCH

                                                                                         September 1, 2010
                                                                                         Bank of America




Exhibit 15                                                                               Exhibit 16
R&W Expense: Base Estimate is $16b, Bull is $6b,                                         BAC’s already incurred $4b in R/W expense and
and Bear is $38b                                                                         repurchased $3.4b of mortgages stemming from
Summary of Scenario Analysis: Our Base Case is Higher                                    R/W breach from 2008 through 2010 YTD
than Management Guidance                                                                 Snapshot of R/W activity to date
($ billions)                                                                             ($ millions)
                                                    Scenario Analysis                                                                                       2008 Thru
                                                    Bull    Base                 Bear                                2008        2009    1Q10      2Q10     2010 YTD

                                                                                         Unresolved                    ND          ND      ND     11,000
BAC Mtg Originations '05-'08                 2,209.18 2,209.18 2,209.18                  Repurchase
 Less Refis (est)                             (471.36) (385.00) (282.37)                 Requests
 Less Paydowns (est)                          (247.26) (247.26) (164.84)
Total Mtg Exposure (est)                      1,490.6  1,576.9  1,762.0                  Reserves (BOP)                ND         ND     3,500     3,300
                                                                                         R/W Expense                  246      1,900       600     1,200       3,946
Delinquency Rate                                 10.4%          10.3%          10.2%     Indemnifications            (111)      (871)     (337)     (201)     (1,520)
                                                                                         Loss on Mtg                   ND         ND      (463)     (399)
Delinquencies                                    154.7          162.6          180.6
                                                                                         Repurchases (Est)
Less BAC's Delinq                                 15.3           15.3           15.3
                                                                                         Reserves (EOP)                ND      3,500     3,300     3,900
Potential Delinq Exposure                        139.4          147.3          165.3
                                                                                         Mtg Repurchases              376      1,768      650       603        3,397
Repurchase Request (%)                             50%            60%            70%
                                                                                         Source: Company data, Morgan Stanley Research
Repurchase Requests                               69.7           88.4          115.7     ND = Not Disclosed
As % of Total Mtg Exposure                        4.7%           5.6%           6.6%

Cure Rate (%)                                      60%            50%            40%     We assess BAC’s potential reps/warranty exposure as follows:
Repurchases                                       27.9           44.2           69.4
As % of Total Mtg Exposure                        1.9%           2.8%           3.9%
                                                                                         -     Estimate BAC provided reps/warranties on $2.6T of
                                                                                               mortgages that they (and predecessor companies)
Severity Rate (%)                                  35%            45%            60%
Severity                                            9.8          19.9           41.7
                                                                                               originated during 2005-2009. We then estimate refi and
As % of Total Mtg Exposure                        0.7%           1.3%           2.4%           paydown rates, with faster refis/paydowns in our bull/base
                                                                                               cases, in order to arrive at total mortgage exposure
Reserves (2q10)                                     3.9            3.9            3.9          outstanding.
Additional R/W Expense                              5.9          16.0           37.8
As % of Total Mtg Exposure                        0.4%           1.0%           2.1%     -     We use delinquency rates as a proxy for the maximum
                                                                                               repurchase request as investors will seek to minimize
EPS Impact                                       $0.38          $1.04          $2.45           losses on delinquent loans, while to date investors have
# of Qs Impled for R/W Exp                         4.9           13.3           31.5           not materially identified reps/warranties breach on
                                                                                               performing loans. We apply a 90 days past due
Additional R/W Exp As Multiple of Current Reserves
                                                                                               delinquency rate by vintage year as disclosed by
 Additional R/W Expense            1.5 x      4.1 x                              9.7 x
                                                                                               FannieMae, since BAC does not disclose similar data.
Source: Inside Mortgage Finance Publications, Inc. www.imfpubs.com Copyright 2010,
Company data, Morgan Stanley Research estimates                                                Overall, we estimate a weighted average delinquency rate
Cute Rate = 1 less reps/warranties repurchase rate                                             for 2005-2008 vintages of ~8.4% that is 220 bp higher than
                                                                                               BAC’s delinquency rate of 6.2%. We reduce the total
                                                                                               delinquency estimate by the amount of delinquencies that
                                                                                               BAC already has on its books.

                                                                                         -     We assess bull, base and bear cases by stressing
                                                                                               repurchase request rates (as a percent of delinquent
                                                                                               loans), cure rates and severities.




                                                                                                                                                                   8
                                                                                                MORGAN             STANLEY           RESEARCH

                                                                                                September 1, 2010
                                                                                                Bank of America




-     Base Case:                                                                                o      Implies 0.7% severity on total mortgage exposure and
                                                                                                       1.9% of mortgage exposure repurchased
o     60% repurchase request rate as a percent of delinquent
      loans                                                                                     -      Bear Case:

o     50% cure rate which is in line with current cure rates                                    o      70% repurchase request rate as a percent of delinquent
                                                                                                       loans
o     45% severity rate which is toward the higher end of BAC’s
      severity estimates for non-agency RMBS of 36-48% on                                       o      40% cure rate which is worse than current rates of about
      prime, alt-a and subprime mortgages                                                              50%

o     $16b of additional reps/warranty expense on $44b of                                       o      60% severity rate on repurchased mtgs which is higher
      repurchases and $88b of repurchase requests                                                      than of BAC’s severity estimates for non-agency RMBS of
                                                                                                       36-48% on prime, alt-a and subprime mortgages
o     Implies 1.3% severity on total mortgage exposure and
      2.8% of mortgage exposure repurchased                                                     o      $38b of additional reps/warranty expense on $69b of
                                                                                                       repurchases and $115b of repurchase requests
-     Bull Case:
                                                                                                o      Implies 2.4% severity on total mortgage exposure and
o     50% repurchase request rate as a percent of delinquent                                           3.9% of mortgage exposure repurchased
      loans
                                                                                                As background, BAC makes representations and warranties
o     60% cure rate which is a modest improvement from                                          with respect to (1) loans sold to GSEs and private investors, or
      current cure rates in the 50% range                                                       (2) loans underlying mortgage insurance purchased from
                                                                                                mortgage insurers, in that the loans meet certain requirements
o     35% severity rate which is slightly better than BAC’s                                     including underwriting standards and lack of material false
      severity estimates for non-agency RMBS of 36-48% on                                       representation. Generally, an investor can put back the
      prime, alt-a and subprime mortgages                                                       mortgage to the originator for the full principal amount if the
                                                                                                loan contains an origination defect or was fraudulently
o     $6b of additional reps/warranty expense on $28b of                                        originated and has defaulted. Standards differ significantly
      repurchases and $70b of repurchase requests                                               from investor to investor with GSE standards the toughest
                                                                                                followed by MIs and then by private securitizations.
Exhibit 17
Sizing BAC’s Mortgage Originations and Refis: 2005-2010
Mortgage Originations
($ in billions)
Source: Inside Mortgage Finance

                                                        2005               2006               2007              2008                 2009   2010 YTD   2005-2008
Countrywide Financial                                 490.95             462.50             408.23            132.02                                    1,493.70
Bank of America                                       158.82             167.90             190.10            183.30             391.32      145.61       700.12
First Franklin Financial, CA                                                                 15.36                                                         15.36

BAC Total                                            649.77             630.40             613.69             315.32             391.32      145.61     2,209.18
Industry Mortgage Originations                     3,120.00           2,980.00           2,430.00           1,485.00           1,815.00      660.00    10,015.00
Market Share                                           21%                21%                 25%               21%                22%         22%          22%

Refinancing (not by vintage)                       1,575.00           1,460.00           1,262.00             759.00           1,257.00      205.00     6,518.00
BAC's share of refis                                 328.01             308.85             318.71             161.16             271.01       45.23     1,437.79
Source: Inside Mortgage Finance Publications, Inc. www.imfpubs.com Copyright 2010, Company data, Morgan Stanley Research estimates




                                                                                                                                                                   9
                                                                                             MORGAN              STANLEY             RESEARCH

                                                                                             September 1, 2010
                                                                                             Bank of America




                                                                                             Exhibit 19
Capital Management, Return to                                                                Declining provisions in 2011-2013 to drive operating
Shareholders and Ultimate ROA/ROE                                                            earnings growth of $14b ($ millions)
                                                                                                                      Non Interest     Opt
                                                                                                              NII      Revenue       Expense    Provision      Taxes

We expect BAC will manage towards a 9% Common Tier 1                                                                                            14,739
Ratio and return $76 bill in capital, or 36% of 2q10 estimated
common equity, to shareholders between 2011-2013. We
expect ROE and ROA to increase by 650 bp and 56 bp                                                                                   1,236                    (8,680)     26,831
                                                                                                                        4,354
between 2010 and 2013 driven by improving credit (provisions
                                                                                                            2,430
declining) and share buy backs.
                                                                                               12,752
We forecast operating income to common of $27b in 2013,
growth of 110% from our 2010 estimate driven by declining
provisions (+105% contribution), lower operating expense                                     Opt Income                                                                  Opt Income
                                                                                               2010E                                                                       2013E
(+9% contribution) and higher fee income (+31% contribution)
and higher NII (+17% contribution). Partially offsetting                                     Source: Company data, Morgan Stanley Research estimates

operating earnings growth are higher taxes (-62%).

                                                                                             Exhibit 20
On an EPS basis we model normalized 2013 EPS of 3.42, with
growth of $2.15 (or 170%) from our 2010 estimate driven by
                                                                                             Expect ROA expansion driven by declining
improving credit in card and resi real estate (contributing 72c)
                                                                                             provisions
                                                                                                                      Non
and share repurchase (contributing 75c).                                                                            Interest     Opt                             Asset
                                                                                                           NII      Revenue    Expense   Provision   Taxes       Base
Exhibit 18                                                                                                                                0.60%
Expect card and resi real estate to drive 33% of EPS
growth (or 72c) to 2013; share buy backs to drive
35% of EPS growth (or 75c)                                                                                          0.18%       0.05%                -0.36%     -0.01%      1.08%

  0          0.5      1       1.5           2            2.5           3          3.5    4                0.10%

   2010 EPS est.      1.27                                                                     0.52%
   Card               0.00          0.36

   Resi Real Estate          0.00            0.35
                                                                                                ROA                                                                          ROA
                                                                                               2010E                                                                        2013E
   Commercial                        0.00         0.17
                                                                                             Source: Company data, Morgan Stanley Research estimates
   Consumer                                0.00     0.07

   Other Earnings                           0.00                0.45

   Share Repo                                            0.00                     0.75

   2013 EPS est.                                                           3.42

Source: Company data, Morgan Stanley Research estimates




                                                                                                                                                                                10
                                                                                            MORGAN            STANLEY           RESEARCH

                                                                                            September 1, 2010
                                                                                            Bank of America




Exhibit 21                                                                                  Exhibit 23
Expect BAC to return $76 bill to shareholders                                               Share repurchases expected to drive 250bps of ROE
through dividends and share buybacks between                                                expansion from 2010e - 2013e; dividends expected
2011e - 2013e                                                                               to add 60bps
                                                                                                                Net Income        Dividend       Share Repo
                                                                                                                 2011-2013       2011-2013        2011-2013

  2013             7.9                     19.3                     27.1                                                                              2.5

                                                                                                                                     0.6                             12.5
                                                                                                                   3.4

  2012          6.1                        23.6                        29.7


                                                                                                    6

  2011       2.8          16.3                    19.0



         -            5   10          15          20        25        30      35       40     2010 ROE est.                                                      2013 ROE est.

                               Dividends      Share Repurchase                              Source: Company data, Morgan Stanley Research estimates

Source: Company data, Morgan Stanley Research estimates

                                                                                            Exhibit 24

Exhibit 22                                                                                  Excluding share buybacks, BAC’s common tier 1
Share repurchases expected to drive 35%, or 75c, of                                         ratio increases by 425 bps to 13.3%, and ROE
the EPS increase from 2010e – 2013e                                                         declines by 269 bps to 9.8% in 2013
                          Net Income                   Share Repo
                                                                                                                             2010E           2011E          2012E       2013E
                           2011-2013                    2011-2013                           Common Tier 1
                                                                                            w/buyback                         9.1%            9.6%         9.0%           9.1%
                                                          0.75                              ex. buyback                       9.1%           10.8%        11.9%          13.3%
                                                                               3.42         Impact of buy-back                0 bp         -121 bp      -293 bp        -425 bp
                               1.40
                                                                                            ROE
                                                                                            w/buyback                        6.0%             8.0%           10.6%       12.5%
                                                                                            ex. buyback                      6.0%             7.5%            9.0%        9.8%
                                                                                            Impact of buy-back               -0 bp           55 bp          165 bp      269 bp
         1.27
                                                                                            EPS
                                                                                            w/buyback                        $1.27           $1.83          $2.65        $3.42
                                                                                            ex. buyback                      $1.27           $1.76          $2.29        $2.67
    2010 EPS est.                                                          2013 EPS est.
                                                                                            Impact of buy-back               $0.00           $0.07          $0.36        $0.75
Source: Company data, Morgan Stanley Research estimates
                                                                                            Price Target*
                                                                                            w/buyback                                      $25.00
                                                                                            ex. buyback                                    $23.00
                                                                                            Impact of buy-back                              $2.00
                                                                                            Note: Our estimates assume BAC repurchases 27% of 2q10 EOP shares outstanding in
                                                                                            2011-2013
                                                                                            Source: Company data, Morgan Stanley Research; E = Morgan Stanley Research estimates




                                                                                                                                                                            11
                                                                    MORGAN        STANLEY       RESEARCH

                                                                    September 1, 2010
                                                                    Bank of America




Highlights from Senior Management Meetings:                         •   Basel 3: Running company for Basel 3 is a hurdle as need
                                                                        to know calibration/timeframe. Expect to optimize balance
Brian Moynihan – CEO                                                    sheet (lower risk-weighted assets, shrink balance sheet
                                                                        depending on required ratios). Expect to know the ask by
                                                                        year-end.
•   ROA: normalized goal of 1% (a floor), 1.25% range is a
    goal. At 50bp now. Credit is biggest driver towards
                                                                    Chuck Noski – CFO
    normalized. Expect progress over time, but can't say when
                                                                    Neil Cotty – Chief Accounting Officer
    BAC will hit this normalized level. Headwinds are economy,
    interest rate structure and financial regulation. If double     •   Opportunities: Resource allocation, capital allocation,
    dip emerges expect more aggressive expense                          streamlining operational effectiveness and efficiencies
    management and higher reinvestment in international.            •   Revenue Lost to Fin Reg: Approach will be to
•   ROE: mid-teens (stated book) commensurate with ROA                  aggressively mitigate. Some but not all of mitigation comes
    goals and estimates for reasonable capital requirements.            through revenues, some through more efficiencies. All
    ROTE falls out in low 20s.                                          done around relationship pricing. What if rate structure
•   Capital management: Reinvest in business (streamlining              doesn't change? Min balance requirements may need to
    opportunities, deepening relationships, international               step up more than currently expected. Priority is total
    footprint/capabilities, large corporate, affluent). Expect          return over size.
    normalized dividend payout ratio in the 30% +/- range. Not      •   Capital Allocation: Shrink non-core assets to free up
    acquiring so remaining capital would be used for share              capital, reinvest in business. Expect to raise dividend and
    buybacks. Timing on dividend hikes and share buybacks               initiate share buybacks or special dividends once we know
    is as soon as possible.                                             the capital rules.
•   Strategy: Best-in-class for the 4-5 key services for            •   Debit card fees: As discussed on conference call, mgmt
    consumers, companies and institutional investors.                   felt the Fed had little wiggle room, assumed 1-2 pricing
•   Investments: Increasing in affluent, corporate, sales and           regimes, assumed they would have a slight margin over
    trading, international. Flat in the highly efficient middle         cost of providing service. Expect to mitigate, but those are
    market. Headcount likely to decline overtime in retail/card/        still being reviewed, tested.
    mortgage as credit improves.                                    •   DTA: NOL is $20-21 bill of which a little over half is UK,
•   Expense Ratio: Expect to be 55-60% over time as credit              which has unlimited expiry. Rest is US based with a 2027
    improves. Higher than pre-crisis given GWIM and MER.                expiry. $15bil associated with reserve build.
    Levers from current higher expense ratio are lower credit
    related headcount, more efficient retail customer delivery,     Mark Linsz – Treasurer
    IT consolidation (west retail and MER/BAC).
                                                                    •   NII: Levers to pull mostly liabilities. Focused on reducing
•   Balance Sheet: Paring away non-core businesses to
                                                                        long-term debt. Expect to reduce ~$95b in l/t debt by 4q12
    create capital and capacity to lend, and to reduce
                                                                        as BAC reduces non-yielding non-core assets enabling l/t
    long-term debt. Triangulating capital/liquidity
                                                                        to roll off. Swap adjusted cost of funds at ~3%, implying 15
    structure/debt funding structure. Roll-off portfolio
                                                                        bp, or 5%, benefit to nim (all other things equal). Maturities
    disclosure coming.
                                                                        rolling, but spike in 2q12 (tlgp issuance). Some
•   Retail fees: Expect to recoup lost revenues over time
                                                                        incremental opportunities to lower CDs and deposit yields,
    through repositioning deposit account fee and rates,
                                                                        but these are close to a floor.
    greater efficiencies, etc. Not promising all revenues will be
                                                                    •   Balance Sheet: Working to generate short-term duration
    recouped.
                                                                        loans. Given oci impact and potential oci changes, could
•   Mortgage: Origination business strong with good margins
                                                                        see investment book's marginal investment shift from
    (obscured by reps and warranties cost) Expect workouts
                                                                        securities to loans (afs).
    associated with credit and servicing book will take another
                                                                    •   Liquidity: High due to Basel 3, expected l/t debt roll-offs,
    24-36 months to conclude.
                                                                        expected rate changes (stay short). Termed out ~ half of
•   Headcount today of 50k goes to 30k or so in four years as
                                                                        repo book.
    workouts resolved
                                                                    •   Basel 2: Completed first quarter in parallel. Earliest
•   NIM: Industry wide challenge. Levers to fight include
                                                                        release on implications is 3q11, although bias is that it is
    exiting non-core franchises which enable debt shrinkage,
                                                                        more likely to be later than sooner. Expect to optimize as
    deepening client relationships, expense management.




                                                                                                                                  12
                                                                     MORGAN        STANLEY       RESEARCH

                                                                     September 1, 2010
                                                                     Bank of America




    regulators approve models. Currently expect trading rwas         •   Sales Management: Changed how sales team is
    to go into effect 4q11, although that could change too.              measured/rewarded to balanced relationship selling that
•   Basel 3: will optimize for this too. Hard to discuss as              focuses on the total relationship, incents packaged sales.
    calibration/timing tbd. Is looking at dta/msr/oci/min interest   •   Assessing alternative ways to drive revenue including
    given potential changes.                                             secured card, prepaid card, etc. Efficiencies also
                                                                         opportunity including folding California and Pacific NW
David Darnell – President, Global Commercial                             retail systems in to BAC retail systems and negotiating
Banking                                                                  with vendors (business-as-usual).
•   Strategy: Focused on deepening client relationships and          •   Not looking for large private label transactions, focus on
    pricing customers holistically across suit of products and           deep affinity relationships and cash rewards.
    services offered which partially mitigate spread pressures       •   Durbin: Mitigation of Durbin Interchange: will include new
    and lack of loan demand.                                             product offerings/pricings. Will work through value
•   Credit based revenue comprises less than half of his client          proposition with merchants.
    revenues (40%). Treasury (33%) and capital markets and           •   Renegotiated card portfolio volumes coming down as
    M&A (15-17%) are other large contributors while the rest is          seeing less of a need for that, losses declining.
    from card, leasing and merchant.                                 •   Card Spend up 3-5% y/y, debit spend up a bit higher than
•   Credit improving in both commercial and cre.                         that. Improvement started in tail end of 2q10, spend up on
•   Pricing and extent of relationship are considered before             basics (discretionary at mass affluent). Some of this
    lending, competition on pricing high.                                reflects gas/fuel prices.
•   Benefiting from MER franchise.                                   •   Card pricing getting more competitive, especially
•   Will aggressively defend client base.                                convenience users.
•   CRE: Working way thru CRE maturities; which are paid off         •   Card losses declining, slope not decelerating yet.
    at maturity, refinanced (if borrower has cash flow) or           •   Returns: Card returns on tangible; high teens to low
    worked-out.                                                          twenties, below prior high twenties returns pre-card act.
•   CRE portfolio is short-term (2-3 yrs) unless BAC has a           •   Deposit ROE: depends on how returns are measured;
    sizeable relationship.                                               BAC has largest deposit base; lowest rate paid; lowest
•   Competition: See regional banks as very aggressive on                expenses per dollar deposit, deposits deliver stability in
    pricing.                                                             low rate environment which is critical even though margins
•   Risk of Housing Price Decline: Does not expect                       may be low.
    dramatic impact on resi mortgage construction portfolio if       •   Seen bulk of deleveraging but not over yet
    housing prices fall modestly (5-10%).
•   CB Segment: Commercial bank has $206b in loans,                  Greg Gobby – CFO, Mortgage Business
    $145b in deposits and 148,000 clients. Business
    segments include; small business, middle market and              •   Reps/Warranties reserves based on forecast of default
    business banking across 6 regions of the country.                    expectations in portfolio; for GSEs use experience with
                                                                         prior defaults and their propensity to request repurchase
                                                                         (long standing experience with GSEs); don’t have as much
Joe Price – President, Consumer and Small                                experience with monolines. And have little experience with
Business Banking                                                         private investors in securitization transactions as hardly
Susan Faulkner – Consumer Sales and Service                              any repurchase requests submitted.
Executive                                                            •   Home price base case: Prices remain flat for several
                                                                         quarters then slight reversion to increase to historical
•   Strategy: Rethinking customer value exchange (focusing               levels of increase over time.
    on relationship, selling a package); running pilots later this   •   Potential impact of home price decline: May increase
    year.                                                                some frequency of default; severity wouldn't increase in
•   Reconfiguring accounts over next 12 months starting                  home equity at all (already 100%) and very little in first lien
    first with ebanking (for those who want online banking and           portfolio.
    no checks) while non-ebanking is priced differently and          •   Housing Price Tail Event: They stress for significant
    higher.                                                              downturn (e.g., 15% decline in HPI) which would drive
                                                                         sharp declines in production, sharp increases in losses;
                                                                         not threatening to institution, but cost to p&l.



                                                                                                                                    13
                                                                   MORGAN        STANLEY       RESEARCH

                                                                   September 1, 2010
                                                                   Bank of America




•   Core mtg business: Originate to distribute model is            Valuation and Risks
    profitable today with wide margins obscured by R&W             Our $25 price target is based on a blend of valuation
    expenses and other legacy costs .                              methodologies, residual income valuation (using a normalized
•   Legacy business costs: R/W and litigation. Current             beta and cost of equity capital), discounted PE and discounted
    reserves based on experience with counterparties to date       PB valuations. Catalysts are declining credit losses in 2010
    and loss estimates.                                            and capital management in 2011 (higher dividends and share
    o 18-24 months before seeing back-end issues                   buybacks). Our bull case intrinsic values use residual income
         significantly subside from servicing portfolio            valuation and our bear case intrinsic values are based on 2010,
         perspective                                               bottom-of-cycle, bear case, price-to-tangible book. We
    o Expect headcount to shrink from 50K today to 30k             assume a 5.0% risk-free rate and a 4.5% equity market risk
         four or so years out as lower credit costs require less   premium in the base case and a 2.5% risk free rate and 4.5%
         people to work through foreclosures…etc. This could       equity market risk premium in the bear case.
         drive significant expense saves.
•   Home Equity: Credit costs are a significant burden. Think      Risks: For BAC shares specifically, downside risks to our
    early/late stage delinquencies peaked.                         thesis and price target include higher cum losses, particularly in
•   Core insurance business: Profitable today. Previously          consumer asset classes, legal challenges from homeowner or
    announced that BAC is pursuing sale of a portion of this       investor groups, integration challenges associated with the
    business.                                                      MER, lower share repurchase than we forecast, and stricter
•   Mtg Originations: Overall portfolio below 80% LTV; non         than expected regulatory interpretation of financial reform
    FHA portfolio around 70% LTV (prime) – could increase if       legislation. Upside risks include lower consumer losses,
    move from securities to whole loans and let more stay on       realization of any of several different investments such as
    balance sheet. Already in some markets with 80% LTV.           China Construction Bank and MER’s securities processor, and
                                                                   earlier and larger accretion from MER and CFC.




                                                                                                                                 14
                                                                                 MORGAN         STANLEY         RESEARCH

                                                                                 September 1, 2010
                                                                                 Bank of America




                                                       Morgan Stanley ModelWare is a proprietary analytic framework that helps clients
                                                       uncover value, adjusting for distortions and ambiguities created by local accounting
                                                       regulations. For example, ModelWare EPS adjusts for one-time events, capitalizes operating
                                                       leases (where their use is significant), and converts inventory from LIFO costing to a FIFO
                                                       basis. ModelWare also emphasizes the separation of operating performance of a company
                                                       from its financing for a more complete view of how a company generates earnings.



                                                       Disclosure Section
The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley & Co. Incorporated, and/or Morgan Stanley C.T.V.M. S.A.
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Morgan Stanley does not assign ratings of Buy, Hold or Sell to the stocks we cover. Overweight, Equal-weight, Not-Rated and Underweight are not the




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equivalent of buy, hold and sell. Investors should carefully read the definitions of all ratings used in Morgan Stanley Research. In addition, since
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                              Coverage Universe    Investment Banking Clients (IBC)
                                             % of                   % of % of Rating
Stock Rating Category            Count       Total     Count Total IBC Category
Overweight/Buy                   1082           42%            381         43%           35%
Equal-weight/Hold                1145           44%            402         46%           35%
Not-Rated/Hold                     13            0%              4          0%           31%
Underweight/Sell                  364           14%             91         10%           25%
Total                           2,604                          878
Data include common stock and ADRs currently assigned ratings. An investor's decision to buy or sell a stock should depend on individual
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Analyst Stock Ratings
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Analyst Industry Views
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.
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                                                                                             MORGAN           STANLEY            RESEARCH

                                                                                             September 1, 2010
                                                                                             Bank of America




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                                                                                                                                                                            17
                                                                                           MORGAN    STANLEY            RESEARCH




The Americas                                   Europe                                        Japan                           Asia/Pacific
1585 Broadway                                  20 Bank Street, Canary Wharf                  4-20-3 Ebisu, Shibuya-ku        1 Austin Road West
New York, NY 10036-8293                        London E14 4AD                                Tokyo 150-6008                  Kowloon
United States                                  United Kingdom                                Japan                           Hong Kong
Tel: +1 (1) 212 761 4000                       Tel: +44 (0) 20 7 425 8000                    Tel: +81 (0) 3 5424 5000        Tel: +852 2848 5200




Industry Coverage:Banking - Large Cap Banks

Company (Ticker)                              Rating (as of) Price* (08/31/2010)


Betsy L. Graseck, CFA
American Express Company                     O (11/23/2009)                   $39.87
(AXP.N)
BB&T Corporation (BBT.N)                     E (10/05/2007)                   $22.12
Bank of America (BAC.N)                      O (05/07/2009)                   $12.45
Bank of New York Mellon Corp                 O (04/13/2006)                   $24.27
(BK.N)
Capital One Financial Corporation             E (11/23/2009)                  $37.86
(COF.N)
Citigroup Inc. (C.N)                          E (07/24/2008)                   $3.72
Discover Financial Services                   E (03/05/2010)                  $14.51
(DFS.N)
Fifth Third Bancorp (FITB.O)                 E (07/10/2008)                   $11.04
J.P.Morgan Chase & Co. (JPM.N)               O (12/11/2006)                   $36.36
KeyCorp (KEY.N)                              E (08/07/2009)                    $7.37
Northern Trust Corp. (NTRS.O)                O (10/31/2007)                   $46.13
PNC Financial Services (PNC.N)               O (10/31/2005)                   $50.96
Regions Financial Corp (RF.N)                U (11/21/2008)                    $6.43
State Street Corporation (STT.N)             E (04/26/2009)                   $35.08
SunTrust (STI.N)                             E (10/30/2009)                   $22.49
U.S. Bancorp (USB.N)                         E (12/02/2002)                    $20.8
Wells Fargo & Co. (WFC.N)                    O (10/16/2008)                   $23.55
Cheryl M. Pate, CFA
Boston Private Financial Holdings,            E (11/21/2008)                   $6.28
Inc. (BPFH.O)
Wilmington Trust Corporation                  E (11/21/2008)                        $8.8
(WL.N)

Stock Ratings are subject to change. Please see latest research for each company.
* Historical prices are not split adjusted.




© 2010 Morgan Stanley

				
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