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Barclays Global Financial Services Conference Andy Sieg, Head of Merrill Lynch Wealth Management September 12, 2018
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Page 1: Barclays Global Financial Services Conferenceinvestor.bankofamerica.com/system/files-encrypted...MLWM $250K+ New Households per Experienced Financial Advisor 1 Net new households Gross

Barclays Global Financial Services Conference

Andy Sieg, Head of Merrill Lynch Wealth Management

September 12, 2018

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• Bank of America is well positioned to grow its leadership position with mass affluent to high-net-worth clients

– No. 1 U.S. wealth management market position across client assets, deposits and loans 1

• Highly profitable wealth management platform

– Record GWIM pretax earnings of $2.7B in 1H18; pretax margin of 28% 2

• Highly integrated and scaled business across the wealth continuum drives responsible growth

– Best-in-class platform with industry-leading breadth of products, solutions and capabilities

– Self-directed / digital (Merrill Edge) to full investment advisory (Merrill Lynch / U.S. Trust)

– Top 10 institutional retirement asset plan provider with reach to 5.6MM participants

• Continued investments in the franchise focused on delivering 1:1 advice-based planning

– Investing in top-ranked advisor force through training programs

– Leveraging technology to increase advisor capacity and enhance client experience

• Strongest Merrill Lynch household acquisition in five years

– Aligned compensation program to growth strategy

• Significant opportunity to acquire new households and deepen existing relationships

– ~10MM affluent and high-net-worth households with existing BAC relationship

Key takeaways

2

Note: GWIM defined as Global Wealth & Investment Management. 1 Source: U.S. based full-service wirehouse peers based on 2Q18 earnings releases.2 Presented on a fully taxable-equivalent (FTE) basis.

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Bull market for advice

• Longevity, changing demographics favor advice-based model

• Global political and economic uncertainty

• Decline of traditional pension plans

• US households remain “under advised” financially

3

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4

Redefining how we deliver advice to clients

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GWIM provides significant revenue, income and attractive returns

5

Consumer Banking

$8.2, 38%

GWIM$3.1, 15%

Global Banking

$7.0, 32%

Global Markets$3.3, 15%

2017 Net Income by Business Segment ($B) 1

1 Does not include net losses from All Other of $3.3B for the year ended December 31, 2017. Reported net income for the year ended December 31, 2017 was $18.2B. 2 FTE basis.3 ROAAC defined as return on average allocated capital.

ROAAC 3

22%

Pretax margin

27%

Client Balances

$2.75T

Loans (EOP)

$159B

Deposits (EOP)

$247B20

17

Merrill Lynch Wealth Management

82%

U.S. Trust18%

2017 GWIM Revenue of $18.6B 2

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Unmatched capabilities and scale across the wealth continuum 1

6

Self-directed, digital model with advisor support Serving clients: Every age, every stage

Mass AffluentAffluent/

High-Net-WorthUltra-High-Net

Worth

Self-directed, digital model with advisor support

Advice-based model (client-to-advisor relationship)

Private banking model(client-to-team relationship)

2.5MM accounts

2.6K Financial Advisors

$200B client balances 2 $2.3T client balances

850K households(>$250K assets)

$443B client balances 3

15K Financial Advisors

24K households 4

($3MM, $10MM+ assets)

415 Private Client Advisors

1 Metrics shown as of June 30, 2018 unless otherwise noted.2 As of July 31, 2018.3 Represents U.S. Trust client balances.4 Represents U.S. Trust households ($3MM+ assets) and Merrill Lynch Private Banking & Investment Group households ($10MM+ assets).

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Highly integrated business driving responsible growth …

U.S. Trust OfficeMerrill Lynch and Financial Center

Merrill LynchCo-Location Office

Merrill Lynch Wealth Office

~800 MLWM and U.S. Trust Locations

7

Bank of America's Market Presidents network covers 90 distinct markets driving business integration to ensure lines of business work together seamlessly.

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… and connecting clients across the enterprise

8

FinancialAdvisor

Global Banking & Markets Capital raising M&A advisory Deposits/Lending/ Treasury

Commercial Banking Deposits Lending solutions Treasury services

Consumer Banking Deposits Card Mortgage Self-directed investing

Business Banking Deposits Lending solutions Treasury services

2017 GWIM Business Referrals

3K

1K 31K

53K

3K

4K 7K

18K

Focused on delivering an unparalleled client experience

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Net Income ($B)

Total Revenue ($B) 1 Pretax Margin

9

GWIM financial trends

• Net income of $2B in 1H18 reflected positive YoY operating leverage as well as benefits from a lower tax rate

ROAAC of 28%

• Revenue growth driven by 13% YoY increase in asset management fees, partially offset by lower transactional revenue

85% of revenue from asset management fees and NII vs. 78% in 1H16

• Pretax margin of 28% improved >200bps since 1H16

$1.4 $1.6

$2.0

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

1H16 1H17 1H18

2.9 3.2 3.1

4.14.4 5.0

1.91.7

1.4$8.9 $9.3 $9.6

$0

$3

$5

$8

$10

1H16 1H17 1H18

Net interest income Asset management fees Brokerage / Other

26%27%

28%

20%

25%

30%

1H16 1H17 1H18

Note: Amounts may not total due to rounding.1 FTE basis.

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Total Client Balances (EOP, $B) 1

10

Strong growth in client balances

MLWM MLWM MLWM

US Trust US Trust US Trust

Assets Under Management (EOP, $B)

Deposits (EOP, $B)Loans and Leases (EOP, $B)

$2,419$2,617 $2,754

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

2Q16 2Q17 2Q18

1 Client balances include margin receivables which are classified in customer and other receivables on the consolidated balance sheet.2 Represents AUM flows for the trailing twelve months as of June 30, 2017.3 Represents AUM flows for the trailing twelve months as of June 30, 2018.

$832$991

$1,101

$0

$300

$600

$900

$1,200

2Q16 2Q17 2Q18

$143$153 $162

$0

$60

$120

$180

2Q16 2Q17 2Q18

$251 $237 $234

$0

$50

$100

$150

$200

$250

$300

2Q16 2Q17 2Q18

CAGR: 7% CAGR: 15%

AUM Flows $86B 2

AUM Flows $74B 3

CAGR: 7%

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11

Industry challenges

Industry-wide pricing pressures

Changing client preferences/technology

New entrants, disruptive business models

Changing advisor demographics

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GWIM business model evolution

2009 1 Today 2

1 2009 metrics exclude the results of businesses subsequently exited.2 Represents 2Q18 results and balances as of June 30, 2018 unless otherwise noted.3 FTE basis.4 Represents total GWIM revenue for the year ended December 31, 2017. 5 CIO defined as Chief Investment Office.

Over the past several years we…

• Focused on delivering comprehensive advice

• Sold non-core businesses (cash management, offshore international)

• Deployed best-in-class investment advisory platform (Merrill Lynch One)

• Invested in world-class advisor training program

• Redesigned compensation program to focus on growth

• Deemphasized competitive recruiting

Total client balances

Total revenue 3

Percent of revenue fromasset management fees and NII

Pretax margin

Financial advisor competitive attrition

$2.0T $2.8T

$14.9B $18.6B 4

71% 85%

17% 28%

15% 3%

N/A $151BAssets under management in CIO portfolios 5

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Growing the leading advisor force as we focus on training programs

13

Financial Advisors 1

World-class Training and Development Program

• Revamped Financial Advisor Development Program; nearly 80% of advisors come from training program

• Strong partnership between Consumer and GWIM leveraging enterprise-wide recruiting process

• Leading employer of CFP® professionals in the United States 2

• Advisor attrition levels near historic lows of 3%

#1 Firm

Top 100 Women Financial Advisors

#1 Firm

Best-in-State Wealth Advisors

#1 Firm, #1 Advisor

Top 250 Wealth Advisors

#1 Firm

Top Next-Gen Advisors

#1 Firm

Top 400

#1 Firm

Top 1,200

Advisor Recognition(All awards for 2018 unless noted)

16,170 16,824 17,017 17,442

2Q15 2Q16 2Q17 2Q18

1 Includes financial advisors in Consumer Banking of 2,622, 2,206, 2,244 and 2,049 in 2Q18, 2Q17, 2Q16 and 2Q15, respectively.2 Source: Certified Financial Planner Board of Standards, Inc.

3 Award ranking as of 2017.

CAGR: 3%

3

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Continuous technology investment enhances client experience

Leveraging BAC Digital Leadership

Zelle / Payments

Spending & Budgeting

Scan / Upload Documents

MyMerrill

New

View all your accounts in one

place

Best-in-class Investment Platform

• Multi-year investment in Merrill Lynch One (fee-based advisory platform) – integrated client relationship view

• Established Integrated Solutions Group (1,000 professionals) and introduced low cost investment portfolios centrally managed by CIO

Merrill Edge® Guided Investing Powered by CIO

• Provides more than just an algorithm through Merrill Lynch CIO professional portfolio balancing

• Creates a personalized investment strategy that is designed by investment experts, aligned to goals

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Total net new households

0.3 0.4 0.3 0.4 1.1

2.6

2014 2015 2016 1H 2017Annualized

2H 2017Annualized

1H 2018Annualized

Strongest Merrill Lynch household acquisition in five years

15

MLWM $250K+ New Households per Experienced Financial Advisor 1

Net new households

Gross new households

+86%

1 Excludes Financial Advisor Development Program, recruits, and attrition.

2.43.0

2.52.5 2.3

4.6

7K 30K4.5X

1H 2018 Annualized

FY 2017 Actual

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Opportunities to grow with >10 million existing BAC households

1 Households with investments at BAC includes only Merrill households. $2.5T in investments for 6.6MM affluent households based on $375k per household. 2 $3.9T in investments for 3MM high net worth households based on $1.3MM per household.

7.0MM Affluent HHs with BAC Relationship 1

$250k - $1MM in Investable Assets

0.4MM, 11%

3.4MM High Net Worth HHs with BAC Relationship

$1MM+ in Investable Assets

0.4MM, 11%

~0.4MM HH with investments at BAC 1

6.6MM HH with investments at competitors – 94%

~0.4MM HH with investments at BAC

3.0MM HH with investments at competitors – 89%

~$2.5T in investable assets 1 ~$3.9T in investable assets 2

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Opportunities to grow banking business with existing GWIM clients

Mortgage

2 out of 3 GWIM clients do not have a Bank of America mortgage

Card

3 out of 5 GWIM clients do not have a Bank of America credit card

• No monthly maintenance fees on eligible checking and savings accounts

• Unlimited no-fee ATM withdrawals at non-Bank of America ATMs throughout the U.S.

• No international transactions fees when using your Bank of America debit card

• 75% rewards bonus on eligible Bank of America credit cards

• $600 reduction in the origination fee on a new purchase or refinance mortgage

• 0.5% interest rate discount on auto loans

• 20% rate booster on Money Market Savings (MMS)

Deposits

~$200B in deposit balances are with other institutions

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The power of Bank of America

The power of Global Wealth & Investment Management

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Forward-Looking Statements

19

Bank of America Corporation (the “Company”) and its management may make certain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as “anticipates,” “targets,” “expects,” “hopes,” “estimates,” “intends,” “plans,” “goals,” “believes,” “continue” and other similar expressions or future or conditional verbs such as “will,” “may,” “might,” “should,” “would” and “could.” Forward-looking statements represent the Company's current expectations, plans or forecasts of its future results, revenues, expenses, efficiency ratio, capital measures, strategy and future business and economic conditions more generally, and other future matters. These statements are not guarantees of future results or performance and involve certain known and unknown risks, uncertainties and assumptions that are difficult to predict and are often beyond the Company's control. Actual outcomes and results may differ materially from those expressed in, or implied by, any of these forward-looking statements.

You should not place undue reliance on any forward‐looking statement and should consider the following uncertainties and risks, as well as the risks and uncertainties more fully discussed under Item 1A. Risk Factors of the Company's 2017 Annual Report on Form 10‐K and in any of the Company's subsequent Securities and Exchange Commission filings: the Company's potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation, regulatory proceedings and enforcement actions, including inquiries into our retail sales practices, and the possibility that amounts may be in excess of the Company’s recorded liability and estimated range of possible loss for litigation exposures; the possibility that the Company could face increased servicing, securities, fraud, indemnity, contribution or other claims from one or more counterparties, including trustees, purchasers of loans, underwriters, issuers, other parties involved in securitizations, monolines or private-label and other investors; the possibility that future representations and warranties losses may occur inexcess of the Company's recorded liability and estimated range of possible loss for its representations and warranties exposures; the Company’s ability to resolve representations and warranties repurchase and related claims, including claims brought by investors or trustees seeking to avoid the statute of limitations for repurchase claims; uncertainties about the financial stability and growth rates of non‐U.S. jurisdictions, the risk that those jurisdictions may face difficulties servicing their sovereign debt, and related stresses on financial markets, currencies and trade, and the Company's exposures to such risks, including direct, indirect andoperational; the impact of U.S. and global interest rates, currency exchange rates, economic conditions, trade policies, and potential geopolitical instability; the impact on the Company’s business, financial condition and results of operations of a potential higher interest rate environment; the possibility that future credit losses may be higher than currently expected due to changes in economic assumptions, customer behavior, adverse developments with respect to U.S. or global economic conditions and other uncertainties; the Company’s ability to achieve its expense targets, net interest income expectations, or other projections; adverse changes to the Company's credit ratings from the major credit rating agencies; estimates of the fair value of certain of the Company's assets and liabilities; uncertainty regarding the content, timing and impact of regulatory capital and liquidity requirements; the potential impact of total loss‐absorbing capacity requirements; potential adverse changes to our global systemically important bank surcharge; the potential impact of Federal Reserve actions on the Company's capital plans; the possible impact of the Company's failure to remediate the shortcoming identified by banking regulators in the Company's Resolution Plan; the effect of regulations, other guidance or additional information on our estimated impact of the Tax Act; the impact of implementation and compliance with U.S. and international laws, regulations and regulatory interpretations, including, but not limited to, recovery and resolution planning requirements, Federal Deposit Insurance Corporation (FDIC) assessments, the Volcker Rule, fiduciary standards and derivatives regulations; a failure in or breach of the Company's operational or security systems or infrastructure, or those of third parties, including as a result of cyberattacks; the impact on the Company's business, financial condition and results of operations from the planned exit of the United Kingdom from the European Union; and other similar matters.

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• The information contained herein speaks only as of the particular date or dates included in the accompanying slides. Bank of America does not undertake an obligation to, and disclaims any duty to, update any of the information provided.

• The Company may present certain key performance indicators and ratios excluding certain items (e.g., DVA) which result in non-GAAP financial measures. The Company believes the use of these non-GAAP financial measures provides additional clarity in understanding its results of operations and trends. For more information about these non-GAAP financial measures, please see the presentation of the most directly comparable financial measures calculated in accordance with GAAP and accompanying reconciliations in the earnings press release for the relevant period and other earnings-related information available through the Bank of America Investor Relations website at: http://investor.bankofamerica.com.

• The Company allocates capital to its business segments using a methodology that considers the effect of regulatory capital requirements in addition to internal risk-based capital models. The Company's internal risk-based capital models use a risk-adjusted methodology incorporating each segment's credit, market, interest rate, business and operational risk components. Allocated capital is reviewed periodically and refinements are made based on multiple considerations that include, but are not limited to, risk-weighted assets measured under Basel 3 Standardized and Advanced approaches, business segment exposures and risk profile and strategic plans. As a result of this process, in the first quarter of 2018, the Company adjusted the amount of capital being allocated to its business segments.

Important Presentation Information

20

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