Operator: Ladies and gentlemen, we are experiencing technical difficulties. Please remain on the line. The conference will now resume…
Operator: [Operator Instructions]. Our first question is from Matthew O’Connor at UBS
: I guess the question is why pay $29 at this point?
: Yeah, it’s an obvious good question. You can think of several scenarios. One, probably the more likely is that Merrill had the liquidity and capacity to see this through… Secondly, there’s always the possibility of investment in Merrill Lynch by others and so then others would have that opportunity, and then finally, we could have roll the dice and possibly could have got it at a cheaper price. We thought the long-term benefits were so overwhelming, it was such a strategic opportunity that we elected not to roll the dice and to go ahead and do it at this time. Again, also, you– I don’t know– I don’t know anybody who’s perfect at picking the absolute bottom, and we thought we had a compelling situation for the shareholders over the long term and at the time, we did.
: Okay, and maybe you can provide a little more color on some of the due diligence that was done. Obviously, there’s a lot of speculation that you are also doing work with respect to Lehman and just wondering how much you could have done with respect to Merrill. I guess also, what kind of protect do you have if, say, six months from now the environment proves that much worse than we are right now?
: Well, Joe, you want to go over it again in terms of– and the JC Flowers piece is key because they were renewing something– an effort that had already gone on and been very, very extensive.
: Matt, kind of reiterate but give you a little bit more. Clearly we had a tremendous amount of historical knowledge both as a competitor with Merrill Lynch and reviewed and analyze the company over the years. As Ken referenced, we did have his as adviser several among them, JC Flowers with pretty extensive knowledge of the company and while none of us like the market turmoil we’ve been through in the last year, it has caused us all to be much more attune to the quality of particularly named credits and/or other asset classes so it’s not as if we don’t have a very significant knowledge of the markets around the asset classes that are most problematic. In addition, as you would expect, we deployed the team that we would ordinarily deploy in these types of situations, which had well over 45 people from our team on site as well as others offsite outside counsel and the like. So collectively with that group and quite Frankly, the progress that Merrill Lynch had made in reducing the risk exposure such and analyzing them and having all that laid out, given the efforts that the manage management team made over the last period made it possible for us.
: Okay. And just a last question, if I may. You mentioned the capital ratios that fit below your target. I think it will be in the low 7s on a tier 1 pro-forma and for Countrywide and Merrill which is still below the 6% well capitalized. How do you anticipate rebuilding the capital and my guess is you want to protect it if the environment deteriorates more than we’re looking for.
: Matt, as I said, you know, we’ll continue to evaluate all the opportunities we had to rebuild that capital. I mean, as we referenced a few minutes ago, we do have dimunition ewe nation because the Countrywide transaction. Remember this transaction is likely not to close until the first quarter also so there’s some time lapse between now and then, but we’ll continue to evaluate the asset level management, any other opportunity that we have to rebuild capital during that period as well as the ongoing earnings of the company.
: And those options, I assume, would include monetizing some of China Construction, re-evaluating the dividend?
: Ken Lewis: all options, Matt. All I would say about China Construction Bank is what I always say is while their options– the one constant thing we like to say is we plan to have a substantial position in China Construction Bank for a long time, and we don’t go much further than that.
: Operator: All right. We’ll go to Jefferson Harrelson at KBW.
: I want to follow up on Mike’s question about the marks. Can you quantify the marks that you are taking out of the Merrill balance sheet in order to render your tier 1 capital projection?
: Not at this time, we’re not prepared. All of our marks are preliminary and obviously given the public information and those marks, we’re not– we do not want to create a situation where it causes pre-release of Merrill Lynch’s numbers.
: Thanks. Can you talk about pro-forma tangible capital ratio at BAC for this deal?
: Let me get back to you only because I don’t have the stuff in front of me. I was– we were focused on tier 1. Obviously, though the, the capital stack that Merrill Lynch had made progress within recapitalizing has a significant component of common compared to some other institutions and so that will be– that will obviously contribute to this being an all-stock deal helps also.
: Operator: And once again, if you would like to ask a question, simply press the star and one on your touch tone phone. We’ll pause another moment to allow people to queue. And we have a question from Ron Mandell at GIC
: Hi, folks. I was wondering if you could talk a little more about the cost savings? You said the 7 billion is 10% of the combined expense base. I was wondering what expense base and you know, it strikes me as a lot given that Merrill’s costs were only about 6 billion in the latest quarter and also the restructuring charge is smaller than the savings typically, you know, it’s equal to one year’s worth of saving and then I guess, the last question on the amortization expense is the 450. I assume that’s pre-tax?
: On the last question, Ron, yes. And driven principally by the identifiable intangibles, obviously, which would entail customer list both institutional as well as retail side and deposit and some deposit premium on the deposit base.
: On the cost saves, that’s 10% of what?
: Yeah, combined annualized cost base.
: Cost base of Bank of America’s corporate and investment bank?
: I’m not sure.
: Combined institution base.
: What about, you know, revenue loss from people who are doing business with both Merrill Lynch and Bank of America now and may want to diversify, you know, their vendors?
: There will be some, I’m sure, but again, if we overestimate any weight on cost savings, I think we underestimated on the revenue side and then secondly, we’re good at this. This isn’t our first time, and when we– more often than not, if not always, when we say we’re going to get X amount of expense saves, we give them. Operator: Now we will go to Nancy Bush at NAB Research.
: Secondly, Ken, I think a lot of people are going to be asking this question. You have had varying attitude around investment banking, you liked it, you’ve not liked it. Can you bring us up to date on where you stand on the whole subject of investment banking and how big an investment bank you want Bank of America to be?
: Yeah. I think obviously, Merrill Lynch is much, much more than an investment bank. This is the best wealth management company in the world, but we’ve– the frustration I think we’ve had is maybe in some ways we were in no-man’s-land, and I don’t know that, but we had a mission creep. We would stay focused but it was very hard to stay within a narrow frame work and not start getting out away from that and wanting to go international or wanting to get other businesses, and so it was– it has been frustrating, frankly, and we’ve had some stops and goes. This creates the company instantly that would have taken, you know, a decade to build, and I’m not sure in hindsight if, in fact, you would ever spend that much money as quickly as you would need to do it, you know, to get there. So we probably would have been frustrated for quite some time and this just changes that and really does, I mean, the fact that we can– we have the breadth of products that we have now and capabilities into the largest conference banking in the world and I like it again.
: I would ask both of you the other significant piece of news this morning is the failure of Lehman, and you know, what your exposures are, have you been able to clear counterparty positions and you know, what is the debris, I guess, going to from that, you know, over the next few days and weeks for the two of you?
: I can answer. From our side we he have a nominal exposure to Lehman.
: Thank you very much.
: Operator: There don’t appear to be any other questions at this time. I will turn the call to our speakers for any closing remarks.
: I think we’re done, operator. Thank you.
: Operator: This concludes today’s conference call. Have a great day.
