Q2 2021 Bank of America Corp Earnings Call
Good day, everyone and welcome to the Bank of America of second quarter earnings announcement at this time all participants are in a listen only mode. Later, you will have the opportunity to ask questions. During the question and answer session. You can register to ask a question of anytime by pressing star and 1 on your Touchtone phone.
Please note today's call is being recorded and it is now my pleasure to turn the conference over to Lee Mcintire. Please go ahead.
Thank you Catherine good morning, Thank you for joining the call to review our second quarter results hopefully you've had a chance to review our earnings release documents as usual, they're available, including the earnings presentation that we'll be referring to during the call..1 hour of Investor Relations section of the Bank of America Dot Com website.
I'm going to first turn the call over to our CEO, Brian Moynihan Force in opening comments and then Paul Donofrio, our CFO will cover the details of the quarter before I turn the call over to Brian and Paul Let me just remind you we may make some forward looking statements and refer to non-GAAP financial measures during the call regarding various elements.
Of the financial results.
Forward looking statements are based on management's current expectations and assumptions and they're subject to risks and uncertainties factors that may cause actual results to materially differ from expectations are detailed in our earnings materials, our SEC filings on our website.
Information about the non-GAAP financial measures, including reconciliations to U S. GAAP can also be found in our earnings materials that are on our website. So with that let me turn it over to you Brian its all yours.
Good morning, and thank all of you for joining us and thank you Lee.
Today Bank of America reported $9.2 billion in after tax net income of $1.3 per diluted shares.
These results included a few items worth highlighting and I'm on page 2 ahead of Paul going through the details.
First as asset quality continued to improve and the economy continue to recover we released $2.2 billion of credit reserves established in the first half of last year.
Yeah, the idea of that a company with our credit quality and other industry participants would be releasing reserves. This quarter is not new news, but the reality is of Bac you were seeing credit credit quality levels that are very strong net charge offs fell to 25 year low as a percentage of loans not just raw dollar amount.
Jim You mentioned a few items I don't believe we're industrywide are expected.
We recorded a 2 billion dollar of positive income tax adjustment following last months of enactment of an increase in the U K corporate income tax rate to 25%.
This required the remeasurement of our deferred tax asset, which just reverse of the write downs from previous years when the tax rate to a lower edition of expense level included 2 things I would note. These add up to about $800 million with our strong results and the tax benefit we took the opportunity to pre fund of $500 million to our tariff.
Foundation.
Salaries are playing funding for not only the rest of this year, but for next year as well.
This is not new money just utilizing some of the tax benefit to cover future expense.
We also recorded roughly $300 million of expense associated with processing transactional card claims related to state unemployment benefits.
It represents to a large degree of catch up as we move through claimed by Blackrock backlogs.
Away from these items he produced another quarter of solid earnings of showed evidence of good client activity in an economy that continues to recover from the pandemic.
Now as we all know that the health care crisis has shown improvement in economies has recovered progress on vaccinations, along with the continued support of fiscal and monetary policy.
As a promoter of Paul and speed of recovery and a return to economic health.
We like others of reopening our facilities and we're seeing more products being sold by our teammates.
And to the continued digital engagement at very high level.
Our advisors and bankers and relationship managers are once again meeting with clients face to face building, even stronger relationships, we're seeing customer demand continue to grow given the opportunities of our cloud companies see.
Well I'd take a minute or 2 on the economy and that if you go to slide 3.
We have included a few slides highlighting our customer data, let me hit a few highlights the GDP growth estimates by of Bofa Securities Research team for the second quarter stand at 10% and stand at 7% for the full year of 2021.
The reopening is further driving projections of an economy has continued to grow at a rate of.
Above the pre pandemic period into 'twenty 3.
Most of the unemployment rate dropped below 6% this quarter of projected by economists continue to fall. You'll also note the stability to increase consumer.
Consumer spending from our own B, a C customers, which is not only of much higher than the same periods in 2020 of which you would expect.
But as notably 22% higher than of first half of 'twenty, 1 compared to 2019 as you can see that in the lower right of page.
That growth rate of 19 was already growing strongly before the pandemic.
A few comments regarding the characteristics of spending I think are interesting we're halfway through the year and of total payments through those through all of different means of 1.8 trillion dollars, that's 60% of last year's level.
Last year, Indeed was a record even though the suppressed and in various periods when business were shut down.
More specifically for the second quarter, the total Bac consumers ball business payment set of fourth quarterly consecutive record, reaching $976 billion of 41% year over year and 23% of of 19.
The trend has also continued into early July spending consol rate as Cobra vaccinations increase visits reopening of domestic travel increase goodbye spend at retailers and services comprises over 50% of debit and credit card spending of portion of the total spend.
Of that increased 27% of of 2019 second quarter, but did slow a bit towards the end of the quarters consumer move their attention and started taking summer leisure trips and activity.
You can see that by noting that return of travel and entertainment spending which comprises about 10% of debit credit cards, but you can see we're recovering traveled remains below 2000, while recovering travel remains below 2019 spending levels.
Splitting of travel up a bit as of mid June domestic airline purchase of were up 8% over 2019, well international airline purchase on our cards are still down approximately 40% shutting the difference of the progress against the war on the virus ninth states versus other place.
Now, let's go to slide 4 we just put this chart in to show you that the consumers are paying their bills. We show in this each quarter and so you could see that the actual card delinquency levels continue to edge down.
Even as people are out and circulating of cod.
Before we go to Paul I want to comment specifically on 3 areas of interest you loan growth NII and expense what we can do that on pages 5 and 6 so first of all of those Paul at all going to show you. The average loans Pollo show you that later end of period loans I'll show you the immediate and long term trends, which are on page 5.
What all of these figures point to is accelerating growth during the quarter.
That's it.
We've spoken about on occasion this quarter, we saw low levels across most every business moved past stabilization of begin to make progress companies.
Companies need to build of inventory higher workers to meet the growing customer demand.
This virtuous circle a.
Circle of.
Hiring workers and meeting customer spending will help drive the economy and hopefully we'll resolve more line usage on our loans.
You can see the path.
On slide 5 of loans since the pandemic pandemic started in March 2020.
As you can see all of them are turning up in recent months.
Moving to slide 6 you see the more traditional detail for our company.
Let's start of lower right hand side of that slide and talking about the commercial portfolio commercial loan balances after adjusting for the reductions in P. P. P loans for Q2 quarter to forgetting. This grew $15 billion. This was led by global Marc as client borrowing activity.
But beyond that and still excluding the P. P. P loan forgiveness of middle market lending group and our business banking team finally had growth in the month of June 2021 of first since last March.
Fueling some of this improvement is calling effect of this relationship managers. They have increased their calling efforts, we're now aggressively calling on targeted prospects.
With vaccination of progress face to face meetings had nearly doubled each month over the past 90 days.
Loans of wealth management clients grew an impressive 5% in the quarter as these customers borrowers who are accustomed lending products and small business our practice solutions.
Group, which supports medical dental and veterinary practices has been building throughout the quarter of small business production overall is back to pre pandemic levels.
Turning to consumer loans overall growth at end of period loans was 6 billion car.
Card loans grew with increased spending even as customer of paying a percentage has remained high at origination of outgrowing fairly consistently although recently lowered or supplies of affected that.
Mortgage balance growth, which is a big part of our loan portfolio in consumer has been a challenge in the low rate environment with high refinancing volumes exceeding originations in past quarters.
We are only modestly down this quarter as our origination volumes of finally overcoming to pay us.
We are pleased with the trajectory through the period and that piece into the second half of the year well average loans drive their debt loan balances during the third quarter will drive that I. It's good to start with a trend that has reversed the past quarters declines.
But anyway. The good news is that we correctly called of bottom 3 quarters ago.
We told you that net 3 that we thought the third quarter of 2020 would be the trial, despite the volatility and lower rate news insignificant decline of loans, we've been able to hold and I've at that level or more for 3 straight quarters, we expect it to move higher and Paul is going to discuss that later.
They're able to comment on is expense.
Thought.
On a reported basis, we saw a $5 billion and expense reduction from first quarter of 'twenty, 1 to second quarter of 'twenty 1.
This quarter. We also had about 800 million of notable items for the aforementioned charitable contribution of unemployment claims process absent those notable items expenses, but of that had been down about $1 billion and.
And then a low of $14 billion rate. This a level we are targeting expense as we move through the rest of the year.
And of second half of the year as we normalize our operations will continue return of our business as usual working on process improvements that allow us to reduce our head count and to continue to fund the franchise of the best at.
Account in the second quarter, including excluding your summer insurance declined by roughly 2500 or over 1% from.
From the first quarter.
So the messages for this quarter of straightforward you organic growth machine that we had rolling before the pandemic hit us re emerging as the economy nor of the normalized we started be careful to ensure that the war on the virus stays 1.
But we're seeing great terrorists and retail preferred in small business. We saw a strong production of core transaction accounts above pre pandemic levels. This quarter was our best net sales growth in checking accounts since the second quarter of 2015.
We saw a car production of about 90% overall of pre pandemic, but net carts of net of runoff were positive. The first time since the quarter. The first quarter of 2021, when we entered the pandemic.
We saw growth of new Merrill Lynch investment accounts, and Paul will talk to you about debt. We saw good mortgage production, we saw a stronger digital activity in wealth management. We saw household growth and strong flows continue to grow even with the use of our banking platform to grow its credit side and go with banking, we saw loan growth of new production coming on by a lot of line usage.
Still remains very low.
So investment banking closed this quarter was record pipelines and markets. We saw a strong first half even compared to 2020 in a strong second quarter, albeit with more normal seasonal impact so normalizing more like 19, but still higher than we.
All of head count come down as operational excellence kicked in by over 2000 people we have.
Work to do to keep driving down of core expenses and getting out of the net COVID-19 expenses over time.
And above all due to responsible growth we saw a strong core credit metrics. So as economy continues to recover we are seeing organic growth engine kick back and with that I'll turn it over to Paul.
Thanks, Brian Hello, everyone I'm, starting on slide 7.
As I have done in the past few quarters of the majority of my comments or excuse me all my comparisons will be relative to the prior quarter rather than year over year given the pandemic.
Since Brian already covered a lot of the income statement I will just add a couple of comments on revenue and returns.
Revenue was down 6% from Q1, the decline was driven by lower sales and trading results.
That more than offset.
All of the consumer and wealth management revenue.
Which was a result of higher card income and AUM fees.
It is also worth noting that while investment banking fees were down from a record Q1 level. They.
They remained strong at more than 2 billion in Q2 last.
Lastly, when comparing revenue against the prior year quarter remember Q2, 'twenty included $8.704 million gain on the sale of some mortgage loans.
With respect of returns our return on tangible common equity was 20% and ROA was 123 basis points, both benefiting from the positive tax adjustment and sizable.
There are really.
Moving to slide 8 balance sheet expanded 60 billion versus Q1, 2 a little more than 3 trillion and total assets.
Deposit growth.
24 billion supported 16 billion of loan growth, while the combination of market based funding and long term debt issuance supported expansion of the balance sheet and global markets.
Other notable movements on the balance sheet included the continued deployment of excess cash into securities.
Securities increased 83 billion, while cash declined 66 billion.
Driven by the additional deposit growth.
Our liquidity portfolio remained above 1 trillion or 1 third of the balance sheet.
Shareholders' equity increased $3 billion as earnings outpaced capital distributions.
Or distributions of $5.8 billion were limited to the average of earnings in the previous 4 quarters per of regulatory guidelines and we're well below the $9 billion earned in the quarter.
With respect to regulatory ratios.
Assistant with Q1 standardized remained the binding approach for us and was down a little less than 30 basis points from Q1, while the CET 1 ratio of declined 30 basis points from Q1. It remained 200 basis points above our minimum requirement of 9.5%, which translates into a $31 billion.
Capital cushion.
While book value Rose 3 billion regulatory capital was up 1 billion is the $2 billion tax adjustment did not benefit CET 1 capital.
<unk> from the liquidity of the Port Securities growth in our markets balance sheet and higher G. M of loan activity more than offset the benefit of 200 ratio from higher capital.
Our subsequent many of our excuse me our supplementary leverage ratio at quarter end was 5.9% dropping from the prior quarter, primarily due to the removal of the regulatory relief.
5.9% versus of minimum requirement of 5% equates to approximately 600 billion of.
Balance sheet capacity, which leaves us plenty of room for growth our T. Lac ratio remained comfortably above our requirement.
Turning to slide 9 Brian reviewed ending loan balances earlier, so I will focus on the average balances which are more closely linked to NII as you look at the year over year trends note that these numbers include P. P. P loans, which have been moving lower now for 2 quarters.
Driven by forgiveness.
You can see the change in those PPP levels on the slide.
Focusing on the linked quarter change while loans on an ending basis were up nicely on an average basis, even with a $3 billion decline in P. P. P balances loans were flat.
Wealth management and global markets experienced the most notable improvements continued to benefit from security based lending as well as custom lending while continuing to have solid mortgage performance.
In global markets, we looked for opportunities to lend to clients against a number of different asset types of creating mostly investment grade exposures.
Good use of our liquidity.
In consumer we saw a credit card loans stabilized for the first time in more than a year as credit spending ramped up and new accounts continued to build across the quarters quarterly new account levels are nearly back to 2019 levels.
With respect of deposits on slide 10, we continue to see significant growth across the client base not only because of the growth and the money to buy but also because we added new accounts and attracted increased liquidity from existing customers.
I would just note that the link quarter growth on a spot basis included a headwind of about 34 billion from customer of income tax outflows.
Normally we see deposits declined in the second quarter, given tax payments, but this year, we saw strong growth even with the tax payments.
Turning to slide 11, and net interest income on a GAAP non FTE basis NII for Q2 was.
10.2 billion $10.3 billion on an FTE basis net interest income declined a little more than 600 million from Q2, 'twenty driven by the rate environment and lower loan balances, but showed modest improvement from Q1.
Year over year comparisons beginning next quarter are expected to improve nicely as Q3 'twenty has proven to be the nadir for NII and we are expecting kind of an improvement in Q3 and Q4.
Compared to Q1, the benefit of an additional day of interest.
And liquidity of deployed was offset by a lower level of PPP loan forgiveness of.
The absence of proceeds recorded in NII from the Q1 litigation settlement.
And modestly higher premium amortization expense.
The net interest yield declined 7 basis points from Q1, driven by the of the continued addition of lower yielding debt securities in Q1, and Q2 and a larger global markets balance sheet.
Remember as part of our liquidity that remain I would include about 150 billion of debt securities hedge to floating which earned a bit more in cash.
As you'll note given all of the deposit growth of low rate, our asset sensitivity to rising rate remain significant and mostly unchanged from Q1, highlighting the value of our deposits and customer relationships.
Let me give you a couple of thoughts.
Round NII for the back half of the year.
Last quarter.
1 of the forward interest rate environment was 30 to 40 basis points higher.
We told you we were targeting NII at roughly 1 billion higher than in Q4 of this year.
This quarter's loan growth is encouraging and supportive of what this target and the slowdown in mortgage prepayments should also help improve NII.
Oh.
While we still think getting NII of $1 billion higher by 4 Q is possible EBITDA.
The recent significant decline in long end rates presents a challenge.
There's a possibility of course assumed loans continued to grow in the second half and rates don't move lower from here.
To improve our chances we could decide to deploy additional liquidity at higher fixed rate in the coming weeks and months as we.
8 the tradeoffs between liquidity capital and earnings.
Turning to slide 12 and expenses.
Q2 expenses were 15 billion of happens.
Sure than Q1.
While lower than Q1 of the combination of the $500 million contribution to the foundation.
And the nearly 300 million increase in costs associated with unemployment claims processing kept expenses above the low 14 billion dollar target shared with you last quarter outside of these 2 items expense was lower driven by the absence of a few Q1 items.
[noise] seasonal payroll taxes.
The real estate impairment charge and the acceleration of expense due to incentive comp of war changes.
Additionally, lower incentive comp and severance cost also contributed to the decline.
Lastly, our COVID-19 costs saw a modest decline as some pandemic related employee programs began to roll off but this was mitigated to a certain degree by preparation costs for associates returning to the office.
As we go to the segments.
I would just note.
The sizable foundation contribution was allocated to the lines of business and therefore negatively impacts comparisons to prior of prior quarters.
As we look forward, we continue to invest.
At a high rate in people and in technology, and a new financial centers.
We are seeing the benefits of these investments and now as we move forward, we expect that natural attrition will allow us to reduce head count as we transition back to a more normal business environment.
As Brian mentioned, excluding some of in terms of our head count this quarter moved down by about 2500 people.
Turning to asset quality on slide 13.
Nothing but good news to report here.
Net charge offs this quarter fell to $595 million or 27 basis points of average loans. This is the lowest loss rate in more than 2 decades.
That is 28% lower than Q1 and more than 30% below the second quarter of 2019.
Our credit card loss rate was 267 and several of loan product categories. We're in recovery positions this quarter.
Provision was $1.6 billion.
It was the $1.6 billion dollar benefit.
Net benefit driven by the continued improvement in the macroeconomic outlook, which resulted in the $2.2 billion dollar release of credit reserves split fairly evenly between consumer and commercial loans.
Our allowance as a percent of loans and leases the end of the quarter at 1.55%, which is still well above the 1 point to 7%, which was the level as we began 2020 following our day 1 adoption of Cecil.
And as a reminder, the mix of our loans has also changed since diesel they want.
To the extent the economic outlook and remaining uncertainties continue to improve we expect our reserve levels could move lower.
Okay on slide 14, we show the credit quality metrics for both the consumer and commercial portfolios of couple of points I would make here with respect of card losses, given the continued low level of late stage delinquencies in the 180 day pipeline, we would expect card losses to decline again in Q3.
For at least the next couple of quarters I would expect total net charge offs to moderate around the current level with lower card losses, partially offset by lower net recoveries and other products.
With respect of commercials retro reserve over criticized exposure and mpls both decline in the quarter.
Turning to the business segments, and starting with consumer on slide 15.
Consumer banking produced another good quarter with strong customer deposits and investment flows and the return of card loan growth.
This reflects the strength of our brand our digital innovations and the deployment of specialists in our centers all of which enabled us to capture more than our fair share of the increase in customer of liquidity.
As Brian said earlier this was a quarter of reopening where both our high tech and high touch capabilities delivered growth and client activity.
Given vaccination progress, we reopened certain financial centers.
More of our associates were at their posts in our financial centers and customer traffic was up all of the above drove higher sales in our centers.
At the same time, we also saw increased sales through digital channels, which suggest increases and digital engagement are here to stay.
The segment earned 3 billion in Q2, 13% higher than Q1 as revenue expense and credit costs all showed improvement.
You improved 1%, reflecting higher card income an increased purchases purchase volumes and modestly higher account service charges on ATM usage.
Expenses moved lower versus Q1.
Given the absence of the Q1 real estate impairment costs.
And seasonal <unk>.
Payroll tax expense.
We also saw some modest improvement in COVID-19 costs at some of the elevated pandemic related associated costs began to wind down.
Our cost of deposits this quarter improved to an impressive 118 basis points. The team has done a great job servicing more and more deposits.
Maintaining a strong cost discipline aided by digital engagement.
Looking back at Q2.19, we.
We have added 38% more deposits.
While expenses have only increased a little more than 3% annually and support of all of that new activity, even with Covid.
On slide 16.
You can see the significant increase in consumer deposits and investments average deposits of 979 billion are up 55 billion linked quarter and nearly 170 billion from Q2, 'twenty with more than 60% of that growth in checking.
Great paid is down to 2 basis points.
56% of the deposits are low interest checking.
We covered loans earlier, but I would just note that while average loans.
Our down linked quarter.
Period end loans are up modestly excluding pvp as growth in card balances and vehicle lending outpaced a small decline in mortgages.
With respect to investment balances, we reached a new record of 346 billion growing 40% year over year as customers continue to recognize the value of our online offering.
Yeah.
Okay on slide 17.
I'll highlight a couple of points regarding the continued improvement in engagement after crossing 40 million digital users in Q1, we added another quarter of millions of users in Q2.
This quarter, 70% of our consumer households use some part of our digital platform.
We also reached $2.6 billion logins from customers in the last 90 days.
And while you will note the tremendous Erica and zelle usage, what I would draw your attention to the digital sales growth, which is up 26% year over year.
85% of book mortgages in the quarter were done digitally while 77% of direct vehicle loans, where digital.
Turning to wealth management.
The continued economic reopening and strong market conditions led to our records.
Average deposits loans and debt.
<unk> balances.
And asset management fees in Q2.
Both Maryland, and the private bank contributed to this improvement.
And gross new households that Merrell continued.
And the average size of the new households is larger this year than last year.
And at the same time net new households grew but at a slower pace given expensive competitive hiring practice across the industry.
We remain committed to organic growth and our advisors and private client sales force as a stronger more sustainable long term strategy.
Net income of nearly 1 billion of improved 12% from Q1 as.
As we saw improvement in both revenue and expense.
With respect of revenue.
The record AUM fees.
Complemented higher NII on the back of solid loan and deposit increases.
Expenses dropped as.
As the absence of seasonally elevated payroll tax in Q1 was partially offset by higher revenue related costs.
Client balances rose to a record of $3.7 trillion.
Up.
725 billion year over year, driven by higher market levels as well as strong client flows.
Let's skip to slide 20, which highlights our progress too.
To digitally engage offline wealth clients.
In both Merrill Lynch and the private bank, we are focused on 3 pillars for digital engagement 1.
Digital adoption and deeper engagement to modernizing our platform for advisors and clients and 3 secure and easy collaboration with clients we.
We provided stats on slide 20 that show record levels of digital engagement improved further in Q2. These are some of the highest levels of digital activity across our customers.
More and more clients are logging in.
To easily trade check balances and originate loans all through 1 simplified sign on.
70% of checks deposited by the private bank clients and more than half.
Checks from Merrill clients are being deposits digitally now.
And <unk>.
Through leveraging Erika based AI capabilities and through use of Webex meetings and secure text messaging.
We are making it easy and more efficient for clients to do business with us.
Wherever and however, they choose.
This creates additional capacity for our advisors to spend more time with existing and potential clients.
Yeah.
Yeah.
Alright, moving to global banking on slide 21.
The business earned $2.4 billion in Q2, improving 251 million from Q1 strong revenue growth and lower expenses were mitigated by a lower provision benefit. Thank you want to.
Posit growth maintained a remained strong and increased 20 billion to a new record.
Outside of the PPP loan provisions, we saw modest growth across the platform as discussed earlier.
Revenue growth reflected the absence of.
Of the prior quarter impairment on sort of energy investments as well as increased ESG investments.
Revenue also included strong firm wide I be fees of $2.1 billion down only modestly from the record.
Q1 level.
This performance resulted in an improvement to a number of 3 ranking in overall fees with a pipeline that remains strong.
Strong debt issuance was more than offset by lower equity underwriting fees.
We had a provision benefit driven by a reserve release of 834 million from Q2, which was.
$328 million lower.
The Q1 release.
Net charge offs were near zero, reflecting both low charge offs and a notable recovery in.
In the quarter.
Noninterest expense declined 7% from Q1, reflecting lower compensation, partially offset by other cost.
We've already covered much of the balance sheet on slide 22.
So lets skip to digital trends on slide 23.
We continued our investments in digital solutions that deliver efficiencies for both clients and our employees the solutions for clients have a compounded effect since they invariably means less manual intervention by the bank enhancing both efficiency and satisfaction.
Hance banking solutions are helping us capture greater market share.
It's wholesale clients.
Do more with their banking partners that do more with banking partners that are stable and secure.
And that have the capability to invest in new technologies that will provide better data and global integrated solutions.
Digitization and in particular artificial intelligence is helping streamline processes.
And respond to clients more quickly and efficiently.
Example of our bankers are using technology powered by Erica.
Not only better manage credit exposure, but also identify and win new business.
We present, some wholesale digital highlights on slide 23.
Switching to global markets on slide 24 results that reflect solid, but lower sales and trading activity as noted earlier, while down from the more elevated pandemic periods trading revenue is still 10% or so higher from Q2.19.
Usually do I will talk about results excluding DVA this quarter net DVA was negligible, but the year ago quarter had a $261 million loss.
Global markets produced $934 million of earnings in Q2 down more than 1 point of 1 billion compared to either Q1 or the year ago quarter, focusing on a year over year revenue was down 15% driven by the reduction in sales and trading day year over year expense increase was driven by higher costs associated.
With processing of unemployment claims and the activity related sales and trading costs compared to Q1 expense the higher.
Unemployment of processing costs were mostly offset by lower compensation sales and trading contributed $3.6 billion to revenue declining 19% year over year fixed declined 38%, while equities improved 33% recording 1 of the strongest equity performances in our history.
FIC results reflected the much more robust trading environment in the year ago period, particularly from macro products Q2, 'twenty, 1 saw credit tightened and agency mortgages of dirt difficult trading environment, given the volatility of brakes.
The strength in equities was driven by a strong trading performance in derivatives and increased client activity noted, notably in derivatives and in Asia.
On slide 25, we note half year revenue trends across the last few years as you can see while the world of pandemic elevated results in 2020.
'twenty 'twenty, 1 remains well above the prior year's presented driven by continued client activity and volatility in the markets.
Finally on slide 26, we show all other which reported profit of $1.9 billion.
The $2 billion tax adjustment benefited results absent this benefit we would've reported of $137 million loss, which is a decline of 239 from Q1, 'twenty, 1 driven by lower revenue.
<unk> declined $545 million, reflecting 2 impacts first hire of partnership losses on ESG.
An increased ESG investments.
As you know we record gross up revenue from these investments on an FTE basis in global banking pay.
Pay the full taxes, there and then back out those entries and all other.
You can also see the increase in ESG investment in Q2 in other income.
On a consolidated income statement, where partnership losses are booked all of this loss impacts revenue. It has more than made up for on the tax line.
We expect our tax credits and associated losses.
In consolidated other income to increase by at least of $100 million in Q3.
And keep in mind Q4 is normally even higher reflecting seasonal activity.
Revenue in all other was also impacted by some refinancing activity, we called and refinanced higher cost structured notes, which pushed some of.
A OCI back through the income statement, our effective tax rate this quarter, excluding the $2 billion tax adjustment was 10, 7%.
And further excluding tax credits driven by our portfolio of ESG investments our tax rate would have been 25%.
For the second half of 'twenty, 1 absent any changes in current tax laws or any other unusual items, we expect our effective tax rate to be in a range of 10% to 12%.
Okay.
With that.
We're ready to go to Q&A.
We will take our first question from Glenn Schorr of with Evercore ISI. Your line is open.
Hi, Thanks very much.
I wondered if we could contextualize that your loan growth inflection.
Conversation.
I heard you on cards and auto contributed to the modest pick up on period end loans.
So.
I'm wondering what confidence level, you have of that that continuing in the second half of the card auto will or will middle market.
M&A or anything else start contributing and then maybe most importantly, do you think 2022 could be of normal ish loan growth yesterday, you know of low to mid single digits. Like you you had been running.
Right.
So Glenn I think if you look across all of the businesses on an end of payer basis had loan growth.
Which bodes well the use of John lines of still low and so that debt.
You know that.
Debt is still running in the low thirties witches flow of about 1000 basis points on average lower in the banking segment.
But what you see underneath that is debt even business banking, which is either the segment from $5 million to $50 million is net growing finally, and it was the most effected by the P. P P run off.
And you know there were not a P. P. P. In the quarter was 6 billion $7 billion of something like that so we and pulse you know basically flat average balances that included you overcame that.
Feel good as we look across of things. So what do you really see net car production.
Back to pre pandemic, you see gross car production basically about 90% of pre pandemic, you see autos, which will pick back up as inventories come available.
And the real driver on the consumer side as mortgages, you know, we're basically Brian holding our own right now and that that was different than you know frankly.
Refi side, we lost some balances through the last several quarters and on the commercial side. It's really line usage you know honestly can't go any lower.
Maybe it can but theoretically you can't because it's been stuck here for a good 4 of 5 quarters with the activity, but the auto dealer line usage, which is net side of the house. For example is very low debt. A traditionally is so we expect those to pick back up but the key is are actually producing more customers of more clients.
Clients, even at the low usage of the loans are starting to grow.
Yeah.
Sounds like we got a shot right yeah.
Let me maybe in a very similar question on expenses and then all of that you've done.
You noted that there is some COVID-19 expenses still in there, but excluding the 2.1 time as you called out were still in the low fourteens it sounds like.
57 day, low 57 billion range for the years Okay.
Should you know we've asked this question every year of any 1 of us have.
She 'twenty to be materially different than than than 'twenty, 1 given how you're able to find a lot of of your investments internally.
So Glenn it's Paul.
We're not providing specific 22 expense outlook, but I will.
After the following thoughts, which I think answered your question.
So our rough estimate for the fourth quarter expense is a range of low <unk> 14 billion.
I think if you add to that the seasonal higher payroll tax of approximately 350 million in Q1.
Plus AD in 1% inflationary cost that we've talked about now for many quarters.
I remember you know if we don't if we do nothing cost would grow by 3 of 4%.
We're driving that lower every year and quarter through Opex Sim and other initiatives, but if you. If you take the <unk> expense you had the higher seasonal payroll tax bad.
Bad 1%, that's a good base I think and then from there you know.
Just based upon whatever assumption you want to make around.
You know higher revenue expectations in areas that are closely linked to compensation of exchange fees. I think if you do that math, you'll have a pretty good number.
Hey, Paul appreciate it.
We'll take our next question from Matt O'connor with Deutsche Bank. Your line is open.
Good morning.
I know in recent quarters I've been asking about just sort of thought process on how you deploy liquidity of securities and work if it's been the right call. Because you were buying a what what felt like low rates, but rates have gone down again.
So I just wanted to circle back on like what is the thought process.
Alluded to potentially deploying more of liquidity.
In the coming weeks and I guess, if I step back and it seems like your loans are starting to grow our deposit growth starting to flow and again, you know rates have ticked down again. So you know why locked in kind of a 10 year duration at these levels with that of the backdrop.
Yeah.
Yep, Matt, let's I'll, let Paul.
It had it more specifically, but.
1 of the things that we just have to always keep mining any of you touched on it you know the deposits across 1.9 trillion and of loans of 900 and change and that difference is gotta be put to work and you know debt. The reality is what you're at a rate of $80 billion deposit growth.
And you know if we got to put it to work and that's that's what we do and so we're not timing the market of bedding.
We just sort of deploy it when we're sure it's really going to be there.
And so and so that's been our strategy and yes, we put some to work and it turned out to be in the aftermath of a good thing and I think frankly, I'd rather have a higher rate structure of your better for long term earnings of the company, but I'll, let Paul talk about redeploying.
Yeah, I mean, I know what specifics you're looking for but I would echo some of Brian's comments I think we've been very balanced.
We if you look at the results compared to other banks, we maintain our NII for the last few.
A few quarters here, we call the bottom in the third quarter, but at the same time, we were doing that we still.
Our reserving significant liquidity. So we have a lot of dry powder as we sit here today and more deposits are coming.
So should we just think about it you know loans Clos securities for basically equal deposits. So if.
The loan growth of modest, but you keep growing deposits sort of plywood and of 30 of kind of regardless of rate.
Yeah, it's bad.
You've got to take out would you have to keep you straight cash obviously, we show you, but that's that's generally the way to think about it in the debate is do you remember you hedged a lot of the stuff that.
We bought it.
Yeah, just to protect ourselves a little bit, but that's the simple way to think about it in the bank side balance sheet debt to simple way to think of that the obviously of securities firms differently.
We I'll just reiterate.
Rate like like you said you were kind of get deposits, it's kind of from loan growth whenever leftover will probably go into securities. But then we still have a bunch of excess liquidity.
Joe that can be deployed as well either in the near term of long term, depending on how we balance.
You know liquidity against capital and earnings.
Actually going back to Glenn's question Matt.
Matt.
1 of the things, we can't take advantage of us our extreme efficiency in the consumer business.
You know the rate structure, and so I think that got down into.
You know the pushing towards 100, there out of 20 basis points of deposits because they're growing.
Core checking customers at a more rapid pace than we've grown.
And of vial, so consistently quarter after quarter after quarter, that's going to stick to our ribs, you don't pay anything for it and as rates rise it'll drive efficiency, but we just haven't had a chance to take advantage of it.
Frankly, because of the rate spike.
Okay got it that's helpful. Thank you.
We will take our next question from Mike Mayo with Wells Fargo. Please go ahead.
Hi, I'm stuck on slide 17, with the digital usage.
So I.
I guess you have a record number of digital user of 70% you highlighted you'd highlight of digital sales of 26% year over year.
You know, we're aspirational do you want that to go.
And what can be the impact on head count and expenses and it's the same question I asked before you have best in class a gauge at all our cost of deposits in the consumer is the lowest in the industry.
But it doesn't translate to the overall firm's I'm just trying to connect the dots from your great digital usage.
Better efficiency and also get some sense of your your aspirations on the digital side.
So Mike just.
Good day.
Last question of sort of that question, which is the consumer side doesn't get the advantage until the you know you get some rate structure on the short end of especially and so all of that investment though.
It'd be like we're having.
The same conversation we had in 16 before rates rose.
You know when it's going to pay off in net exploded and paid off and we expect it to happen again is as the economy normalizes and we are taking good advantage of that as you well know.
Prior to the pandemic and so let me back up on digital products and usage. The key strategies, we've been engaged honest beyond of consumer and Paul.
Some of the wealth management piece as you can see them and so when we're talking about the digital it.
Things were actually showing of by each segment. So the growth in the wealth management side, both for external usage out of your customers and internal is extremely important and using Erica.
Erica internally as a method of artificial intelligence based natural language processing stuff helps make people more efficient and the curse of commercial segment of wealth management. So we don't have.
Our aspiration is just a fall of them pushed follow and push the clients at the same time and that always has a benefit and that's why of the last decade without 40000 people in the retail network to give you a sense of where it goes.
We we have some internal plans. So we have an idea of are we we are sort of we don't go out and say that because frankly. It happens you know piece by piece by piece and honesty of 2500 dollar 2500 FTE reduction in the quarter is in part due to the consumer efficiencies kicking back in and once they got through P. P. P processing.
Things like.
And that that reduction of head count you ought to also factor in the.
The increase in head count in the front office so.
We're getting the reduction of overall if you go back pre pandemic of course, they look at this quarter, but at the same time, you're seeing a mix shift or adding more people.
Theyre talking to customers across the platform 1 of them I have less people and support in the back office.
Okay. Just 1 follow up on that aspirational question. When you strip out and you know normalized everything you know rates and everything else do you want to do how much more of do you think you can lower unit costs over the next several years what would be the main technology driver for that.
The.
There are basically 3 ways.
1 of it but it's all going to show up in head count and so we expect that the.
The consumer of cost of deposits has gone from 350 basis points, probably you know 10.12 years ago to 120, and so we'd expect to keep driving that down and that's going to be driven by everything we just talked about when you get to.
Revenue related compensation of wealth management business, that's up a half billion dollars from this quarter and 19, probably or something like that and that's that's a good thing because we make money, but debt that will be more driven by you know its production capabilities and things like that so so theres basically of buildings and how many of you need and how many people say that's driven by how many people.
How much do you pay that our teammates are who are talented and drive the business that's driven by how many people and we just had to weigh.
It had been.
Working our way down.
And head count and it then froze because of all the work we had to do a round of pandemic related programs, but now its dropped by 1% of quarter, and that's where that's where it pays back.
Great Alright, thank you.
Our next question is from Betsy <unk> with Morgan Stanley. Your line is open.
Morning, Bad Hi, Hi, good morning.
Great Slide on slide 5 really love it. Thanks for all of the detail I just wanted to dig in on card a little bit there's been some discussion around how you know spend is up a lot as you indicated as well.
And how much of that spend is likely to be translating into revolving versus.
Trans actor.
You're giving us the daily clearly we can see that here on the slide but it would be helpful to understand what you're seeing and in the and the guts of the machine and it has a revolver is starting to pick up or does this loan growth that you show on the slide reflect just the increased spend and transact or pay down rates are of similar to what they've been over the past.
Months.
Uh huh.
The revolver piece did start there is starting to move forward, but it is down obviously significantly.
Pre pandemic the transact or piece is higher you want people to use the card to get revenue and you saw that in the field to get revenue.
From.
The usage and also get revenue from the loans the loans are obviously the bad.
Part of the equation, but.
That's it you have to realize we have about.
Round numbers, you know the same number of cards outstanding and there's $25 billion less balances, which people didn't get any.
Different they just have more of a cash until they paid off the credit card usage of completely of responsible thing for them to do and when they can get out and spend more money, which is starting to happen I think you'll see them use these lines.
Short term purchases. So I don't think yeah of the pay rates up but I don't think of the fundamental difference of behaviors just the opportunity to use of cards for.
Activity has been limited coming into this quarter. When you finally saw things open so we'll see where it goes but the good news is that's going a different direction of had been leading up of that your point about slide 5 and the good news is you know that people are of high credit quality, So yep debt.
Debt that means that the net interest.
Risk adjusted margin Ie that margin from cards minus the charge offs is actually closer than what people think because the card charge offs of dropped by 3 or 400 million of quarter.
Okay, Brian that sort of.
Yeah, no that's great that leads into the follow up which is relating to your reserve ratio on card I think the way. We're calculating is around 8 and a halfway 0.8% at this stage and give us a sense as to how you're thinking about that trajectory here.
Given that the environment has been improving what what should we expect on reserves going forward.
Well I'll answer the question. This way if you go to Cecil day, 1 I think it was 6 point.
Brian 698.
So you.
That gives you a sense of a different environment with a different sort of economic outlook at that moment.
Obviously as we grow loans car.
Card loans, which were talking about doing.
I'm going to eat into some of that excess reserve, but I think you know between.
Whatever you want him out of on loan growth and whatever you want to think about in terms of us getting back to seasonal day..1 you can kind of come up with whatever you know with an answer.
Right and just could you even be below seasonal day, 1 because the environment is so good right now.
Could easily be below seasonal day, 1 I mean, it as you know it just depends at the moment you're setting your reserves.
What your mix is what of your card balances and what is your.
Our view of the future an episode of our view of the future is a more benign environment than it wasn't piece of.
She still day, 1 then by definition, you that you'd end up with lower reserves and net.
That's the point of page 6 Betsey really goes to your question non card specifically.
Okay. Thanks very much.
Our next question comes from Steven Chu Bank with Wolfe Research. Please go ahead.
Good morning, good morning.
So Paul it was certainly encouraging to hear that Theres still a path to the 1 billion dollar improvement in net NII exit rate that you cited just given some of the log and pressure of since you gave that guidance.
I was hoping you could just help us unpack some of the component pieces, given it's a meaningful step up versus what we saw in the most recent quarter and maybe just thinking about it in 3 buckets loan growth liquidity deployment and premium and being the third no assuming no change in the forward like how can we underwrite that path to the $1 billion.
Increase off the current base.
So I would say that you know.
It's about half loan growth.
Well first backup we have an extra day, okay bad.
Got out and as we sit here today.
It'd be roughly half loan growth in <unk>.
<unk>.
And Marc production of premium animal production having.
Having said that you know.
It's a challenge given the fact of breaks of fall and it's a challenge.
It's hard to get there.
And so you know we have got.
Always have the opportunity of the point a little more liquidity.
As we think about this going forward.
Understood of at least the premium am ultimately will come. It's just a question of timing there so but under I understand that that kind of at least impact where it shakes out by the end of the year on the other thing I wanted to get a better sense of Paul is just on the capital comment that you made earlier you noted that you're at 11 and a half per.
<unk> 200 bps above your minimum so just curious if you can give us some sense as to where you plan on operating on a steady state basis, how much cushion do you want to retain and just given the strength of your excess capital position, how should we be thinking about the pace or cadence of the buyback for the next 4 quarters.
Obviously, we're allowed to do it so that's that's a change and yep.
But at a level of allows us to move capital off the balance sheets that are constrained by the average of earnings which was sort of this quarter. So it'll move up but you know I think we try to operate 50 basis points above the minimums.
Target because there's volatility so our SLR of 5.9 years.
Got 90 basis points of the of Cushing.
Cushion in it and we.
1 of operate 50 basis points there the 9 of half as 10, etcetera. So you should expect us not immediately to be moving towards out of a time and then that just goes through the periods of the question will be you know.
What's the ultimate net.
He said, yes level that we have to maintain of future and things like that so.
But where we can move at pace now and we couldn't before because of where he was constrained here.
Your dividends plus share buybacks could only equally of earnings and if we were a company that went into this crisis.
A lot more excess capital and we are a company came out of this crisis with a lot more excess capital than they were 3 couple of CCAR of exams. During this crisis, we had the lowest losses stay below the $2.50 S. C. P. So off we go.
But as you know the constraint you Gotta go to the lowest constraints in.
And at 50 basis points, and you should expect us to stay above that but right now that's a lot of excess cash.
And if I could just squeezing 1 more sorry, I just get a kind of a bunch of questions on the global markets long grass growth, which was a pretty eye popping number and I was hoping you can just unpack the opportunity that you're seeing within that segment and whether there is further runway for continued growth just given how significant of an uptick we saw in the most recent quarter.
Yeah sure.
So.
We did a debt that activity the loan growth was led by global markets, but we did see it across the platform, including the non market in other areas.
In global markets, we just look for opportunities to use some of our liquidity of more constructive way. Then then maybe buy more securities.
And it was across a number of different types of opportunities in clients, but.
About I would say $6 billion ish of it went into our.
Our decision to hold.
Some CLO and loans for now we concentrated those holdings and triple a and double a.
Instead of distributing the securities to investors.
And we think that activity is very consistent with our plans to allocate.
More balance sheet to customers in both of the markets.
Having said all of that so I know people concentrate on CLO exposure.
A lot of exposure is still extremely low relative to our parents peers.
Fair enough. Thanks for accommodating the additional question.
Yeah.
Our next question is from Kenneth <unk> with Jeffries. Please go ahead.
Oh.
Thanks, Good morning, if I could just further on the commercial loan topics as you start to see a little bit better demand aside from PPP.
Across whether it's corporate or would you just talked about commercial small business. Once you just sense from the customer base of where it's potentially coming back the most and where the most hold back some of our because customers still have tons of excess liquidity to get through before they borrow.
Well look if you look at global banking this.
This quarter middle market was driven by food products commercial services and suppliers and diversified.
Sellers.
Obviously, you've still got.
Some industries that are affected by the pandemic and so.
They really haven't started to recover yet.
If you look at our commercial committed of exposures by.
By the way they grew 30 billion quarter over quarter.
We're now above.
The 1 trillion dollar prepaying bad level. So people are people are getting.
Getting ready Tomorrow of war.
As Brian noted the revolver utilization is still at historic lows, but you know we're going to we would expect that to move up.
To be approved.
Yeah.
And then you know in global markets as I mentioned, there were there were lots of opportunities and mortgage warehouse lending subscription facilities asset backed securitization of those lots of opportunities there to put more balance sheet to work.
Yes.
Thanks, Paul and as a follow up on that point about the utility being low but our customers are readying themselves. So I don't know I think as an industry. We've been waiting for that for a couple of quarters now what what's that trigger point, where you think of it will start to see or the cause.
The line usage to actually start moving.
It's been flattish for now.
A few quarters as we ready for it.
It's gonna be inventory builds.
Across various interest rate.
And you're seeing trade finance kicked up Yep Yep, the trade finance flows and the trade flows that we have.
They've been kicking up and kicking up which means at some point.
All of those building inventories to meet the customer demands of a duck.
Some of that inventory building has been hampered by you know trucking and ocean liner.
Logistics, so I think.
Working out some kinks, there you could start to see it.
And do you of any line of sight is when you talk to your customers about any easing up of those supply chain constraints here as we anticipate bad.
It's getting better but still I've learned a lot more about ports I never thought I'd learned from our customers.
Instead of getting bad at it.
Getting better, but it's going to take of what I mean, everybody talks about the chip that you know well talked about well know, but youre talking about basics.
And so it's getting better but it's it really comes down to the operations of sports efficiently and the impact of it.
Virus are unemployed and those ports and having people to work and unload the ships and things like that so it's a it's a it's a pretty.
You know drilled out sort of analysis they have but the reality is it's it's it's still constraining, but it's getting incrementally better of it'll take another 6 months of kind of and most of them, saying their say at the end of the year that'd be better or let's say bad.
As you think about from growth and you start modeling I just remember it with you know revolver utilization is down close to 10%.
At 45 billion of from last year, Yeah, that's 45 billion of loss.
Just Ross.
Right right. That's the that's the opportunity set is of how quickly could that be of loaded spring right right.
Okay. Thank you very much.
Okay.
Our next question is from Gerard Cassidy with RBC. Please go ahead.
Good morning, guys. How are you from that.
Gerard how are you.
Good.
Paul can you share with us when I look at your average earning balance sheet in your supplement and you gave us the.
The yield of the App.
Average, earning assets and I think of decline to 179 basis points.
Can you share with us.
1 what's the difference between what you're reporting and what you're putting on each quarter of new earning assets is there of 20 basis points of difference 10 basis points of difference and if we assume rates don't change when when does that GAAP.
Disappear because of where you're putting on is equal to what you're actually earning.
Yeah, well again, I mean, I'll talk about when we <unk>.
Take our liquidity, which again, we've got a lot of excess liquidity.
And we deploy that into of security.
Right, where we're picking up.
In the second quarter, we picked up on a blended basis between mortgages and treasuries, which were roughly 50.50 purchases, we picked up about 170 basis points relative to cash.
But when you look at that.
Security that's rolling off.
And being replaced they're rolling off of sort of you know $2.50, and it'll be replaced the 210.
Now you could do the same amount of I did it with securities you can do the same math with alone pick your loan category, whether it's a card or.
Our commercial loan or it's kind of just depend on the heels.
Very good income.
<unk> Bank I think you pointed out our debt.
The asset sensitivity of the balance sheet is still intact of 100 basis point parallel shift is Lee so about an $8 billion increase in net interest revenue.
Can you share with us.
What weighs more heavily on that number is at the short end of the curve going up.
Is it 70% of that increase comes from the short end going up versus the long end.
Correct, it's approximately 70% of the short term.
Very good okay.
Great. Thank you.
Yeah.
Andrew will go to Charles Peabody with Portales. Your line is open.
Yeah, I wanted to focus on your card operations.
2 reasons, 1 it's the area, where there seems to be some visibility to loan growth and 2 because it.
I think generates about 20% of your bottom line. So it's a significant mover.
If I'm using your line of business to out of correctly.
Cards as a lot of business.
No car on pace to generate somewhere between.
No.
From 1.8 billion a quarter.
So somewhere between you know.
Well close to people here.
Am I right in that assumption.
If you're talking about interest.
Bank income Yeah. If you look at this up on page 8 the 1.876 billion as of the card interest income for the second quarter 'twenty, 1, but that's how.
I was using your U S net.
Net income you know.
Yeah.
But the net income we don't have a card segment of a bunch of yeah. We don't report of card segment because it goes there it goes in the fee line of it.
It goes in.
Yep.
But if you look at your line of business reporting you do have a consumer lending.
Versus deposits in the consumer lending is primarily cards, if I understand it correctly.
It's got mortgage loans in all of them.
And you know.
It's all lending products so.
If you got the split of question. We get later Okay. The question of the question is if I if I assume you know 2019 kind of debt.
You know in terms of margins in terms of gross yield and I assume high single digit growth in loans in 2022.
Hmm.
Because of the substantial reserve released this year versus what probably would be less next year.
C of fairly substantial decline in your card business as a line of business as a profit business.
And so I'm trying to get a sense of in my right that there's a delay even even of of balances pick up there's a delay to the improved profitability of that product line.
Because there's less reserve last year it was hurt by a reserve build this year.
Benefit by reserve releases and next right not that bad if it comes out.
The company and not only that but you have to reserve as youre putting on loans.
And so you get less benefit day, 1 versus day 100.
Yeah, but remember remember we've got.
I think it was somebody asked earlier question of reserved on loans now.
You know 200 basis points higher than where we were seasonal day 1.
So as loans grow you can eat into that reserve.
Right.
And I estimate and you probably have about 1 billion of 1 billion of half of excess reserves in your cards. If you go back to day 1 Cecil.
And so you're going to clean some of that back over the second half of this year, which means you have maybe half of billions of 1 billion next year.
Hey, Charlie it's Lee.
Why don't we why don't we take this offline.
And I can go through this afterwards, I see where you're okay.
I'll share my model with your lease because I think it's an important.
All of that has to be still next year, yes.
Yeah.
I'd also just add though just while everybody has them a lot of it's just remember our charge offs of running significantly lower you know in addition to forget about all of the reserving.
Absolutely, yes, yes, okay.
Okay, I'll get with you afterwards Paul.
Thanks.
Yeah.
Yeah.
And it appears we have no further questions I'll return the floor to Brian Moynihan for closing remarks.
So thank you all for joining us.
Once again in.
In the quarter of customers are seeing good growth opportunities.
In a recovering economy.
Deposits continue to grow 80 billion of quarter loan balance of stabilized and growth on a period end basis for the quarter, even overcoming the P. P. P run off of asset quality is at 25 year percentage loss lows not just dollar amount.
The solid earnings continue this quarter.
The important thing is we're seeing increased activity by our customer base, whether it's sales of.
Of all the different products, whether its the reopening of the branches of more appointments that lead to sales, whether it's our face to face me sort of commercial businesses. So that all of us in good stead and helps answer the question about how NII grows in the second half of the year and so and then on top of all of that this quarter as of first quarter end.
Many of that we've been able to Oh.
Forever that we've been able to go back in and actually use of cash excess capital based on our earnings power and our board's discretion. So you should expect us to get back into share buyback game. So thank you and we will return that capital to you and we look forward to talking next quarter.
We will conclude today's program. Thanks for your participation you may now disconnect.
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