Q4 2021 Bank of America Corp Earnings Call

Darcy around.

Yes.

Good day, everyone and welcome to the fourth quarter Bank of America earnings announcement call. At this time, all participants are in a listen only mode.

Later, you will have the opportunity to ask questions. During the question answer session. You can register to ask a question at any time by pressing star and one on your Touchtone phone. Please note. This call may be recorded I will.

I'll be standing by if you should need any assistance it is.

It's now my pleasure to turn today's conference over to Lee Mcintire. Please go ahead.

Well, thank you operator.

Thank you for joining our quarterly earnings call. Good morning to everybody I'm sure by now you've all had a chance to review the earnings.

Were released before seven this morning.

As usual there are available, including our earnings presentation that we will refer to during the call only Investor Relations section of the Bank of America Dot Com website.

On the first turn the call over to our CEO , Brian Moynihan for some opening comments and then we will hear from Alastair Borthwick, our CFO , who will cover the details of the quarter.

Before I turn the call over to Brian and Alastair Let me just remind you that we may make some forward looking statements and refer you to the non-GAAP financial measures during the call regarding various elements of our financial results.

Our forward looking statements that may be made are based on management's current expectations and the assumptions therein and are subject to risks and uncertainties factors that may cause our actual results to materially differ from expectations are detailed in our earnings materials and the SEC filings et cetera.

Saleable on the website.

Information about the non-GAAP financial measures, including reconciliations to those.

Can also be found in our earnings materials that are available on the website. So with that let me turn it over to Brian take it away.

Thank you Lee and good morning to everyone and thank you for joining US again and I hope all of you are continuing to manage safely through the new variant.

First I'd like to start this call by recognizing the Paul our CFO for many years has now moved on to help us with our efforts, helping our customers make a just transition to a low carbon footprint and I want to thank him for his many years of service and welcome Alister to the call our new CFO , it's been up.

In that role since November 1st and he's off to a great start and youre going to hear from him in a minute.

So just stepping back on the cover slide today, we reported $7 billion in after tax net income or your two cents per diluted share that's up significantly from the year ago period.

This quarter was a repeat of the themes we discussed with you in the last few quarters. The pre pandemic organic growth engine that is bank of America is fully back in place and producing success, we had strong organic and responsible growth across all our businesses. We grew revenue and produce positive operating leverage we continue to see very strong asset.

Quality metrics.

We support our clients and their need for capital and we made further progress in support of local community efforts across all our markets.

Want to congratulate you congratulate importantly, and thank our 200000 teammates around the globe for all the great work. They did in 2021 that enabled us to deliver for our clients our team our shareholders and our communities.

Yeah.

Let's go to start on slide two and a few comments about our full year results. This quarter capped a record year of $32 billion in earnings for 2021, and representing a significant growth in net income over 2020.

We even saw a more significant growth in EPS of share count dropped we generated more than $7 billion of earnings in every quarter in 2021.

Revenue grew 4% year over year and activity gain momentum throughout the year.

NII grew well in the second half of the year, which kaufmann and fee growth, especially in our markets related businesses wealth management investment banking and sales and trading revenues were all strong in 'twenty one.

Causing an NII and NII.

Recall that in the first quarter of 2021.

We noted at the time that our expectation is that quarterly NII could progress up by $1 billion.

Per quarter as we entered the fourth quarter and in fact, we have recorded a fourth quarter NII that is $1 2 billion or 12% better than first quarter 'twenty one.

Our teams managed well through the rate volatility and we grew loans and deposits with our customer as the year progressed.

That sets us up nicely for 2022, and Alistair is going to talk about that in a minute.

Expense was well managed but expense did go up as we continue to invest for growth, that's axiomatic or Cobra related related costs remained elevated and revenue related costs group. So while we did not see full year operating leverage we did however returned to strong operating leverage in each of the last two quarters of the year restarting our streak that we had before the pandemic.

Nick.

Credit remains stellar through 2021 charge offs consistently improved each quarter, our commitment to responsible growth remains well placed we are growing faster than the market and keeping credit costs in check.

The academic improvement and our strong credit allowed us to release much of the reserves we built in 2020.

When you look at the balance sheet, we grew deposits $270 billion in 2021.

That was on top of the $360 billion of growth we had in 2020.

Our loan growth accelerated throughout the year fourth quarter, representing the strongest quarter, our organic loan growth we have experienced at bank of America.

Now of course, that's absent the first quarter of 2020 at the start of Covid, which had $70 billion of panic drawdowns in a few weeks.

At the end of the day, we produced strong ROA and a 17% R. O T C for you our shareholders.

We returned $32 billion in capital during the year.

Let's go to slide three.

The best way the best way to highlight the drivers behind the earnings success is to look at the momentum and client activity across our businesses.

This shows the organic growth engine is running hard more and more of this client activity is powered by our digital transformation, which is foundational to everything we do.

We are proud of our digital stats and continue to spotlight. Our results later in the materials as usual see pages 24 to 28.

With some key stats on this page <unk>.

Consumers logged into our digital channels more than $2 7 billion times in the fourth quarter alone Erica our digital financial assistant completed more than $400 million requests from our clients in the year 2021.

Half of our consumer sales were digital in the fourth quarter.

86% of all the check deposit transactions are now digital.

Custom use out to transfer $65 billion in the most recent quarter. The number of zelle transactions now surpasses the checks written by our consumers cash flow approvals by our commercial and corporate clients to move money grew 240% since the pandemic. So the digital journey continues and that's supercharged our relationship manager driven model.

And together that has driven the growth in loans and deposits and fees.

Net new checking accounts have grown in each of the past 12 quarters. This contributes to the continued growth in our core deposits.

This also demonstrates the extent of our leadership position with U S consumers and deposits.

We have $1 four trillion in deposits from all American consumers.

On credit cards at roughly 1 million new accounts in the fourth quarter alone. That's all operating at the same level of new car production as it was pre pandemic, we're going to continue to drive that opportunity.

When you think about consumer investments Merrill edge as we call. It we opened 525000 new accounts in the year 2021.

Those accounts carried it.

Or new at opening $70000 imbalances for each of those accounts. This demonstrates the deep penetration of the mass affluent customer base of America.

Sales of bank products in both Merrill and our private bank teams. It remains strong now.

Now when you combine Merrill and the private bank and consumer investments.

They've produced more than $170 billion net client flows in 2021.

In global banking, we had record years in investment banking fees combined with strong D. T. S results in global markets, we saw a record equity sales and trading we have it.

These are just a few examples of the types of client activity that are driving market share gains for our company.

As I've done in the past I want to spend a few minutes on the broader economy and I use our own customer data to make a few points, let's go to slide four.

First on consumer spending I would offer a few thoughts we are a provider of choice for individuals and businesses when paying for goods and services are award winning and easy use capabilities across all forums help clients budget say spend and borrow carefully and confidently. We look at all forms of consumer spending, including ACTH wires Bill pay P to P cash and checks.

Many firms focus many firms and many people discuss credit and debit spending but as you look at the chart on the lower left hand side of page four you can see that 80% of the money moves in other form.

So what happened in 2021, well consumer spent record amounts into context, when comparing 'twenty one against the pre pandemic period of 19 and you can see that in the upper charts on both sides of the page bancomer.

Bank of America 67 million clients made three eight trillion dollars in total payments during 2021.

That was an increase of 24% sent over P pandemic levels and all time high fourth quarter in December payments also reached record highs.

Fourth quarter payments were up 28% over 2019 and December payments were up 30% over 2019.

These are the dollar volume payments, but likewise a numbers of payments.

We're up double digits also.

More and more activity.

Just focusing on debit and credit spending for the holiday period in November and December spending was up 26% of our 2019.

This data confirms that consumers consumers continue to spend into the holiday season.

And so far this year that strength continues for all of the spending of all types through January 17th 2022, we have seen it up over 11% versus the start of 'twenty one.

Which is well up over 20, and 19 that bodes well for the rest of the year in quarter.

Focusing on the channels that payment in the lower right hand chart.

You'd expect cash and check volumes are down 24% for 2021 compared to 19.

This simply means more and more customers are using our digital capabilities to achieve their goals each year.

Now importantly, though this allows us to grow our consumer business with lower cost.

We believe theres lots of potential spending capacity left as average deposits deposit balances continue to move up to the end of the year. Despite the heavy spending at sea.

We had one <unk>.

Segment, one cohort of deposits that dipped for one month out of last part of the year in November we had a small dip in customers that had $2000 or lessen your balances pre pandemic. They dipped by 1% other than that every cohort from June July August September October and November and December all grew every month and what's striking is that the.

Balances for people had less than $2000 average balances before the pandemic, they're now sitting with five times the balances they had pre pandemic, but those customers at $10000 in accounts before the pandemic, they're now sitting with two times in their accounts.

The team's track this data carefully and shows the spending power left in the American consumer.

Another economic signposts worth noting.

Our customer activity was acceleration of loan growth in the fourth quarter.

Earlier this year earlier last year, we talked about the green shoots of loan growth. We saw in next first quarter and we saw that turn into growth as we move through the quarters, culminating with $50 billion and record loan growth. This quarter. We note. These borrowers both consumer commercial have strong capacity to continue to bear if they so desire as lines across the border.

And low usage status.

We provide slide five.

To show you the daily outstanding bonds again, this quarter, which gives you a sense of progression across time every loan category saw improvement this quarter, except for home equity.

But I would draw your attention to the two on slide five as is the addition to the pre pandemic starting points to give you some reference.

But some of the growth this quarter wasn't global markets and that business ebbs and flows with the market activity 35 billion of that $50 billion was in the core consumer and commercial books.

Far in January the businesses other than global markets continued to show growth over the end of the year.

So, let's start and talk about the commercial portfolio, where we have move above the pre pandemic level with the most recent growth commercial loans, excluding PPP grew $43 billion or 9% linked quarter compared to quarter three growth. This quarter was broad based across all segments of commercial lending we saw improvement in both new loans as well as improved utilization from existing clients.

This reflects the intense relationship manager effort, our teams have done and across the last couple of years, and adding more and more relationship managers.

Loans with wealth management clients extended their growth trend this quarter as these customers bard for various liquidity needs for asset purchases and small business lending the all important small business segment.

Lending activity is running consistently above pre pandemic levels.

And especially in our practice solution group, the sports medical dental and veterinary practices.

You see continued momentum and finished one of the best years across all small business with our businesses advantaged rewards card.

Consumer loans card loans grew $4 6 billion or 6% from quarter three levels.

This occurred a spending increase and even occurred as prepared as payment rates.

Paying off the car completely trended higher for the quarter car balances still remain well below the pre pandemic levels $95 billion and we continue to push that opportunity.

Against all the levels grew 2% linked quarter as originations remain at high levels and Paydown slowed down.

On the next slide six I would like I would say that while we deliver capital back to our shareholders $32 billion and we invest in our teammates. We also continue to invest in our communities through our local teams across the country focused on our markets I'd call out the referenced in the bottom of slide the middle bottom middle of slide six to the sweeping changes we announced last week.

NSF policies.

These updates continue the work we began over a decade ago to simplify our product set and allow a great experience for our clients and inefficient that capability for our operations.

Eliminating NSF fees and reducing the overdraft charge per occurrence from 35 to $10 and the other changes we're making is a big win for our clients. It's going to have an obvious impact on those fees, which have fallen dramatically since 2009 and 2010, but currently run about $1 billion in 'twenty, one we'd expect them to drop by 75%.

Over the next year or so with that let me turn it over to Alastair.

Thank you, Brian and good morning, everyone.

I'm going to take us to our fourth quarter results on slide seven focusing in comparisons against the prior year quarter and I'll also talk to the high level commentary on slide eight.

As Brian noted, we produced $7 billion in net income, which grew 28% from fourth quarter 'twenty.

While earnings per share of 82 cents improved.

At a faster 13, 9% pace due to our share repurchases.

Looking at our topline improvement on a year over year basis revenue rose 10%.

The improvement was driven by a $1.2 billion increase in NII.

And a little more than $800 million increase in non interest income.

Each business segment produced strong noninterest income results and as you look at significant components of revenue.

Pretty consistent through the quarters in 2021.

One important aspect of responsible growth has been to grow consistently and sustainably.

And I think we executed on that in 2021 with investment banking over $2 billion each quarter sales.

Sales and training.

Trading near or above 3 billion each quarter.

<unk> and brokerage services revenue over $4 billion each quarter.

With regard to expenses or revenue related costs increased and we continue to make investments in our people.

And our capabilities to grow the franchise.

At the same time, lower COVID-19 costs and further digital engagement have helped to offset some of those increases.

In the fourth quarter revenue growth outpaced expense growth on a year over year basis, which produced operating leverage of 400 basis points.

And a 19% year over year improvement in pretax pre provision income to $7 3 billion.

With regard to returns.

R. R O T C. He was 15%.

ROA was 88 basis points, both of which improved nicely.

Over the year.

Moving to slide nine during the quarter the balance sheet grew 85 billion.

Well, that's the last one can you point to Trillium.

And this reflected the $100 billion.

Growth in deposits.

These deposits funded $51 billion of loans growth.

And we also added $14 billion in securities and so our cash increased by 68 billion.

Partially offsetting these increases were typical year end moves in our global <unk>.

<unk> balance sheet.

Our liquidity portfolio grew to $1, two trillion or little more than a third of our balance sheet.

And shareholders' equity declined $2 4 billion from Q3, driven by the $8 9 billion of capital distributions, which once again outpaced earnings in the fourth quarter as it did in Q3.

With regard to our regulatory ratios CET one under the standardized approach was 10, 6% in.

And remains well above our nine 5% minimum requirement.

The CET one ratio declined 50 basis points from Q3, driven by excess capital reduction as well as an increase in our R. W. A due to the strong loan growth.

And we're happy to see that capital usage increasingly needed to support customers and to fuel their growth.

Producing plenty of capital to return to our shareholders.

Earnings alone in the most recent quarter contributed 45 basis points to our CET one ratio before the other capital impacts of share repurchase.

Given our deposit growth, our supplemental leverage ratio declined to five 5% versus a minimum requirement of 5%, which still leaves plenty of capacity for balance sheet growth.

And our T Lac ratio remained comfortably above our requirements.

Turning to slide 10, we included the schedule on average loan balances, but in the interest of time I don't have anything to add beyond what Brian noted earlier.

Moving to deposits on slide 11, we continue to see significant growth across the client base as we deepened relationships and added net new accounts across our deposit taking businesses.

Combining both consumer and wealth management customer balances I would highlight that retail deposits grew 48 billion from Q3.

Our retail deposits have now grown to nearly $1 four trillion and we lead all competitors.

We also saw continued strong growth with our commercial clients.

And remember the deposits were focused on and are gathering I think operational deposits of our customers in both consumer and wholesale.

Turning to slide 12, and net interest income.

On a GAAP non FTE basis NII.

In Q3 was $11 4 billion.

But I know as investors you tend to focus on the FTE NII number which was 11 5 billion.

So focusing on the change on an FTE basis net interest income increased $1 2 billion from Q4 'twenty four.

Our 11% driven by deposit growth and related investing of liquidity.

NII versus Q3 of 'twenty, one was up $319 million driven by deposit growth.

And then higher securities levels as well as long as growth.

Premium amortization declined roughly 100 million to 1.3 billion in Q4.

And the positive NII impact of lower premium amortization offset lower P. P P fees.

Given continued deposit growth and low rates, our asset sensitivity to rising rates remains significant.

It's modestly lower quarter over quarter as long end rates moved higher.

And we recognize some of that sensitivity and are now higher reported level of NII.

So I'd like to give you a couple of thoughts on NII expectations for 2022.

First I want to start by reiterating Paul's comment last quarter that we expect to see robust NII growth in 2022.

Compared to 2021.

That assumes we see continued loan growth.

And the rising rates expectations embedded in the forward curve.

And in the first quarter, specifically, we expect two headwinds.

First there are two less interest accrual days in the quarter and as a reminder, we pick those back up in the subsequent two quarters.

Second we expect less P. P P fee benefits.

Those two headwinds out to about $250 million.

Despite those headwinds we would still expect Q1 to be up about couple of hundred million from Q4 and should grow nicely. Each subsequent quarter in 2022 again, that's of course dependent upon the realization of the forward curve.

And some loans growth.

Lastly, as we see the forward curve now expecting a new rate hiking cycle to begin we added slide 13, as we thought it might be helpful from a historical context to see the trend of NII across the years since the last rate hike cycle.

And when I draw your attention to is the stark difference in the size of our balance sheet today.

And because of that balance sheet differential.

Today's NII.

It's already at the NII level, we saw when we were well into the middle of the last rate cycle.

And importantly, our shorthand asset sensitivity today is twice what it was in the third quarter of 2015 as that cycle began.

Okay, let's turn to costs and will use slide 14 for that discussion.

Our Q4 expenses were $14 7 billion, an increase of $291 million from Q3.

Higher revenue related costs and to a lesser degree seasonally higher marketing costs drove the increase.

As Brian noted the mid quarter conference.

Our Q4 expenses were a bit higher than we anticipated when we ended the last quarter.

Revenue continued to hold up well and the company had a good year with resulting then in higher incentive costs.

Compared to the year ago period expense growth was driven by incentive costs associated with all of our markets related improvements.

As we look forward, we continue to invest in technology and people at a high rates across our businesses and we continue to add new financial centers and expansion and growth markets.

So let me say two things about 2022 expenses.

First.

Relative to Q4 expense, we expect Q1 to include two elements of seasonality.

We typically experience seasonally higher payroll tax expense and that was about $400 million in 2021.

Also Q1 is typically our best period of sales and trading revenue, which results in modestly higher associated costs.

Second.

With regard to full year 2022.

Best expectation currently as we can hold expenses flat compared to 2021, which finished just below 60 billion.

This guidance incorporates our expected continuing investments.

Strong revenue performance.

And the inflationary costs, we experienced in the second half of 2021.

It also relies upon our continued expense discipline.

Operational excellence improvements and.

And the benefits of digital transformation to deliver the operating leverage we seek.

Turning to asset quality on slide 15.

The asset quality of our customers remains very healthy and net charge offs. This quarter fell to a historical low of $362 million or 15 basis points of average loans.

They continue to steady decline through the quarters of 2021.

With Q4 down $100 million from Q3.

And done more than 500 million from Q4 last year.

Our credit card loss rate was 1.42% and that's less than half of the pre pandemic rate improved each quarter during the year.

Several other loan product categories have been in recovery positions throughout the year.

Provision was a 489 million net benefit in Q4, driven primarily by asset quality and macroeconomic improvement and was partially offset by loan growth.

This included a reserve release of $850 million, primarily in our commercial portfolio.

And on Slide 16, we highlight the credit quality metrics for both our consumer and.

And commercial portfolios.

Okay.

Turning to the business segments, let's start with consumer banking on slide 17.

I'll start by acknowledging what a strong year. The consumer bank has had let's say generated nearly 12 billion of earnings.

Just 37% of a record year results for the company.

Consumer opened over 900000, net new checking accounts and in fact this quarter represents their 12th consecutive quarter of net new consumer checking account growth.

And in turn consumer.

Consumer grew deposits by more than $140 billion.

They opened 3.6 million credit cards and grew card accounts in 2021 by more than any of the past four years.

This helped card balances grow in Q4, despite payments remaining high.

They also opened 525000, new consumer investment accounts.

And that helped us to reach a new record for investment balances of 369 billion growing 20% year over year as customers continue to recognize the value of our online offering.

Yes market valuations grew balances.

And we also saw a 23 billion of client flows since Q4 'twenty.

So Q4 was a strong finish to these results and in the quarter. The business produced $3 1 billion of earnings of $8 9 billion of revenue and managed costs well.

Our 8% revenue growth was led by NII improvement as we continued to recognize more of the value of our deposit book.

And while revenue grew expense declined by 1% year over year generating over 900 basis points of operating leverage.

Lower COVID-19 costs and increased digital adoption by clients more than offset our continued investments in people and our franchise.

This expense discipline is now driven our cost of deposits to an industry, leading 111 basis points.

Net charge offs declined and we had $318 million of reserve released in the quarter.

And as you can see and as I already noted deposits continued to grow strongly both year over year.

Well as linked quarter.

Importantly, our rate paid remained low and stable.

Yeah.

Turning to the wealth management business Bank of America continued to deliver wealth management at scale across a full range of client segments.

The continued economic progress strong market conditions and the efforts of our advisors contributed to strong client flows and net new household growth.

[noise] allowed wealth management to generate more than 4 billion and earnings in 2021.

Up more than 40% from 2020.

Speaker 1: In Q4, this powerful combination of Merrill Lynch and our private bank produced records for revenue, earnings, investment balances, and asset management fees, as well as record levels of loans and deposits.

In Q4, this powerful combination of Merrill Lynch and our private bank.

<unk> records for revenue.

Earnings investment balances and asset management fees as well as record levels of loans and deposits.

Speaker 1: In fact, with regard to loans, this is the 47th consecutive quarter of average loans growth in the business. It's consistent and it's sustained.

In fact with regard to loans. This is the 47th consecutive quarter of average loans growth in the business, it's consistent and it's sustained.

Q4, net income was $1 2 billion, improving 47% year over year and driven by strong revenue growth good expense controls and lower credit costs.

Speaker 1: Q4 net income was $1.2 billion, improving 47% year over year, and driven by strong revenue growth, good expense controls, and lower credit costs.

Speaker 1: Revenue growth of 16% was led by strong improvements in both AUM and brokerage fees, as well as higher NII on the back of solid loan and deposit increases.

Revenue growth of 16% was led by strong improvements in both a U N and brokerage fees as well as higher NII on the back of solid loan and deposit increases.

Speaker 1: Expenses increased 8% in alignment with the higher revenue and resulted in 800 basis points of operating leverage.

Expenses increased 8% in alignment with the higher revenue and resulted in 800 basis points of operating leverage.

Client balances of $3 eight trillion rose 491 billion up 15% year over year, driven by higher market levels as well as a very strong net client flows of 149 billion.

Speaker 1: Client balances of $3.8 trillion rose $491 billion, up 15% year over year, driven by higher market levels as well as very strong net client flows of $149 billion.

Speaker 1: Within these flows, deposits grew 68 billion year over year to 390 billion.

Within these flows deposits grew 68 billion year over year to 390 billion.

Speaker 1: and loans grew $21 billion year-over-year to $212 billion. And that loan and deposit growth is further evidence that more and more Merrill and private bank clients are using the bank's products broadly.

And loans grew 21 billion year over year to 212 billion.

And that loan and deposit growth is further evidence that more and more narrow and private bank clients are using the bank's products broadly.

Speaker 1: Net new household generation is getting closer to pre-pandemic levels as advisors are meeting in person more with clients and are building their pipelines back following the shutdown during the pandemic.

Net new household generation is getting closer to pre pandemic levels as advisors, our meeting in person more with clients and are building their pipelines back following the shutdown during the pandemic.

Speaker 1: This quarter, Merrill Lynch net new households of 6,700 and private banking relationships net new of 500 were both up more than 30% from the year ago period.

This quarter.

Merrill Lynch net new households have 6700.

And private banking relationships net new 500 were both up more than 13% from the year ago period.

Speaker 1: The clients of this business continue to lead our franchise in digital adoption, utilizing digital tools to access their investments.

The clients of this business continued to lead our franchise in digital adoption utilizing digital tools to access their investments.

Speaker 1: and also for other banking needs like mobile check deposits and lending.

And also for other banking needs like mobile check deposits and lending.

Speaker 1: The evolution is forming a modern Merrill which is advisor-led and powered by digital. Moving to global banking on slide 19. The business momentum through the

The evolution is forming a modern merrell, which is advisor led and powered by digital.

Yeah.

Moving to global banking on slide 19.

The business momentum through the back half of the year was strong.

Net interest income grew on the back of accelerating loan growth.

Speaker 1: Investment banking fees reach record levels and deposits continue to grow as clients navigated the pandemic.

Investment banking fees reached record levels and deposits continued to grow as clients navigate it depend deneke.

Speaker 1: We also saw strong demand from our clients around ESG investments, driving improvements in bottom line results.

We also saw strong demand from our clients around ESG investments driving improvements and bottom line results.

Speaker 1: Net income for the full year was a record $9.8 billion, or 31% of the company's overall net income.

Net income for the full year was a record $9 8 billion or 31% of the company's overall net income.

Speaker 1: The business earned $2.7 billion in Q4, improving nearly a billion year over year, driven by higher revenue and lower provision costs, partially offset by higher expenses.

The business earned $2 $7 billion in Q4, improving nearly 1 billion year over year, driven by higher revenue and lower provision costs, partially offset by higher expenses.

Speaker 1: Revenue improvement of 24% year-over-year reflected more than 30% growth in investment banking fees in this segment, and net interest income increased 18%.

Revenue improvement of 24% year over year.

Reflected more than 30% growth in investment banking fees in this segment and net interest income increased 18%.

Speaker 1: This investment banking performance allowed us to gain market share and record a number three ranking in overall fees in what was a very strong Q4 market.

This investment banking performance allowed us to gain market share and record number three ranking in overall fees and what was a very strong Q4 market.

Speaker 1: Ranked number one in investment grade and number two in leverage finance with market share improvement compared to the year ago period And we also saw another record m&a period and most importantly Our investment banking pipeline remains quite healthy

Ranked number one in investment grade are number two in leveraged finance with market share improvement compared to the year ago period, and we also saw another record M&A period, and most importantly, our investment banking pipeline remains quite healthy.

Speaker 1: Provision expense reflected a reserve release of $435 million, compared to a $266 million release in the year-ago period.

Provision expense reflected a reserve release of $435 million compared to a 266 million released in the year ago period.

Speaker 1: And what I draw your attention to here is the reduction in net charge-offs year-over-year, from $314 million in Q4 of 2020 to small recoveries in Q4 of 2021. That year-ago period included some losses from clients and those industries that were heavily impacted by COVID.

And what I draw your attention to here is the reduction in net charge offs year over year from $314 million in Q4 of 'twenty.

To small recoveries in Q4 'twenty one.

Year ago period included some losses from clients in those industries that were heavily impacted by Covid.

Speaker 1: Finally, given the strength of revenue, we saw expenses increase by 12%, which is still only half of our increase in revenue.

Finally, given the strength of revenue we saw expenses increase by 12%, which is still only half of our increase in revenue.

Switching to global markets on slide 20.

Speaker 1: Switching to global markets on slide 20, full year net income of $4.6 billion reflects another solid year of sales and trading revenue. This included a record year for equities, up 19% versus 2020.

Full year net income of $4 6 billion reflects another solid year of sales and trading revenue.

This included a record year for equities up 19% versus 2020.

Investments made in this part of the business is seeing good results as our financing clients are doing more business with our company.

Speaker 1: Investments made in this part of the business are seeing good results as our financing clients are doing more business with our company.

As we usually do I'll talk about the segment results.

Speaker 1: excluding DVA, even though net DVA was negligible in both Q4 21 and Q4 20.

Excluding DVA.

Even though net DVA was negligible in both Q4, 'twenty, one and Q4 'twenty.

Speaker 1: In Q4, global markets produced $667 million in earnings, $167 million lower than the year-ago quarter.

In Q4 global markets produced 667 million and earnings of $167 million lower than the year ago quarter.

Speaker 1: Focusing on year over year, revenue was modestly down driven by sales and trading.

Focusing on year over year revenue was modestly down driven by sales and trading.

Speaker 1: Sales and trading contributed 2.9 billion to revenue, a decline of 4% year over year. FIC down 10% while equities improved 3%.

Sales and trading contributed $2 9 billion to revenue a decline of 4% year over year.

Thick down 10%, while equities improved 3%.

Speaker 1: The thick results reflect a weaker credit trading environment than Q420, and the strength in equities was driven by growth in client financing activities and the multiplier effect.

<unk> results reflect a weaker credit trading environment in Q4, 'twenty and the strength in equities was driven by growth in client financing activities and the multiplier effect.

Speaker 1: A year-over-year expense move was driven by investments and revenue-related sales and trading costs, partially offset by the absence of costs associated with the realignment of a liquidating business activity to the all other units in Q4.

The year over year expense move was driven by investments and revenue related sales and trading costs, partially offset by the absence of costs associated with the realignment of.

The liquidating business activity to the all other units in Q4.

Finally on slide 21, we show all other.

Speaker 1: Finally, on slide 21, we show All Other, which reported a loss of $673 million, which declined a little more than $250 million from the year-ago period.

Which reported a loss of $673 million, which declined a little more than $250 million from the year ago period.

Speaker 1: Revenue declined as a result of higher volume of deals, particularly solar.

Revenue declined as a result of higher volume of deals.

Particularly solar.

Speaker 1: and partnership losses on ESG investments. That's offset by the tax impact in this reporting unit.

And partnership losses on ESG investments, that's offset by the tax impact in this reporting unit.

Speaker 1: Expense increased as a result of costs now recorded here after the fourth quarter realignment out of global markets, which was partially offset by decrease in various other expenses in the segment. That realignment obviously had no bottom line impact on our company overall.

<unk> expense increased as a result of costs no recorded here after the fourth quarter realignment out of global markets, which was partially offset by decrease in various other expenses in the segment.

That realignment, obviously had no bottom line impact on our company overall.

Speaker 1: As a reminder, for the financial statement presentation in this release, the business segments are all taxed on the standard fully taxable equivalent basis. And in all other, we incorporate the impact of our ESG tax credits and any other unusual items.

As a reminder for the financial statement presentation. In this release the business segments are all taxed on the standard fully taxable equivalent basis.

And in all other we incorporate the impact of our ESG tax credits and any other unusual items.

For the full year, the effective tax rate was 6%.

Speaker 1: and excluding the second quarter 21 positive tax adjustment triggered by the UK tax law change and other discrete items the tax rate would have

And excluding the second quarter 'twenty, one positive tax adjustment triggered by the U K tax law change.

And other discrete items.

Tax rate would have been 14%.

Speaker 1: Further adjusting for ESG tax credits, our tax rate would have been 25%.

Further adjusting for ESG tax credits or tax rate would've been 25%.

Speaker 1: And looking forward, we would expect our effective tax rate in 2022 to be between 10% and 12% absent any tax law changes or unusual items.

And looking forward, we would expect our effective tax rate in 2022 to be between 10, and 12% absent any tax law changes or unusual items.

Speaker 1: And with that, I think I'll stop and we'll open it up for Q&A.

And with that I think I'll stop there.

And we'll open it up for Q&A.

Speaker 2: If you would like to ask a question, please press star and one on your touchtone phone. Again, that is star and one. You can remove yourself from the queue by pressing the pound key. Our first question today comes from Glenn Shore with Evercore. Your line is open.

If you would like to ask a question. Please press star and one on your Touchtone phone again that is star and one you can remove yourself from the queue by pressing the pound keep our first question today comes from Glenn Schorr with Evercore. Your line is open.

Speaker 3: Okay, thank you. I'll try to ask this as easy as possible, but in the wave of a couple of other companies in the space.

Okay. Thank you.

I'll try to ask this as easy as possible, but and the wave of a couple of other companies in the space.

Speaker 3: talking a lot about comp inflation and stepped up investment.

Talking a lot about compensation and stepped up investments I think a lot of shareholders, we'd love to see and hear your comments about all else equal flattish expenses in 'twenty two.

Speaker 3: I think a lot of shareholders love to see and hear your comments about, you know, all else equal, flattish expenses in 22. And so the simple enough question is, is what, how do people take comfort to know that you're making all the right investments to continue to.

And so the simple enough question is is what how do people take comfort to know that you're making all the right investments to continue.

Speaker 3: Compete and take share and migrate digitally like you have been doing but we're seeing so much competition across all your business lines So just looking for some warm fuzzy blanket words of encouragement. Thanks

Pete and take share and migrate digitally like you had been doing but we're seeing so much competition across all your business lines. So just looking for some warm fuzzy like it where it doesn't in cards.

Speaker 1: Well, I'll just start, Glenn, by reiterating what you just said. You just said we're taking market share.

Well I'll just start Glen Bye bye.

Reiterating what you just said you just said, we're taking market share.

Speaker 1: So I'd say we've sustained our technology investments all the way through the pandemic.

So I'd say, we sustained our technology investments all the way through the pandemic.

Speaker 1: We've sustained our financial center renovations, we've sustained our marketing, we've sustained our investment in relationship managers, and the result of that is, in many cases, record client experience, and you can see, I think, in our numbers that we're doing more business with our

We have sustained our financial center renovations, we sustained our marketing we've sustained our investment in relationship managers and the result of that is in many cases record client experience and you can see I think in our numbers.

That we're doing more business with our existing clients, we're adding net new clients and we're growing market share and we're getting into third party recognition as well. So I think it's the results is how you will judge us on the technology, but were obviously very competitive in that regard.

Speaker 1: We're adding net new clients and we're growing market share and we're getting the third party recognition as well. So I think it's results is how you will judge us on the technology. But we're obviously very competitive in that regard.

Speaker 4: So, Glenn, let me just throw a couple things. One, obviously, it's axiomatic that...

So Glenn let me just throw a couple of things one obviously, it's axiomatic that.

Speaker 4: you know, revenue from markets related business, whether it's a wealth manager or investment banking teammates.

Revenue from markets related business, whether it's in wealth manager or yeah, or investment banking teammates or it's in the markets business. So you know Jimmy Tomorrow, and Matthew Coder, and Andy and Katie have done great jobs in it that just you know if that's a given theyre going to go up and you see that those numbers are up dramatically over the last couple of years as market.

Speaker 4: or it's in the markets business. So, you know, Jimmy Damara and Matthew Coder and, you know, Andy and Katie have done great jobs. And that just

Speaker 4: if that's a given, they're going to go up. And you see that those numbers are up dramatically over the last couple of years as markets have raised, but you invest a lot of ways. So we'll never have the temerity to say that, you know, we know every possible competitive thing could happen over the next decade in this company. But if you look across history, which is what Alistair's referring to, we've invested, you know, new technology development.

Raised but you invest a lot of ways. So we'll never had the temerity to say that you know we know every possible competitive thing could happen over the next decade and his company, but if you look across history, which is what Dallas or deferring to we've invested.

New technology development.

Speaker 4: you know, three to three and a half billion dollars year after year after year. And we tend to invest in things that work and then drive them and scale them. And so you see that if you look at pages 24, 25, 26, 27, and just start to think about what we said earlier.

Yeah, three to $3 $5 billion year after year after year, and we tend to invest in things that work and then drive them and scale them and so you see that if you look at pages 'twenty four 'twenty five 'twenty six 'twenty seven and just start to think about well, what we said earlier.

Speaker 4: Zelle is more transaction count than checks written.

Zelle is more transaction count then checks written.

Speaker 4: you think about that change, think about the change in the branches that

Do you think about that change and think about the change in the branches that yep.

Speaker 4: You know, basically, you know, in our expense guidance, we'll open 100 new branches this year.

Basically you know in our expense guidance, we'll open 100, new branches. This year on top of the 200 and some of them. We've opened the last three years, but importantly, we shifted from other places and that we brought branch count overall down as we've been doing that that means we're open up new markets gaining market share as Alastair said and using the expense base and others. So.

Speaker 4: on top of the 200 and some we've opened the last three years. But importantly, we shifted from other places in that we brought.

Speaker 4: branch count overall down as we've been doing that. That means we're opening up new markets, gaining market share, as Alistair said, and using the expense base and others. So whether, and then in our broad-based teammates, you know, we basically have gone to $21 an hour. Our attrition rates are similar to where they were in 19, which was a 10-year low.

Whether it and then at our broad based teammates you know, we basically it had gone to $21 an hour R. R.

Mission rates are similar to where they were in 19, which was a 10 year low.

Speaker 4: You know, so think about, you know, we've invested heavily, we've invested broad base, but you're seeing the activities going. And if you start to think about the.

So think about you know we've.

We've invested heavily we've invested broadbased, but you're seeing the activity is going and if you start to think about the you know the retail deposits per branch are multiples or other people that do you think about the 4100 branches, we have a trillion dollars in consumer deposits.

Speaker 4: You know, the retail deposits per branch are multiples of other people. So you think about the, we have 4,100 branches. We have a trillion dollars in consumer deposits.

Speaker 4: in $400 billion in wealth management. So that operating leverage is what we do. So we're an operating leverage company. We're not a cost takeout company anymore. We haven't been. And but we, we see the path forward of flat expenses next year. And frankly, there was a lot of one time stuff that went through the last couple years that is, you know, coming to an end. And that will reposition that to help pay for the types of things revenue related growth and investments that we think are important.

<unk> $400 billion in wealth manager to buy so that operating leverage is what we do so we're an operating leverage company, we're not a cost takeout company anymore, we haven't been and but we we see the path forward of flat expenses next year and frankly, there was a lot of one time stuff that went through the last couple of years that is coming to an end and that will reposition that to help pay for the types of <unk>.

<unk> revenue really growth in investments that we think are important but.

Speaker 4: Just look at those stats and see what we've done. And I think that that's where we get the confidence.

Look at the stats and see what we've done and I think that that's that's where you get the confidence.

All right I'll leave it at that thanks very much.

Yeah.

The next question comes from John Mcdonald with Autonomous Research Your line is open.

Speaker 1: Morning. Alistair, I was wondering if you could unpack the outlook for robust net interest income growth in 2022. I'm kind of wondering what kind of loan growth assumptions are you building in for the year and how do liquidity deployment and premium amortization assumptions also factor in to your outlook? Okay, so let's start with loans growth. We're pretty...

Good morning, Alastair I was wondering if you could unpack the outlook for a robust net interest income growth in 'twenty, two kind of wondering what kind of loan growth assumptions are you building in for the year and how to liquidity deployment and premium amortization assumptions also factor in to your outlook.

Okay, So let's start with loan growth.

We're pretty optimistic on loan growth.

You can see on slide five.

Speaker 1: just the consistency. That's daily. You can see the consistency of the growth. It's broad-based across all the businesses, as Brian noted, and obviously it's accelerating.

Just the consistency that's daily.

You can see the consistency of the growth is broad based across all the businesses as Brian noted.

And obviously, it's accelerated recently.

Speaker 1: The thing I find interesting about slide 5 is you've really got to adjust for the size of the economy today relative to where our loans were in 2019 pre-pandemic.

And the thing about slide five as you've really got to adjust for the size of the economy today relative to where our loans were in 2019 pre pandemic. So we know there's some potential for catch up there and we can see that in our data to John a revolver utilization rates are still lower than historic levels. So we feel like there's some potential there and then things like.

Speaker 1: So we know there's some potential for catch up there. And we can see that in our data too, John .

Speaker 1: Our revolver utilization rates are still lower than historic levels, so we feel like there's some potential there. And in things like card, payment rates are still elevated. So there's a variety of things there that make us feel good about loans growth.

Card payment rates are still elevated so there's a variety of things there that make us feel good about loan growth.

Speaker 1: certainly more bullish than we might have been in a pre-pandemic GDP type two to three percent, you know, kind of environment.

Certainly more bullish than we might've been in a pre pandemic GDP type 2% to 3%.

Environment.

Speaker 1: So we're pretty optimistic on loans. I think you need to think about that in the sort of high single digits.

So we're pretty optimistic on loans I think you need to think about that and just sort of high single digits.

Speaker 1: And then when it comes to, you know, you can see when we put forth our asset sensitivity numbers, that $6.5 billion for a parallel shock is meant to give you an idea of how we believe we're levered to rates. I'd say about...

And then when it comes to.

You you can see when we put forth our asset sensitivity numbers.

That $6 5 billion for a parallel shock.

It's meant to give you an idea of how we believe we're levered to rates I'd say about.

Speaker 1: 75% is probably the short end. Probably 25% is the long end, with things like premium amortization. And that's probably how I would break it down.

75% and that's probably the short term.

Probably 25% as the long end with things like Cat premium amortization, and that's probably I would break it down.

Okay.

Speaker 5: And then as a follow-up, can you talk a little bit about how you're managing to your capital minimums? What kind of cushion do you want to keep to the SLR? Just remind us the target on CET1 and how do buybacks, which seems like you've accelerated in the back half of 2021, how did that factor into the overall calculation of managing growth and capital? Thanks.

And then as a follow up can you talk a little bit about how you're managing to your capital minimums are what kind of cushion do you want to keep to the SLR.

Remind us the target on CET, one and how to buybacks, which it seems like you've accelerated in the back half of 'twenty, one how does that factor into the overall calculation of managing growth and capital. Thanks.

Sure John .

We if you go back yard and for many years in our discussions we've we've had excess capital.

Speaker 4: We, if you go back, John , for many years in our discussions, we've, we've had excess capital.

Speaker 4: Despite the many ways that the capital process increased the capital requirements for large companies like ours, including the introduction of the Jesus said the buffer, etc, etc. And then the stress testing and SLR, etc. So we've always said we'd maintain, you know.

Despite the many ways that the capital process increase the capital requirements for large companies like ours, including the introduction of the G SIB buffer.

Buffer etcetera, etcetera, and then the stress testing and S. L. R et cetera. So we've always said, we'd maintain you know.

Speaker 4: you know, 50 basis points to 100 basis points of cushion. We're now getting closer to that. But the reality is that we are seeing the kind of organic growth that is what you want us to see, investing in the client franchise, whether it's in the markets business, having, you know,

50 basis points to 100 basis points of cushion, we're now getting closer to that but the reality is that we are seeing the kind of organic growth that is what you want us to see investing in the client franchise, whether it's in the markets business up having yep.

Speaker 4: 20-25 percent more balance sheet deployed and seeing that pick up and having a record amount of revenues, whether it's the deposit growth.

20% to 25% more balance sheet deployed and seeing that pick up and having a recognized amount of revenues whether its the deposit growth that you know we're now two trillion dollars of pauses a trillion dollars in loans and it is growing well so expect us to have a different equation, which is we'll still pay out dividends and see them ramp up to 30% like we said we used to.

Speaker 4: that we're now $2 trillion in positives and $1 trillion in loans, and it has grown well. So expect us to have a different equation, which is we'll still pay out dividends, you know, up to 30%, like we said. We used to say the other 70% would come back to you. Now there'll be some for organic growth if, in fact, we get down to the 10.5% levels, and the rest we repurchased on a quarterly basis. But at an earnings rate of, you know, $7 billion, there's a lot of capital deployment even embedded in that.

The other 70% would come back to you know there'll be some for organic growth. If in fact, we get down to the 10, 5% levels in the rest of it you repurchased on a quarterly basis, but at an earnings rate at 7 billion Bucks Theres a lot of capital deployment, even embedded in them.

Okay. Thanks, Brian .

Yeah.

Speaker 2: We'll go next to Mike Mayo with Wells Fargo. Your line is open.

We'll go next to Mike Mayo with Wells Fargo. Your line is open.

Hi.

Speaker 6: I guess first, Brian and then Alistair, you know, you talk about the benefit of higher rates, but I think, you know, for you in the industry, it's the benefit of better relationships to the extent that relationships are sticky as rates increase. So, if you can just give some metrics around, you know, retention. And then, specifically, last year you gave an NII guide of a billion higher. Can you give us some sense where you expect NII to be from 4Q21 to 4Q22? Thanks.

I guess first Brian and then Alister.

You know you talk about the benefit of higher rates, but I think you know for you and the industry, it's the benefit of better relationships.

The relationships are sticky as rates increase so if you can just give some metrics around retention.

And then specifically last year, you gave an NII guide of 1 billion higher.

Can you give us some sense, where you expect NII to be.

From <unk> 21 to <unk> 22.

Speaker 4: I think on your very last point, you know, Alistair gave you the starting point and gave you robust is strong enough because it depends a little bit on the path forward, 6.2.

I think on your very last point that you know I also gave you a starting point and gave you some robust is strong enough well because it depends.

Depending a little bit on the path forward, where six point.

To have $1 billion of rate sensitivity, a 100 basis point increase as we said so well, let you figure out when those rate changes come through video backing up to your broader point, Mike you know at the end of <unk>.

Speaker 4: You know, in the consumer business, what drives our capabilities there is the preferred group of customers.

Day.

Yep.

The consumer business, what drives our capabilities. There is the preferred a group of customers that are 80% plus of the balances in retention rate through preferred rewards in the millions of people, we have and it is 99% plus.

Speaker 4: that are 80% plus the balances and retention rate through Preferred Rewards and the millions of people we have in it is 99% plus. And those customers have, you know, tremendous relationship with us and we invest across whether it's the Preferred Rewards, as you know, go across the whole business and not just by product. So those customers get rewards in credit card that they pay for by giving us deposits. You go to the Wealth Management, you can see.

Those customers have tremendous relationship with us and we invest across whether it's the preferred rewards as you know go across the whole business and not just by products. So those customers get rewards credit card that they pay for it by getting these deposits you go to the wealth management you can see if you look at this stats you can see the strong growth.

Speaker 4: If you look at the stats, you can see the strong growth, not only in what you'd expect in the AUM side, but the client flows and deposits and other products as we continue to...

Not only what you would expect any a U M side, but the client flows and deposits and other products as the we continue to.

Speaker 4: you know, drive, you know, the core deep relationship across.

Drive.

Core deep relationship across in the private bank, but importantly merrill across all the different segments and even as we enter new markets, where we didn't have banking capabilities Columbus, Ohio. For example, there was robust Merrill capabilities. We're building underneath so that relationship but then if you move the commercial side. It's the same thing. So you know our deposits in commercial.

Speaker 4: in the private bank, but importantly, Merrill across all the different segments. And even as we enter new markets where we didn't have banking capabilities, Columbus, Ohio, for example, there was robust Merrill capabilities we're building underneath. So, you know, that relationship and as you move the commercial side, it's the same thing. So, you know, our deposits and commercial.

Speaker 4: are strong, they are all operating deposits, you know, to a lion's share of them, they, you know, they're part of what we core do, but they build off the backs of that great relationship management practice and the GTS capabilities of which we invested billions of dollars in across the West. Thanks.

Our strong they are all operating deposits at you know the lion's share of them. They you know they are part of what we do but they build off the backs of that great relationship management practice in the GTS capabilities of which we have invested billions of dollars in across the west things and what seals out altogether is not that these are the affiliate group of enterprises that I'll go off and operate it.

Speaker 4: seals that all together is not to be there to fill you in group of enterprises that i'll go up and operate is the common things that they have together which are things like

Is the common things that they have together, which are things like yep.

Speaker 4: that the digital capabilities which we give you the capabilities that that backbone goes across all our customer sets and that enables us to drive it and also how they work together in the markets. You know we will set a record.

The digital capabilities, which would give you the capabilities that that backbone goes across all of our customer sets and that enables us to drive it.

Also how they worked together in the markets you know, we we will set a record.

Speaker 4: In 21, we ended up getting back to where we were in referrals from one business to the other in every market. And those are important ways that we cement a relationship. Our commercial banking investments group, as we call it, has millions of customers through our corporate relationships that have priority access. So it is about how you build the franchise and concentrating on eight lines of business and how they work together. Our merchant sales are back.

'twenty one we ended up getting back to where he worked referrals from one business. The other in every market and those are important ways that we cement their relationship or a commercial banking investments group as we call. It has millions of customers that through our corporate relationships that have priority access. So it is about how you build the franchise and concentrating on eight lines of business and how they work together.

Our merchant sales are back.

Speaker 4: you know, way over where they were when we had the joint venture, our 401K engagements are way up, and again, that's going through the franchise, so we feel good about the relationship side of it.

Way over where they were when we had the joint venture are falling case engagements are way up and again, that's going through the franchise. So we feel good about the relationship side or is that your point.

Well, Brian are you tempted to take some of that assuming you get $6 $5 billion of benefits are you tempted to take some of that and spend more.

It seems like you're letting that fall at the bottom line, but what are your considerations. When you say hey, we'll let that fall on the bottom line instead of making additional investments and also what do you think about expenses say in 2023.

Well I think when we were flat next year, Mike If you remember back leading independent Democrat I think 20 quarters of operating leverage in a row, where but we are starting to make the turn from you know expenses going down and then flattening that we were gonna have to start growing again to allow for the right investments in compensating our teammates well.

Speaker 4: Well, I think when we, you know, we're flat next year, we might be remember back.

Speaker 4: leading in the pandemic, we had, I think, 20 quarters of operating leverage in a row, you know, we're, but we're starting to make the turn from, you know, expenses going down and then flattening that we're going to have to start growing again to allow for the rate of investments and compensating our teammates well, etc. And so, you know, we, we, we feel that that rate of investment is embedded in the run rate. And would we start to grow expenses at some point?

Et cetera, so yeah, we feel that that rate of investment is embedded in our run rate and would we start to grow expenses at some point.

Speaker 4: You know, I think that'll be based on, you know, really some of the market-related revenue and incentives that drive it. But we still have a lot of room to go on a day-to-day basis and cost takeout in this company from, you know, reinvesting that in OPEX and stuff. It is, you know, think about.

I think that'll be based on you know really some of the market related revenue and incentives that drive it but we still have a lot of room to go on a day to day basis and cost takeout in this company from it and reinvesting that in Opex and stuff. It is if you think about that checked two years, 24% less checks going through the system, that's by driving those capabilities.

Speaker 4: two years, 24% less checks going through the system. That's by driving those capabilities.

Speaker 4: allows us to be more efficient. So it'll go to the bottom line.

Allows us to be more efficient so it'll go to the bottom line.

Speaker 4: It, you know, because frankly, most of that value comes off the consumer franchise, which has been investing heavily in whether it's Merrill Edge, whether it's the card business, whether it's the rewards, which are huge investment in our client base.

Yeah, Yeah, because frankly.

Most of that value comes off the consumer franchise, which has been investing heavily in whether it's merrill edge, whether it's a card business, whether its the rewards which are huge investment in our client base, meaning that you know there's charges go up in the revenue doesn't go up as much that's actually investment and whether it's the branches and you know the new branches in new markets and then but there Deane in.

Speaker 4: Meaning that if charges go up and the revenue doesn't go up as much, that's actually investment. And whether it's the branches, and the new branches, new markets, but Dean and the team have been experts at repositioning expense based on more efficient execution.

Team have been experts at repositioning expense base to more efficient execution.

How do we start counting again, the number of quarters in a row that you achieved positive outcome I regret to try and bring more 'twenty quarter wrecker well. We're at two so if we got some room to go so.

Speaker 4: So do we start counting again the number of quarters in a row that you achieve positive optimal leverage? You're at two? Are you trying to break that 20 quarter record? Well, we're at two, so we've got some room to go.

Speaker 4: Yeah, we're working on it, Mike, and we'll keep plugging away. But, you know, you know us. We know how to manage expenses in this company. I wouldn't be here if we didn't think we could do it the right way and invest. And, you know, so I think people should be confident that we count heads. We're down 4,000 people in the quarter, in the year, from 212 to 208. And all those people are going to make more money because they've had a fabulous year. But the reality is we keep managing the overall human countdown, which is our biggest cost.

Yeah, we're working on it Mike.

We'll keep plugging away, but you know, it's we know how to manage expenses in this company.

I wouldn't be here, if we didn't think we could do it the right way.

And and invest in you know so I think people should be confident that we count heads were down 4000 people in the quarter and the year up from 212 Detroit.

And all of those people are going to make more money because they've had a fabulous year, but the reality is we keep managing the overall human countdown, which is our biggest cost.

Alright, thank you.

Excellent.

Speaker 2: We'll go now to Jim Mitchell with Seaport Global. Your line is open.

We'll go now to Jim Mitchell with Seaport Global your line is open.

Speaker 1: Hey, good morning. Maybe maybe a question on credit. I think we're all sort of ignoring that now. But, you know, you've seen your all time low net charge offs, particularly in the card business. I think the consensus is that we'll see a normalization process in the back half of this year and into 23.

Hey, good morning.

Maybe maybe a question on credit I think we're all sort of ignoring that now, but you know you've seen your all time low net charge offs, particularly in the card business I think the consensus is that we'll see a normalization process in the back half of this year and into 'twenty three.

Speaker 7: But, you know, we're not seeing any change really in delinquencies. You know, are you in a camp that we're going to see normalization? What are the drivers of that? Or is there some sort of behavior mix change among customers that maybe we can be a little bit more optimistic on charge-offs over the next 18 months?

But you know we're not seeing any change really in delinquencies.

Are you in that camp that we're gonna see normalization what are the drivers that it or is there some sort of behavior mix change among customers that maybe we can be a little bit more optimistic on charge offs over the next 18 months.

Speaker 1: Well, Jim, we're seeing the same thing you are. So when we're looking at our 30 days past or 60 days past or 90 days past, they're staying at those same low levels you talked about when Brian talked about customer balances being elevated, in some cases up five times where they were pre pandemic. That's probably what's accounting for a lot of the consumer.

Well, Jim we're saying the same thing you are so when we're looking at our 30 days past or 60 days past 90 days past, they're staying at those same low levels you talked about.

When Brian talked about customer balances being elevated in some cases up five times, where they were pre pandemic.

It's probably what's accounting for a lot of the consumer.

Credit quality improvement.

Speaker 1: We're anticipating at some point it will go back towards more normal historical levels.

We're anticipating at some point it will go back towards more normal historical levels.

Speaker 1: uh... we just think it's going to bump around here for a little while so we don't see we don't have a particular timeline on that at this point uh... but i'm not sure we'd be betting on behavioral change

But we just think it's going to bump around here for a little while so we don't see we don't have a particular timeline on that at this point.

But I'm not sure we'd be betting on behavioral change.

Speaker 7: Okay, thanks for that. And then just as a follow-up on the wealth management business, there's nice acceleration of new households and deposit growth and net flows. But even as FAA headcount kind of trickles down, I guess, how are you improving productivity there? And do you see a time where you start to see net FAA headcount grow to kind of accelerate that growth?

Okay. Thanks.

Thanks for that and then just as a follow up on the wealth management business.

There's a nice acceleration of new household and deposit growth and net flows.

But even as they head count kind of trickles down.

I guess, how are you improving productivity there and do you see a time, where you start to see net FA head count grow to kind of accelerate that growth.

Speaker 4: Yeah, uh, Jim, if you look at the quarter by quarter progression on that in the supplement or something, you can see it's starting to flatten out. A lot of that adjustment in the recent past has been due to the, um, the work that Dean and

Yes.

Jim If you look at the quarter by quarter progression on that in a supplement or something you could see it starting to flatten out a lot of that adjustment in the recent past has been due to that.

The work that Dean.

Speaker 4: And he did with Aaron Levine and others on the combined training program. So we're training, you know, we had two training programs running and etc. We combined all that. And so that now has sort of stabilized. And so you'd expect us to see slow growth out for the Merrill Edge customer. It's largely a

And he did with Aaron Levine and and others on their combined training program. So we're training.

We had two training programs running in etcetera, we combined all of that and so that now has sort of stabilized and so you would expect us to see a slow growth out for the Merrill edge customer, it's largely a ditch.

Speaker 4: you know, a digital execution and that's where the real growth comes from. And that's sort of infinitely leverageable. And that, you know, that, that deposit, that balance is there 300 plus billion, you know, 500,000 new customers growing well, and for Merrill.

The digital execution, and that's where the real growth comes through and that's sort of Infinera, who leverages <unk> net debt.

Deposit.

Balances are 300 plus billion five.

500000, new customers growing well and for Merrell.

Speaker 4: In the private bank, it is people, and you'll see that flatten out come up. But that had largely to do with repositioning of the training program that the team has accomplished. And so now we train one set of advisors. They have different career paths in our company, but it makes us more efficient going to the ability to keep managing expenses.

And the private bank it is people and you'll see that flatten out and come up with that had largely due to the repositioning of the training program that the team has accomplished and so now we trained one set of advisors. They have different career paths and our company, but it makes us more efficient going to the ability to keep managing expenses.

Speaker 4: Um, and so you're seeing good household formation, the, you know, the marginal.

And so you're seeing good household formation.

The marginal.

Speaker 4: The productivity of our advisors is through the roof, and you can see that. But the reality is you want to have the growth and flows, and that $170 billion for the year is a pretty substantial increase over any year past. I think it's either twice or almost three times, so we feel good about it. And a year when, I remember, you still couldn't meet face-to-face with your clients a lot. It's not the easiest year to develop business, too, so the team did a great job.

She productivity of our advisors just through the roof, you and you can see that but the reality is you want to have you want to have the growth and flows in that 170 billion for the year is a pretty substantial increase over any year passed I guess either twice or almost three times. So we feel good about it in a year when I remember you still couldn't meet face to face with your clients a lot.

Yeah. It was it it's not the easiest year to develop business too. So the team did a great job.

No absolutely thanks, Brian .

Well go now to Erika Najarian with UBS. Your line is open.

Speaker 2: We'll go now to Erica Nigerian with UBS, your line is open.

Speaker 2: Yes, hi. I just wanted to ask Alistair a follow-up question on NII. In that $6.5 billion number, what kind of deposit repricing is embedded in your sensitivity? And as you look at potential actual performance for the year, as opposed to the sensitivity?

Yes, Hi, I just wanted to ask Alastair a follow up question on NII and that $6 5 billion number what kind of deposit repricing is embedded in your sensitivity and as you look at potential actual performance for the year as opposed to the sensitivity how should we expect.

Speaker 8: How should we expect total deposits to trend in terms of growth or attrition and also...

Total deposits to trend in terms of growth or attrition and also repricing.

Speaker 1: Okay so obviously it feels like right now we're at the beginning of a new rate hike cycle and so we're looking back towards 2015 to 2019 as the most recent rate hike cycle. During that period Erica we had deposit beta probably between 20 and 25 percent.

Okay. So obviously it feels like right now we're at the beginning of the new rate hike cycle.

And so we're looking back towards 2015 to 2019 as the most recent rate hike cycle.

During that period, Erika, we had deposit beta I'd, probably between 20 and 25%.

Speaker 1: somewhere in the middle of that. We'd like to think this time around it'll be something similar, hopefully a little bit better based on what we've learned and based on the value we add to our customers. And then in terms of you know deposit growth

Somewhere in the middle of that.

We'd like to think this time around it'll be something similar hopefully a little bit better based on what we've learned and based on the value we add to our customers.

And then in terms of deposit growth.

Speaker 1: We have deposit growth moderating back towards more normal growth over time. Just recognizing we're coming off of two years of extraordinary monetary and fiscal stimulus.

We have deposit growth moderating.

Back towards more normal growth overtime.

19, we're coming off of two years of extraordinary monetary and fiscal stimulus.

Yeah.

Speaker 8: Just to confirm, you know, given the deposit growth that you're seeing, you know, you mentioned that most of your growth is concentrated in operating accounts. You don't expect declines in deposits as rates rise.

Just to confirm you know given the deposit growth that youre seeing them. You know you mentioned that most of your growth is concentrated in operating account you don't expect declines in deposits as rates rise.

We didn't see it last time from 17 to 19, we saw or we continue to grow deposits.

Speaker 4: We didn't say it last time, you know, from 17 and 19, we saw our we continue to grow deposits better than history and they grew throughout that period of time. And so, because of the nature of what they are.

Better than history, and they grew throughout that period of time, and so because of the nature of what they are.

Speaker 4: We get the economists to go through all the drawing and the things, and because of some of the off-balance sheet financing the Fed has put together. But as a strict matter, the last time we did not see deposits go down is the Fed's balance sheet shrank from $8 trillion or whatever the peak was down to around $4 trillion.

If we get the economist to go through all the withdrawing the things in it because of some of the off balance sheet financing. The fed has put together, but you know there's a strict matter. The last time, we did not see deposits go down as the fed's balance sheet shrank by you know from the trillion or whatever the peak was down around four.

Speaker 8: Got it. And just taking a step back, this question is for Brian . You know, Brian , one of your closest peers, J.P. Morgan, sort of gave a medium-term ROTC.

Got it and just taking a step back on this question is for Brian Brian One of your closest peers J P. Morgan.

Medium term, our TCE target of about 17%.

Speaker 8: target of about 17 percent. And if you think about B of A over the next...

And as you think about Bofa over the next few years, when you think about normalizing rates.

Comment about self funding our investments are much bigger balance sheet I don't think we've seen high single digit growth in quite some time.

As he put all of that together.

What would you tell your investors with your our TCE medium term target would be in a normalized rate environment.

We've always said and no debt.

Speaker 4: that our job is to keep that well in excess of our cost of capital and we've done it. And I think, you know, again, because of the leverage and rate increases in instantaneous impact.

Our job is to keep that well in excess of our cost of capital and we've done it and I think you know again because of the leverage and rate increases an instantaneous impact too.

Speaker 4: to business like the consumer business, which doesn't need any more capital and will grow. We feel good about it, but we have focused people on that we'll continue to grow the earnings at returns that are, we used to say 10 to 12 percent, now I'd say 15 percent, and we'll continue to do that. But we need to balance the raw nominal returns of growth, and last year we had good RRTC, and we expect to maintain that.

Two businesses like the consumer business, which you know it doesn't need any more capital to grow.

Feel good about it but we we focus people on that will continue to grow the earnings at at returns that are.

We used to say, 10% to 12% now I would say, 15% and we'll continue to do that but we need to balance the.

Rod nominal returns of growth and you know last year, we had good our TCE and we expect to maintain.

Thank you.

Yeah.

Speaker 6: The next question comes from Matt O'Connor with Deutsche Bank. Your line is open. Hi. You made some significant announcements on overdraft and NSF, and I think you framed the drop versus...

The next question comes from Matt O'connor with Deutsche Bank. Your line is open.

Uh huh.

You made some significant announcements on overdraft NSF and I think you framed the drop versus.

Speaker 6: 2010, if I remember correctly. But just how much we'd be modeling if that goes down in the next couple of years, say, versus the 21 level. And then also remind us what else is in service charges. I think you have a bunch of commercial fees, and there's always some confusion in terms of what that is.

Got it if I remember correctly.

Should we be modeling that goes down in the next couple of years say versus the 21 level.

And then also remind us what alpha and service charges I think you have a bunch of commercial fees and there's always some confusion in terms of what that is.

So let's start with N S F O D.

Speaker 1: So let's start with NSFOD. What Brian's outlined is we think it's about.

What Brian's.

Aligned as you know we think there's about.

Speaker 1: Billion dollars in there have come down over time, probably around 75% of that this year, just to give you some idea. Obviously we're making those changes as we update systems and processes, etc. So that's some in February .

$1 billion in there I'll come down overtime, probably around 75% of that this year just to give you. Some idea obviously, we're making those changes as we update systems and processes et cetera. So that's some in February .

Speaker 1: some in may i think we have been can help you with timing but that gives you a ballpark try to think about that

Some of them may.

I think Lee and his team can help you with timing, but that gives you a ballpark for how to think about that.

Speaker 6: And then just just ask me this service charges. Just explain that one more time. Oh Yeah, I think a lot of investors look at service charges and think it's all consumer But I think there's a lot of commercial fees in there too And just what exactly are those and remind us like how those react as interest rates go up

And then just just asked me this service charges just explain that one more time.

Yeah, I think a lot of investors look at service charges and I think it's all consumer but I think there's a lot of commercial fees in there too and just what exactly are those and remind us how those react as interest rates go up.

Speaker 4: Yeah. So those are the GTS fees. So Global Transaction Services. So people can pay us cash fees or they can pay us the balances of which we get the earnings rate and we get my credit as you all know. So.

Yes.

So those are the G. T S fees, so global transaction services that people can pay us cash fees or they can pay us the balances of which will get the earnings right and we give them a credit as you well know so.

Speaker 4: Generally, when rates go up, the dollar value of the earnings credit goes up, and therefore people shift a little bit to that. So I, you know, I, you know, look, Lee could take you through some of the dynamics, but yes, there'll be pressure on that fee line, but we'll be earning money a different way. It, believe me, all in, you make a lot of money and it's, it's different for largest companies versus small businesses and things like that. So it's a, it's a complex thing and it also comes back to, you know, how you, how you.

Generally when rates go up the dollar value of the earnings credit goes up and therefore.

You know people shift a little bit to that so yeah.

Aye.

Well Lee can take you through some of the dynamics, but yes, there'll be pressure on that fee line, but will be earning money a different way it.

Believe me it all in he makes a lot of money and it's it's different for largest companies versus small businesses and things like that so it's a it's a complex thing and it also comes back to you.

How you how you.

Speaker 4: The deposit paid is in a commercial business that Alistair referenced earlier. Also in that fee line is monthly maintenance fees for accounts on both the commercial, small business, consumer side. There's other things in there, but the NSF is the one that we, in OD, we wanted you to focus on, which we gave you about a billion in change, and it's down 75 percent. That, other than that, it ought to bounce around and kind of go up or down a little bit, but I wouldn't be too overly worried about the other.

So the deposit betas are in the commercial business that Alistair referenced earlier also in that fee line as monthly maintenance fees for accounts on the both the commercial small business consumer side, there's other things in there, but the NSF is the one that we did we wanted to focus on which we gave you about $1 billion in change and it's down 75% debt other than that it ought to bounce around.

And kind of go up or down a little bit, but I wouldn't be too overly worried about the other pieces.

Okay. That's helpful. And then just a quick clarification question also you mentioned about high single digit loan growth and 22 was that on a full year kind of average basis through our period end or what how.

Speaker 6: Okay, that's helpful. And then just a quick clarification question. Alistair, you mentioned about high single-digit loan growth in 2022. Was that on a full year kind of average basis or a period end? Or how would you frame that?

How would you frame that.

Yeah, I'd say, that's kind of a full year kind of a growth rate average and I would just say.

It's early in the year, but we're.

That's what we're trying to impress upon you is we're pretty optimistic based on everything we've seen.

Okay. Thank you.

Okay.

Speaker 2: We'll take our next question from Ken Houston with Jefferies. Your line is open.

We will take our next question from Ken Houston with Jefferies. Your line is open.

Speaker 6: Thanks. Good morning. Just wanted to follow up on the rate sensitivity in the NII outlook. Obviously, what you give us in the $6.5 billion is the banking book. Can you help us just understand the rest of the balance sheet, the institutional part that's, I think, historically more liability sensitive? What's the best way of us trying to understand how that nets out in terms of the true underlying benefit from rates as we move higher overall for the balance sheet?

Hey, Thanks, good morning.

Just wanted to follow up on.

The rate sensitivity in the NII outlook on obviously, what you gave us in the six 5 billion as the banking book can you help us understand the rest of the balance sheet. The institutional part that's I think historically more liability sensitive out what's the best way.

I'm just trying to understand like how that nets out in terms of the true underlying benefit from from rates as we move higher overall for the balance sheet.

Speaker 1: Yep. So we'd say our markets business, generally speaking, is.

Yep, So we'd say our markets business generally speaking is.

Speaker 1: pretty liability sensitive, so the short end will have a modest impact negatively on us.

You know pretty liability sensitive so the short term they will have a modest.

In fact negatively on us.

And then it's.

Speaker 1: liability that works in our favor on the long end, so obviously when we're carrying things short.

It's a liability that works in our favor on the long end.

So obviously when we were carrying things short.

Speaker 1: um longer assets we end up making some money there so it's probably a few hundred million negative um at the short end over a 12-month period it's probably

Longer assets, we ended up making some money there. So it's probably a few hundred million negative at the short end over 12 month period, it's probably.

You know couple of hundred million positive at the long end over a 12 month period, but that's ballpark how to think about it so.

So it's really not a meaningful net down impact then.

No not compared to our asset sensitivity at the power of the franchise is.

Liability price insensitive deposits yep.

Speaker 7: Yep. Okay. And on that second point about the deposit growth is just outstanding. And you mentioned earlier that it's good to see the good stuff growing, but, you know, you are getting tighter on your SLR and your CT1 versus your targets. So, as you go forward, would you consider issuing more preps to keep that buffer free, or is it more that you just let the balance sheet grow and take the RWAs at the tradeoff of a lower buyback?

Yep.

Okay and on that second point about the deposit growth is just outstanding and you mentioned earlier that it's good to see the good stuff growing.

You are getting tighter.

On your SLR and your CET one versus your targets. So as you go forward. It would you would you would you consider issuing more pressed to keep that buffer free or is it more that you just let the balance sheet grow in and take the <unk> at the trade off of a lower buyback.

Speaker 1: So I'll talk about the SLR. I think Brian talked about CET and buyback earlier.

So I'll talk about the SLR I think Brian talked about C T and buyback earlier, but.

Speaker 1: Obviously, with SLR, we've got a couple of different levers there. One is PREFs. As you saw in fourth quarter, we issued about a billion three in PREF, which obviously gets some more balance sheet flexibility where we need it and when we need it. And look, I'd just say, when we have customers coming in here about to establish a relationship with us for the course of the next 50 years, or in the case of commercial clients, for the next decades.

Obviously with SLR, we've got a couple of different levers. There one is perhaps as you saw in the fourth quarter, we issued about 1 billion three impress.

Which obviously get some more balance sheet flexibility, where we need it and when we need it and look I'd just say when we have customers coming in here about to establish a relationship with us for the course of the next 50 years or in the case of commercial clients for the next decades, we're going to make sure that we're in a position to take their deposits and established that.

Speaker 1: we're going to make sure that we're in a position to take their deposits and establish that relationship for the long term.

Relationship for the long term.

Yes, that's exactly why I asked okay. Thank you very much.

Yeah.

Speaker 2: We'll take our next question from Betsy Gracek with Morgan Stanley . Your line is open. Hi. Good.

We'll take our next question from Betsy <unk> with Morgan Stanley . Your line is open.

Hi, good morning.

Good morning.

Speaker 9: Alistair, a question, just, sorry, as we think about securities reinvestment in this rising rate environment, should we think about you?

I'll start a question just sorry, as we think about securities reinvestment in this rising rate environment.

Should we think about you.

Speaker 9: you know, trying to keep pace with where the yields are today and shortening the duration of the block, which, you know, reduces, you know, potential AOCI risk? Or should we anticipate that you would be more likely to, you know, keep duration where it is and benefit from a yield pickup as rates rise?

So trying to keep pace with where yields are today and shortening the duration of the block, which you know reduces potentially a OCI risk.

Or should we anticipate that you would be more likely to you know keep duration, where it is and it benefits me you'll pick up as rates rise.

Speaker 1: So I'd say, with respect to our securities reinvestment right now,

So I'd say with respect to our securities reinvestment.

Right.

We're finding that we're.

Speaker 1: You know, we've got the kind of loans growth that we want to see, generally speaking. We'd come off a period where we didn't see that loans growth. So with the excess liquidity, we were in a position where we were looking primarily and first at security.

We've got the kind of loan growth that we want to see generally speaking we'd come off a period, where we didn't see that loans go up so with the excess liquidity we were in a position where we were looking primarily in the first <unk> securities.

Speaker 1: Now we're moving more towards loans, so if you looked at our last quarter, we added $51 billion in loans. We added $14 billion in securities.

Now, we're moving more towards long. So if you looked at our last this last quarter. We added 51 billion of loans, we added 14 billion in securities.

Speaker 1: Now we're obviously going to be careful with respect to the OCI impact, and when you look at our balance sheet you'll see most of the securities available for sale are Treasuries swapped to floating, so that's going to have obviously a pretty substantial offsetting effect to anything that happens with higher rates.

Now, we're obviously going to be careful with respect to the OCI impact and when you look at our balance sheet, you'll see most of the securities available for sale, our treasury swap to floating so that's going to have obviously, a pretty substantial offsetting it back to anything that happens with higher rates and then I'm not sure where.

Speaker 1: And then I'm not sure we're going to necessarily change our duration profile around the securities portfolio. Remember we have a lot of that rolling off every quarter and then we tend to just put more back in the stack over time. So.

Going to necessarily change our duration profile around the securities portfolio, but we have a lot of that rolling off every quarter.

Then we tend to just put more back in the stack over time so.

Speaker 1: With any luck, we'll continue to see the loans grow. That'll be our primary focus.

With any luck, we'll continue to see the lunch growth that'll be our primary focus.

Speaker 9: Okay. No, that's great. Very helpful. Thank you. And then, Brian , I know we talked a lot about, you know, reinvestment in the franchise and the platform. I wanted to ask that question from a slightly different angle. We get, obviously, we're all very well aware of FinTech competition and what's going on. Technologically speaking, that enables not only competitors in the banking space, but non-banking space.

Okay now that's great very helpful. Thank you and then Brian I know, we talked a lot about no reinvestment.

In in the franchise and the platform.

I wanted to ask that question from a slightly different angle, we get obviously, we're all very well aware of our fintech competition and what's going on technologically speaking that enables not only competitors in the banking space, but non banking space to be more active and in finance when you think about your work.

Speaker 9: be more active in finance. When you think about your current platform, is it at the end state that you want?

Current platform is it at the end state that you want.

Speaker 9: Or is there more to do with regard to leveraging cloud and AI to enhance the efficiency of the organization overall? Or maybe that's not even a potential outcome of shifting the technology. Maybe there's something else I'm not thinking about.

Or is there more to do with regard to leveraging cloud and AI to enhance the efficiency of the organization overall or maybe that's not even.

Uh huh.

Outcome of of shifting the technology, maybe theres something else I'm not thinking about.

I don't.

Yeah, I think cloudy.

Speaker 4: AI is different, but internal clouds, what we do with external has largely to do with cost, flexibility, security, what apps, applications that we're running and how do we do that. But security and the ability to integrate it and the ability to be never down and things like that are high on our minds. I put that aside. The ability to continue to improve our platform is

AI is different in the cloud.

Turning to cloud and so what we do with external has largely to do with cost flexibility security, who what programs what apps applications that we're running.

And how do we do that but you know security in and the ability to integrate it and the ability to be never down and things like that are high on our mind. So I put that aside the ability to continue to improve our platform is evident and you see it I mean, you could have asked me. This question two quarters ago and you would have had if you look at the.

Speaker 4: And you see it, I mean, you could have asked me this question two quarters ago, and you would have had, if you look at, you know, the pages from 24 to 27, look at the statistics from two quarters ago. And what drives these changes is, you know, things like Erica going from.

Pages 24 to 27 and look at the statistics from two quarters ago, and what drives these changes as you know things like Eric going from Yep.

Speaker 4: Yep. 17 million to 24 million users and 30 million interactions to 120. Fourth quarter last year the fourth quarter this year is because of the feature functionality and capabilities of it go up our life plan.

17 million, a 24 million users and 30 million interactions to 124th quarter of last year. The fourth quarter. This year is because of the feature functionality and capabilities that will go up our life plans that 7 million people I think are using them. They have 20, 25% more balances because of what they're doing so.

Speaker 4: 7 million people I think are using them. They have 20, 25% more balances because of what they're doing.

Speaker 4: So we will never be at end state. I mean, that's, and that's where we continue to drive investment. Digital sales capabilities. We're only starting to be able to take full advantage of it, frankly, across the platform, because you had to get end to end, you had to get it all.

So we will never be at end state I mean, that's and that's where we continue to drive investment digital sales capabilities, we're only starting to be able to take full advantage of it frankly across the platform. Because you had to get end to end you had to get it all knocked together and then meet up and its its kind of interesting because it's it's growing quicker.

Speaker 4: knocked together and then it's kind of interesting because it's growing.

Speaker 4: quickly now so small business capabilities the whole merchant services we finally got a new platform out of a cost of 300 million bucks it's now being sold you know those are a major investment so i the question is do we appeal and you know about a we

Now so small business capabilities the whole merchant services. We finally got a new platform out of a cost of 300 million Bucks. It's now being sold as you know those are the major investments so I E.

The question is do we appeal in.

Got it.

We opened a twice the population right.

Speaker 4: for young, for people between the ages of 18 and 24.

For young for people between the ages 18 and 24.

Speaker 4: in terms of new accounts. We seem to be gaining share in that segment, and the usage by that segment is high. And so we feel very good that our platforms appeal to every cohort of age and experience, and that's what we're driving at. And then look at Merrill Lynch, 500,000 new accounts, $70,000 average balance. Those are deep clients with real money put into work.

In terms of new accounts, we seem to be gaining share in that segment and the usage by a segment is high and so we feel very good that they are our platform's appeal to you obviously appeal to every call.

Cohort of age and experience and that's what we're driving at and then.

Look at Merrill edge 500000, new accounts $70000 average balance those are deep clients with real money putting to work and so.

Speaker 4: yep are we satisfied that we can take a look at look all the awards in the growth and feel good it didn't feel spectacularly good about it

Are we satisfied.

Yeah, we can take a look at and look at all the awards and the growth and feel good and feel spectacularly good about it.

But yeah.

Speaker 4: You can be satisfied that way, but that would be dangerous. So we continue to invest and you can see the numbers of patents we get. We see that everything we will continue to invest heavily in this platform and what it takes us to it is still ahead of us.

You can be satisfied that way, but that would be dangerous. So we continue to invest in you can see the numbers of patents, we get V C.

We will continue invest heavily in this platform and what it takes us to it.

It's still ahead of us.

Speaker 9: OK, and when you think about where you are leveraging the technology in the consumer and wealth versus maybe the high net worth piece of your business versus the institutional piece, do you feel like you're running a pace at each of those or is there significantly more due in one of the sleeves?

Okay, and when you think about where you are leveraging the technology in the consumer and wealth.

This is maybe the high net worth piece of your business versus the institutional piece.

Are you do you feel like you're running a pace at each of those or is there.

More significantly more doing in in one of the sleeves.

I take it.

Speaker 4: The investment in the commercial cash management side.

The investment in the commercial cash management side.

Speaker 4: you know, it's just as we go continue to drive global business continues to be high. And I'd say, you know, as I met in the team, they're continue to challenge themselves to how much more we could do with investment. You know, we invest in merchants. Now we've got to sell it. And Mark Monaco and a team are driving that. And so there's, you know, I think there's a different again, this is, you know, a group of businesses have commonalities and differences. And, you know, the investment markets.

It's just as we go continue to drive global business continues to be high.

And I'd say yeah.

There's ed and the team there continue to challenge themselves.

As to how much more we could do with the investment.

Investment in merchants now we've got to sell it and Mark Monica and her team are driving that and so theres I think theres a different again. This is a group of businesses have commonalities and differences in the investment markets.

Speaker 4: technologies and stuff is critically important, but we built the data.

Technologies and stuff is critically important that we built the data.

Speaker 4: capabilities, I think all courts over the years at a billion and a half dollar cost that enables us to build on that platform for risk and finance and markets. And then now we're continuing to enhance that. So I'd say each one is a different story, but all will be better and all we're investing heavily in and we make choices about.

Our capabilities I think all courts over the years at 1 billion a half dollar cost that enables us to build on that platform for risk and finance and markets and then now we're continuing to enhance that so that I would say each one has a different story, but all will all will be better and all we're investing heavily in.

We make choices about the biggest constraint is do ability how much stuff can get done it's not the money.

Speaker 4: The biggest constraint is doability, how much stuff can you get done, it's not the money.

Speaker 4: It's really a question, you got to make sure you do it right and don't screw it up. And it's going to really stick to the ribs when you start driving.

It's really a question that you got to make sure you do it right and don't screw it up in there and that it's going to really stick to the ribs. When you start driving.

Thanks, Brian .

We'll go now to Steven Chu back with Wolfe Research Your line is open.

Speaker 2: We'll go now to Stephen Chuback with Wolf Research. Your line is open.

Hey, good afternoon.

Speaker 10: So, I wanted to start off with just a clarifying question on some of the ESG investments. I know you provided the guidance on the tax rate of 10 to 12 percent, which includes that benefit from those investments, versus 2021. Is there any incremental drag to other income that we should be thinking about at the pace of those investments that will be built?

So wanted to start off with just a clarifying question on some of the ESG investments I know you provided the guidance on the tax rate of 10% to 12% which includes that.

That benefited from those investments versus 'twenty 'twenty. One is there any incremental drag to other income now we should be thinking about as the pace of those investments steadily belts.

Speaker 1: Yeah, so Stephen, I think, you know, we're continuing to do more with our clients in terms of the ESG side. So I think when you're modeling, I'd use, say, 400 to 500 million for Q1 to Q3. And then I'd use just a few hundred million.

Yeah. So Stephen I think we're continuing to do more with our clients in terms of the ESG side. So I think when you're modeling I would use.

You say 400 to 500 million for Q1 to Q3.

And then I'd use just a few hundred million higher for Q4.

Speaker 10: Great. And just a question on a follow-up on capital. I was hoping you could just provide some early insights or perspective into how you're handicapping the impact of Basel IV adoption in the U.S. and how you think your position relative to fear has given lots of significant changes to the regime, some positive but also quite a few negative.

Great and just a question on a follow up on capital I was hoping you could just provide some <unk>.

Early insights your perspective into how you're handicapping the impact of Boswell for adoption in the U S. How do you think you're positioned relative to peers, giving lots of significant changes to the regime. Some positive but also quite a few negative.

Speaker 4: like any other regulatory change when it comes we'll deal with it but you know these things

Got it like any other regulatory change when it comes will deal with it but you know.

These things have impacts or like you said plus and minus in and life will go on you know it's it's it may cause us to have to adjust a little here and there, but we still have optimized it Optimizes Asian ahead of the optimization ahead of us in the balance sheet, you know that we can continue to work but.

Speaker 4: have impacts are like you said, positive and minus and life will go on, you know, it's

Speaker 4: It may cause us to have to adjust a little here and there, but we still have optimization ahead of us and the balance sheet, you know, that we can continue to work. But when a set of rules get developed and put in front of us and become final, we'll implement them. But my guess is it won't be as dramatic as going from $60 billion of required capital to $175 billion of tangible common equity over the last decade, believe me.

When they when they develop a real set of it when a set of rules get developed and put in front of us.

Some final rule will implement them, but my guess is it won't be anything that we it won't be as dramatic as going from 60 billion of required capital of 175 billion of tangible common equity over the last decade, believing.

Speaker 10: Fair enough. If I could just squeeze in one more follow-up, just a clarifying question on the NII guidance. Just to help with benchmarking versus peers that have all guided on 22 NII based on the forward curve, I was hoping you could provide just more explicit guidance for full year 22 NII if, in fact, the forward curve materializes.

Fair enough if I could just squeezing one more follow up just a clarifying question on the NII guidance just to help with benchmarking versus peers. They have all guided on 22 NII based on the forward curve I was hoping you could provide just more explicit guidance for full year 'twenty to NII. If in fact, the forward curve material.

Rises.

Yeah.

Yeah. So look one of the reasons, we don't provide full year.

Speaker 1: Yeah, so look, one of the reasons we don't provide full year.

Speaker 1: is because we don't control what the Fed does in terms of number of hikes, but nor the...

It's because we don't control what the fed does in terms of number of hikes.

Nor the size of each nor the timing.

Speaker 1: And, you know, those things we can control, like expenses, we're quite comfortable with.

And those.

Those things, we can control like expenses were quite comfortable with.

Speaker 11: so i think uh... you know beyond any guidance we've given today even i would just follow up with uh... with lee probably

So I think you know beyond any guidance, we've given today, Steven I would just follow up with up with Lee probably.

Okay understood. Thanks, so much for taking my questions.

Thank you.

Speaker 2: We'll take our final question today from Gerard Cassidy with RBC. Your line is open.

We will take our final question today from Gerard Cassidy with RBC. Your line is open.

Speaker 12: Thank you. Bye, Brian . How are you?

Hey, Gerard.

Hi, Brian how are you.

Speaker 13: Frank, can you share with us your thoughts? You guys have committed to, I think it's a trillion five in sustainable finance commitments out to 2030. And I'm not asking so much.

Can you share with us.

You had thought you guys are committed to I think it is truly in five and sustainable sustainable finance commitments.

30.

I'm not asking so much on the you know the.

Speaker 13: You know, the climate change and that type of risk, I think we all understand that.

Climate change and that type of risk.

I think we all understand that.

Speaker 13: But can you share with us what the financial risk is, you know, when you think about.

Can you share with us what's the financial risk is you know when you think about your credit card receivables delinquencies, obviously, if the unemployment rate was the double or triple those delinquencies, obviously would go up.

Speaker 13: your credit card receivable delinquencies. Obviously, if the unemployment rate was to double or triple, those delinquencies obviously would go up. So we could kind of measure where we think delinquencies could go based on economic activity.

We can kind of measure where we think delinquencies could go based on economic activity.

Speaker 13: What should we be looking at when it comes to sustainable finance and some of the risks that we should be aware of out there? Again, not the climate part. I'm thinking more the financial.

What should we be looking at when it comes to sustainable finance.

The risks that we should be aware of out there again, not the climate, but I'm thinking more of a financial partner.

Speaker 4: Well, at the end of the day, these are companies and projects that have to be underwritten. And so some of them don't go well, you know, so some of the renewable things don't work the way people want them to. So it's a good core, you know, and you got to

Yeah in the end of the day. These are companies and projects that have to be underwritten and so you know.

Some of them don't go well you know it honest Ido took it so suddenly renewable things don't work the way people want them too. So it's a good corn and you got it.

Speaker 4: Bruce Thompson, the team in credit, and Jeff Green are the team in risk. I think our track record underwriting credit is strong.

Bruce Thompson and the team in credit and Jeff Green Entertainment risk I think our track record of underwriting credit strong and so you know there's a business plan and our investments are to help our clients make the transition we already invest $80 billion to $100 billion and this is a step up from that as we as we move forward into 2021 step up.

Speaker 4: You know, there's a business plan and our investments are to help our clients make the transition.

Speaker 4: We already invest $80 to $100 billion, and this is a step up from that as we move forward, and 2021 was a step up. So it's not some, we've got to go out and do things we haven't been doing. We have to just do more of what we've been doing. Each individual deal is underwritten.

So it's not something we gotta go out and do things, we haven't been doing well.

To just do more of what we've been doing at each individual deal is underwritten so what's the risk the risk on the renewable side doesn't work in a risk on the other side is the value of your assets because it comes down because of cash flow start to get impaired by regulation customer change and things like that and so you know as we go forward, but additional consideration of a busy.

Speaker 4: So what's the risk? The risk on the renewable side doesn't work, and the risk on the other side is the value of...

Speaker 4: you know, assets because it comes down because the cash flows start to get impaired by regulation, customer change and things like that. And so, you know, as we go forward, you know, an additional consideration of a business plan of a

This plan of a.

Speaker 4: a heavily emitting industry will be, you know, will its business model sustain in the change in customer behavior and use of things? In the near term, you know, demand for all energy is going up and, you know, the challenge for society is how we

Heavily emitting industry will be you know.

Well its business model sustain and are in the change in customer behavior.

And use of things in the near term demand.

Demand for all energy is going up and you know the challenge for society as how we meet the needs to have a just transition occur for everyone well change in emission structure, but yes.

Speaker 4: meet the needs to have a just transition occur for everyone, while changing the emission structure. But over time, your business plans of both the emitter side and the renewable side will come cleaner based on customer behavior. You know, people like ourselves reducing our demand for energy, you know, it affects our power companies and how they supply it, and our demands of our power companies to do more renewables.

Her time business plans of both the emitter side and the renewal of a side will come cleaner based on customer behavior, you know people like ourselves, reducing our demand for energy and facts are power companies and how they supply it in our demands of our power companies do more renewables.

Speaker 4: that's going to reverberate to our 30,000 middle market clients and our millions of small businesses piece by piece by piece. So I don't know if that's

Its going to reverberate through our 30000 middle market clients and our millions of small businesses piece by piece by piece. So I don't know if that's entirely where you're going you are but it's going to come down to you know.

Speaker 4: entirely where you're going, you are, but it's going to come down to, you know, good core underwriting, given the circumstances of the individual company, its business and its plans and what its transition plans are and the disclosures they make to us, the underwriting process.

Good core underwriting given the circumstances of individual company its business and its plans and what its transition plans are in the disclosures they make to us the underwriting process.

Speaker 4: But you know, we've done a great job in commercial underwriting, you'd have to agree with that over the decades. So I think, you know, we'll adjust each deal in each quarter, each deal in each company in each portfolio as we move along.

You know we did we've done a great job in commercial underwriting you'd have to agree with that over the decades. So I think you know.

We'll adjust each deal and each quarter, each deal and each company and each portfolio as we move along.

Speaker 13: No, no, that is helpful. Thank you. And you have done a good job with the underwriting. Absolutely. The follow-up question, Ryan, you've expanded into some new markets. I think you mentioned on the call today maybe Columbus, Ohio, if I recall, was a relatively new market, and Minneapolis, Minnesota. Are there other markets that you intend to expand into like you've done in those two markets? Or are you all set? You're satisfied with the expansion physically into new areas of the country? Yeah, so a couple...

No no that is helpful. Thank you and you haven't done a good job with the underwriting absolutely.

Oh, a question right here.

Expanding into some new markets I think you mentioned on the call today, maybe Columbus, Ohio, If I recall, it was a relatively new market and Minneapolis, Minnesota.

Are there other markets that you.

Tend to extend into like you've done in those two markets are you or are you all set you're satisfied with the expansion and physically into new areas of the country.

Yeah, So a couple of things one.

Speaker 4: So why are we expanding these markets? This is a prioritization. We first looked at the largest markets that we weren't and said, we're going to expand these markets.

So why are we expanding as Mark had said I believe we first this is prioritization. We first looked at the largest markets that we werent and said why aren't we there because we're nationwide.

Speaker 4: Why aren't we there? Because we're a nationwide brand and capabilities. And by the way, in a lot of those markets, we had bulk manager clients. So, you know, we started in 14

And in capabilities and by the way. It allows markets we had wealth management clients. So we started in 2014 has been a long effort. So we did Denver, starting in 2014, and Minneapolis, Indianapolis, Pittsburgh Salt Lake Columbus, Cincinnati, Cleveland that Lexington. So there's a list of other markets that we continue to go down largely starting originally to get it.

Speaker 4: been a long effort, so we did Denver starting in 14, then Minneapolis, Indianapolis, Pittsburgh, Salt Lake, Columbus, Cincinnati, Cleveland, now Lexington.

Speaker 4: So there's a list of other markets that we continue to go down. Largely starting. Originally the key was to close the top 30 markets.

The key was to close the top 30 markets.

Speaker 4: which we were in seven if I remember right at the time and we're now in all those.

Which we werent seven if I remember right at the time and we're now in all of those so theres really think of the next several years is being going down to the top 50 markets, which starts to cover a substantial part of the population where you aren't but also even within those markets take Grand Rapids, Michigan, where not to the level, we want to be there and by the way in a place like.

Speaker 4: So there's really, think of the next several years as being, going down to the top 50 markets, which starts to cover a substantial part of the population, where you aren't. But also, even within those markets, take Grand Rapids, Michigan, we're not to the level we want to be there. And by the way, in a place like...

Speaker 4: uh... columbus were now number five in the market you recruit nine percent we only have twelve financial centers and state will be another you know eight ten type a number and so we're still building out these markets and it's working and it works because of the way we do it so that all be a

Uh huh.

Columbus, We're now number five in the market grew at 9%, we only have 12 financial centers and state will be another.

10 type of number and so we're still building out in these markets and it's working and it works because of the way we do it so that all be yep.

Speaker 4: a move, but expect us to keep working down, you know, by population markets.

But expect us to keep working down.

By population markets.

Speaker 4: But think about two dimensions. One is more markets, and the second is also making sure every market, what we do is we look at the.

But think about two dimensions, one is more markets and the second is also making sure every market. What we do is we look at the.

We look at like markets and compare them same size capabilities and.

Speaker 4: We look at like markets and compare them, you know, same size capabilities. And we expect every market will get to the 75th percentile of Bank of America business, uh, comparative. So why is that? That means like, even in Los Angeles, we're four or 5% wealth manager share, if I remember right.

And we expect every market will get to the 70.

Fifth percentile at Bank of America business, a comparative so why is that so that means like even in Los Angeles War of four 5% wealth manager share if I remember right.

Speaker 4: versus D.C. where we have equal representation consumer. D.C. were 15, 20 percent market share and wealth management. That means we should be 15 percent in L.A. That's a heck of a lot of work that Danny and Katie and team have to do. So we look at this that way in terms of trying to drive our market share by market. Sometimes it's people, sometimes it's branches, sometimes it's advertising, sometimes it's charitable work, sometimes community work, all the above.

<unk> D C, where we have equal representation in consumer D C, where 15, 20% market share in wealth management.

Means we should be 15% and L. A that's a heck of a lot of work that Andy and Katie and team have to do so we look at this that way in.

In terms of trying to drive our market share by market and sometimes it's people sometimes its branches, sometimes its advertising sometimes its charitable work sometimes community work. It all the above but think of us as trying to close out you know most of the U S population centers are.

Speaker 4: But think of it as trying to close out, you know, most of the U.S. population centers over the next several years.

Over the next several years.

Very good thank you.

Speaker 4: Okay, I think that's all our questions, operators. Let me just close by saying, you know, as I said earlier, the number one point to remember is the organic growth engine that we had before the pandemic is fully back in gear and driving.

Okay I think that's all our questions operator, so let me just close by saying as I said earlier the number one point to remember is the organic growth engine that we had before the pandemic is fully back in gear and driving we've had good expense discipline. We continue we're now up to two quarters of operating leverage and we're working towards driving our streak again.

Speaker 4: We've had good expense discipline. We're now up to two quarters of operating leverage, and we're working towards driving our streak again. The client activity across the board was strong. Loan growth, deposit growth, net new households and wealth management, commercial GTS fees, capital markets activity, investment banking activity. And so those investments across the last several years continue to drive our strong growth in core market share.

The client activity across the board was strong.

Loan growth deposit growth net new households, a wealth management commercial.

G T S fees.

Capital markets activity.

Investment banking activity and so those investments across the last several years continue to drive our strong growth and core market share and in the end of the day last year was a record year of earnings and we returned $32 billion of catheter you our shareholders. Thank you for your support and we look forward to talking to you next time.

Speaker 4: And in the end of the day, last year was a record year of earnings, and we returned $32 billion of capital to our shareholders. Thank you for your support, and we look forward to talking to you next.

Speaker 2: This concludes today's program. Thank you for your participation. You may disconnect at any time and have a wonderful day.

That does conclude today's program. Thank you for your participation you may disconnect at any time and have a wonderful day.

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