Q1 2023 Bank of America Earnings Conference Call

April 18, 2023

Thank you Catherine and good morning, welcome. Thank you for joining the call to review our first quarter results.

I Trust everybody has had a chance to review our earnings release documents.

They are available, including the earnings presentation that we will be referring to during this call one of the Investor Relations section of the Bank of America Dot Com website.

I'm going to turn the call over to CEO , Brian Moynihan, and Alastair Borthwick, our CFO to discuss the quarter, but before I do let me.

Just remind you that we may make forward looking statements and refer to non-GAAP financial measures during this call.

Our forward looking statements are based on management's current expectations and assumptions.

Subject to risks and uncertainties.

<unk> that might cause those actual results to materially differ from those expectations are detailed in our earnings materials and the SEC filings that are available on our website.

Information about the non-GAAP financial measures, including reconciliations to U S. GAAP can also be found in our earnings materials and those are available on our website.

So with that we.

We will turn it over to Brian . Thank you.

Good morning, and thank all of you for joining us I'm starting on slide two of the materials.

The company produced one of its highest core EPS.

Earnings numbers in a challenged operating environment in the first quarter simply put we navigate that environment well the preparedness and strength of bank of America and the trust.

Of our clients reflects a decade long responsible growth model and relationship nature of our franchise.

During quarter one.

Importantly, organic growth engine continued to perform.

Let me first.

Some points and I'll turn it over to Alastair take you through the details of the quarter.

If you go to slide two of the materials Banc of America delivered strong earnings growing EPS, 18% over first quarter 'twenty to every business segment performed well, we grew clients and accounts organically and at a strong pace, we delivered our seventh straight quarter of operating leverage library at 13% year over year revenue growth.

We further strengthened our balance sheet.

With our CET, one ratio increasing to 11, 4%.

<unk> capital ended the highest nominal level in our history at 184 billion.

We maintained strong liquidity, we ended the quarter with more than $900 billion in global liquidity sources.

We earn good returns for you as our shareholders with a return on tangible common equity of 17% or 107 basis points return on average assets tangible book value per share grew 9% year over year.

We did this as the economy slowed and remember our research team continues to predict a shallow recession that it will occur beginning in the quarter three of 2023.

They are interesting and we look at our consumer behavior payments by consumer continues to drive the U S economy, we've seen debit and credit card spending at about 6% year over year growth pace, a little slower but still healthy.

But remember card spending represents less than a quarter of how consumers pay for things out of their accounts of bank of America overall payments from our customers accounts across all sources are up 9% year over year for March as a month.

Year to date were up about 8% for the quarter.

After slowing the back half of 'twenty, two a bit we saw the pavement pace of payments pick back up in quarter one.

Especially in the latter parts of the quarter.

Consumers' financial positions remains generally healthy they are employed with generally higher wages continue to have strong account balances.

And have good access to credit.

As you think through all the tightening actions of the fed.

Close to alternative yielding asset investments and the disruption in the past quarter, our deposits continue to perform well and in the quarter of one point.

Nine one trillion.

If you think about it that's about the same balance that we had in mid October of 2022.

So we've seen these balances stabilize and remain 34% above they were in prior to the pandemic.

The team has managed well during these periods while remaining focused on the things we can control to drive value through our franchise.

Hi, thank them for a very strong quarter near record earnings with strong returns, let me turn the call over to Alastair to walk through the details of the quarter.

Thank you Brian .

And I'll pick up on slide three where we list some of the more detailed highlights of the quarter and then on slide four we present. The summary income statement, so I am going to refer to both of these together.

As Brian mentioned for the quarter, we generated $8 2 billion of net income and that resulted in 94 per diluted share.

Our revenue grew 13% and that was led by a 25% improvement in net interest income coupled with strong 9% growth in sales and trading results excluding DVA.

Our noninterest revenue was strong despite three headwinds first.

We had lower service charges as commercial clients paid lower fees for Treasury services since they now receive higher earned rates on balances and obviously that allows us to invest those funds to earn NII.

On consumer we had lower NSF insufficient funds in overdraft fees as a result of our policy changes announced in late 2021.

Second we had lower asset management fees and that just reflects the lower equity market levels and fixed income market levels and.

And third investment banking fees were lower just reflecting the continuation of sluggish industry activity and reduced fee pools.

All of that said despite these headwinds each of the fee categories saw modest improvement from the fourth quarter levels.

Asset quality remains strong and provision expense for the quarter was $931 million that consisted of $807 million of net charge offs and $124 million of reserve build.

And that reserve build compares to a reserve release in the first quarter 'twenty two of $362 million.

Our charge off rate was 32 basis points and still well below the fourth quarter of 19, when our pre pandemic rate was 39 basis points and remember 2019 was a multi decade low so credit obviously remains quite strong.

I want to make one other point on slide four and that is simply to note that pretax pre provision income grew 27% year over year compared to reported net income growth of 15%.

So, let's turn to the balance sheet that starts on slide five and you can see during the quarter our balance sheet increased to 144 billion to $3 195 trillion.

Bryan noted our liquidity levels at the end of the period those rose to more than 900 billion from December 31.

It's 23 billion higher.

And it remains 324 billion above our pre pandemic level in the fourth quarter of 19.

Shareholders equity increased 7 billion from the fourth quarter as earnings were only partially offset by capital distributed to shareholders.

And we saw an improvement in OCI of 3 billion due to lower long term interest rates.

The OCI included more than half a billion increase.

Improved valuations of Hff's debt securities and that flows through CET one.

And the remaining $2 5 billion due to changes in cash flow hedges doesn't impact regulatory capital.

During the quarter, we paid $1 billion in common dividends and we bought back $2 2 billion in shares.

Turning to regulatory capital our CET, one level improved to 184 billion since December 31, and our CET one ratio improved 14 basis points to 11, 4%.

Once again, adding to our buffer over our 10, 4% current minimum requirement as well as the 10, 9% minimum requirement.

That we'll see on January one 'twenty four.

That means in the past 12 months, we've improved our CET one ratio by 100 basis points.

And we've supported our clients and we've returned $12 billion in capital to shareholders.

CET, one capital improved 4 billion and that reflects the benefit of earnings and the OCI improvement, partially offset by the capital we returned to shareholders.

Our risk weighted assets increased modestly and that partially offset the benefit to the CET one ratio.

The higher capital we generated.

And then our supplemental leverage ratio increased to 6% that compares to a minimum requirement of 5% and leaves plenty of capacity for balance sheet growth.

And our T Lac ratio remains comfortably above our requirements.

So let's spend a minute on loan growth.

And we will do that by turning to slide six where you can see the average loans grew 7% year over year, driven by commercial loans and.

And credit card growth.

The credit card growth reflects increased marketing it reflects enhanced offers and higher levels of card account openings.

The commercial growth across the past year reflects the diversity of commercial activity across global banking.

In global markets and to some degree global wealth.

And on a more near term linked quarter basis loans grew at a much slower pace.

Partly driven by seasonal credit card paydowns after the fourth quarter holiday spending.

And then commercial demand slowed in Q1, and we saw some pay downs by our wealth management clients as they lowered leverage as rates rose.

So, let's turn to deposits and there's obviously been a lot of additional focus this quarter. So I want to spend extra time here and I'm going to start with slide seven and talk about average deposits just a few points, we need to make before focusing on a more detailed discussion of the recent trends.

Average total deposits for the first quarter were $1 eight nine trillion that is down 2% linked quarter and down 7% year over year.

Our deposits peaked in the fourth quarter of 2021, and even as the fed has continued to withdraw money supply our deposits have held around one nine trillion because there's a lot more industry deposits today in a much bigger economy today compared to pre pandemic.

Our average deposits are up 34% compared to our pre pandemic Q4, 19 violence and the industry's deposits are up 31% to $17 four trillion. So.

We fared a little bit better than the industry.

We put our pre pandemic deposits for each line of business on the slide. So you can compare our balances then and now.

To highlight consumer checking balances, which remains 53% higher than pre pandemic.

And as I think all of US would expect G. When combined client deposits are up a lesser 23% as those are the clients that generally move their excess cash into other off balance sheet products.

And in global banking, you can see the rotation to interest bearing across time as rates rose.

So, let's get a little more granular in a little more near term and will use slide eight for that where you can see the breakout of deposit trends on a weekly ending basis across the last two quarters.

You can also see that we plotted the timeline of fed target in rate hikes on the top left chart just for comparison through time.

In the upper left you can see the trend of our total deposits.

We ended Q1 dollars 23 at $1 91 trillion, that's down 1% and as Brian mentioned over the course of the past six months those balances have been relatively stable.

And consumer looking at the top right chart.

We show the difference here in the movement through the quarter between the balances of low to no interest checking accounts.

And the higher yielding non checking accounts and across the entire quarter. We saw a modest 4 billion decline in total.

Checking balances, obviously have some variability around pay days in particular, but note the relative stability of checking deposits. Because these are the operational accounts with money in motion to pay the bills and everyday living costs for families.

I'd also point out that our checking balances were modestly growing even ahead of March 9th upheaval and continue to move higher through the quarter on the back of disruption.

Lower non checking balances, mostly reflect money moved out of deposits and into brokerage accounts, where we earn a small fee.

Right paid increased six basis points from the fourth quarter to 12 basis points on this trillion dollars of total consumer deposits and remains low because of the 52% mix that is checking.

Lastly, I'd just note that the rate movements in this business are concentrated in the small Cds and consumer investment deposits, which together represent about 5% of the deposits.

In wealth management as you would expect it shows the most relative to claim and you can see the continued trend of clients moving money from lower yielding sweep accounts into higher yielding preferred deposits.

And off balance sheet to other investment alternatives.

Now if we went back further you would see that roughly 90 billion has moved out of sweeps in the past year, which leaves $80 billion in these accounts.

So you can see how with the pace and size of rate hikes flowing.

Expect the declines in balances to lessen from here.

At the bottom right note the global banking deposit movement, where we hold about $500 billion in customer deposits. These are generally operational deposits of our commercial customers.

And they use that to manage their cash flows through the course of the year those are down $3 billion from the fourth quarter and what's interesting to note is that our total deposits. In this segment have been stable at around 500 billion for the past six months and this business just continues to see rotation into interest bearing.

The mix of interest bearing deposits on an ending basis moved from 49% last quarter to 55% in Q1, and obviously, we pay increased rates on interest bearing deposits and it's this rotation in global banking, that's driving the rotational shift of the total company and it's pretty typical and to be expected.

In this environment.

So in summary, our deposits continue to behave as we would expect the cash transactional balances have shown some recent stabilization.

And for investment cash, we've seen deposits moved to brokerage and other platforms for direct holdings of money market mutual funds treasure.

Treasuries.

And we're capturing many of those flows as you've seen in our numbers. It's just we expect that to slow going forward.

So now that we've examined trends for the different lines of business I want to make some important points about the characteristics of our deposit franchise using slide nine and this will just help reinforce.

For shareholders, one bank of America that they are investing in one of the world's great deposit franchises all of it based off of relationships, we have with our customers and the value. They place on the award winning capabilities and convenience they have access to.

So starting from the top focus first on consumer you can see that more than 80% of deposits have been with us for more than five years and more than two thirds of our consumer deposits are balances with customers, who have had relationships with the bank for more than 10 years.

Also more than three quarters of these customers are.

Very highly engaged in their activities with us. They are also geographically dispersed across the United States given our presence in 83 of the top 100 markets.

Lastly, whether you look at consumers or small business the value proposition is whats driving the same result, we've got long tenured customers with deep relationships that are highly engaged.

Turning to wealth management, you can see a similar story around long tenure.

And quite active relationships the average relationship of our <unk> clients is around 14 years and again. These clients are very geographically diverse. They're also very digitally engaged and we continue to see deepening around banking solutions and products of all types.

There's lots of options for these clients that extend from their operational checking accounts all the way up through preferred deposit options and then we also benefit from having great alternatives for them within our investment platform.

On global banking note that 80% of our U S deposit balances are held by clients, who have had an account with us for at least 10 years.

Furthermore, as we measure the number of solutions that clients have with US we know that 73% of balances are held by clients that have at least five products on us and just like the other businesses, they're highly diversified by industry and geography. So those are some of the things that make our quality deposit base.

Stable.

So now that we've walked through both loans and deposits. So I want to transition a bit to make some points on balance sheet management.

And.

To focus on the liquidity, we enjoy by having a surplus of customer deposits that far exceeds the loan demand of our clients today.

And far exceeded the loan demand of our clients pre pandemic, having the deposits alone doesn't pay the expenses to support these great customer basis, and it doesn't mean much to our shareholders unless we put them to work to extract the value of those deposits. So that's what we're trying to illustrate and we want to show you how we do that.

You can see that on slide 10, where you note.

We had significant excess deposits over loans pre pandemic.

And during the pandemic that increased that amount increased significantly.

Before the pandemic, we had half a trillion more in deposits than loans and that peaked in late 2021 more than $1, one trillion and it remains high at roughly 900 billion still today, that's the context as we talk about how we manage excess cash.

So let's turn to.

Slide 11.

And here, we're going to focus on the banking book, because our global markets balance sheet has remained largely market funded.

And just follow the graph from left to right at the top of the slide you note trend of cash and cash equivalents and the two components of the debt securities balances available for sale and held to maturity.

And you can see the trend of the overall combined cash and securities balance movement.

And it closely mirrors the previous slides excess deposit trends as you would expect.

2020 deposits grew while loans declined and that was pandemic borrowing from our commercial clients stopping and then quickly paying it off.

Throughout 2020, as we put deposits to work we took a number of actions to protect our capital and that included a buildup and hold to maturity.

Aligning our capital treatment with our intent to hold those securities to maturity.

We also hedged rate risk and the available for sale book using pay fixed received variable swaps. So these securities acted like cash.

They earned higher yields and guarded against capital volatility.

As we entered the middle of 2021, it became more clear that the stimulus payment would likely be the last one and therefore, we believed deposits would be peaking.

As a result, we stopped adding to our hold to maturity Securities book.

That book peaked in the third quarter of 2021 at 683 billion.

562 billion were mortgage backs and the rest were treasuries.

And all that's happened is that notional balances have declined in each of the past six quarters ending the quarter at 625 billion and within that the mortgage backed portfolio is down $67 billion to 495.

As rates began to rise quickly throughout 2022, the value of our deposits rose.

And at the same time, the disclosed market value of the whole to maturity securities has declined resulting in a negative market valuation on those bonds.

That negative market valuation peaked in the third quarter came down in the fourth quarter and it's come down another $10 billion in the first quarter.

In our 10-K disclosure we include a chart, which shows the maturity distribution of our securities portfolio.

I'd remind you. This is based on the maturity dates of those originations I E. The date of the last contractual payment when.

When we look at the actual cash flows of those bonds over time. It results in an average weighted life of the hold to maturity Securities book of a little more than eight years.

And as you can see since the third quarter of 'twenty. One we've continued to see increases in the overall yield on the balances.

Due to both the maturity and reinvestment of lower yielding securities.

As well as remix into high yielding cash.

And as you can see with deposits paying 92 basis points that compares to our blend of cash and government guaranteed securities, which pays 290 basis points. So we continue to benefit NII and yield.

And finally, one very very important last point I want to make which is on the improved NII of our banking book.

Because remember we manage the entirety of our balance sheet that includes our deposits.

And that's where you see the net interest income has improved significantly NII, excluding global markets, which we disclose each quarter troughs in the third quarter of 2020 at $9 1 billion.

It's now $5 4 billion higher on a quarterly basis at $14 5 billion in the first quarter of 'twenty, three and Thats the acid test of managing the entire balance sheet.

So, let's turn now to slide 12, and focus on net interest income.

On a GAAP.

Non FTE basis.

In the first quarter was $14 4 billion and the FTE NII number was $14 6 billion.

Focusing on FTE net interest income increased $2 9 billion from the first quarter of 'twenty, two or 25%.

While our net interest yield improved 51 basis points to two 2%.

The improvement was driven by rates and that includes reductions in securities premium amortization.

Average fed fund rates are up 440 basis points year over year.

Relative to that increase in fed funds, which has benefited all of our variable rate assets.

The rate paid on our total deposits rose 18 nine basis points.

And the rate paid today on interest bearing deposits is up 133 basis points.

Average loan growth of 64 billion also aided the year over year NII improvement.

Turning to our linked quarter discussion NII of $14 6 billion is down $222 million from Q4.

And that's primarily driven by the continued impact of lower deposit balances and the mix shift into interest bearing.

It's also influenced by lower global markets, NII, which remember still gets passed through to clients via higher noninterest income as part of the trading revenue.

Excluding the $262 million decline in global markets NII. The banking book NII of $14 5 billion that was modestly higher as the benefit of increased short interest rates, some modest loan growth and some deposit favorability was offset by two less days of interest in the quarter.

Sure.

Turning to asset sensitivity on a forward basis.

Plus 100 basis point parallel shift at March 31 stands at $3 3 billion of expected NII over the next 12 months from our banking book.

96% of that sensitivity is driven by short rates.

Summary, the first quarter NII was $14 6 billion in this quarter on an FTE basis, and that was a little better than our $14 4 billion expectation as we began the quarter since deposits and rate pass throughs were both modestly better.

Looking forward based on everything we know about interest rates and customer behavior, we expect second quarter NII on an FTE basis to be around 2% lower compared to Q1.

So think about that NII is about $14 3 billion, FTE, plus or minus driven by expected deposit movements as well as lower global markets NII, which again is offset in trading revenue.

So let me remind you of some of the caveats when it comes to the NII guidance first importantly.

It assumes the interest rates and the forward curve materializes and that includes one more hike.

And then a couple of cuts in 2023.

We also expect funding costs for global markets client activity to continue to increase based on those high rates and.

And as noted the impact of that is still offset in noninterest income.

And that obviously assumes our current client positioning and the forward rate expectations.

We continue to expect modest loan growth.

So that's in our NII expectation as well and it's driven by credit cards and to a lesser degree commercial.

And then finally, we just expect lower deposits and rotational shifts towards interest bearing really for three reasons.

We expect further fed balance sheet reductions to continue to reduce deposits for the industry.

Second we anticipate lower wealth management deposits in the second quarter, that's pretty typical due to the seasonal impact of clients paying income taxes and to a lesser degree now a continuation of balanced movements seeking better yields off balance sheet.

And third we just continue to expect some of the rotation of commercial deposits towards interest bearing.

Okay.

Let's go to slide 13, we'll talk about expense.

And here you can see is in the first quarter. Our expenses were $16 2 billion, that's up $700 million from the fourth quarter, and it's driven by seasonal elevation from payroll taxes, mostly at $450 million.

A little bit from higher FDIC insurance expense that was another $100 million this quarter.

And the cost of adding people called out another $100 million.

We ended the first quarter with a little more than 217000 people at the company that was 260 people.

More than year end.

During the quarter, we welcomed 3000 additional people into the company in January that's due to outstanding offers that we extended in the fourth quarter.

That meant that our head count peaked in January that's a little more than 218000.

And at the end of last week, we were down to 216000.

We continue to expect that to move lower over time, and we expect by the end of the second quarter, our fulltime equivalent head count will be roughly 213000, excluding our summer interns.

As we look forward to the next quarter, then we would expect Q2 expense to benefit from the reduction of the seasonal elevation of payroll tax in Q1.

And we would also expect to see expense reductions coming from head count reductions through attrition over time.

And our operational excellence work.

So we expect expense in Q2 to be around 400 or $500 million lower than Q1. So think of that is around $15 8 billion plus or minus in Q2.

And then further we just expect continued sequential expense declines in the third quarter.

And then again in the fourth quarter as we benefit from continued head count discipline and attrition through time.

Turning to asset quality on slide 14, and I want to start the credit discussion by saying once again.

Asset quality of our customers remains healthy and net charge offs continued to rise from there near historic lows.

Net charge offs of $807 million increased $118 million from the fourth quarter.

That increase was driven by credit card losses as higher late stage delinquencies flowed through to charge offs.

For context, the credit card net charge off rate was 221% in this first quarter and.

And that compares to three 3% in the fourth quarter of 19 pre pandemic.

Provision expense was $931 million in Q1 and that included $124 million reserve built.

That's obviously less than the 403 million builds we took in the fourth quarter and it reflects modest loan growth and an ever so slightly improved macroeconomic outlook, but on a weighted basis continues to include an unemployment rate still north of 5% as we enter 2023.

We included a slide in the appendix this quarter that highlights the mix and credit metrics of our commercial real estate exposure and.

And I just wanted to remind everyone here, we've been very intentional around our client selection very intentional around portfolio concentration and deal structure over many years and as a result, we've seen npls and realized losses that remained quite low for this portfolio.

We had a total of $66 million of commercial real estate losses in 2022.

70% of that was in office loans and that resulted in an annualized loss rate of 26 basis points.

In the first quarter to give some perspective, our office loan losses were $15 million.

We have roughly $73 billion in commercial real estate loans outstanding that's less than 7% of our loan book.

Highly diversified by geography, and no part of the country represents more than 22% of the book. It's also very diversified across property type.

Within property type our office portfolio was $19 billion, it's about 2% of our total loans.

Portfolio is roughly 75% class a properties.

And when we originate they're typically around 55% loan to value.

Even though we've seen some property value declines these exposure still remain well secured.

$3 $6 billion is classified as a reserve over criticized and even on the most recent refreshes on our toughest loans, we still have 75% ltvs.

And our office book 4 billion are scheduled to mature this year another $6 billion in 2024 with the remainder spread over the following years. So we continue to feel that the portfolio is well positioned and adequately reserved given the current conditions.

On slide 15 for completeness, we highlight the credit quality metrics for both our consumer and commercial portfolios.

With that I'm going to turn it back to Brian to talk about the lines of business.

Thank you Alastair and we're going to begin on slide 16 16.

So I want to bring us back to the things that drive the long term value of this franchise and the value for you. Our shareholders every business segment grew customers and accounts organically in the quarter and use digital tools and capabilities to drive engagement, even deeper and also to drive customer satisfaction to industry, leading levels on slide 16, we've highlighted some of the important elements of our.

Ganic growth I won't go through all the line items here, but in consumer we saw we opened 130000 net new checking accounts $1 3 million credit card accounts and 9% more investment accounts that aided to record quarter, one consumer investment flows.

Consumer also has now have has had 17 quarters of positive net new checking accounts in global wealth, we had a record quarter, adding 14500, net new wealth relationships and global banking, we added clients increased the number of products per relationship.

Global markets as we said earlier, Jimmy Tomorrow team had one of the highest quarters of sales and trading.

The other elements of earnings.

Management team remains focused on throughout this inflationary environment as our expense management efforts.

But even given those we continue to make investments in the future.

We continue to streak of operating leverage in our account and you can see that on slide 17, and our company and you can see on slide 17.

We now have had seven quarters of operating leverage.

And even on the most recent refreshes on our toughest loans, we still have 75% ltvs.

<unk> ratio.

62% and a nominal dollars of expenses. We had today are similar to what we had 10 eight 910 years ago.

And our office book 4 billion are scheduled to mature this year. Another 6 billion in 2024 with the remainder spread over the following years. So we continue to feel that the portfolio is well positioned and adequately reserved given the current conditions.

As we go to slide 18, let's talk about individual businesses and consumer banking first for the quarter consumer banking earned 31, $3 1 billion on good organic revenue growth and delivered its eighth consecutive quarter of strong operating leverage.

On slide 15 for completeness, we highlight the credit quality metrics for both our consumer and commercial portfolios and with that I'm going to turn it back to Brian to talk about the lines of business.

While we continue to invest in future topline revenue grew 21% expenses rose 11%.

These results demonstrate the true value of the one trillion deposit franchise and the deep relationships. We have the clients in that business. The business continues to have $700 billion in excess deposits over as loan balances and as we said earlier grew checking accounts $2 5 million to 5 million new checking accounts.

Thank you Alastair and we're going to begin on slide 16 16.

So I want to bring us back to the things that drive the long term value of this franchise and the value for you. Our shareholders every business segment grew customers and accounts organically in the quarter and used digital tools and capabilities to drive engagement, even deeper and also to drive customer satisfaction to industry, leading levels on slide 16, we've highlighted some of the important elements.

Since the pandemic started.

Organic growth.

Go through all the line items here, but in consumer we saw we opened 130000 net new checking accounts $1 3 million credit card accounts and 9% more investment accounts that aided to record quarter, one consumer investment flows.

Also note that the revenue growth overcame the decline in service charges as a result of us lowering our NSF charges for customer several quarters ago.

The expenses are consumers reflect the continued business investments for growth, including adding relationship associates further development increases in the cost of technology and implementation of new tools.

As you think about this business remember much of the Companys minimum wage hikes during 2022.

In global markets as we said earlier, Jimmy Tomorrow and her team had one of the highest quarters of sales and trading.

The ones, we made mid year. In addition to our March of $25 an hour.

The other elements of earnings.

Impact this business more than any other business.

The management team remains focused on throughout disinflationary environment as our expense management efforts.

However, it has helped drive the attrition in the business in half compared to last year this quarter.

But even given those we continue to make investments in the future.

On Slide 19, you can see some of the digital statistics around consumer.

Continuous streak of operating leverage in our account and you can see that on slide 17, and our company and you can see on slide 17.

We believe that those digital tools, our customers have access to are the key to growing and retaining customer relationships. These tools also help us deliver more efficiently.

We now have had seven quarters of operating leverage.

CNC ratio to.

62% and the nominal dollars of expenses. We had today are similar to what we had 10 eight 910 years ago.

We now have 45 million users actively engaged with our digital properties.

1 billion times a month Erica.

Artificial intelligence driven personal assistant so I'll use a dry 35% just in the past year.

The number of our customers using zelle grew 21% in the past year.

Remember these aren't new functionality is just being put in place. These are growing off a high high scale and show at the Bank of America impact on these products.

We continue to invest in future topline revenue grew 21% expenses rose 11%.

Zelle remember back in mid 2021, zelle transactions across the number of checks written for our clients now at 60% higher less than two years later.

And you can see the growth in digital sales that continues.

Main focused on growing the customer base and delivering the best in class tools and service that make us more efficient and more important to our clients in the consumer business and Dean Athanasia team continue to have good job with respect to those goals.

Since the pandemic started.

Solid earnings growth of 4% Understates. The success of this business as prior year included reserve releases, while we built reserves this quarter on a pretax pre provision basis <unk> grew 34% year over year. I'll also note that the revenue growth overcame a decline in service charges as a result of us lowering our NSF charges.

On slide 20, we move to wealth management.

Yeah, good results, earning about a little over $900 million after tax for the quarter.

These results were down from last year's Alastair said as asset management fees fell with the negative market levels in equity and fixed income.

For customer several quarters ago.

The expense in the consumers' reflect the continued business investments for growth, including adding relationship associates further develop increases in the cost of technology and implementation of new tools.

Those fees were mitigated by the beneficial impact of revenue from the sizeable banking business within this line of business for us.

As I noted a moment ago, both Merrill and the private bank saw organic revenue growth and provide solid client flows of $25 billion in the quarter our assets under management flows of $15 billion reflect some of the movement of deposits note earlier, but we also saw a $33 billion of brokerage flows.

As you think about this business remember much of the Companys minimum wage hikes during 2022.

The ones, we made mid year. In addition to our March of $25 an hour.

Impact this business more than any other business.

However, it has helped drive the attrition in this business in half compared to last year this quarter.

Expenses reflects lower revenue related incentives, but also reflect continued investments in the business as we continue to add financial advisors.

On Slide 19, you can see some of the digital statistics around consumer.

We've added more than 650 wealth advisers in the past year alone as.

We believe that those digital tools, our customers have access to or is the key to growing and retaining customer relationships. These tools also help us deliver more efficiently.

As we move forward, we are excited to have Eric ship and Lindsay Hans lead this business. They work closely with Katy Knox, who drive our global wealth and investment management business across the company.

We now have 45 million users actively engaged with our digital properties.

As we go to global wealth and investment management digital on Slide 21, you can see the statistics here just as with the concern of business. These clients become more more digitally engaged across time.

One 1 billion times a month Erica.

Artificial intelligence driven personal assistant saw usage rise, 35% just in the past year.

Advisors have led the way in driving a personal driven advice model supplemented by our digital tools on slide 21, you can see the client digital adoption rate of 84% with Merrill.

The number of our customers using zelle grew 21% in the past year.

These arent new functionality is just being put in place. These are growing off a high high scale. It showed the bank of America impact on these products.

And the private bank is over 90%.

More than 75% of our base digit delivery of their statements.

Zelle remember back in mid 2021 sell transactions across the number of checks written for our clients now at 60% higher less than two years later.

As a key tool their service, providing more convenience for them and our advisor Eric and cell interactions continue to grow here also even among these wealthy clients.

And you can see the growth in digital sales that continues.

On Slide 22, you see the global banking results. This business produced very strong results growing revenue, 19% year to year to $6 2 billion.

Main focused on growing the customer base and delivering the best in class tools and service that make us more efficient and more important to our clients in the consumer business and <unk>.

The business earned $2 6 billion after tax.

Dean Athanasia team continue to do a good job with respect to those goals.

Essent banking remains sluggish our Gulf of Treasury services business has been robust leading to strong revenue performance.

On slide 20, we move to wealth management.

Yes, good results, earning about a little over $900 million after tax for the quarter.

Loan activity has been good across this business also as noted earlier the deposit flows appear to have stabilized in March and we benefit some customer flows during the flight to safety during the quarter.

These results were down from last year's Alastair said as asset management fees fell with the natus market levels in equity and fixed income.

The company's overall investment banking fees of $1 2 billion in quarter, one and while down from quarter. One 'twenty. Two we saw modest improvements from quarter four 2002 provision expense declined year over year as prior year prior year's reserve builds compare to release in the current period.

Those fees were mitigated by the beneficial impact of revenue from the sizeable banking business within this line of business for us.

As I noted a moment ago, both Merrill and the private bank saw organic revenue growth and provide a solid client flows of $25 billion in the quarter.

Credit quality of the business again remains very strong.

Our assets under management flows of $15 billion reflect some of the movement of deposits note earlier, but we also saw a $33 billion of brokerage flows.

<unk> increased 10% year over year, driven by strategic investments in the business, including relationship manager hiring in technology costs.

Expenses reflects lower revenue related incentives, but also reflect continued investments in the business as we continue to add financial advisors.

Digital engagement as shown on slide 23, with a global banking customers. These commercial customers continue to grow in importance as treasures and others. Appreciate the ease of doing business with us through these tools, while the volume of transactions and sheer number isn't the same as consumer the volume of money moved is tremendous.

We've added more than 650 wealth advisers in the past year alone as.

As we move forward, we are excited to have Eric shift and Lindsay Hans lead this business. They work closely with Katy Knox, who drive our global wealth and investment management business across the company.

Next business will go to is our global markets business on slide 24.

As we go to global wealth and investment management digital on Slide 21, you can see the statistics here just as with the consumer business as clients become more more digitally engaged across time.

Do you mean demand the team had another strong quarter of results growing year over year earnings to nearly $1 $7 billion. After tax the continuing teams inflation due to political tensions and central banks changing monetary policies around the globe drove volatility and.

Advisory have led the way in driving a personal driven advice model supplemented by our digital tools on slide 21, you can see the client digital adoption rate of 84% with Merrill.

On the bond and equity markets, which this team did a good job managing.

As a result, it was a quarter we saw strong performance in our credit trading business, particularly in mortgages in Muni trading in macro trading again farewell buoyed by strong client activity and secured financing.

And the private bank is over 90%.

More than 75% of embrace digital delivery of their statements.

As a key tool their service, providing more convenience for them and our advisor Eric and cell interactions continue to grow here also even among these wealthy clients.

Investments made in this business over the last few years continue to produce favorable results.

Just focus on the sales and trading numbers alone ex DVA revenue improved 9% year over year to $5 1 billion.

On Slide 22, you see the global banking results. This business produced very strong results growing revenue, 19% year to year to $6 2 billion.

<unk> improved 29% equities were down 19% compared to quarter one 2022.

The business earned $2 $6 billion after tax while investment banking remains sluggish our global Treasury services business has been robust leading to strong revenue performance.

Every year expense increased 8% probably.

Mainly driven by continued investments as stated in this business.

Finally on slide five you can see the all other shows a modest loss, which included the $220 million of losses and security sold.

Mentioned earlier, Alaska I would note our 10% effective tax rate. This quarter continues to prevent it benefited from a strong business with clients supporting environmental investments in housing investments approves tax benefits, excluding those discrete tax benefits our tax rate would have been 26%.

The company's overall investment banking fees of $1 2 billion in quarter, one and while down from quarter. One 'twenty two we saw modest improvements from quarter four 2002 <unk>.

Provision expense declined year over year as prior year prior year's reserve builds compared to release in the current period.

So in summary, a strong quarter by our team delivered for you our shareholders operating leverage organic growth strong credit capital returning strong RTC.

Credit quality of the business again remains very strong expense.

<unk> expense increased 10% year over year, driven by strategic investments the business, including relationship manager hiring in technology costs.

Let's jump to Q&A.

At this time, if you would like to ask a question. Please press star one on your Touchtone phone you can remove yourself from the queue at any time by pressing the pound key.

Yes.

Our first question from Jim Mitchell with Seaport Global your line is open.

Hey, good morning, guys.

Maybe just one question on the NII trajectory.

<unk> trajectory.

We remain asset sensitive in the banking book, but the forward curve I think you pointed out currently expect three rate cuts by the end of the year. If that plays out how do you think about that impact on NII in the back half of the year.

Next business will go towards our global markets business.

Slide 24.

Give me tomorrow and the team had another strong quarter of results growing year over year earnings to nearly $1 $7 billion. After tax the continuing teams inflation due to political tensions and central banks changing monetary policies around the globe drove volatility in the bond and equity markets, which this team did a good job managing.

The puts and takes as we think about NII beyond <unk>.

So Jim I think.

Right now the expectations for the market in terms of whether or not there'll be another hike in may.

Pension around pretty good.

Similarly, you've got a question of whether or not there's two two cuts in the back half or three.

So we are operating with the same information you are well.

Investments made in this business over the last few years continue to produce favorable results.

Looking at the forward curve day today.

Just focus on the sales and trading numbers alone ex DVA revenue improved 9% year over year to $5 1 billion.

That through at the same time, we're looking at our deposit balances, they're performing kind of the way we would think.

And we're competing for rate paid so I'd say generally speaking at this point.

<unk> improved 29% <unk> were down 19% compared to quarter one 2022.

We feel pretty good about NII, it's obviously going to be up this year pretty significantly.

Every year expense increased 8%.

Merely driven by continued investments as stated in this business.

And look we don't provide guidance for our full year for a very simple reason it just comes down to it's very difficult to predict what the fed is going to do six months nine months out but.

Finally on slide five you can see the all other shows a modest loss, which includes the $220 million of losses in Securities sold Alastair mentioned earlier, Alaska I would note our 10% effective tax rate. This quarter continues to prevent it benefited from a strong business with clients supporting environmental investments in housing investments approves tax.

Let me put it this way we can see where consensus is consensus is right around.

57 billion plus or minus.

That's not a number that would imply us up for the year, 7% to 8% I mean, I think we're pretty comfortable there, but it's just so many moving parts. That's why we don't provide the guidance.

Excluding those and other discrete tax benefits our tax rate would have been 26%.

So in summary, a strong quarter by our team delivered for you our shareholders operating leverage organic growth strong credit capital returning strong RTC.

No that's all fair.

And maybe just pivoting to the trading business.

You had another strong quarter and outperformed peers in the fixed income business is there anything unusually strong there or do you believe you guys have made some sustainable market share gains in that business given your recent investments.

Let's jump to Q&A.

At this time, if you would like to ask a question. Please press star one on your Touchtone phone you can remove yourself from the queue at any time by pressing the pound key.

Well I think the team is doing a really good job, Brian talked about that a couple of years ago, we made a.

Our first question from Jim Mitchell with Seaport Global your line is open.

Hey, good morning, guys.

Decision as a team that it was important for us to invest more in that business and we did that.

Maybe just one question on the NII trajectory.

Trajectory you guys remain asset sensitive in the banking book, but the forward curve I think you pointed out currently expect three rate cuts by the end of the year. If that plays out how do you think about that impact on NII in the back half of the year.

And we've made pretty significant investments in equities and in fixed income.

And we felt like in particular, we could continue to grow our macro businesses, which we've done and that's what has done a really good job until this quarter. This quarter, we just happened to firing on more cylinders, particularly in FIC.

The puts and takes as we think about NII beyond <unk>.

So Jim I think.

Because this quarter, we had a great quarter for our micro products.

Right now the expectations for the market in terms of whether or not there would be another hike in may.

Can you kind of expect that because it was a better quarter for them. We had positive returns there so mortgages credit.

Pension around pretty good.

Similarly, you got a question of whether or not there's two cuts in the back half or three.

Nice financing futures FX all of them had a pretty good quarter and I think Jim and the team are just executing at a really high level. So they just got to keep at it.

So we're operating with the same information you are.

We're looking at the forward curve day today thinking that through at the same time, we're looking at our deposit balances, they're performing kind of the way we would think.

Fair enough thanks for taking my questions.

And we're competing for rate paid so I'd say generally speaking at this point.

Okay.

We'll take our next question from Erika Najarian with UBS. Your line is open.

We feel pretty good about NII, it's obviously going to be up this year pretty significantly.

Hi, Good morning, and also just a clarification you gave us the quarterly expected trajectory for expenses do you still expect to hit $62 5 billion or so of full year expenses in 'twenty three.

And look we don't provide guidance for our full year for a very simple reason it just comes down to it's very difficult to predict what the fed's going to do six months nine months out but.

Let me put it this way we can see where consensus is consensus is right around.

Right now Thats, our expectation I mean, we're 90 days into the quarter.

57 billion plus or minus.

As I enter the year rather.

Obviously as we're looking forward, we see we know the head counts coming down so that's going to be a tailwind all the way through the course of the year.

That's not a number that would imply us up for the year, 7% to 8% I think we're pretty comfortable there, but there's just so many moving parts. That's why we don't provide the guidance.

So we don't have any change to our expectations right now we're going to see how the year develops we still got a little bit of a.

No that's all fair.

A headwind in terms of you know something like our sales and trading business, having a very good revenue year.

And maybe just pivoting to the trading business.

And we're still investing in the business so it'll be a dog fight, particularly as we get into the back half of the year, but we still feel good about where we are with respect to expense.

Got it and my second question is for Brian Brian U.

Well I think the team has done a really good job, Brian talked about that a couple of years ago, we made a.

A significant amount of revenue this quarter and grew your CET. One at the same time I think that a lot of investors are looking down the path of significant macro uncertainty.

Decision as a team that it was important for us to invest more in that business and we did that.

And we've made pretty significant investments in equities and in fixed income.

As we take that into account how should we think about.

The buyback activity going forward, especially ahead of the stress test results in June .

And we felt like in particular, we could continue to grow our macro businesses, which we've done and that's that's what has done a really good job until this quarter. This quarter, we just happened to firing on more cylinders, particularly in FIC.

I think you saw this quarter, we continue to adopt our basic.

Apply our basic principles, which is.

Because this quarter, we had a great quarter for our micro products.

We support the growth in our customer base, we pay a dividend pay the dividends out of <unk>.

And you kind of expect that because it was a better quarter for them. We had positive returns there so mortgages credit.

The rational rate and then we use the rest to you.

Basically returned to use for share buybacks.

<unk> financing futures FX all of them had a pretty good quarter and I think Jim and the team are just executing at a really high level. So just.

We're in the middle of a stress test as you just mentioned, we'll have to see the results of that.

We also but the good news is we crossed $11 40, this quarter, which basically is in excess of <unk>.

You just got to keep at it.

Fair enough thanks for taking my questions.

On top of what we need for the first quarter of next year and so we'll continue to follow our basic principles. So we feel very good about our capital and you should expect us to continue to follow the idea to pay the dividend of <unk>, what's the organic growth pay the dividend and buyback shares, but we've got to get through the near term sort of.

Okay.

We'll take our next question from Erika Najarian with UBS. Your line is open.

Hi, Good morning, and also just a clarification you gave us the quarterly expected trajectory for expenses do you still expect to hit $62 5 billion or so of full year expenses in 'twenty three.

What goes on in our business every year at this time.

Got it thank you.

Right now Thats, our expectation I mean, we're 90 days into the quarter.

We'll go next to Ken Houston with Jefferies. Your line is open.

Hi, its way into the year rather.

Obviously as we're looking forward, we see we know the head counts coming down so that's going to be a tailwind all the way through the course of the year.

So we don't have any change in our expectations right now we're going to see how the year develops.

Got a little bit of.

You think forward how much more mix shift or are you expecting in terms of DDA as a percentage of total deposits and how do you expect that to also look as you think across.

A headwind in terms of you know something like our sales and trading business had been a very good revenue year.

And we're still investing in the business so it'll be a dog fight, particularly as we get into the back half of the year, but we still feel good about where we are with respect to expense.

Across the businesses with regards to just where customers are moving funds incrementally. Thank you.

Got it and my second question is for Brian Brian You produced a significant amount of revenue this quarter and grew your CET. One at the same time I think that a lot of investors are looking down the path of significant macro uncertainty.

Yes, I think Ken.

We think this.

It takes us a big bulk thing bank of America, but it's really and then it looks a broad categories interest bearing non interest bearing accounts and try to try to do it you have to really think about customer bases and what they do with their money and so theres transactional cash whether that's for consumer running a household day to day, a wealthy consumer under household day to day, which may.

As we take that into account how should we think about.

The buyback activity going forward, especially ahead of the stress test results in June .

Different level expenses and then.

Then the commercial customers, who run their business day to day, and then have excess cash in that if they're successful and then.

I think you saw this quarter, we continue to adopt our basic.

Apply our basic principles, which is.

How they all.

Play that grows so I think we think transactional cash in investment cash you've seen a lot of the investment cashes.

We support the growth in our customer base, we pay to pay the dividends that are what we think.

The rational rate and then we use the rest to you.

So to speak as Alastair mentioned earlier, we price competitively for that that move that moves around but the good news is we have a massive investment platform. When we put that money to work for our customers if they don't need it to manage their data their household so.

Basically returned to use through share buybacks.

Yes, we are in the middle of a stress test as you just mentioned, we'll have to see the results of that.

We also but the good news is we crossed $11 40, this quarter, which basically is in excess has a cushion on top of what we need for the first quarter of next year and so we'll continue to follow our basic principles. So we feel very good about our capital and you should expect us to continue to follow the idea to pay the dividend of <unk>.

Nia estimates are our view of what happens in the future I think the key for the consumer business is to remember that <unk> got $700 billion of excess deposits over its loans are generating a lot of excess deposits.

That grew 300 odd billion from pre pandemic it has been stable.

To support the organic growth pay the dividend and buyback shares, but we've got to get through the near term sort of.

Checking balances if you look at those charts. We gave you to show you. The near term movement are stable that generates at a total all in cost of 10 to 15 basis points a lot of the value in our franchise and meaning including interest bearing part of that franchise. When you think about deposits across time and then like businesses. So you would expect some of those trends to continue in terms of.

What goes on in our business every year at this time.

Got it thank you.

We'll go next to Ken Houston with Jefferies. Your line is open.

Yeah.

Good morning, Hey, I was just wondering on the deposit side. If you can help us understand theres, obviously, the ongoing mix shift, which you referred to and gave US a lot of great detail on them I'm. Just wondering as you think forward how much more mix shift or are you expecting in terms of DDA as a percentage of total deposits and how do you expect that to also look as you.

Customers have excess cash putting it to work differently you.

We expect deposit rates to move to <unk>.

To match the market, but the broad value of this deposit franchise is driven by the money people leave us because it's transactional cast which is emotion and we don't pay interest on and that is both a consumer's vaulting customers' businesses. So it's hard it's a very detailed question of which we spent a lot of time looking at or the team.

Across across the businesses with regards to just where customers are moving funds incrementally. Thank you.

Yes, I think Ken we think this everybody thinks this is a big bulk thing bank of America, but it's really and then it looks a broad categories of interest bearing and non interest bearing accounts and try to do it you have to really think about customer bases and what they do with their money and so theres transactional cash whether that's for consumer running a household data.

As you might imagine.

Okay and the other question is just on Alastair you walk through how.

<unk> been changing the composition of the securities portfolio and still benefiting from those variable rate swap. So I'm. Just wondering if you can help us understand what happens from here in terms of should you continue to get benefits from those variable rate swaps and then also just do you have you done any positioning repositioning underneath.

A day a wealthy consumer on their household day to day, which may have different level of expenses and then.

Yes.

Commercial customers, who run their business day to day, and then have excess cash from that if they're successful and then.

The surface it looks like there were some securities losses, so how much how much room do you have to continue to kind of rework the portfolio and grind more income out of the book, even as you shrink it.

How they all.

So I think we think transactional cash in investment cash you've seen a lot of the investment cash is so.

Yes, so Ken think about I mean, the easiest way to think about those treasuries.

To speak as Alastair mentioned earlier.

Price competitively for that that move that moves around but the good news is we have a massive investment platform. When we put that money to work for our customers. If they don't need to manage their data their household so.

They are swapped to floating so they're essentially cash.

And actually this quarter, we ended up converting some of them in to cash just because it's simpler.

It's simpler for everyone to understand.

NIH estimates our view of what happens in the future I think the key for the consumer business is to remember that <unk> got $700 billion of excess deposits over its loans are generating a lot of excess deposits.

So obviously a pretty good bid for treasuries this quarter. So we just converted them into cash.

That's what accounted for some of the securities laws.

There was a couple hundred million dollars.

That grew 300 odd billion from pre pandemic it has been stable.

But I think the way to think about it is as the.

Overall securities portfolio remember, we got cash we've got available for sale you can almost think about it as enhanced cash and I've got a hold to maturity.

Checking balances if you look at those charts. We gave you to show you. The near term movement are stable that generates at a total all in cost of 10 to 15 basis points a lot of the value in our franchise and meaning including the interest bearing part of that franchise that when you think about deposits across time and then like businesses. So you would expect some of those trends that continue in terms of <unk>.

That continues to pay down.

Sweeping at right now into cash that's something I've talked about in the last couple of quarters and we're putting in cash because number one it's a really high yielding asset number two it gives us a lot of options during a period of volatility so pretty straightforward at this point.

Customers have excess cash putting it to work differently.

We expect deposit rates to move to continue to match the market, but the broad.

Okay got it thank you.

<unk> of this deposit franchises driven by the money people leave us because it's transactional cast which is emotion and we don't pay interest on and that is both the consumer's loyalty customers are businesses. So it's hard.

Our next question comes from Mike Mayo with Wells Fargo. Your line is open.

Hi, well I guess, the topic of the day and week in our mind is to what degree of your assets matched with your liabilities.

A very detailed question of which we spent a lot of time looking at or the team does as you might imagine.

Staring at slide 11, and you've seen the front page of many papers highlighting your unrealized securities losses.

Okay and the other question is just on Alastair you walk through how.

You highlight the yield on your securities at two 6% you highlighted the held to maturity portfolio of eight years.

You've been changing the composition of the securities portfolio and still benefiting from those variable rate swaps I'm. Just wondering if you can help us understand what happens from here in terms of should you continue to get benefits from those variable rate swaps and then also just do you have.

That would all suggest Assam that youre, not so well Matt on the other hand, what you don't provide or at least I didn't see it the change in the value of your deposits even the duration of your deposit. So the basic question is.

Have you done any positioning repositioning underneath the surface. It looks like there were some securities losses. So how much how much room do you have to continue to kind of rework the portfolio in and grind more income out of the book, even as you shrink it.

Can you describe to what degree your assets are matched with your liabilities.

Or you think you may have been off or when the mark.

Yeah, So Mike I'll start Brian can add anything he chooses to but.

Yeah. So Ken think about I mean, this is way to think about those treasuries.

One of the reasons that we spend as much time laying out the deposit franchises because in a rising rate environment.

They are swapped to floating so they're essentially cash.

You would expect obviously that.

And actually this quarter, we ended up converting some of them in to cash just because it's simpler.

Bond markets are going to turn negative.

And at the same time U and we have been expecting as rates go up.

Simpler for everyone to understand.

There's obviously a pretty good bid for treasuries this quarter. So we just converted them into cash.

Rice.

The deposits are so much more valuable in that environment.

That's what accounted for some of the securities.

We laid out for you and for everyone to see is just how broad.

Last there was a couple of hundred million dollars.

And stable and diversified is this deposit base, we think it's very long tenured.

But I think the way to think about it is as the.

Overall securities portfolio remember, we got cash we've got available for sale you can almost think about eyes, and hence cash and I've got hold to maturity.

It's why we're laying out some of these things around just how long the relationships are in consumer and in wealth.

That continues to pay down.

And in global banking and it's one of the reasons.

Sweeping at right now into cash that's something I've talked about in the last couple of quarters and we're putting on cash because number one it's a really high yielding asset.

Alistair.

If I can just interrupt.

When you say long tenured can you put any numbers around that range because I think that's the one biggest most important number if you could just.

Number two it gives us a lot of options during periods of volatility so pretty straightforward at this point.

Some kind of blending that you. If you took a look at slide number nine.

Okay got it thank you.

To lay that out for you.

Our next question comes from Mike Mayo with Wells Fargo. Your line is open.

So you take a look at and consumer for example, you're talking about 67% of the clients have been with us for more than 10 years.

Hi, well I guess the topic of the day week and the month is to what degree of your assets matched with your liabilities.

That's pretty long tenured.

From my time in the commercial bank.

Our clients on average was 17 years with us.

Staring at slide 11, and you've seen the front page of many papers highlighting your unrealized securities losses.

You have long operational deposits and all of these businesses. So that's what we're trying to lay out in front of everyone. So you can see that.

You highlight the yield on your securities at two 6% you highlighted were held to maturity portfolio at eight years.

Okay, I'm, sorry, I interrupted but go ahead.

Now I can't remember where it was.

That would all suggest to some that youre not so well Matt on the other hand, what you don't provide or at least I didn't see it the.

You were talking about general curious Mark VII went higher.

That's part of the benefits of having what I am trying to convey to you too Mike and you know this works we've got to balance all of this because we have to think about the entire balance sheet.

Change in the value of your deposits, even the duration of your deposit so the basic question is.

Can you describe to what degree your assets are matched with your liabilities and where you think you may have been off or when the mark.

And there's a lot going on with the entire balance sheet and so we're trying to do is invest that excess which has existed now in hundreds of billions.

Yeah, So Mike I'll start and Brian can add and then chooses to but.

For many many years, we've got invested the best way, we can the way we do that we talked about balancing. It is we are number one trying to make sure we grow capital we've done that we're up 100 basis points. There in the last year number two we're trying to grow liquidity, we added 23 billion this past quarter.

One of the reasons that we spend as much time laying out the deposit franchises because in a rising rate environment.

You would expect obviously that.

Bond markets are going to turn negative.

And at the same time U and we had been expecting as rates go up and I would rise.

Number three we're trying to grow earnings were $8 2 billion. It's one of our best earnings quarters ever. So look we can always be better you know that we're taking the portfolio and just making it smaller its runoff now six quarters in a row, we're taking all of that.

Because of the deposits are so much more valuable in that environment.

What we laid out for you and for everyone to see is just how broad.

And stable and diversified is this deposit base, we think it's very long tenured that's why we're laying out some of these things around just how long the relationships are in consumer.

<unk> it into cash and loans, that's what we've been doing we'll just continue doing that in the portfolio is going to get smaller and shorter overtime and when you look at the asset sensitivity now relative to rates going up 100 or rates going down 100, we're pretty balanced there too were sort of up $3 3 billion of if rates go up 100.

And in wealth.

And in global banking and it's one of the reasons.

Alistair.

If I can just interrupt when you say long tenured can you put any numbers around that.

We're down three six if rates go down 100, so we feel like we're in a pretty balanced place and a lot of flexibility at this point.

Because I think thats.

The one biggest most important number if you could just.

Some kind of framing that you. If you took a look at slide number nine we've tried to lay that out for you.

And then just a follow up I guess some will take your greatest strength is a weakness that is you don't pay as much on deposits of others I estimate that you have.

So you take a look at and consumer for example, you're talking about 67% of the clients have been with us for more than 10 years.

The lowest cycle to date deposit data.

That's pretty long tenured.

No from my time in the commercial bank.

And so what is it that keeps your customers around if youre not going to pay them as much.

Our clients on average was 17 years with us.

Of long operational deposits and all of these businesses. So that's what we're trying to lay out in front of everyone. So you can see that.

Well I think if you look at the value proposition that we're talking about if you go to the consumer business. For example, we've invested so much in client experience, whether it's the financial centers renovation, whether it's the new people that we've added in that business over a long period of time.

Okay, I'm, sorry, I interrupted but go ahead.

Now I can't remember where it was.

You were talking.

And about the unrealized securities losses, VII went higher.

It's the digital the more.

Mobile preferred rewards ours is a relationship model and it has been.

That's part of the benefits of having what im trying to convey to you too Mike and you know how this works we've got to balance all of this because we have to think about the entire balance sheet.

And if you look then like just think about this quarter look at the organic growth in consumer again, that's a 130000 net new checking 17 quarters in a row.

And there's a lot going on with the entire balance sheet and so we're trying to do is invest that excess which has existed now in hundreds of billions.

Based on that relationship value proposition that we're attracting if you go to the wealth management business.

For many many years, we've got to invest in the best way, we can the way we do that we talk about balancing it is number one trying to make sure we grow capital we've done that we're up 100 basis points. There in the last year number two we're trying to grow liquidity, we added 23 billion this past quarter.

This was a record quarter for net new households.

Or Merrill Lynch and a record for the private bank this quarter.

That tells you we're offering people something that's valuable.

Number three we're trying to grow earnings were $8 2 billion. That's one of our best earnings quarters ever. So look we can always be better you know that we're taking the portfolio and we're just making it smaller its runoff now six quarters in a row, we're taking all of that.

And then we added 35000, new bank accounts for people in our wealth management franchise. So.

That again is a significant indicator that what we're offering.

As value to people and if I go back to my old business and business banking and commercial banking.

Plumbing it into cash and loans, that's what we've been doing we'll just continue doing that in the portfolio is going to get smaller and shorter overtime and when you look at the asset sensitivity now relative to rates going up 100 or rates going down 100, we're pretty balanced there to sort of up $3 3 billion if rates go up 100.

Adding new logos and new clients over time.

In a way that we're really happy with right now so.

I think the.

The ultimate answers, we we are a purpose driven company, who put our clients' interests first that is helping make their financial lives better and in this period of time people want stability and Thats, what we offer.

We're down three six if rates go down 100, so we feel like we're in a pretty balanced place and a lot of flexibility at this point.

Alright, thank you.

And then just a follow up I guess some will take your greatest strength is a weakness that is you don't pay as much on deposits as others I estimate that you have.

We'll go next to Glenn Schorr with Evercore. Your line is open.

Hi, Thanks.

Maybe an easy one.

The lowest cycle to date deposit data.

It wasn't noticeable but do you feel like there was a flight to quality benefit during the March madness, I would've thought that people would have flocked to the safety of Bofa during times like that but you didn't comment specifically on that so thanks.

And so what is it that keeps your customers around if youre not going to pay them as much.

Well I think if you look at the value proposition that we're talking about if you go to the consumer business. For example, we've invested so much in client experience, whether it's financial centers renovation, whether it's the new people that we've added in that business over a long period of time.

So we're going to decline Glen to give a specific number we're pretty confident we saw.

Noticeable flight to safety.

And it comes in two parts part one is.

Either it's the digital the more.

Mobile preferred rewards ours is a relationship model and it has been.

During a period like March 10% around that week or two.

And then there's a second part that comes with Onboarding clients over a period of time, who are trying to move operational accounts here and that takes a while that has a lag. So you can think about we get some of the deposits quite quickly, but relationships take a longer time to build and onboard. So you can see from our numbers it was improving before the disruption.

And if you look then like just think about this quarter look at the organic growth in consumer again, that's 130000 net new checking 17 quarters in a row.

Based on that relationship value proposition, that's what we're attracting if you go to the wealth management business.

We've chosen not to put an exact number on it because their typical ebbs and flows in any given quarter, leading up especially to a.

This was a record quarter for net new households.

For Merrill Lynch and a record for the private bank this quarter.

Payroll end of quarter.

That tells you we're offering people something that's valuable.

But generally speaking I'd say, we were improving anyway, a lot of that is just organic growth.

And then we added 35000, new bank accounts for people in our wealth management franchise. So that again is a significant indicator that what we're offering.

We obviously benefited.

Okay.

You noted the one more hike and then the back half.

As value to people and if I go back to my old business and business banking and commercial banking.

What's interesting is the fed doesn't have the same forward curve, but the market has so I'm curious if you could talk to the sensitivity of what if there are no cuts how much of that helps your forward NII still in process.

They're adding new logos and new clients over time.

In a way that we're really happy with right now so I think.

The ultimate answers.

Well, we do use the forward curve, because we feel like it's the most kind of dispassionate assessment with the most information out there in the market from the broadest set of people and importantly, it's not just us making it up.

We're a purpose driven company, who put our clients' interests first that is helping make their financial lives better and in this period of time people want stability and Thats, what we offer.

So we use the forward curve and.

Alright, thank you.

I even mentioned during my remarks, thanks, a bunch and around around does it is it one hike is it zero is it two cuts, but the sensitivity that we provide around up 100 or down 100 is probably the best we can offer at this stage and then depending on how things develop in the developing quickly. It will allow you to adjust the model accordingly.

We'll go next to Glenn Schorr with Evercore. Your line is open.

Hi, Thanks.

Maybe an easy one first.

Wasn't noticeable but do you feel like there was a flight to quality benefits during the March madness.

I would've thought.

That people would have flocked to the safety of Bofa during times like that but you didn't comment specifically on that so thanks.

The last the simple one is held to maturity you talked a lot about it I think the answer is no, but I'll ask it anyway.

So we're going to decline Glen to give a specific number we're pretty confident we saw.

So do you don't feel like you have to do anything material.

Material with your unrealized loss business.

Notable flight to safety.

And it comes in two parts part one is.

Again, it's in treasuries that swap its agency mortgages, we don't have a credit issue.

During a period like March 10 front around that week or two.

At this point given the stability of the deposit base.

Capital growth do you feel like you can just kind of ride it out grind it down.

Correct right now that's exactly what we've been doing we've communicated that pretty clearly and that's what we're continuing to do just keeps getting smaller and shorter.

Thank you I appreciate it.

We've chosen not to put an exact number on it because their typical ebbs and flows in any given quarter, leading up especially to a.

We'll go next to Steven <unk> with Wolfe Research Your line is open.

Hey, good morning.

Payroll and a courtyard.

Alistair.

But generally speaking I'd say, we were improving anyway, a lot of that is just organic growth.

You had mentioned it.

Some of the strong kpis that youre seeing within Gwen.

We obviously benefited.

Okay.

At the same time, the business did see a pretty material decline in pre tax margins, both sequentially and year on year I wanted to better understand how the business might evolve under some of the new leadership and how we should just be thinking about the margin trajectory.

Yeah.

You noted the one more hike and then cuts through the back half for you. That's the forward curve. What's interesting is the fed doesn't have the same forward curve, but the market has so I'm curious if you could talk to the sensitivity of what if there are no cuts how much of that helps your Florida NII thought process.

Wanted to better understand how you are balancing investment needs with the goal of delivering continued profitability.

Yes.

The margin came down largely because you had to sort of incremental hit to you.

The investment side revenues of markets fell year over year, but we'd expect that margin to move back up towards more traditional 20, 25% to 30.

So we use the forward curve.

And I.

You mentioned during my remarks, thanks, a bunch and around around does it is it one hike is it zero is it two cuts, but the sensitivity that we provide around up 100 or down 100 is probably the best we can offer at this stage and then depending on how things developed and the developing quickly. It allow you to adjust the model accordingly.

Percent, but you also have to remember that.

They are a big beneficiary of hit of the elevated payroll taxes and other things in the first quarter, because as a percentage of our compensation and the companies. They are not a small amount so.

But we expect that to move back in the high Twenty's, but.

Yeah.

We have been working on this business to continue to improve.

The last the simple one is held to maturity you talked a lot about it I think the answer is I know it but I'll ask it anyway.

Digitization of the services side of it so basically if you think about it you get.

So do you don't feel like you have to do anything.

$1 of revenue and you take about half past the compensation in the financial advisory grids and the other payouts and then we take the rest of it and convert it to to.

Material with your unrealized loss position.

It's in treasuries that swap.

Agency mortgages, we don't have a credit issue.

It's about a 30% deposit the other half and converted about 30 percentage points or 60% at the profit pretax this quarter down a little bit because of the payroll. So we feel very good about where we stand on a relative basis, but one of the things. The team continues to work on across.

At this point given the stability of deposit base loan growth capital growth do you feel like you can just kind of ride it out grind it down.

Correct right now that's exactly what we've been doing we've communicated that pretty clearly and that's what we're continuing to do just keeps getting smaller and shorter.

Eric and Lindsay and Katie is to drive operational excellence to new level in that business.

Thank you I appreciate it.

We believe that there's still a lot of costs that can come out around the simplicity more simple straightforward products the delivery of those products.

We will go next to Steven <unk> with Wolfe Research Your line is open.

Hey, good morning.

Paper based usage and things like that and then also remember we are making investments advisors. We have 4000 plus trainees in the businesses across the company and we believe that the best advisors, one has grown at or with.

So alistair.

You had mentioned it.

And some of the strong kpis that youre seeing within Gwen.

With our own company and we continue to do that and Thats a drag on the P&L that we're willing to take to make sure we have an advisor growth in the future.

That's helpful color, Brian and just for my follow up was hoping either your Alistair could provide just an update on expectations around upcoming regulatory.

Wanted to better understand how you are balancing investment needs with the goal of delivering continued profitability.

Yes.

Our regulatory development, specifically, how your scenario planning for Basel four any expectations around the FDIC special assessment there are a lot of.

The margin came down largely because you had to sort of incremental hit too.

Yes.

The investment side revenues are markets fell year over year, but we'd expect that margin to move back up towards more traditional 20, 25% to 30.

Items that have been floated.

Given recent events in the SBB fallout I was hoping to get some perspective, just in terms of regulatory mark to market.

<unk> percent, but you also have to remember that they are a big beneficiary of hit of the elevated payroll taxes and other things in the first quarter, because as a percentage of our compensation and the companies. They are not a small amount so but.

I mean, I think we don't have anything more than you do in a broad sense, but I think at the end of day I think this industry is extremely strong capital liquidity and capabilities.

But we expect that to move back in and the high Twenty's, but.

And we just demonstrated through.

No.

We have been working on this business to continue to improve the digitization of the services side of it. So basically if you think about it you get.

Through the pandemic and then through the aftermath of the pandemic and then through inflation and then through a tightening cycle that hasnt happened before so yes, I feel good about where the industry stands I think people have to step back and think about it overall and then frankly this industry in the United States is so much stronger than Europe . It has so much capital per square inch so to speak than Europe does.

$1 of revenue and you take about half past the compensation in the financial advisory grids and the other payouts and then we'd take the rest of it and convert it to to about a 30% deposit the other half and converted about 30 percentage points or 60% at the profit pretax this quarter down a little bit because of the payroll. So we feel very good about where we stand on a relative basis.

To get to ratios, which are numbers are lower but the amount of capital to get there is pretty unbelievable.

We have twice that.

But one of the things the team continues to work on across.

Capital is a European counterparts of similar size and our ratios are considered to be lower so obviously its a pull this together they've got to make sure. They arent counting the beans and different ways of the gold plating or other things nine states. So hopefully people will start to see the wisdom and making sure they're careful here.

Eric and Lindsay and Katie is to drive operational excellence to new level in that business, because we believe that there's still a lot of costs that can come out around the simplicity.

More simple straightforward products the delivery of those products.

And we will see that play out, but we don't have any special understanding.

Paper based usage and things like that and then also remember we are making investments advisors. We have 4000, plus trainees in our businesses across the company and we believe that the best advisors, one is growing at or.

Alright, thanks for taking my questions.

We'll take our next question from Matt O'connor with Deutsche Bank. Your line is open.

Good morning, just a quick clarification on the balance sheet.

With our own company and we continue to do that and Thats a drag on the P&L that we're willing to take to make sure we have advisor growth in the future.

Separate question.

Cash obviously went up a lot and you did allude to that moving some of those securities to cash.

That's helpful color, Brian and just for my follow up was hoping.

But the short term borrowings was also a lot.

Either you or Alistair could provide just an update on expectations around upcoming.

Just to kind of hold more liquidity in the current environment and we should assume that continues which I think weighs on NIM, but not another $9 or is that just temporary and <unk> and we shouldn't pay too much attention to the period end trends there.

Regulatory development, specifically, how your scenario planning for Basel four any expectations around the FDIC special assessment there are a lot of.

It's a little bit of both Matt.

Items that had been floated.

You've got first quarters, just normally a seasonal build for us so that happens in a little bit of borrow and youre right it doesn't impact them.

Given recent events in the SBB fallout I was hoping to get some perspective, just in terms of regulatory mark to market.

Because you can invest it in cash straight away and Theres no no drag there, but it may have hurt NOI slightly at the margin, but you know a little bit.

Yeah, I mean, I think we don't have anything more than you do in a broad sense, but I think at the end of the day I think this industry is extremely strong capital liquidity and capabilities.

Okay, sorry, Thank you meant to say he doesn't hurt than NII dollars that much better parts of members that right correct.

Yes, we just demonstrated through.

Through the pandemic and then through the aftermath of the pandemic and then through inflation and then through a tightening cycle that hasnt happened before so I feel good about where the industry stands and I think people have to step back and think about it overall and then frankly this industry in the United States is so much stronger than Europe . It has so much capital per square inch so to speak than Europe does.

Yes.

And then separately.

Any kind.

<unk> trends to call out in spending in March some of your peers talked about a slowdown.

In March and you highlighted kind of for the full quarter, our debit and credit card was up 6% year over year total payments up nine any kind of intra quarter trends that you'd want to point to.

To get to ratios, which.

Numbers are lower but the amount of capital to get there is pretty unbelievable. So we have twice.

I think we saw.

The first part of the quarter first quarter being a little bit.

Capitals of European counterparts of similar size and our ratios are considered to be lower so obviously as they pull this together they've got to make sure. They arent counting the beans and different ways of the gold plating or other things nine states. So hopefully people will start to see the wisdom and making sure they're careful here.

A little bit softer and then we saw a kick back up in March.

So far in April still early it's.

It's probably a little lower than it was for the month of March but.

It's a couple of weeks and so we got a little careful about that just due to the different ways.

Vacation fall and things like that so, but it's over the course of last year. The total spending year over year increases have slowed down and I think that means.

We'll see it play out, but we don't have any special understanding.

Alright, thanks for taking my questions.

We will take our next question from Matt O'connor with Deutsche Bank. Your line is open.

It's a precursor to the economy being a little bit slower and that we're seeing and then frankly consumers being more careful in their use of the cash because the cash and accounts and our accounts, especially for the lower income cohorts continues to build honestly from peak last April it fell down a little bit of all of course, a year and it's built back up in the first part of this year. So.

Hi, Good morning, just a quick clarification on the balance sheet.

A question on the cash obviously went up a lot and you did allude to that moving some of those securities to cash.

Short term borrowings was also a lot and I didn't know if that just to kind of hold more liquidity in the current environment and we should assume that continues which I think weighs on NIM, but not an NII dollars or is that just temporary and <unk> and we shouldn't pay too much attention to the period end trends there.

We'll see that play out there's been a delay in some of the tax returns as you know this year that pushes them from quarter to quarter, but stay tuned I think it's a little early to call, but it is it is a little softer in the first part of April here.

Okay. Thank you very much.

It's a little bit of both Matt.

First quarter is just normally a seasonal build for us so that happens in a little bit of borrow and you're right. It doesn't impact them. Because you can invested in cash straight away and Theres no no drag there, but it may hurt NOI slightly at the margin, but you know a little bit.

We'll go next to Vivek <unk> with Jpmorgan. Your line is open.

Hi, Thanks, just a couple of questions I wanted to clarify the shift to <unk>.

Interest bearing from noninterest bearing I know you said you expect that to company or do you expect the pace of that to slow or is it still.

Okay, sorry, I think you meant to say it doesn't hurt the NIM NII dollars that might spread it hurts them, 10% right.

Yes.

It says it's still running pretty high are you going to accelerate any color on that.

Correct.

Yes.

And then separately.

Any kind.

I would expect it to slow over time, because we're getting pretty close now to Q4 19 levels anyway, which was the last peak.

Kind of trends to call out in spending in March some of your peers talked about a slowdown.

In March and you highlighted kind of for the full quarter, our debit and credit card was up 6% year over year total payments up nine any kind of intra quarter trends that you'd want to point to.

And also when you think about the big driver it tends to be global banking.

And as rates are rising.

Clients are doing their rotation, but we're getting towards the end of the hikes now we would think so you'd anticipate there'll be a little bit of a lag there.

I think.

We saw.

The first part of the quarter first quarter being a little bit.

But generally speaking I would expect it to slow at some point and I think we're probably getting close to that.

A little bit softer and then we saw it kick back up in March so far in April still early it's.

One more alistair.

It's probably a little lower than it was for the month of March but.

Office CRE, you gave the geographical mix and the slides for the total CRE portfolio can you give us some similar thing for the office CRE portfolio.

It's a couple of weeks since we've got a little careful about that just due to the different ways.

Vacation fall and things like that so, but it's over the course of last year. The total spending year over year increases have slowed down and I think that means.

I can do but I'm going to need to follow up with you afterwards, because I don't have it at hand.

It's a precursor to the economy being a little bit slower and that we're seeing and then frankly consumers being more careful in their use of the cash because the cash and accounts and our accounts, especially for the lower income cohorts continues to build honestly from peak last April fell down a little bit of all of course of the year and it's built back up in the first part of this year. So.

Okay.

But I don't think youre going to find anything there other than sort of typical geographic distribution similar to the way we serve our customers around the United States.

Okay.

Alright. Thanks.

Okay.

We'll go next to Gerard Cassidy with RBC. Your line is open.

We will see that play out there's been a delay in some of the tax returns as you know this year that pushes them from quarter to quarter, but stay tuned I think it's a little early call, but it is it is a little softer in the first part of April here.

Good morning, Brian Good morning Alastair.

Good morning.

Alistair can you elaborate a little further you talked about.

Slide 12, you show US a 100 basis point parallel shift impacts net interest income by a positive $3 3 billion over the following 12 months.

Okay. Thank you very much.

We will go next to Vivek <unk> with Jpmorgan. Your line is open.

If the rate environment does shift and maybe we do start to see lower rates by the end of the year. How quickly can you guys move this from being asset sensitive to neutral or liability sensitive on the balance sheet.

Hi, Thanks, just a couple of questions I wanted to clarify the shift to <unk>.

Interest bearing from noninterest bearing.

I know you said you expect that to continue or do you expect the pace of that to slow or is it still.

Well I think if you were to take that same metric on the downside it would be probably be down $3 6 billion.

Yes.

It says it's still running pretty high are you going to accelerate any color on that.

For down 100, just to give some idea.

I would expect it to slow over time, because we're getting pretty close now to Q4 19 levels anyway, which was the last peak.

And what's happening now is obviously as the interest bearing piece just continues to rise across the company.

And also when you think about the big driver it tends to be global banking.

We've got a we've got a hedge now as rates if and when they start to go back down it won't be a complete hedge but there'll be a little bit of a hedge there and then you also get something back in terms of global markets NII that will start bleeding back positively. So theres, some puts and takes but well see how that develops over the course of the year.

And as rates are rising.

Clients are doing their rotation, but we're getting towards the end of the hikes that we would think so you'd anticipate there'll be a little bit of a lag there.

But generally speaking I would expect it to slow at some point and I think we're probably getting close to that.

Very good and then as a follow up question in the global Blank Global banking Slide you guys gave us a slide 22.

One more alistair.

Office CRE, you gave the geographical mix and the slides for the total CRE portfolio can you give us some similar thing for the office CRE portfolio.

You had a negative provision in this quarter and you referenced that it's an improved macroeconomic outlook can you give us some color on what youre seeing there to give me confidence to have a negative provision in the second does. This also include the recent shared national credit exam results.

I can do but I'm going to need to follow up with you afterwards, because I don't have it at hand.

Okay.

But I don't think youre going to find anything there other than sort of typical geographic distribution similar to the way we serve our customers around the United States.

This line item as well.

It would it would always include those results has come through continuously.

No.

Got it has changed over time, that's a continuous set of things they look at and we always do well in that.

Okay.

Alright. Thanks.

Okay.

And when we say macro environment remember this.

We'll go next to Gerard Cassidy with RBC. Your line is open.

Business is credit across the world. So Theres places that we finished up on cleaning up.

Good morning, Brian Good morning Alastair.

Good morning, how are you doing it.

Alistair can you elaborate a little further you talked about.

It allowed us to lease reserves on one side and then we got other places that you'll be able to put up reserves, but at the end of the day.

I think it's slide 12, you show US 100 basis point parallel shift impacts net interest income by a positive $3 3 billion over the following 12 months.

The overall credit quality here is very strong and very stable.

Very good I appreciate and you asked the question in commercial correct, yes.

Yes.

Yeah, Okay. So.

I think there's a couple of things going on number one we didn't have any real loan growth number two the asset quality remains terrific number three.

You know that the macro environment. When you look at the Blue chip consensus was ever so slightly better. So we felt like we were pretty well provided for already.

Well I think if you were to take that same metric on the downside it would be probably be down $3 6 billion.

Down 100, just to give some idea.

And then on the commercial side, we had a little bit of exposure runoff in one or two places where we may have been.

And what's happening now is obviously as the interest bearing piece just continues to rise across the company.

Reserve quite conservatively. So it was all those things added together.

We've got a we've got a hedge now as rates if and when they start to go back down and it won't be a complete hedge but it'll be a little bit of a hedge there and then you also get something back in terms of global markets NII that will start bleeding back positively. So theres, some puts and some takes but well see how that develops over the course of the year.

Actually Brian and Alistair you guys, obviously had been through a few cycles why is commercial so strong as few of your peers. All have really good commercial credit quality any suggestions on what youre seeing that makes it so good.

Well their profitability remains in a good place cash flows remained in a good place.

Very good and then as a follow up question in the global Blank Global banking Slide you guys gave us a slide 22.

I think corporate America learned something from 2009 and 2008.

And so leverages and are in a good place.

You had a negative provision in this quarter and you referenced that it's in <unk>.

Add all that up you get a deal.

Environment overall for the economy and.

<unk> macroeconomic outlook can you give us some color on what youre seeing there to give you confidence to have a negative provision in the second does. This also include the recent shared national credit exam results in this line item as well.

That's where that's where we are with respect to credit quality. So we'll have to watch that over time, but as of right now it's in terrific shape.

Great. Thank you very much.

Our next question comes from Betsy <unk> with Morgan Stanley . Your line is open.

It would it would always include those results has come through continuously.

Hi, good morning.

There is not.

Got it has changed over time, that's a continuous set of things they look at and we always do well on that.

Good morning Betsy.

Two questions one just keying off of the loan discussion just now could you give us a sense as to how youre thinking about lending standards and any changes.

And when we say macro environment remember this.

Business is credit across the world. So Theres places that we finished up on cleaning up.

<unk> environment.

Well you know what can we do.

Don't really have a significant change to our risk appetite, we haven't changed our client selection. Those are largely speaking designed to be through the cycle.

It allowed us to reasonably some reserves on one side and then we had other places.

We would've put up reserves, but at the end of the day.

Overall credit quality here is very strong and very stable.

We will obviously adjust on specific concerns about ASP.

Very good I appreciate that you asked the question on commercial correct.

Asset quality performance in our sector.

Yes.

Yeah, Okay. So.

Or outlook.

I mean, I think there's a couple of things going on number one we didn't have any real loan growth number two the asset quality remains terrific number three.

But I'd say with respect to our loan growth.

Where we're seeing it more as.

As the fed raises rates those rates are changing our customer demand. So we just don't see as much demand right now for securities based lending our mortgage but it's less about credit tight.

The macro environment. When you look at the Blue chip consensus was ever so slightly better. So we felt like we were pretty well provided for already in.

And then on the commercial side, we had a little bit of exposure runoff in and one or two places where we may have been.

Tightening or standards, it's more about just the fed doing.

Having the effect that you would expect.

Reserve quite conservatively. So it was all those things added together.

Okay.

And then two other quick one on <unk>.

Actually Brian and Alastair you guys, obviously had been through a few cycles why is commercial so strong as you and your peers all have really good commercial credit quality any suggestions on what youre seeing that makes it so good.

Consumer checking account balances in March was that uptick in part a function of seasonality and <unk>.

End of period end of <unk>.

Hey cycle type of behavior or is there something more going on there.

Well their profitability remains in a good place cash flows remained in a good place I.

Well I think there's always that's a cohort of pre pandemic compared to where they were then and now.

I think corporate America learned something from 2009 and 2008.

It had been.

And so leverages and are in a good place.

Sort of bouncing around.

Go ahead level for the last six months and they moved up a little bit. This is the time here. They do move up because of tax returns and other things in year end payments and stuff but.

Add all that up you get a decent environment overall for the economy and.

That's where that's where we are with respect to credit quality. So we'll have to watch that over time, but as of right now it's in terrific shape.

They clearly are going they basically were stable from.

November December January they started increasing February and then it bounced up a little bit so, we'll see where it ends up with clear messages. Despite people having said these consumers are spending down their money.

Great. Thank you very much.

Okay.

Our next question comes from Betsy <unk> with Morgan Stanley . Your line is open.

Hi, good morning.

It would be.

Be out of these balances in mid 2022 in the third quarter. They clearly are still.

Good morning Betsy.

Two questions one just keying off of the loan discussion just now could you give us a sense as to how youre thinking about lending standards and any changes.

Sitting with a fair amount of money in account relative to pre pandemic times.

Okay, and then just lastly, AI, it's been a big topic recently as I'm sure you know.

<unk> environment.

Well, we don't really have a significant change to our risk appetite, we haven't changed our client selection. Those are largely speaking designed to be through the cycle.

<unk> got Erica just wondering about plans to leverage AI, maybe you're going to be leveraging Erik on that maybe it's a different kind of strategy, but thoughts there would be helpful. Thank you.

We will obviously adjust on specific concerns about.

Yes so.

Erica obviously the basic concept was built for US a number of years 4567 years ago, starting and came out of that came into the business. It is a predictive language type of program, where you put it.

Asset quality performance in our sector.

Or outlook.

But I'd say with respect to our loan growth.

Where we're seeing it more as.

As the fed raises rates those rates are changing our customer demand. So we just don't see as much demand right now for security space lending, our mortgage, but it's less about credit tight.

A question and answers it but we had to do a special language to make sure it would work with our.

Our business it wasn't a general so we did that.

Tightening or standards, it's more about just the fed doing.

Then put us.

In a condition to start to deploy to our customers because it's captive to our data and I were just looking our assistance finding information and given to clients is really a service capability. So what we've seen is or that increase is a clear indicator of how valuable.

Having the effect that you would expect.

Okay.

And then two other quick one on <unk>.

Checking account balances.

<unk> was that uptick in part a function of seasonality in <unk>.

These types of artificial intelligence natural language processing predictive technologies can be.

End of period end of pace.

Pay cycle type of behavior or is there something more going on there.

For customer service and things like that we've also taken Erika internally and applied it to help us do work and we've seen and have those benefits.

Well I think there's always a cohort of pre pandemic compared to where they were then and now and they had been.

Ultimately.

We think this has extreme benefits for our company.

Sort of bounce around.

We think it has a lot and you've seen this written about in the computer coding areas in other words it can speed up the process of what they used to be called object programming that goes on we think it has a lot to do.

So that level for the last six months and they moved up a little bit. This is a time of year. They do move up because of tax returns and other things in year end payments and stuff but.

But they clearly are going they basically were stable from.

In terms of.

Allowing.

November December January .

Teammates to work much more quickly and efficiently with our systems and get information out and can make even someone like me the ability to do analytics that I'd have to send somebody to have input into the system. So there is a lot of there's a lot of value to this.

They started increasing February and then it bounced up a little bit. So we will see what ends up clear messages. Despite people having said these consumers are spending down their money.

It would be.

Be out of these balances in mid 2022 of the third quarter. They clearly are still.

The key question will be when can use it without the fear of.

Sitting with a fair amount of money in account relative to pre pandemic times.

The reason why a lot of it stopped.

Okay, and then just lastly, AI, it's been a big topic recently as I'm sure you know.

Our industry and other industries was it wasn't clear how it works with your data any and if there any outside worlds data and how it would interactive pull stuff out and we have to be careful that in and secondly, we have to understand how the decisions are made to be able to stand up to the to our customers' demands for us would be fair.

<unk> got Erica just wondering about plans to leverage AI, maybe you're going to be leveraging Erica and that maybe it's a different kind of strategy, but thoughts there would be helpful. Thank you.

Yeah. So.

Erica obviously the basic concept was built for US a number of years 4567 years ago. Starting in came out came into the business. It is a predictive language type of program, where you put it.

Frankly follow the laws and rules and regulations.

Lending so I think all of that is.

Good good strong it's really important thing so we're not in EFI to NSS actually operated.

A question and answers it but we had to do a special language to make sure would have worked with our.

Getting out to we understand the value of it but we will carefully apply it and we see great value I don't think it's a great value in the next months, but in the overall sense it'll help us continue to manage the head count down, which we've been doing this quarter and remember we started this company.

Our business it wasn't a general so we did that.

Then put us.

In a condition to start to deploy to our customers because it's captive tar data. We're just looking our assistance finding information given to clients is really a service capability. So what we've seen is or that increase is a clear indicator of how valuable.

Management team started with this company in 2010 months 285000, 300000 people working here and we're running the same sized company with 216000 people are bigger company doing more stuff and so all of that's been aided by Digitization of which is a potential step function change.

These types of artificial intelligence natural language processing predictive technologies can be.

For customer service and things like that we've also taken Erika internally and applied it to help us do work and we've seen it have those benefits.

Thanks, so much I appreciate it.

Ultimately.

We think this has extreme benefits for our company.

We'll take our final question at this time. This is a follow up from Mike Mayo with Wells Fargo. Please go ahead. Your line is open hi.

I think it has a lot and you've seen this written about in the computer coding areas in other words it can speed up the process of what they used to be called object programming that goes on we think it has a lot to do.

In terms of your guidance for lower expenses in the second quarter than the third quarter than the fourth quarter.

Much of that is expectations for slower business activity and how much of that is due to expected scale benefits from technology and I guess the bigger question too is.

In terms of.

Allowing.

And teammates to work much more quickly and efficiently with our systems and get information out and can make even someone like me the ability to do analytics that I could.

Are you seeing evidence of a banking crisis are you seeing evidence of banking recession is that.

I'd have to send somebody to have them put keyed into the system. So there is a lot of there's a lot of value to this.

The key question will be when can use it without the fear of.

Part of the reason for the expense guide.

No it's not Michael.

Mike I would say.

The reason why a lot of it stopped.

There could be the activity the first quarter it was actually higher in some ways.

Our industry and other industries was it wasn't clear how it work with your data any and if they're in the outside world is data and how it would interact to pull stuff out and we have to be careful that and then secondly, we have to understand how the decisions are made to be able to stand up to the to our customers' demands for us to be fair.

Because the volatility in the trading side and things like that so we arent we arent we.

We're expanding to get scale and operating leverage across activity, taking less dollars to do it and the opex and the work we do we had.

Build up more people largely because.

Frankly follow the laws and rules and regulations.

Fear of last year of the turnover rate that is now gone and half in a year.

Lending so I think all that is.

Good good strong it's really important thing so we're not in EFI <unk> actually operated.

Cars to be hiring a lot to stay ahead of it and then when it slowed down we built up people and we're bringing that back down in line, but there is no. The expenses frankly are just managing head count carefully because thats two thirds expense base and getting more leverage out of the activities, but there is no.

Now we understand the value of it but we will carefully apply it and we see great value I don't think it's good.

Value next month, but on the overall sense it'll help us continue to manage the head count down, which we've been doing this quarter and remember we started this company.

We will have more checking accounts will have more credit card accounts will do more wires on a given day, we will do more trades on a given day and that can ebb and flow, but overall, we're expecting activity continued to rise now will loan demand people want to borrow another $10 versus the $10 ahead, that's what we say slows down so that doesn't.

Management team started with this company in 2010 months of 285000 300000 people working here and we're running the same sized company with 216000 people are bigger company doing more stuff and so all of that's been aided by Digitization.

But that's not that they don't have a loan is that the bar different amounts of money.

<unk> of which is a potential step function change.

Alright. So this is really just managing the business not your reduced investments band or anything like that.

Thanks, so much I appreciate it.

On the investment spend we're spending.

We increased this year versus last year $3 to $400 million in pure initiative spending and thats going through the run rate as we speak and we are we wouldn't cut that because we think.

We will take our final question at this time. This is a follow up from Mike Mayo with Wells Fargo. Please go ahead. Your line is open hi.

In terms of your guidance for lower expenses in the second quarter than the third quarter than the fourth quarter.

To the point of Betsy's comment it gives us a chance to continue to leverage the franchise and nowhere is that more evidenced in our consumer business, where the numbers of branches year over year or down a few hundred again.

How much of that is expectations for slower business activity and how much of that is due to expected scale benefits from technology and <unk>.

Customers are bigger and more stuff's going through customer delight is at all time high.

I guess the bigger question too is.

Attrition is an all time low and Thats, what makes that franchise valuable as you as you well know and thats by continuing to invest in new capabilities at all time.

Are you seeing evidence of a banking crisis are you seeing evidence of banking recession is that.

Part of the reason for the expense guidance.

And last thing Big picture for you, Brian just the evidence that a recession is coming and the impact on you guys.

No it's Mike.

Mike I would say.

There could be activity in first quarter, it was actually higher in some ways.

Where are you right now is it red is a flashing yellow is a green how has it moved.

Because the volatility in the trading side and things like that so we arent we arent we.

What's your what's the temperature Kansas.

Spending to get scale and operating leverage across activity, taking less dollars to do it and the opex and the work we do we had.

Candace research team had been consistent to see after the fed raises rates. This amounts there would be a yes.

Recession, they have a mild recession.

Built up more people largely because the fear of last year of the turnover rate that is now gone and half in a year.

That they predicted basically say half to 1% negative annualized negative GDP growth Q3, Q4, and Q1 and then back to positive so I think.

It has to be hiring a lot to stay ahead of it and then when it slowed down we built up people and we're bringing that back down in line, but there is no. The expenses frankly are just managing head count carefully because thats two thirds expense base and getting more leverage out of the activities, but there is no.

The end of the day, we don't we don't see the activity on the consumer side slowing at a pace that would indicate that but we see.

Commercial customers are being more careful and things like that but everything points to a relatively mild recession given the amount of stimulus that was put in that was paid to people in the money. They have left over the fact that unemployment is still at three 5% is false.

Have more checking accounts will have more credit card accounts will do more wires on a given day, we will do more trades on a given day and that can ebb and flow, but overall, we're expecting activity continued to rise now will loan demand people want to borrow another $10 versus the $10 ahead, that's what we say slows down so that doesn't.

Full employment plus.

And then the wage growth is slowing and tipping over so the signs of inflation of tipping down, but they're still there but that translates into good relatively good activity. So we see it as a slight recession.

But that's not that they don't have alone is that the bar different amounts of money.

Alright. So this is really just managing the business not your reduced investments band or anything like that.

We'll see.

On the investment spend we're spending.

See what happens, but we built this company across the last decade, even in a stress scenario that you see somewhere in our slides last quarter, we didnt reproducing because they're the same answer it <unk>.

We increased this year versus last year $3 to $400 million in pure initiative spending and Thats gone through the run rate as we speak and we are we wouldn't cut that because we think.

Our stress scenarios are always less than anybody else's because of how we built the company through that go through recessions without a problem, including the pandemic.

Got it alright, thank you.

And at this time I would like to turn the program back over to Brian Moynihan for any additional or closing remarks.

Customers are bigger and more stuff's going through customer delight to the all time high.

Thank you for your time and I want to thank my teammates for a great <unk>.

<unk> is an all time low and Thats, what makes that franchise valuable as you as you well know and thats by continuing to invest in new capabilities at all time.

<unk> again, this first quarter of 2023.

Quarter of 18% year over year, EPS growth, the strength stability and being there for our customers continue to show through included including strong capital at 11, four liquidity at $900 million Ngls, but the most important thing and we just touched on it was really two things continued organic growth in our franchise and operating leverage.

And last thing Big picture for you, Brian just the evidence that a recession is coming and the impact on you guys.

Where are you right now is it red is it flashing yellow is a green how has it moved.

What's your what's.

What's the temperature.

Anderson, our research team had been consistent to see after the fed raises rates. This amounts there would be a yes.

By growing revenue faster than expenses. So we feel good about that and look forward to talk to you next quarter.

Recession, they have a mild recession and that.

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

<unk> predicted basically say half to 1% negative annualized negative GDP growth Q3, Q4, and Q1 and then back to positive so I think.

The end of the day.

We don't see the activity on the consumer side slowing at a pace that would indicate that but we see.

Commercial customers are being more careful and things like that but everything points to a relatively mild recession given the amount of stimulus that was putting that was paid to people in the money. They have left over the fact that unemployment is still at three 5% is false.

Full employment plus.

And then the wage growth is slowing and tipping over so the signs of inflation or tipping down, but they're still there but that translates into good relatively good activity. So we see it as a slight recession.

We'll see.

We'll see we'll see what happens, but we built this company across the last decade, even in a stress scenario is that youll see somewhere in the slides last quarter, we didnt reproducing because it's the same answer.

Our stress scenarios are always less than anybody else's because of how we built the company through that go through recessions without a problem, including the pandemic.

Got it alright, thank you.

And at this time I would like to turn the program back over to Brian Moynihan for any additional or closing remarks.

Thank you for your time and I want to thank my teammates for a great.

Performance again, this first quarter of 2023.

Strong quarter at 18% year over year EPS growth.

Stability and being there for our customers continue to show through included including strong capital at 11, four liquidity at $900 Ngls, but the most important thing and we just touched on it was really two things continued organic growth in our franchise and operating leverage.

By growing revenue faster than expenses. So we feel good about that and look forward to talking next quarter.

This 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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Okay.

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Q1 2023 Bank of America Earnings Conference Call

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