Q1 2024 Bank of America Corp Earnings Call

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Speaker Change: Good day, everyone and welcome to the Bank of America earnings announcement.

Speaker Change: At this time all participants are in a listen only mode. Later, you will have the opportunity to ask questions. During the question and answer session. You may registered to ask a question at any time by pressing the star and one on your telephone keypad you may withdraw yourself from the queue by pressing the pound key. Please note. This call may be recorded I'll be standing by if you should need any assist.

Operator: Later, you will have the opportunity to ask questions during the question-and-answer session. You may register to ask a question at any time by pressing the star and 1 on your telephone keypad. You may withdraw yourself from the queue by pressing the pound key. Please note that this call may be recorded. I'll be standing by if you should need any assistance.

Lee McIntyre: It is my pleasure to turn the conference over to Lee McIntyre of Bank of America. Good morning. Thank you, Leo. Welcome and thank you for joining the call to review our first quarter results. Our earnings release documents are available in the Investor Relations section of the BankofAmerica.com website, and that includes the earnings presentation that we will be referring to during the call. I trust that everyone has had a chance to review the document.

It is my pleasure to turn the conference over to Lee Mcintire Bank of America.

Lee Mcintire: Good morning, Thank you Lee a welcome and thank you for joining the call to review our first quarter results.

Our earnings release documents are available on the Investor Relations section of the Bank of America Dotcom website that includes the earnings presentation that we will be referring to during the call.

Lee Mcintire: I Trust that everyone's had a chance to review the documents I'm going to first turn the call over to our CEO, Brian Moynihan for some opening comments.

Lee McIntyre: I'm going to first turn the call over to our CEO, Brian Moynihan, for some opening comments before Alastair Borthwick, our CFO, discusses the details of the quarter. Before they begin, let me just remind you that we may make forward-looking statements and refer to non-GAAP financial measures during the call. Forward-looking statements are based on management's current expectations and assumptions that are subject to risk and uncertainty. Factors that may cause our actual results to materially differ from expectations are detailed in our earnings materials and our SEC filings, which are available on our website.

Brian Thomas Moynihan: Before Alastair Borthwick, our CFO discusses the details of the quarter.

Speaker Change: Before they begin let me just remind you we may make forward looking statements and refer to non-GAAP financial measures during the call.

Speaker Change: We're looking statements are based on management's current expectations and assumptions that are subject to risks and uncertainties factors that may cause our actual results to materially differ from expectations are detailed in our earnings materials. Our SEC filings that are available on our website.

Lee McIntyre: Information about non-GAAP financial measures, including the reconciliations to U.S. GAAP, can also be found in our earnings materials that are available on the website. So with that, I'll turn the call over to you, Brian. Thanks. Thank you, Lee, and good morning to all of you.

Speaker Change: Information about non-GAAP financial measures, including the reconciliations to U S. GAAP can also be found in our earnings materials that are available on the website. So with that I'll turn the call over to you Brian. Thanks.

Brian Thomas Moynihan: Thank you Lee and good morning to all of you and thank you for joining us I am starting on slide two of the earnings presentation.

Brian Thomas Moynihan: I am starting on slide two of the hearings presentation. We once again delivered a strong set of results in quarter one, reporting re-reported net income of $6.7 billion after tax and EPS of 76 cents. This included the additional expense accrual for the industry's special assessment by the FDIC to recover losses from the failures of Silicon Valley Bank and Signature Bank. This lowered our quota of 1 EPS by 7 cents. Excluding net expense, net income was $7.2 billion, and the EPS was $0.83 per share in quarter one.

Once again delivered a strong set of results in quarter one.

Brian Thomas Moynihan: We reported net income of $6 $7 billion after tax and EPS of <unk> 76 sets.

Brian Thomas Moynihan: This included the additional expense accrual for the industry as special assessment by the FDIC to recover losses from the face of Silicon Valley Bank and signature bank.

Brian Thomas Moynihan: This Florida quota, what EPS by seven cents.

Brian Thomas Moynihan: Excluding that expense net income was $7 2 billion and EPS was <unk> 83 per share.

Brian Thomas Moynihan: In quarter one.

Brian Thomas Moynihan: Alastair is going to walk you through the details of the quarter in a moment, but first, let me give you a few thoughts on our performance. We delivered good improvement in our fee-based business, driven both by continued organic growth and good market conditions. Investment Banking saw a nice rebound this quarter. We delivered nearly $1.6 billion in investment banking fees and grew 35% from the first quarter of 2023. Matthew Coder and the team have done a great job delivering market share growth. In addition, our results reflect the benefits of investments made in our middle market investment banking teams and dual coverage teams. Matthews has utilized this penitent power.

Speaker Change: I was just going to walk you through the details of the quarter momentarily, but first let me give you a few thoughts on our performance.

We delivered good improvement in our fee based business driven both by our continued organic growth and good market conditions investment banking.

Speaker Change: So a nice rebound this quarter.

Speaker Change: We delivered nearly $1.6 billion of investment banking fees and grew 35% from the first quarter of 2023 Matthew.

Speaker Change: Matthew coated and the team have done a great job delivering market share growth. In addition, our results reflect the benefits of investments made our middle market investment banking teams in dual coverage teams Matthews.

Speaker Change: As utilized has been put up at power.

Brian Thomas Moynihan: wisely grow our middle market team from 15 bankers in 2018 across a dozen cities to more than 200 bankers In twice as many cities today, both groups with our work with our commercial bankers and wealth management advisors, no cities to deliver our investment in brokerage services revenue across Merrill and the private bank grew 11% year-over-year in quarter one to nearly $3.6 billion. Continued investments in our advisor training programs and digital delivery for our clients, as well as positive market conditions, helped us deliver strong revenue. Asset and management flows were $25 billion in the quarter.

Speaker Change: Wisely to grow our mid market team from 15 bankers in 2018 across a dozen cities to more than 200 bankers in twice as many cities today, both groups with our work with our commercial bankers and wealth management advisers know cities to deliver for our clients.

Speaker Change: Investment brokerage services revenue across Merrill and the private bank grew 11% year over year and quarter, one to nearly $3 $6 billion continued investments in our advisor training programs and digital delivery for our clients.

Speaker Change: As well as positive market helped us deliver strong revenue.

Speaker Change: Under management flows were $25 billion in the quarter.

Brian Thomas Moynihan: Sales and trading, excluding DVA, delivered its eighth consecutive quarter of year-over-year revenue improvement. We have allocated more balance sheet and invested in talent to build on our strengths over the last five years in this business. Those investments, plus the intensity of the teams under Jimmy DeMars' leadership, have resulted in good momentum and market share improvement. From the balance sheet perspective, we entered the quarter expecting modest moves in loan growth and a decline in deposits. Those were our expectations.

Speaker Change: Sales and trading excluding DVA delivered its eighth consecutive quarter of year over year revenue improvement at 5.2 billion. This is the highest first quarter result in over a decade.

We have allocated more balance sheet invested in talent to build on our strengths over the last five years in this business.

Speaker Change: Those investments plus intensity the teams under Jimmy Tomorrow. His leadership has resulted in good momentum and market share improvement.

Speaker Change: From a balance sheet perspective, we ended the quarter expecting modest lose in loan growth and a decline in deposits that were that was where our expectations. What we actually delivered was growth in any deposits up more than $20 billion ending loans were down modestly due to the expected credit card seasonality otherwise loans are pretty stable.

Brian Thomas Moynihan: What we actually delivered was growth in ending deposits of more than $20 billion, while ending loans were down modestly due to the expected credit card seasonality. Otherwise, loans are pretty stable. This fallacy performance, along with our continued pricing discipline, allowed us to deliver better than expected NII performance. We told you last quarter that we expected NII to decline from the fourth quarter of 2023 to the first quarter of 2024, a decline of about $100 to $200 million.

Speaker Change: This balance sheet performance.

Along with our continued pricing discipline allowed us to deliver better than expected at a high performance. We told you last quarter that we expect.

Speaker Change: <unk> and I did decline from the fourth quarter of 2023 to the first quarter of 2024, a decline of about 100 to 200 million.

Speaker Change: We actually reported today.

Brian Thomas Moynihan: We actually reported NII of $14.2 billion today. That was $100 million higher than quarter four, exceeding our guidance. We continued to deliver strong expense management. Year-over-year expenses adjusted for the FDIC assessment were up a little less than 2%.

Speaker Change: <unk>, a $14 $2 billion that was $100 million higher than quarter four exceeding our guidance. We continue to deliver strong expense management year over year expenses adjusted for the FDIC assessment was up.

A little less than 2%.

Brian Thomas Moynihan: That compares to 4% plus inflation. We also continue to invest in our company while managing those expenses. We had several categories of stronger fee-based revenue in the first quarter of this year. This drove higher formulaic compensation and processing costs due to the increased activity. Fees and commissions were up 10% year-over-year.

Speaker Change: That compares to a 4% plus inflation rate.

Speaker Change: We also continue to invest in our company, while managing those expenses, we had several categories of stronger fee based revenue in the first quarter. This year. This drove higher formulaic compensation and processing cost of the increased activity.

Speaker Change: Fees and commissions were up 10% year over year, we are happy to pay for that revenue and deliver mornings to the bottom line because of it.

Brian Thomas Moynihan: We are happy to pay for that revenue and deliver mornings to the bottom line because... So how do we do all that and hold expenses under the inflation rate? Well, we remain focused on three primary drivers at Bank of America. First, our operational excellence platform continues to deliver an improved process. These savings from that growth helped fund future growth in the company and lower the risk. Second, we managed headcount as we eliminated work.

Speaker Change: So how do we do all of that and hold expenses under the inflation rate. While we remain focused on three primary drivers of bank of America first our operational excellence platform continues to deliver and improve processes. These savings from that drove growth help fund our future growth in the company and lower the risk second we managed head count as we eliminate work we call it.

Brian Thomas Moynihan: Recall we noted in January of last year that our headcount would be down throughout the year. Our headcount at the end of the first quarter 2025 is down by more than 4,700 people from the first quarter 2023. It declined 650 people just from the end of 2024, uh, 2026. The digitization activity is also driving ongoing expense-cost savings, customer retention, and market share improvement, driving across all three factors. It also supports the ever-increasing volumes of client activity with little increased cost.

Speaker Change: We noted.

Speaker Change: And the expectation in January of last year that our head count would be down throughout the year, our head count at the end of first quarter 2024 is down by more than 4700 people from the first quarter 2023.

Speaker Change: 650 people just from the end of 2020 for 2023.

Speaker Change: The Digitization activity is also driving I'll go ongoing expense cost savings customer retention and market share improvement driving across all three factors.

Speaker Change: In sports the ever increasing volumes of client activity with little increase cost.

Brian Thomas Moynihan: I would highlight our continued capital strength with common equity tier one capital of $197 billion. That amount of capital is $31 billion over the current regulatory minimums for our company. That capital has allowed us to both support our clients and return $4.4 billion to shareholders this quarter in share repurchases and dividends. Let me highlight a few points on organic growth before I pass over to Alastair. Now I'm turning to slide three.

Speaker Change: I would highlight our continued capital strength with common equity tier one capital of $197 billion.

Speaker Change: That amount of capital is $31 billion over the current regulatory minimums for our company.

Speaker Change: That capital has allowed us to both support our clients and returned $4 $4 billion to shareholders this quarter and share repurchases and dividends.

Speaker Change: Me highlight a few points on our organic growth before I pass over to Alister.

Alister: Now I'm turning to slide three.

Brian Thomas Moynihan: You can see on slide three the highlights of the quarter one successful organic activity across. We continue to invest in and enhance our digital platform. We provide our customers with a convenient and secure banking experience. By leveraging our technology and continuous investment in that technology and putting customers at the center of everything we do, we have successfully deepened our relationships and expanded our customer base across all our businesses and consumer. We added 245,000 net new checking accounts this quarter.

Alister: You can see slide three the highlights of the quarter, one successful again active organic activity across the businesses.

Alister: We continue to invest and enhance our digital platforms, we provide our customers a convenient and secure banking experiences by levering.

Alister: By leveraging our technology and continuous investment in that technology and putting customers at the center of everything we do we have successfully deepened our relationships and expanded our customer base across all our businesses.

Alister: Yeah.

Alister: And consumer.

Alister: We added 245000 net new checking accounts. This quarter. This completes 21 straight quarters of net additions Dean Athanasia, Aron Aron Levine and Holly O'neill.

Brian Thomas Moynihan: This completes 21 straight quarters of net additions. Dean Anthony Najarian, Aron Levine, and Holly O'Neill helped drive that business for us and continue to perform well, driving strong performance across our consumer franchise. These checking balances continue to drive the performance of a consumer's deposits. These checking account conditions are important for many other reasons.

Alister: Help drive that business for us and it continues to perform well driving strong performance across our consumer franchise.

Alister: These checking balances continue to drive the performance of our consumer deposits. These checking additions are important for many other reasons on average 68% of our deposit balances have been with us for more than 10 years, 92% of the customer checking accounts are primary checking accounts and household.

Alister: And even after the core operating account for the household for their financial lives.

Alister: So when we onboard a client we started a long term valuable relationship about 60% of our checking accounts our customers use a debit card and on average they do about 400 transactions per year on that card.

Brian Thomas Moynihan: On average, 68% of our deposit balances have been with us for more than 10 years. 92% of the customer checking accounts are primary checking accounts in the house, meaning that they're the core operating account for the household in their financial lives. So when we onboard a client, we start a long-term, valuable relationship. About 60% of our checking accounts customers use a debit card, and on average, they do about 400 transactions per year on that card.

Alister: New checking accounts have traditionally open savings accounts about 25% of the time within a few months of opening that checking account.

Alister: At opening a new checking account on average things about $4000 in balances below our averages.

Alister: That continues to grow and buy within a year. It's two times that amount likewise, when we opened a new savings account on average brings about $7000 in balances. That's also deepens the by about two times during the year.

Brian Thomas Moynihan: The new checking accounts traditionally opened savings accounts about 25% of the time within a few months of opening that checking account. Opening a new checking account on average brings about $4,000 in balances below our average.

Alister: Investment relationships and credit card account openings continue to be strong in the first quarter as well.

Speaker Change: While we believe some of these statistics are best in class rest assured there are plenty opportunities for further growth in our franchise and our company.

Speaker Change: As we think about our global wealth team led by Eric Jim Lindsay Hans and Katy Knox.

Brian Thomas Moynihan: That continues to grow, and within a year, it's two times that amount. Likewise, when you open a new savings account, it brings in about $7,000 in balances on average. This also deepens the buy about two times during the year. Investment relationships and credit card account openings continue to be strong in the first quarter as well. And while we believe some of these statistics are best in class, rest assured, there are plenty of opportunities for further growth in our franchise and our company. As we think about our global wealth team, led by Eric Schimpp, Lindsay Hans, and Katie Knox, that team added 7,300 net new wealth relationships to the mayor's bank and the private bank.

Speaker Change: Team added 7300, net new wealth relationships to Merrill and the private bank or.

Speaker Change: Our advisors opened 29000, new bank accounts in a quarter, where their customers deepen their relationships.

Speaker Change: More than 60% of our investing clients in Merrill and 90% of our private banking clients now have a core banking relationship with us.

Speaker Change: In addition across our wealth spectrum, we saw $60 billion in total flows over the last year.

Speaker Change: As you can see on the slide we now manage more than five six trillion dollars in total client balances.

Speaker Change: Cross loans deposits investments and consumer and wealth management.

Speaker Change: We moved to global banking, we added more new relationships in this quarter than we did in last year's first quarter. We also increased the number of solutions per relationship with preexisting clients.

Speaker Change: Just like in our consumer business, we have seen good growth in customers seeking the benefits of both our physical and our online capabilities and our talent and also the Ah <unk>.

Brian Thomas Moynihan: Our advisors opened 29,000 new bank accounts in the quarter, with our customers deepening the relationship. More than 60% are investing clients at Merrill, and 90% of our private banking clients now have a core banking relationship. In addition, across our wealth spectrum, we saw $60 billion in total flows over the last. As you can see on the slide, we now manage more than $5.6 trillion in total client balances across loans, deposits, and investments in Consumer and Wealth Management.

Speaker Change: Care of our talented relationship managers, who can provide financing solutions and advice for our clients with global needs.

Speaker Change: A couple of other points I'd make on our digital success.

Speaker Change: Erica our virtual banking assistant reached a key milestone of more than 2 billion interactions since its introduction about six years ago.

Speaker Change: It took four years to reach 1 billion interactions. It took just 18 months to reach the second billion.

Speaker Change: In August we extended air because reach and launched Erica Global Treasury services business.

Brian Thomas Moynihan: We moved to global banking. We added more new relationships in this quarter than we did in last year's. We are also increasing the number of solutions per relationship with pre-existing clients. Just like in our consumer business, we have seen good growth in customers seeking the benefits of both our physical and our online capabilities and also the care of our talented relationship managers who provide financing solutions and advice for our clients with global needs.

Speaker Change: And cash flow.

Speaker Change: Erica is resolved 43% of the cash pro chat inquiries automated Lee.

Speaker Change: Demonstrating more and more clients are able to self solve this is a great example of best practices being shared across the scale of our company.

Speaker Change: Second as an example of our digital success Zelle continues to grow.

Speaker Change: It wasn't long ago that we noted that the number of zelle transactions.

Speaker Change: The quarter had surpassed the number of checks written shortly.

Brian Thomas Moynihan: A couple other points I'd make on our digital success. Erika, our virtual banking assistant. Key Milestone of More Than 2 Billion Interactions. This is a presentation about... ... ... ... ... ... ... .., took four years to reach one billion Iraq. It took just 18 months to reach the second.

Speaker Change: Shortly after that Zelle transactions reached two times the number of checks written.

Speaker Change: This quarter Zelle transactions has now passed the combined number of checks written plus the amount of cash for draws from a talent from tellers and from Ats that is a rapid adoption and represents continued cost savings and convenience and security for the customers.

Brian Thomas Moynihan: In August, we extended Erika's reach and launched Erika in our global treasury services business in Kashmir. As of today, Erika has resolved 43% of the cash pro chat inquiries automatically. Demonstrating that more and more clients are able to self-solve. This is a great example of best practices being shared across the scale of our company. Second, as an example of our digital success, Zelle continues to grow. It wasn't long ago that we noted that the number of Zelle transactions in a quarter had surpassed the number of checks written. Shortly after that, Zelle transactions reached two times the number of checks. This quarter, Zelle transactions have now passed the combined number of checks written plus the amount of cash withdrawals from tellers and from ATMs.

Speaker Change: These stats and others are included in our core and our quarterly academia for our digital banking progress.

Speaker Change: That's included in slides 20, and 22 and 24 I encourage you to read them. They show our market leading efforts representing billions of dollars of our investment over the years.

Speaker Change: We are continuing to drive growth with with expense growth under control.

Speaker Change: The solid earnings results achieved this quarter, a testament to the dedication and talent of our 212000 people.

Speaker Change: Who work here and deliver for our customers every day I. Thank them for another great quarter with that I'll turn it over to Alastair.

Alastair M. Borthwick: Thank you, Brian and I'm going to start on slide four of the earnings presentation.

So Brian covered much of the income statement highlights and he noted the difference in our reported results and the results adjusted for the FDIC assessment, so I'm not going to repeat that.

Brian Thomas Moynihan: That is a rapid adoption and represents continued cost savings and convenience and security for the customer. These stats and others are included in our quarterly econonymum for our digital banking progress. It's included in slides 20, 22, and 24. I encourage you to read them.

Alastair M. Borthwick: I'd just add that we delivered strong returns on a reported basis. Our return on average assets was 83 basis points and return on tangible common equity was 12, 7%.

Alastair M. Borthwick: When adjusted for the FDIC assessment, our efficiency ratio was 64% ROA at 89 basis points and our O T C E at 14%.

Brian Thomas Moynihan: They show our market-leading efforts, representing billions of dollars of our investment over the years, and we are continuing to drive growth with expense growth under control. These solid earnings results achieved this quarter are a testament to the dedication and talent of our 212,000 people who work here and deliver for our customers every day. I thank them for another great quarter.

Alastair M. Borthwick: So let's move to the balance sheet on slide five.

Alastair M. Borthwick: Where we ended the quarter at 3.2 dollars seven trillion of total assets up 94 billion from the fourth quarter and the bulk of that increase was in global markets to support seasonally elevated levels of client activity.

Alastair M. Borthwick: Outside of the global markets activity, we'd highlight both the 23 billion growth in deposits and the 20 billion decline in cash levels. So with that increase in liquidity. You'll also note that debt securities increased 13 9 billion.

Alastair M. Borthwick: Thank you, Brian, and I'm going to start on slide four of the earnings presentation. So Brian covered most of the income statement highlights, and he noted the difference in our reported results and the results adjusted for the FDIC assessment. So I'm not going to repeat that.

Alastair M. Borthwick: Which included an $8 billion decline in hold to maturity securities and a $47 billion increase in F. S Securities.

Alastair M. Borthwick: I'd just add that we delivered strong returns on a reported basis. Our return on average assets was 83 basis points, and Return on Tangible Common Equity was 12.7%. And when adjusted for the FDIC assessment, our efficiency ratio was 64%, ROA at 89 basis points, and ROTCE at 14%. So let's move to the balance sheet on slide five, where we ended the quarter at $3.27 trillion in total assets, up $94 billion from the fourth quarter.

Alastair M. Borthwick: And those are mostly hedged U S treasuries added with yields effectively a cash rates.

Alastair M. Borthwick: At 313 billion, our absolute cash levels remain higher than required.

Alastair M. Borthwick: Liquidity remains strong with 909 billion of global liquidity sources, and that's up 12 billion from the fourth quarter and remains 333 billion above our pre pandemic fourthquarter 19 level.

Alastair M. Borthwick: Shareholders' equity increased 1.9 billion from the fourth quarter earnings as they were only partially offset by capital distributed to shareholders.

Alastair M. Borthwick: A OCI was little changed in the quarter.

Alastair M. Borthwick: And the bulk of that increase was in global markets to support seasonally elevated levels of client activity. Outside of the global markets activity, we'd highlight both the $23 billion growth in deposits and the $20 billion decline in cash levels. So with that increase in liquidity, you'll also note that debt securities increased $39 billion, which included an $8 billion decline in hold-to-maturity securities and a $47 billion increase in AFS securities, which are mostly hedged U.S. treasuries added with yields effectively at cash rates.

Alastair M. Borthwick: During the quarter, we paid out 1.9 billion in common dividends and we bought back $2 5 billion in shares which more than offset our employee awards.

Alastair M. Borthwick: Part of those share awards in the first quarter, we announced our seventh consecutive year of sharing success compensation awards covering more than 95% of our associates and further aligning their interests with shareholders.

Alastair M. Borthwick: Tangible book value per share of $24.79 is up 9% year over year.

Alastair M. Borthwick: Looking at regulatory capital, our CET, one level and improved.

Alastair M. Borthwick: Improved to one point, sorry, 197 billion from December.

Alastair M. Borthwick: At $313 billion, our absolute cash levels remain higher than required. Liquidity remains strong with $909 billion of global liquidity sources, and that's up $12 billion from the fourth quarter and remains $333 billion above our pre-pandemic fourth quarter 2019 level. Shareholders' equity increased $1.9 billion from the fourth-quarter earnings as it was only partially offset by capital distributed to shareholders, and AOCI was little changed in the court.

Alastair M. Borthwick: 31st and our CET one ratio was stable at 11, 8% and remained well above our current 10% requirement.

Alastair M. Borthwick: We also remain quite well positioned against the current proposed capital rules.

Alastair M. Borthwick: As our CET one level is also above the 10% requirement even when we include estimated R. W. A inflation from those new proposed rules.

Alastair M. Borthwick: Risk weighted assets increased modestly driven by client activity in global markets.

Alastair M. Borthwick: Our supplemental leverage ratio was 6% compared to a minimum requirement of 5%, which leaves capacity for balance sheet growth.

Alastair M. Borthwick: During the quarter, we paid out $1.9 billion in common dividends, and we bought back $2.5 billion in shares, which more than offset our employee award. As part of those share awards in the first quarter, we announced our seventh consecutive year of share success compensation awards, covering more than 95% of our associates and further aligning their interests with shareholders. Tangible book value per share of $24.79 is up 9% year over year. Looking at regulatory capital, our CET-1 level improved to $197 billion from December 31st, and the CET-1 ratio was stable at 11.8% and remained well above our current 10% requirement.

Alastair M. Borthwick: And at 475 billion of total loss absorbing capital R. T Lac ratio remains comfortably above our requirements.

Alastair M. Borthwick: So, let's turn to our balance sheet focus to loans by looking at the average balances on slide six.

Alastair M. Borthwick: Average loans in the first quarter of 1.048 trillion were flat compared to the fourth quarter and they improved 1% year over year, a solid credit card growth was partially offset by declines in securities based lending.

Commercial loans grew modestly year over year.

Alastair M. Borthwick: We experienced modest improvement in revolver utilization in commercial lending in the first quarter and that's being offset for the most part by Paydowns as larger client financing solutions are being met through capital markets access.

Alastair M. Borthwick: And lastly on a positive note loan spreads continued to widen.

Moving to deposits will stay focused on averages on slide seven and relative to pre pandemic Q4 2019.

Alastair M. Borthwick: We also remain quite well positioned against the current proposed capital rolls, as our CET-1 level is also above the 10% requirement, even when we include estimated RWA inflation from those new proposed. Risk-weighted assets increased modestly driven by client activity in global markets, and our supplemental leverage ratio was 6%, compared to a minimum requirement of 5% which leaves capacity for balance sheet growth. At $475 billion of total loss-absorbing capital, our TLAC ratio remains comfortably above our requirements.

Alastair M. Borthwick: Average deposits are still up 35%.

Alastair M. Borthwick: Every line of business remains well above their pre pandemic levels and consumer is up 32% with checking up 38% driven by net new checking accounts added as Brian noted earlier.

Alastair M. Borthwick: Linked quarter total average deposits remained steady at more than 1.9 trillion.

Alastair M. Borthwick: The total rate paid on consumer deposits in the quarter was 55 basis points, while the rate increased nine basis points from the fourth quarter. The pace of increases continues to slow.

Alastair M. Borthwick: Mix of low rates and high quality transactional accounts keeps the rate paid law.

Alastair M. Borthwick: So let's turn our balance sheet focus to loans by looking at the average balances on slide six. Average loans in the first quarter of $1.048 trillion were flat compared to the fourth quarter, and they improved 1% year over year, solid credit card growth, partially offset by declines in securities-based lending.

Alastair M. Borthwick: Wealth management and global banking also saw a slowdown in the increases in their rate paid.

And slowdown in the rotation out of non interest bearing accounts in the first quarter.

Alastair M. Borthwick: Focusing for a moment on ending deposits and movement from the fourth quarter. This quarter, we delivered good deposit growth.

Alastair M. Borthwick: Total deposits grew 23 billion and they're now 100 billion above their trough in mid may of 2023.

Alastair M. Borthwick: Commercial loans grew modestly. We experienced modest improvement in revolver utilization and commercial lending in the first quarter, and that's being offset for the most part by paydowns as larger client financing solutions are being met through capital markets access. And lastly, on a positive note, loan spreads continued to widen. Moving to deposits, we'll stay focused on averages on slide seven, and relative to pre-pandemic Q4 2019, average deposits are still up 35%. Every line of business remains well above its pre-pandemic levels, and Consumer is up 32% with checking up 38% driven by net new checking accounts added, as Brian noted earlier. Linked quarter total average deposits remain steady at more than 1.9 trillion.

Alastair M. Borthwick: Consumer banking deposits saw growth in both consumer interest bearing and noninterest bearing.

Alastair M. Borthwick: Global banking continued their more normal pattern up deposits seen for the past five quarters and up more than $30 billion over the last year.

Alastair M. Borthwick: Yeah.

Alastair M. Borthwick: Deposit growth exceeded loan growth for the third straight quarter, and our excess of deposits over loans expanded to 897 billion and that's nearly two times. The 450 billion. We had pre pandemic you can see that on the upper left hand side of slide eight.

Alastair M. Borthwick: We continue to have a mix of cash available for sale securities and held to maturity securities and this quarter, our combination of cash and F. S is now 52% of the total 1.2 trillion noted on this page.

You'll also notice the continued change in mix of the shorter term portfolio as we again lower cash.

Alastair M. Borthwick: The total rate paid on consumer deposits in the quarter was 55 basis points, and while the rate increased nine basis points from the fourth quarter, the pace of increases continues to slow. The mix of low-rate and high-quality transactional accounts keeps the rate paid low.

Alastair M. Borthwick: An increase F. S securities that are mostly hedged and if similar yields to the cash.

Alastair M. Borthwick: Note also the whole to maturity book continues to decline from Paydowns.

Alastair M. Borthwick: In total the hold to maturity book is now down 19 6 billion from its peak and it consists of about $122 billion in treasuries and about 458 billion in mortgage backed securities along with $7 billion of other securities law.

Alastair M. Borthwick: Wealth Management and Global Banking also saw a slowdown in the increases in their rates paid and a slowdown in the rotation out of non-interest bearing accounts in the first quarter. Focusing for a moment on ending deposits and movement from the fourth quarter, this quarter, we delivered good deposit growth. Total deposits grew $23 billion, and they're now $100 billion above their trough in mid-May of 2023. Consumer banking deposits saw growth in both consumer interest-bearing and non-interest-bearing.

Alastair M. Borthwick: Lastly, our blended cash and securities yield of 360 basis points continued to rise and remained about 168 basis points above the rate we pay for deposits.

The replacement of lower earning assets into higher yielding assets continues to provide an ongoing benefit to NII.

Speaker Change: Let's turn our focus to NII performance using slide nine where you can see on a fully tax equivalent basis NII was 14.2 billion.

Alastair M. Borthwick: Global banking continued its more normal pattern of deposits, seen for the past five quarters and up more than $30 billion over the last year. Deposit growth exceeded loan growth for the third straight quarter, and our excess of deposits over loans expanded to $897 billion, and that's nearly two times the 450 billion we had pre-pandemic. You can see that on the upper left side of slide eight.

Speaker Change: Good deposit growth provided a strong start to the year for NII.

Speaker Change: Ryan noted NII of $14 2 billion increased by 100 million from the fourth quarter.

Speaker Change: Now that compares to our expectation and guidance of a decline of $100 million to $200 million and that would have resulted in NII. This quarter of 13.9 or 14 billion.

Speaker Change: So we did quite a bit better than we had originally expected.

Alastair M. Borthwick: We continue to have a mix of cash available for sale securities and held to maturity securities. And this quarter, our combination of cash and AFS is now 52% of the total $1.2 trillion noted on this page. You'll also notice the continued change in mix of the shorter-term portfolio as we again lower cash and increase AFS Securities that are mostly hedged and have similar yields to the cash. Note also that the Hold to Maturity book continues to decline from paydowns.

The improvement in quarterly NII in Q1 compared to Q4 included the benefits of higher yielding assets.

Speaker Change: And improvement in global markets, NII, partially offset by higher deposit costs and one less day in Q1 than Q4, 'twenty three deposit balance activity more generally also aided in the beat versus our expectations.

As we look forward for Q2, we expect some modest impact of lower deposits in wealth management as clients make their seasonal income tax payments and we expect global markets NII to decline, mostly seasonally a little bit as well.

Alastair M. Borthwick: In total, the Hold to Maturity book is now down $96 billion from its peak, and it consists of about $122 billion in treasuries and about $458 billion in mortgage-backed securities, along with $7 billion of other securities.

Speaker Change: So we expect second quarter NII could approach 14 billion on an FTE basis.

Alastair M. Borthwick: Lastly, the blended cash and securities yield of 360 basis points continued to rise and remained about 168 basis points above the rate we pay for deposits. The replacement of lower earning assets with higher yielding assets continues to provide an ongoing benefit to NII. Let's turn our focus to NII performance using slide 9, where you can see that on a fully tax-equivalent basis, NII was $14.2 billion. Good deposit growth provided a strong start to the year for NII.

Speaker Change: And further we continue to expect the Q2 will be the low point for NII and we expect the back half of 2020 for it to grow.

And compared to our guidance last quarter, we're obviously growing off a larger base of and I I after having outperformed in the first quarter.

Speaker Change: With regard to that forward view, let me just note a few other caveats. It includes our assumption that interest rates and the forward curve at the end of the quarter materialize.

Alastair M. Borthwick: And as Brian noted, NII of $14.2 billion increased by $100 million from the fourth quarter. Now that compares to our expectation and guidance of a decline of $100 to $200 million, and that would have resulted in NII this quarter of $13.9 or $14 billion. So we did quite a bit better than we had originally expected.

Speaker Change: And at the end of the first quarter. There was still three cuts expected this year starting in June.

Speaker Change: Our forward view also includes an expectation of low single digit loan growth and some moderate growth in deposits as we move into the back half of 2024 and.

Speaker Change: And given our recent deposit and loan performance, we continue to feel good about these assumptions.

Speaker Change: Turning to asset sensitivity and focused on a forward yield curve basis, our sensitivity to the plus and minus 100 basis point parallel shifts and the forward curve at March 31st remains well balanced.

Alastair M. Borthwick: The improvement in quarterly NII in Q1 compared to Q4 included the benefits of higher yielding assets and the improvement in Global Markets NII, partially offset by higher deposit costs and one less day in Q1 than Q4-23. Deposit balance activity more generally also aided in the beat versus our expectations. As we look forward for Q2, we expect some modest impact of lower deposits in wealth management as clients make their seasonal income tax payments, and we expect global markets NII to decline seasonally a little bit as well. So we expect second quarter NII could approach $14 billion on an FTE basis.

Speaker Change: Okay, let's turn to expense and will use slide 10 for that discussion.

Speaker Change: We reported 17.2 billion expense this quarter, including the FDIC assessment.

Speaker Change: Adjusted for the assessment expenses were $16 5 billion and the increase over the fourth quarter included a little more than 400 million and seasonal payroll tax expense as well as higher revenue related costs and to a lesser extent annual merit increases and other annual awards like.

Alastair M. Borthwick: And further, we continue to expect that Q2 will be the low point for NII, and we expect the back half of 2024 to grow. And compared to our guidance last quarter, we're obviously growing off a larger base of NII after having outperformed in the first quarter. With regard to that forward view, let me just note a few other caveats. It includes our assumption that interest rates in the forward curve at the end of the quarter materialize. And at the end of the first quarter, there were still three cuts expected this year, starting in June.

Speaker Change: <unk> success awards provided this quarter.

Speaker Change: The $16 5 billion. It was just a little above our forecast for Q1, which we made last quarter and the increase is driven by better than expected fee revenue across wealth management investment banking and sales and trading and.

Speaker Change: And as Brian said, that's a tradeoff, we're more than happy to make bringing more earnings to the bottom line.

Speaker Change: <unk> expenses up almost 2% from last year, we simply remind you inflation is up by more than 4% and we've increased our investment and we're paying for the revenue growth. So we think it represents good work by our teams.

Speaker Change: As we look forward in Q2, we expect a decline from the Q1 level as we typically see about two thirds of the Q1 elevated payroll tax expense come back out.

Alastair M. Borthwick: Our forward view also includes an expectation of low single-digit loan growth and some moderate growth in deposits as we move into the back half of 2024. And given our recent deposit and loan performance, we continue to feel good about these assumptions. Turning to asset sensitivity and focused on a forward yield curve basis, our sensitivity to the plus and minus 100 basis point parallel shifts in the forward curve at March 31st remains well balanced.

Speaker Change: And the remainder of the year expenses expected to trend down.

Speaker Change: Continued digital engagement savings and operational excellence initiatives should help us offset other cost increases for people and technology through the back half of the year.

Speaker Change: Turning to credit on slide 11 provision.

Speaker Change: Provision expense was one 3 billion in the first quarter and that included $179 million of reserve release due to a most are modestly improved macro environmental outlook as the baseline consensus expectations improved from the fourth quarter.

Alastair M. Borthwick: Okay, let's turn to expense, and we'll use slide 10 for that discussion, where we reported $17.2 billion in expenses this quarter, including the FDIC assessment. Adjusted for the assessment, expenses were $16.5 billion, and the increase over the fourth quarter included a little more than $400 million in seasonal payroll tax expense, as well as higher revenue-related costs, and to a lesser extent, annual merit increases and other annual awards like Sharing Success Awards provided this quarter.

Speaker Change: On a weighted basis, we remain reserved for an unemployment rate of nearly 5% by the end of 2025.

Speaker Change: Compared to the most recent actual three 8% rate.

Speaker Change: Net charge offs of $1 5 billion increased 306 million from the fourth quarter driven by continued credit card seasoning.

Speaker Change: And commercial real estate office exposures as Swift revaluations from current appraisals and resolutions drove higher charge offs.

Speaker Change: The net charge off ratio was 58 basis points 13 basis point increase from the fourth quarter.

Alastair M. Borthwick: $16.5 billion was just a little above our forecast for Q1, which we made last quarter, and the increase is driven by better-than-expected fee revenue across wealth management, investment banking, and sales and trading. And as Brian said, that's a tradeoff we're more than happy to make, bringing more earnings to the bottom line. And while expense is up almost 2% from last year, we simply remind you inflation is up by more than 4%, and we've increased our investment, and we're paying for the revenue growth. So we think it represents good work by our team.

Speaker Change: On Slide 12, we show you the credit quality metrics for both our consumer and commercial portfolios.

Speaker Change: Consumer net charge offs increased 150 minute 15 million versus the fourth quarter from the flow through of higher late stage credit card delinquencies.

Speaker Change: We included a credit card delinquency slide number 28 in our appendix.

Speaker Change: And we're encouraged by the trend of delinquencies because of the late stage increase has slowed and early stage delinquencies improved as well and that leads us to believe we should begin to see consumer net charge offs start to level out over the next quarter or so.

Alastair M. Borthwick: As we look forward to Q2, we expect a decline from the Q1 level, as we typically see about two-thirds of the Q1 elevated payroll tax expense come back out. And for the remainder of the year, expense is expected to trend down. Continued digital engagement savings and operational excellence initiatives should help us offset other cost increases for people and technology through the back half. Turning to credit on slide 11, provision expense was $1.3 billion in the first quarter, and that included $179 million of reserve release due to a modestly improved macro-environmental outlook as the baseline consensus expectations improved from the fourth quarter. On a weighted basis, we remain reserved for an unemployment rate of nearly 5% by the end of 2025, compared to the most recent actual rate of 3.8%.

Speaker Change: All of this is still well within our risk appetite and our expectations and it's consistent with the normalization of credit we've discussed with you in prior calls.

Speaker Change: Commercial net charge offs increased 191 million versus the fourth quarter, driven by commercial real estate losses and office exposures.

Speaker Change: On office losses. This quarter, we recorded charge offs on 16 office loans.

Speaker Change: Four were result of sales activity I E final resolution.

Speaker Change: Seven were from losses that we expect unexposed yours that are in the process of expected resolution in the course of the next 90 days and the rest we took as a result of refreshed evaluations.

Speaker Change: We're using our continuous and thorough loan by loan analysis, and we're quick to recognize impacts in the commercial real estate office space through our risk ratings and that's resulted in several downgrades in the last few quarters.

Speaker Change: As a result of these quick actions and are downgrades and categorization. We've also refreshed the valuation of our resorbable criticized properties and we've taken appropriate reserves and charge offs in the process.

Alastair M. Borthwick: Net charge-offs of $1.5 billion increased $306 million from the fourth quarter, driven by continued credit card seasoning and commercial real estate office exposures, as swift revaluations from current appraisals and resolutions drove higher charge-offs. The net charge-off ratio is 58 basis points, a 13 basis point increase from the fourth quarter. On slide 12, we show you the credit quality metrics for both our consumer and commercial portfolios. Consumer net charge-offs increased to $115 million versus the fourth quarter due to the flow-through of higher late-stage credit card delinquency. We included a credit card delinquency slide number 28 in our appendix.

Speaker Change: Roughly one third of our office exposure is now categorized as resolvable criticized and importantly, the pace of the increase in reserve criticized exposures has slowed each quarter since the second quarter of last year.

Speaker Change: So we believe the losses on these office properties have been Frontloaded and largely reserved we.

Speaker Change: We expect the losses to move lower in the second quarter.

Speaker Change: We expect a notable decline in the second half of the year when compared to the first half of this year absent any material change in expected real estate prices.

Speaker Change: In the appendix on Slide 29, we've included a current view of our commercial real estate and office portfolio metrics as we usually do.

Alastair M. Borthwick: And we're encouraged by the trend of delinquencies because the late-stage increases slowed and early-stage delinquencies improved as well. That leads us to believe we should begin to see consumer net charge-offs start to level out over the next quarter or so. All of this is still well within our risk appetite and our expectations, and it's consistent with the normalization of credit we've discussed with you in prior calls. Commercial net charge-offs increased to $191 million versus the fourth quarter, driven by commercial real estate losses and office exposure. On office losses this quarter, we recorded charge-offs on 16 office loans.

Speaker Change: Yeah.

Speaker Change: Okay, let's turn to the various lines of business and offer some brief comments on their results starting on slide 13 with consumer banking.

Speaker Change: For the quarter consumer banking earned $2 7 billion on continued strong organic growth.

Speaker Change: Our reported earnings declined 15% year over year as revenue declines from lower deposit balances compared to the first quarter of 'twenty three.

Speaker Change: Credit card loss normalization also caused year over year provision expense to increase.

Speaker Change: As Brian noted customer activity showed another strong quarter of net new checking growth.

Speaker Change: Other strong period of card openings and investment balances for consumer clients, which climbed 29% year over year to a record 456 billion.

Alastair M. Borthwick: Four were a result of sales activity, i.e., final resolution. Seven were from losses that we expect on exposures that are in the process of expected resolution in the course of the next 90 days, and the rest were taken as a result of refreshed valuation. We're using a continuous and thorough loan-by-loan analysis, and we're quick to recognize impacts in the commercial real estate office space through our risk rate, which has resulted in several downgrades in the last few quarters.

Speaker Change: That included market appreciation.

Speaker Change: Also very strong full year flows of 44 billion.

Speaker Change: As noted earlier loans grew nicely year over year from credit card as well as small business, where we remain the industry leader.

Speaker Change: Expenses were flat year over year fighting off inflation.

Speaker Change: Increases higher minimum wages.

Speaker Change: And new and renovated financial centers and technology investments, so holding expense flat reflected very good work by the consumer team.

Alastair M. Borthwick: As a result of these quick actions and our downgrades in categorization, we've also refreshed the valuation of our reservable criticized property, and we've taken appropriate reserves and charge-offs in the process. Roughly one-third of our office exposure is now categorized as reservable-criticized. And importantly, the pace of the increase in reservable-criticized exposures has slowed each quarter since the second quarter of last year.

Speaker Change: As you can see on the appendix page 20, digital adoption and engagement continued to improve reaching a record of 3.4 billion digital logins in the quarter and it showed good year over year improvement.

Speaker Change: Customer satisfaction scores at near record levels illustrate the continued appreciation of the enhanced capabilities we provide.

Speaker Change: Moving to wealth management on Slide 14, we produced good results and that included good organic client activity market favorability and strong flows.

Alastair M. Borthwick: So, we believe the losses on these office properties have been front-loaded and largely reserved. We expect the losses to move lower in the second quarter, and we expect a notable decline in the second half of the year when compared to the first half of this year, absent any material change in expected real estate prices. In the appendix on slide 29, we've included a current view of our commercial real estate and office portfolio metrics, as we usually do. Okay, let's turn to the various lines of business and offer some brief comments on their results, starting on slide 13 with Consumer Banking. For the quarter, consumer banking earned $2.7 billion on continued strong organic growth.

Speaker Change: Our comprehensive suite of investment and advisory services, coupled with our commitment to personalized wealth management planning and solutions.

Speaker Change: Has enabled us to meet the diverse needs and aspirations of our clients in the first quarter, we reported record revenue of $5 6 billion and a little more than $1 billion in net income.

Speaker Change: That net income rose, 10% from the first quarter of 'twenty three.

Speaker Change: The business generated positive operating leverage and grew revenue faster than expense, while improving the pre tax margin year over year.

Speaker Change: While overall average loans were down year over year, driven by the securities based lending it's worth noting the strong growth, we're seeing and custom lending and ending loans in the wealth management customer loan book are up 6% year over year.

Speaker Change: As Brian noted earlier, both Merrill and the private bank continued to see strong organic growth and produce good assets under management flows of more than 60 billion since the first quarter of 'twenty, three which reflects a good mix of new client money as well as existing clients putting money to work.

Alastair M. Borthwick: The reported earnings declined 15% year-over-year, as revenue declined from lower deposit balances compared to the first quarter of 2023. Credit card loss normalization also caused year-over-year provision expenses. As Brian noted, customer activity showed another strong quarter of net new check-in growth, another strong period of card openings, and investment balances for consumer clients, which climbed 29% year-over-year to a record $456 billion, that included market appreciation and also very strong four-year flows of $44 billion.

Expense growth here Baxter, Robyn you growth, otherwise fighting off higher investment costs and inflation.

Speaker Change: Let me also highlight the continued digital momentum here as an example, merrell has 86% of its clients that are engaging with us digitally and 80% utilizing E delivery, 76% of their eligible accounts opened digitally so the cost for us to open as half and the customer.

Speaker Change: Cycle times are improved greatly.

Speaker Change: On Slide 15, you see global banking results.

Alastair M. Borthwick: As noted earlier, loans grew nicely year over year from credit cards as well as small business, where we remain the industry leader. Expenses were flat year-over-year, fighting off inflation, merit increases, higher minimum wages, and new and renovated financial centers and technology investments.

Speaker Change: And the business produced earnings of just less than 2 billion down 22% year over year as improved investment banking fees and Treasury services revenue were overcome by lower net interest income and higher provision expense.

Speaker Change: Revenue declined 4% driven by the impact of interest rates and deposit rotation to interest bearing and that impacted NII.

Alastair M. Borthwick: So holding expense flat reflected very good work by the consumer team. As you can see in the appendix, page 20, digital adoption and engagement continue to improve, reaching a record of 3.4 billion digital logins in the quarter, and it showed good year-over-year improvement. Customer satisfaction scores at near record levels illustrate the continued appreciation of the enhanced capabilities we provide.

Speaker Change: The diversification of our revenue across products and regions continues to reflect the strength of this platform and G. T S and investment banking fees are good examples.

Speaker Change: And our global Treasury services business some of the NII pressure from higher rates on deposits is offset by the fees paid for moving and managing the cache of clients and that continues to grow with existing clients as well as with new client generation.

Alastair M. Borthwick: Moving to Wealth Management, on slide 14, we produced good results that included good organic client activity, market favorability, and strong flows. Our comprehensive suite of investment and advisory services, coupled with a commitment to personalized wealth management planning and solutions, has enabled us to meet the diverse needs and aspirations of our clients. In the first quarter, we reported record revenue of $5.6 billion and a little more than $1 billion in net income.

Speaker Change: As Brian noted investment banking had a strong quarter.

Speaker Change: And at 1.6 billion in investment banking fees. This quarter was the strongest quarter in seven years.

Speaker Change: Absent the pandemic 2020 in 2021 periods.

Speaker Change: An increase in provision expense included the commercial real estate net charge offs I discussed earlier as well as a larger reserve release in the prior year period.

Speaker Change: Expense increased 2% year over year, including the 35% lift in investment banking fees from the first quarter of 'twenty three.

Speaker Change: Switching to global markets on slide 16.

Speaker Change: We'll focus our comments on results excluding DVA as we normally do.

Alastair M. Borthwick: That net income rose 10% from the first quarter of 2020. The business generated positive operating leverage and grew revenue faster than expenses while improving its pre-tax margin year over year. While overall average loans were down year over year driven by securities-based lending, it's worth noting the strong growth we're seeing in custom lending, and ending loans in the Wealth Management Custom Loan Book are up 6% year over year. As Brian noted earlier, both Merrill and the private bank continue to see strong organic growth and produce good assets under management flows of more than $60 billion since the first quarter of 2023, which reflects a good mix of new client money as well as existing clients putting money to work.

Speaker Change: The team had another terrific quarter with $1 8 billion and earnings growing 7% year over year.

Speaker Change: Revenue improved 6% from the first quarter of 'twenty, three and return on average allocated capital was 16%.

Speaker Change: Focusing on sales and trading ex DVA revenue improved 2% year over year to $5 2 billion, which is the highest first quarter result in over a decade.

FIC was down 4%, while equities increased 15% compared to the first quarter of 'twenty three.

Speaker Change: And the decline in the FIC revenues versus the first quarter was driven by a weaker macro trading quarter that was partially offset by better mortgage trading results.

Speaker Change: Equities was driven by strong trading results in derivatives.

Alastair M. Borthwick: Expense growth here matched the revenue growth, otherwise fighting off higher investment costs and inflation. Let me also highlight the continued digital momentum here. As an example, Merrill has 86% of its clients now engaging with us digitally, and 80% utilize eDelivery.

Speaker Change: And year over year expenses were up 4% on continued investment in the business.

Speaker Change: Finally on slide 17.

Speaker Change: All other shows a loss of $700 million driven by the FDIC assessment.

Speaker Change: Revenue declined year over year, reflecting higher investment tax credit deals.

Speaker Change: And expense adjusted for the FDIC assessment was down $113 million driven by lower unemployment processing costs are.

Alastair M. Borthwick: 76% of their eligible accounts are now open digitally. So the cost for us to open an account is half, and the customer cycle times are improved greatly. On slide 15, you see global banking results, and the business produced earnings of just less than $2 billion, down 22% year-over-year, as improved investment banking fees and Treasury services revenue were overcome by lower net interest income and higher provision expenses. Revenue declined 4% driven by the impact of interest rates and deposit rotation to interest-bearing, and that impacted NII.

Speaker Change: Our effective tax rate for the quarter was 8%.

Speaker Change: Excluding the FDIC assessment and other discrete items it would have been 9%.

Speaker Change: And further excluding tax credits related to investments in renewable energy and affordable housing our effective tax rate would have been 26%.

Speaker Change: And with that we'll jump into Q&A.

Speaker Change: At this time, if you would like to ask a question. Please press star one now on your telephone keypad to withdraw yourself from the queue you May press the pound key.

Alastair M. Borthwick: The diversification of our revenue across products and regions continues to reflect the strength of this platform, and GTS and investment banking fees are good examples. In our global treasury services business, some of the NII pressure from higher rates on deposits is offset by the fees paid for moving and managing the cash of clients. And that continues to grow with existing clients as well as with new client generations. As Brian noted, investment banking had a strong quarter, and at $1.6 billion in investment banking fees, this quarter was the strongest quarter in seven years, absent the pandemics of 2020 and 2021.

Speaker Change: We will take our first question from Stephen <unk> of Wolfe Research.

Stephen: Hey, good morning.

Stephen: Good morning, Steven.

Stephen: So maybe just to start off with a question on capital management, just given the strength of your excess capital position I mean, it will be still some uncertainty around Basel, III and game and where the proposal could ultimately shake out I was hoping you could just speak to where you're comfortable running on CET one.

And when can we expect that Youll return to 100% plus type payout.

Stephen: I think you should expect that we'll run a cushion.

Whatever rules come out and when they come out and get clarity, we'll expect to run the requirements plus 50 basis points up to 100 basis points of excess.

Alastair M. Borthwick: An increase in provision expense included the commercial real estate net charge-offs I discussed earlier, as well as a larger reserve release in the prior year period. Expenses increased 2% year-over-year, including a 35% lift in investment banking fees from the first quarter of 2020.

Stephen: Above that will be either used to continue to grow the company if needed not it'll be returned and so.

Stephen: Just as all of US are waiting for the Finalization of these rules right now we're sitting on 30 billion under the old rules, we have enough under the new rules as.

Alastair M. Borthwick: Switching to global markets, on slide 16. We'll focus our comments on results excluding DVAs, as we normally do. The team had another terrific quarter with $1.8 billion in earnings, growing 7% year-over-year. Revenue improved 6% from the first quarter of 2023, and return on average allocated capital was 16%. Focusing on sales and trading, XDVA revenue improved 2% year-over-year to $5.2 billion, which is the highest first quarter result in over a decade. Thick was down 4%, while equities increased 15% compared to the first quarter of 2013.

Sleep oppose but obviously, they're talking about changing them. So you should expect clarity on that what you would also expect is as we think about it.

Stephen: Beginning now you're basically at the point, where you're sitting on the capital, they're very modest need to build a cushion to the to the rules as proposed.

Stephen: The changes will be more favorable that I assume.

Stephen: So expect us to continue to return capital.

Stephen: Fairly strong rate.

Stephen: As we move through the second quarter and beyond and the rules become clarified.

Stephen: Yeah.

Stephen: Great color, Brian and for my follow up just on the NII commentary Alastair it sounds like you're still assuming some modest deposit growth in the back half as part of that NII trajectory of that recovery off the trough into Q2.

Alastair M. Borthwick: The decline in FIC revenues versus the first quarter was driven by a weaker macro trading quarter that was partially offset by better mortgage trading results. Equities was driven by strong trading results in derivatives, and year-over-year expenses were up 4% on continued investment in the business. Finally, and on slide 17, all other slides show a loss of $700 million, driven by the FDIC assessment. Revenue declined year over year, reflecting higher investment tax credit deals.

Stephen: Giving you a deposit balances increased 500 billion since Covid I know some of that is going to be a function of share gains, but as we prepare for some Q T driven outflows. How are you handicapping the risk of deposit attrition and how does that impact your NII guidance. If you can frame any sort of sensitivity recognizing many of those 10.

Stephen: To be hot money or higher cost deposits.

Yeah. So first I would just say Stephen as we we've been up against Cuttino for the last couple of years.

So the deposits are beginning to settle in the.

Alastair M. Borthwick: An expense adjusted for the FDIC assessment was down $113 million, driven by lower unemployment processing costs. Our effective tax rate for the quarter was 8%, and excluding the FDIC assessment and other discrete items, it would have been 9%, and further excluding tax credits related to investments in renewable energy and affordable housing, our effective tax rate would have been 26%. Thank you. And with that, we'll jump into Q&A. At this time, if you would like to ask a question, please press star 1 now on your telephone keypad. To withdraw yourself from the queue, you may press the pound.

Stephen: And if we were to go back to if you take for example, consumer.

Stephen: If you were to go back to pre pandemic can think about what long term sustainable growth rates look like for consumer.

Stephen: If you just extended that through from the fourth quarter of 2019 to today.

Stephen: Given that the economy is 30% larger.

Stephen: We kind of feel like consumer is approaching that floor.

Stephen: So we're still a miss our belief that Q2 is gonna be Q3 may be the turning point for consumer you can see that slowing though.

Stephen: The rest of our business. If you look at the exhibit we put together on deposits. If you look at the bottom left chart on wealth, you'll see it slowed and grew this quarter.

Stephen: In global banking and on the right hand side of that page.

Stephen: They're kind of back to pre pandemic growth rates, they're up 7% year over year. So we're seeing some structure now in the deposit base.

Operator: We'll take our first question from Steven Chubak of Wolf Research. Hey, good morning. Morning, Steven.

Stephen: Even with Q T over the course of the past year, our deposits are up 100 billion.

Steven Joseph Chubak: So maybe just to start off with a question on capital management, just given the strength of your excess capital position but admittedly still some uncertainty around the Basel III endgame and where the proposal could ultimately shake out, I was hoping you could just speak to where you're comfortable running on CET1 and when we can expect that you'll return to 100% plus type payouts. I think you should expect that we're on a cushion. Whatever rules come out, and when they come out and get clarity, we'll expect to run the requirements plus, you know, 50 basis points up to 100 basis points of excess.

Stephen: So it has been a point of conviction of ours that as we get towards Q2, we should see the consumer side begin to stabilize that's what's driving our conviction that NII will go up in Q3 and Q4, we're in that transition period right now.

Stephen: Yeah.

Speaker Change: Great color. Thanks, so much for taking my questions.

Speaker Change: We'll take our next question from Mike Mayo of Wells Fargo.

Speaker Change: Hi.

Michael Lawrence Mayo: Well, thanks for the the outlook for NII in consumer charge offs, but once again I'll go back to efficiency.

Michael Lawrence Mayo: And you highlight the.

Michael Lawrence Mayo: The 2 billion Erika interactions last though in the last 18 months you mentioned zelle.

Steven Joseph Chubak: And anything above that will be either used to continue to grow the company, or, if need be, it'll be returned. And so, you know, we're just, as all of us are, waiting for the finalization of these rules. Right now, we're sitting on $30 billion under the old rules. We have enough under the new rules, as previously proposed, but, you know, obviously, they're talking about changing them.

Michael Lawrence Mayo: Transactions now double the cheque transactions or more then checks plus cash withdrawals from Atms plus cash withdrawals from towers. So for all the great Tech work.

The efficiency ratio improved 66% to 64% quarter over quarter, but I know, you're still not happy with that 64%. So as you see the NII decline insight and as you have this attack.

Brian Thomas Moynihan: So you should expect clarity on that. But what you'd also expect is, as we think about it, you know, beginning, you know, now you're basically at the point where you're sitting on capital, the very modest need to build a cushion to the rules as proposed, and any changes would be more favorable to that, I assume. So expect us to continue to return capital at a fairly strong rate as we move through. Great color, Brian.

Speaker Change: Evolution, continuing when do you think you can get below a 60% efficiency ratio what what's your outlook for that because I'm just reconciling the numbers that we've looked at with all the progress you're making internally.

Speaker Change: Yeah, Mike I think you know.

Speaker Change: I sort of moves.

Speaker Change: A lot in the past Alastair mentioned, you all that sort of flows through because there's no more activity attaches as you're pointing out and then we continue to reduce.

Speaker Change: The marginal expense of that activity, because largely that's a consumer wealth management and global banking, which don't have lots more clients and stuff and with lots of more activity, even though the numbers go up it's other efficiencies. So that continue to improve our efficiency ratio. As you also well know you'll when the revenue growth is coming through the wealth management business, which.

Brian Thomas Moynihan: And for my follow-up, just on the NII commentary, Alastair, it sounds like you're still assuming some modest deposit growth in the back half, as part of that NII trajectory, that recovery off the trough in 2Q, just given your deposit balances increased $500 billion since COVID. I know some of that's going to be a function of share gains, but as we prepare for some QT-driven outflows, how are you addressing the risk of deposit attrition?

Speaker Change: By definition.

Speaker Change: Because of the way the compensation process works has our lowest efficiency ratio in the company. That's a good thing because it grows and we get good profitability growth out of it but we're fighting that trend and is one of the largest wealth management business in the world if not.

Brian Thomas Moynihan: And how does that impact the NII guidance, if you can frame any sort of sensitivity, recognizing many of those tend to be hot money or higher-cost deposits? Yeah, so the first thing I would just say, Steven, is we've been up against QT now for the last couple of years. So the deposits are beginning to settle in now. And if we were to go back to, if you take, for example, consumer,

Speaker Change: It's a higher percentage of our revenues and our our expense base and so we're continuing to drive it down we're at 64 or you would expect that to improve as the deposit.

Speaker Change: Thousands of stabilized and you know for many quarters now and starting to grow the rate paid is really flattened out.

Alastair M. Borthwick: If you were to go back to pre-pandemic and think about what long-term sustainable growth rates look like for consumers, she just extended that through from the fourth quarter of 2019 to today. Given that the economy is 30% larger, we kind of feel like the consumer is approaching that floor. So we're still in this belief that Q2 is going to be, and Q3 may be the turning point for consumers. You can see that it is slowing down now.

Speaker Change: Sequentially by quarter, and the yield of the portfolio and the only assets continues to grow so we feel good about how it's going our focus is really on deploying expenses.

Speaker Change: In operating leverage and as we get through the twist in NII you should start to see us return to that again and that will then obviously drive down the efficiency ratio.

Speaker Change: Yeah.

Speaker Change: What are you thinking about expense growth the rest of the year or next year for a while there you're trying to get at inflation has gone up quite a bit.

Alastair M. Borthwick: The rest of our business, if you look at the exhibit we put together on deposits, if you look at that bottom left chart on wealth, you'll see it slowed and grew this quarter, and then in global banking on the right hand side of that page, they're kind of back to pre-pandemic growth rates. They're up 7% year over year, so we're seeing some structure now in the deposit base. Even with QT over the course of the past year, our deposits are up $100 billion.

Speaker Change: But what are your thoughts about expense growth looking ahead.

Speaker Change: Well last year remember, Mike We told you we thought we could drive the expense down every quarter.

Speaker Change: We believe this year the expense will trend down over the course of this year.

Speaker Change: And you know, obviously Q1s inflated a little bit with just payroll tax and some of the revenue seasonality.

Speaker Change: But underneath that there's pretty significant revenue strength, so I think that probably cost us $100 million or so this quarter I think we probably are looking you know if if this environment continues we're looking at another 100 million per quarter going forward, but it's it's to Brian's point. It's the good expense that comes with revenue growth over time.

Alastair M. Borthwick: So it has been a point of conviction of ours that as we get towards Q2, we should see the consumer side begin to stabilize. That's what's driving our conviction that NII will go up in Q3 and Q4. We're in that transition period right now.

Speaker Change: That's really the only change I would say with respect to how we think about the expense picture.

Speaker Change: Alright, thank you.

Speaker Change: Yeah.

John Eamon McDonald: We'll take our next question from John Mcdonald of Autonomous research.

John Eamon McDonald: Thanks, Good morning wanted to follow up on the household deposit commentary Alastair.

Steven Joseph Chubak: Thanks so much for taking my question. We'll take our next question from Mike Mayo of Wells Fargo. Hi.

John Eamon McDonald: So you mentioned the consumer.

John Eamon McDonald: Thinking that that will stabilize in the back half with your own deposits.

Michael Lawrence Mayo: Well, thanks for the outlook for NII and consumer charge-off. But once again, I go back to efficiency. And, you know, you highlighted the 2 billion Erika interactions; the last billion in the last 18 months; you mentioned Zelle.

John Eamon McDonald: Wondering what your mix shift expectations are you know earlier. This year, you kind of thought that those customers that had moved for rate seeking already had and I'm just wondering if higher rates for longer.

John Eamon McDonald: Put some pressure on rate seeking behavior again, and what you're baking in in terms of mix shift from noninterest bearing into interest bearing and your AR and your outlook and your planning.

Michael Lawrence Mayo: Transactions, now double the check transactions or more than checks plus cash withdrawals from ATMs plus cash withdrawals from tellers. So for all the great tech work, you know, the efficiency ratio improved 66 to 64% quarter over quarter, but I know you're still not happy with that 64%. So as you see the NAI decline in sight, and as you have this tech evolution continuing, when do you think you can get below a 60% efficiency ratio?

Speaker Change: Yes, John I think if you look at seven and you can see sort of the mix in the left hand corner I remember that.

Speaker Change: One of the things people have we all have to be careful about is in our in.

Speaker Change: In the global banking area.

John Eamon McDonald: Yeah. The way the fees are paid in earnings credit.

John Eamon McDonald: Messes up the simplicity of noninterest bearing and interest bearing so it's complex, but if you look at the quarters coming across.

John Eamon McDonald: From the first quarter of 'twenty three through the first quarter of 24, you can see that you are seeing that the rate of change slow dramatically.

Brian Thomas Moynihan: What's your outlook on that? Because I'm just reconciling the numbers that we look at with all the progress you're making internally. Thanks.

John Eamon McDonald: <unk> kind of settle in so I don't a lot of the money has moved in the.

Brian Thomas Moynihan: Yeah, Mike, I think, as NI sort of moves along the path Alastair mentioned, all that sort of flows through because there's no more activity attached to this, as you're pointing out, and we continue to... The Marginal Expense of that activity, because largely that's consumer wealth management and global banking, which don't add lots more clients and stuff and lots more activity. The numbers go up. It's out of efficiency.

John Eamon McDonald: If you look at the seven day average for consumer go all the way back to the early part of October it's been relatively stable at 959 hundred $50 billion 60 billion.

John Eamon McDonald: We're just getting through the tax seasons, and the ins and outs in the Gulf and the wealth management business consumer of people paying taxes out on the wealthier side and receiving benefits and on the on the tax refund side. So as we stabilize and that we expect it to grow we don't expect a massive change in how the deposits are structured from a.

Brian Thomas Moynihan: So that continues to improve our efficiency ratio. As you also well know, when revenue growth is coming through the wealth management business, which by definition, because of the way the compensation process works, you know, has the lowest efficiency ratio in the company. That's a good thing because it grows and we get good profitability growth out of it, but we're fighting that trend, and it's one of the largest wealth-managed businesses in the world, if not the largest. You know, it's a higher percentage of our revenues and our expense base. And so we're continuing to drive it down. We're at 64.

John Eamon McDonald: What is the money markets, what's in savings Watson checking what's in that it's it's really slowed down and been relatively stable. So you know if things bump around but it's all it's all very good value even the highest paid the balances in the wealth management business a good value for the company.

But if you look at what really drives the value of 950 odd billion in the checking balances you can see.

John Eamon McDonald: On page seven.

John Eamon McDonald: Sure.

Checking balances that's what drives it.

John Eamon McDonald: Yes, you're still feeling Brian like the bulk of people that have kind of moved on rate seeking behavior like we have done so.

Brian Thomas Moynihan: Yeah. If you look at on the consumer business and you think about you know tracking those deposits accounts from pre pandemic to know.

Brian Thomas Moynihan: You'd expect that to improve as the deposit balance is stabilized, but for many quarters now, the rate paid has really flattened out sequentially by a quarter, and the yield of the portfolio and the yield of the assets continues to grow. So we feel good about how it's going. Our focus is really on deploying expenses and Operating Leverage. And as we get through this twist in the NII, you should start to see us return to that again. And that will then, obviously, drive. So what are you thinking about expense growth for the rest of the year or next year? For a while there, you're trying, and I get it.

Brian Thomas Moynihan: Which is one thing we've talked about for different purposes, but if you look at where all the deposit balances if people with lower average balances are still multiples of where their pandemic people that have higher balances are actually lower because obviously they were sitting on cash when the pandemic and accumulate more cash and when rates came up they moved it and all that and that gives you what you're seeing.

Brian Thomas Moynihan: Consumer which has yet to date.

Brian Thomas Moynihan: On $1 billion over where it was pre pandemic.

And so but the people have moved and you're seeing it a month to months relatively stable as we track that every month on both sides frankly, the a the lower average balance accounts from pre pandemic basically bouncing around at the same level right now not going down not going up in the higher ones are stable, but they are down you know 15, 20% for people with a half million.

Michael Lawrence Mayo: Inflation has gone up quite a bit. But what are your thoughts about expense growth looking ahead? Well, last year, remember, Mike, we told you we could drive expense down every quarter. We believe this year the expense will trend down over the course of this year, and obviously, Q1's inflated a little bit with just payroll tax and some of the revenue seasonality.

Brian Thomas Moynihan: A million dollar balances largely because they moved in the market. So we feel we feel it's stabilized so there'll be ins and outs and we'll see it play out but it's it's extremely valuable no matter no matter, how you look at.

Michael Lawrence Mayo: But underneath that, there's pretty significant revenue strength. So, you know, I think that probably cost us $100 million or so this quarter. I think we probably are looking, you know, if this environment continues, we're looking at another $100 million per quarter going forward. But it's, to Brian's point, it's the good expense that comes with revenue growth over time. That's really the only change, I'd say, with respect to how we think about the expense. All right, thank you. We'll take our next question from John McDonald of Autonomous Research. Thanks. Good morning.

Brian Thomas Moynihan: Okay, and then maybe as a quick follow up for Hollister, It's nice to see the core NIM. The net interest yield ex markets inflect positively. This quarter is that sustainable do you feel like and what are some of the fixed asset reprice dynamic stack that are tailwind beyond that $10 million per quarter on securities in terms.

Hollister: Like loans in swaps that or they'll come due over the next year or two and help the NIM a bit could you talk a little bit about that.

Hollister: Sure you know we've talked about the fact that the net interest yield.

Hollister: Obviously this quarter benefits from the NII growth, so you're getting in the numerator.

John Eamon McDonald: I wanted to follow up on the helpful deposit commentary, Alastair. So, you mentioned the consumer. You're thinking that this will stabilize in the back half of the year on deposits. I'm wondering what your mixed shift expectations are. Earlier this year, you kind of thought that those customers that had moved to rate-seeking had already done so. I'm just wondering if higher rates for longer could put some pressure on rate-seeking behavior again. What you're baking in terms of a mixed shift from not interest-bearing to interest-bearing in your outlook and your planning? Yeah, John, I think if you look at seven, you can see sort of the mix in the left-hand corner.

Hollister: But we inflated the denominator in terms of the average earning assets last year as we just made the balance sheet more liquid.

So that's going to allow us to continuous the deposits grow to grow the net interest income over time.

Hollister: Without necessarily growing the other earning assets so.

Hollister: Q2 was a little more of a challenge.

Hollister: But going forward I expect all the NII improvement in Q3, and Q4 it to drop into that net interest yield.

Speaker Change: And part of things supporting that John as you pointed out is we do have loans repricing.

Speaker Change: Because we've got loans coming off the balance sheet, we are booking new loans at higher rates. So so that's one element second element is we've got securities that were reinvesting underneath all this too. So obviously, we're sweeping the hold to maturity paydowns and reinvesting those at much higher rates and then third the teams have been working hard that repricing.

Brian Thomas Moynihan: Remember that, you know, one of the things people have to be careful about in a global banking area. The way the fees are paid in earnings credit messes up the simplicity of non-interest bearing and interest bearing, so it's complex. But if you look at the quarters coming across from the first quarter of 23 through the first quarter of 24, you can see that you're seeing the rate of change slow dramatically and kind of settle in.

Speaker Change: Cheap broadly for things like loans and I believe we've now had seven quarters in a row of improving loan pricing. So we just got to keep grinding away at that.

Speaker Change: Got it thank you.

Speaker Change: We'll take our next question from Betsy <unk> of Morgan Stanley.

Betsy: Hi, good morning.

Betsy: Good morning.

Betsy: So thanks very much for taking the question I guess I just wanted to follow up on the conversation you just having and Alastair I know that look here your NII guide.

Brian Thomas Moynihan: So I don't think a lot of the money has moved in a – if you look at the seven-day average for a consumer going all the way back to the early part of October, it's been relatively stable at $950 billion, $960 billion. So we're just getting through the tax seasons and the ins and outs of the wealth management business consumer, people paying taxes out on the wealthier side and receiving benefits on the tax refund side.

Betsy: <unk> improved this quarter due to one two results being better.

Betsy: And then you know what do you anticipate it.

Betsy: Warner ago.

Betsy: My question is on the second half 'twenty for improvement.

Speaker Change: I I get that it's going to be an improvement from first half right that basically the base that you're looking at I'm wondering how you're thinking about the NII trajectory on a year.

Brian Thomas Moynihan: So as we stabilize in that, we expect it to grow. We don't expect a massive change in how deposits are structured from what's in money markets, what's in savings, what's in checking, what's in that. It's really slowed down and been relatively stable. So things bump around, but it's all very good value. Even the highest paid balances in the wealth management business are good value for the money. But if you look at what really drives the value, it's the $950-odd billion checking balance on page 7 of the Corp Checking Balance. That's what drives it.

Speaker Change: I believe NII is down about 3% year on year in <unk> should we anticipate that that.

Speaker Change: Is kind of stable pace throughout the year or that reduces as well when we're talking about second half 'twenty. Four if you could just give us a sense of year on year that'd be helpful. Thanks.

Speaker Change: Betsy before ouster answers. Your question. It's good to have you back and and we wish you. Good luck with everything so Alastair once you hit that.

Betsy: So much Brian really appreciate that.

It's good to have you. So I guess a couple of things. The first thing is we haven't.

Alastair M. Borthwick: Yes, you're still feeling, Brian, like the bulk of people that have kind of moved on rate-seeking behavior likely have done so. Yeah, if you look at on the consumer business, and you think about tracking those deposits accounts from pre pandemic to now, which is one thing we talked about for different purposes, but if you look at where all the deposit counts, If people with lower average balances are still multiples of where they were pre-pandemic, people in the higher balances are actually lower because obviously they were sitting on cash when the pandemic and accumulate more cash and when rates came up, they moved it.

Alastair M. Borthwick: We haven't changed our perspective in terms of this idea of Q2 being the low point in the trough for the year, we haven't changed our point of view on growing in terms of Q3 and Q4 I think the important thing we're trying to convey is because of the continued stability in pricing rotation.

Alastair M. Borthwick: Cause of this continuous stability in deposits, we feel like that extra couple of hundred million in Q1 is something that should flow through in Q2, Q3 and Q4.

Alastair M. Borthwick: And then there'll be a second dynamic to watch for as well Betsy which is.

Alastair M. Borthwick: If we have less rate cuts, we're going to benefit from that.

Alastair M. Borthwick: We wouldn't necessarily benefit a lot in Q2, because there isn't enough cuts or time in Q2.

Alastair M. Borthwick: And all in that gives you what you see in consumer, which is in the end of the day, couple hundred billion dollars over where it was pre-pandemic. It's so, but the people have moved, and you're seeing it month to month, relatively stable, as we track that every month, and on both sides, frankly, the lower average balance accounts from pre-pandemic are basically bouncing around at the same level right now, not going down, not going up, and the higher ones are stable, but they are down, you know, 15, 20% for people with a half million, a million dollar balance, it's largely because they moved it in the market.

Alastair M. Borthwick: By the time, we get to Q3 and Q4, we'll know more about the rate structure at that point, then we'll be able to tell you more about how what we expect for the growth in the back half of the year, but where we're reasonably optimistic there.

Speaker Change: Super that's perfect. Thank you and then just one follow up is on the OCI.

Speaker Change: We all know the HTM.

Speaker Change: <unk> is is a portfolio that you are in run off on I guess, if that's fair to say it is.

Speaker Change: Balances are pulling off.

Speaker Change: Yes.

Speaker Change: This quarter, we did have a backup in the long end of the curve here Aoc I really didn't flex that much and you know part of my question is is.

Speaker Change: Is that a function of how the securities book is.

Speaker Change: You know comprised in you know you've been shifting towards treasuries and that's reducing this risk as as the back end of the curve increases I just wanted to understand how that trajectory in your mind because it is a concern that people raise and.

Alastair M. Borthwick: So we feel it's stabilized enough. There'll be ins and outs, and we'll see it play out, but it's extremely valuable, no matter how you look at it. Okay, and maybe as a quick follow-up for Alastair, it's nice to see the core NIM, the Net Interest Yield X markets, inflect positively this quarter. Is that sustainable?

Speaker Change: Yeah.

Speaker Change: Today.

Speaker Change: Suggest that it's much less of a concern than it had been a year ago to say for example would you agree with the latter Yep Yep Yep.

Alastair M. Borthwick: Do you feel like and what are some of the fixed asset reprice dynamics that are tailwinds beyond the $10 billion per quarter on securities in terms of like loans and swaps that will come due over the next year or two and help the NIM a bit? Could you talk a little bit about that? Sure.

Speaker Change: Yes, I mean, we've deliberately worked on that over time, but but we've always I think had a pretty good program of hedging the fixed rate securities in the first book so that they are swapped.

Speaker Change: And that means that if rates go up we obviously benefit from that it doesn't necessarily hurt us in terms of a OCI. So most all of the treasuries that you see in our portfolio are swapped so I would expect very little in the way of the OCI impact there.

Alastair M. Borthwick: You know, we've talked about the fact that that interest yield. Obviously, this quarter benefits from the NII growth, so you're getting an enumerated... But we inflated the denominator in terms of the average earning assets last year as we just made the balance sheet more liquid.

Speaker Change: Thanks, so much.

Speaker Change: We'll take our next question from Glenn Schorr of Evercore.

Alastair M. Borthwick: So, that's going to allow us to continue, as deposits grow, to grow the net interest income over time without necessarily growing the other earning assets. So Q2 will have a little more of a challenge, but going forward, I expect all the NII improvement in Q3 and Q4 to drop into that net. And part of the things supporting that, John, as you pointed out, is we do have loans repricing because we've got loans coming off the balance sheet. We're booking new loans. A higher rate, so that's one element.

Speaker Change: Yeah.

Speaker Change: Perfect.

Glenn Paul Schorr: Question on slide eight.

Glenn Paul Schorr: You talk about that.

Glenn Paul Schorr: Securities, mostly had to floating rate swaps and the duration of less than half of the year.

Glenn Paul Schorr: The fed forward curve keeps not being correct, but at some point, it's going to be correct and rates are going to come in my question.

Glenn Paul Schorr: What do you do about that how much do you think about extending duration.

Glenn Paul Schorr: And managing just swaps a little differently as we eventually no need at this time transition to a different rate.

Yeah.

Yeah, So Glenn I mean, ultimately we will use the same philosophy and strategy that we do to this point.

Alastair M. Borthwick: The second element is we've got securities that we're reinvesting underneath all this too. So obviously, we're sweeping the hold to maturity paydowns and reinvesting those at much higher rates. And then third, the teams have been working hard at repricing the balance sheet broadly for things like loans. And I believe we've now had seven quarters in a row of improving loan pricing. So we just have to keep grinding away at that. We'll take our next question from Betsy Graseck of Morgan Stanley. Hi, good morning.

Glenn Paul Schorr:

Glenn Paul Schorr: We are in it obviously, a very good position, where we have substantial deposits and excessive Laurence that's what creates this excess in the top left of page eight.

Glenn Paul Schorr: And it's what allows us to put everything to work in the top right.

Glenn Paul Schorr: The balance that we try to strike you can start to see them and lifetime site, we're trying to make sure that that cash and securities yield compared to deposit rate paid performance in any environment. So in an environment like this one where there's an awful lot going on with rates, we feel like if you look at that spread.

Betsy L. Graseck: Good morning. So, thanks very much for taking the time to answer the question. I guess I just wanted to follow up on the conversation you were just having, and Alastair, I know that your NII guide improved this quarter due to 1Q results being better than, you know, what you anticipated a quarter ago. My question is on the second half 24 improvement. I get that it's going to be an improvement from the first half, right? That's basically the base that you're looking at.

Glenn Paul Schorr: I think it was one basis point different quarter over quarter.

Glenn Paul Schorr: So we're trying to make sure that we lock in the value and monetize the deposits regardless of whatever rate environment.

Glenn Paul Schorr: It turns out to be and we feel like we're pretty balanced now we've got a pretty good balance of short dated long dated fixed and floating that should allow us to perform whether rates go up or down from here.

Betsy L. Graseck: I'm wondering how you think about the NII trajectory over the year. I believe NII is down about 3% year-on-year in 1Q, and is, you know, kind of a stable pace throughout the year or that reduces as well when we're talking about second half 24. If you could just give us a sense of year-on-year, that'd be helpful. Thanks.

Glenn Paul Schorr: Yeah.

Speaker Change: One final thing I'll, just say and I think you'll notice.

Speaker Change: Underneath underneath all of this obviously, we've got some securities repricing and to the point I think it was John asked earlier, we've got the loans repricing as well and all of that gives us a little bit of underlying resilience to this.

Speaker Change: Yeah.

Speaker Change: Yeah, I get that I guess, you had a lot of flexibility should the second time.

Brian Thomas Moynihan: Before Alastair answers your question, it's good to have you back, and we wish you good luck with everything. Oh, thanks so much, Brian. Really appreciate that. Good to have you back.

Speaker Change: Just one follow up.

Speaker Change: Deposits to death.

Speaker Change: Yeah.

Speaker Change: And year on year loan growth, mostly in cards I think.

Speaker Change: Yeah.

Alastair M. Borthwick: So I guess a couple things. The first thing is we haven't changed our perspective in terms of this idea of Q2 being the low point on the trough for the year. We haven't changed our point of view on growth in terms of Q3 and Q4. I think the important thing we're trying to convey is because of the continued stability in pricing rotation. Because of this continuous stability in deposits, we feel like that extra couple hundred million in Q1 is something that should flow through in Q2, Q3, and Q4. And then there'll be a second dynamic to watch for as well, Betsy, which is...

Speaker Change: I don't know, how we got here, but it's a weird environment, it's really strong economy up markets and yet no loan growth.

Speaker Change: Yep.

Speaker Change: Is this just any way you slice it we'd have to go through another year or two of spurred low loan growth or are there any leading indicators that would lead you to believe we can get back to a little bit more normal b of a loan growth.

Speaker Change: And not have to wait two years right.

Speaker Change: Yeah, well I think I think we're probably getting closer no because remember the big macro.

Speaker Change: We're in that transition period, where post pandemic the economy.

Speaker Change: Is sort of recovering in rates are settling in and it's changing peoples behavior. So we've actually got pretty good credit card growth.

Speaker Change: And that's.

Betsy L. Graseck: If we have fewer rate cuts, we're going to benefit from them. We won't necessarily benefit a lot in Q2 because there aren't enough cuts or time in Q2. But I think by the time we get to Q3 and Q4, we'll know more about the rate structure at that point, and we'll be able to tell you more about what we expect for growth in the back half of the year. But we're reasonably optimistic there. Super. That's perfect.

Speaker Change: That's just offset by the fact that for example, with securities based lending at rates that are 5% higher people are doing less of it or in commercial we've got some loan growth, but the revolver utilization still suppressed because revolver cost a lot more so as the fed has raised rates it's changed some of the.

Speaker Change: The borrowing patterns of our clients, but that's not going to last forever, because as you pointed out the economy powers through at 3%.

Betsy L. Graseck: And then just one follow-up question is on the AOCI. So we all know that HTM is a portfolio that you're in runoff on, I guess, if that's fair to say, is, you know, the balances are pulling off. And this quarter, you know, we did have a backup on the long end of the curve. Your AOCI really didn't flex that much.

Speaker Change: Or whatever it ends up being loan growth is going to catch up to that overtime. So for right now we're in that transition period, but we're anticipating that loan growth will pick up.

Speaker Change: At some point in the future, but it's not an enormous part of our NII guide at this point.

Speaker Change: And just remember that the capital markets opened up in a lot of the larger clients access to them as they frankly have gotten used to the higher rate structure and need to refinance that debt. If you look across the businesses you've got the commercial run, but if you look across the commercial businesses and the.

Betsy L. Graseck: And, you know, part of my question is, is that a function of how the securities book is, you know, comprised, and you've been shifting towards treasuries, and that's reducing this risk as the back end of the curve increases? I just wanted to understand how that's playing out in your mind, because it is a concern that people raise. And, you know, what I saw today suggests that it's much less of a concern than it had been a year ago. Say, for example, would you agree with that?

Speaker Change: You know middle market and business banking segment up to $50 million revenue companies and up to two and a half billion they actually saw yep.

Speaker Change: Progress in loan growth it was really in the high end global.

Speaker Change: Global corporate investment banking business, where you saw sort of pay downs and bring that down.

Alastair M. Borthwick: Yes, I mean, we've deliberately worked on that over time, but we've always, I think, had a pretty good program of hedging the fixed-rate securities in the FS book so that they're swapped. And that means that if rates go up, we obviously benefit from that. It doesn't necessarily hurt us in terms of AOCI. So most of the treasuries that you see in our portfolio are swapped. So I would expect very little in the way of AOCI impact. Thanks so much.

Speaker Change: That phenomenon is one that's.

Speaker Change: Of course from time to time, it's probably stabilized now and we'll see it play out, but we are fighting for loan growth and frankly line usage stabilized.

Speaker Change: <unk> is better than it's been for the last few quarters in terms of trend and so again that all speaks to people feeling fine, but they're not they're not quite as aggressive as they were.

Speaker Change: Would be when you read the economic statistics and that's one of the great debates that you can read about in the paper every day.

Speaker Change: Thank you both for all that.

Glenn Paul Schorr: We'll take our next question from Glenn Schorr of Evercore. Perfect lead into this question. On slide 8, you talk about AFS.

Matt O'connor: Take our next question from Matt O'connor of Deutsche Bank.

Matt O'connor: Yeah.

Matt O'connor: Good morning.

Matt O'connor: So obviously, there's been a lot of questions on net interest income and a lot of good color I guess, just when you put it all together like when you think about the higher for longer environment.

Glenn Paul Schorr: Well, the security is mostly hedged with floating rate swaps and the duration is less than a half a year. I know the Fed forward curve keeps not being correct, but at some point, it's going to be correct, and rates are going to come in. My question is, what do you do about that?

Matt O'connor: Obviously, it's good on the Reinvestments, you're trying to match that.

Matt O'connor: Positive like you talked about but how would you just boil it down you'll make disclosures also rebellion.

Matt O'connor: Kind of exposure on the either side.

Alastair M. Borthwick: How much do you think about extending duration and managing your swaps a little differently as we eventually, not unit at this time, transition to a different rate back up? Yeah, so Glenn, well, I mean, ultimately, we'll use the same philosophy and strategy that we have used to this point. We are in, obviously, a very good position where we have substantial deposits and excessive loans. That's what creates this excess on the top left of page 8, and it's what allows us to put everything to work on the top right.

Matt O'connor: Stable stable rates for a couple of years is that good.

Matt O'connor: Or does that accelerate the deposit or pricing or just boil that down.

Matt O'connor: Sure.

Matt O'connor: Well.

Matt O'connor: I'd say generally speaking higher for longer is probably better for banks as a general statement.

Matt O'connor: The question will become why are rates higher like what's going on in the economy.

Are we talking about inflation.

Matt O'connor: Is it is it is it under control or is it coming down right now that appears to be the case. So that that's obviously, a good place and the feds and a good place because they appear to have rates real rate that's high enough to make sure that inflation stays in a good place.

Alastair M. Borthwick: The balance that we try to strike, you can sort of see on the left-hand side, we're trying to make sure that that cash and securities yield compared to deposit rate paid performs in any environment. So in an environment like this one where there's an awful lot going on with rates, we feel like if you look at that spread, I think it was one basis point different, quarter over quarter.

Matt O'connor: Things can change, Matt so an awful lot will depend upon just.

Matt O'connor: The y for rates.

Matt O'connor: But generally speaking if if it's just because it's taken a little while longer for the inflation to nudge down before the next set of cuts that's probably a good environment for us I would expect us to perform relatively better than we've disclosed so far.

Alastair M. Borthwick: So we're trying to make sure that we lock in the value, monetize the deposits, regardless of whatever rate environment it turns out to be, and we feel like we're pretty balanced now. We've got a pretty good balance of short-dated, long-dated, fixed, and floating that should allow us to perform whether rates go up or down from here. One final thing I'll just say, and I think you know this, underneath all of this, obviously, we've got some securities repricing, and to the point, I think it was John who asked earlier, we've got the loans repricing as well, and all of that Yeah, I get that. I guess that you have a lot of flexibility should you decide.

Matt O'connor: And then you were asking a second question, which is around the what is the sensitivity look like two plus 100 or minus 100. We've tried to just make sure that we continue to stay balanced if anything that that corridor of plus 100 minus 100 has gotten narrower and narrower overtime as were trying to lock in.

Matt O'connor: NII, that's four or 5 billion higher per quarter today than it was three years ago, and just make sure that the shareholder benefits from that through the course of time so.

Matt O'connor: Let me just see how the environment plays out it's only been you know a quarters. Since we were last here talking about six cuts now its three.

Glenn Paul Schorr: This one follow-up, we talked deposits to death, you had a smidgen of year-on-year loan growth, mostly in cards, I think, but, you know, I know how we got here, but it's a weird environment to see. It's a really strong economy, up markets, and yet no loan growth. Yeah.

Matt O'connor: So we just have to we just have to watch this play out and stay patient.

Speaker Change: Okay Fair enough that's helpful. Thank you.

Speaker Change: Yeah.

Speaker Change: We'll take our next question from Ken Houston of Jefferies.

Kenneth Michael Usdin: Thanks, very much good morning.

Kenneth Michael Usdin: A real breakout quarter for the IV feline and just wondering a couple of things within that one there was a bit of a back and forth from some of the other banks about whether or not DCM was pulled forward a little bit from future I Wonder where do you think about that and but more broadly just you guys have done a good job taking share what inning do you think you are in terms of.

Brian Thomas Moynihan: Is this just, any way you slice it, we have to, like, go through another year or two of super-low loan growth, or are there any leading indicators that would lead you to believe we can get back to a little bit more normal B of A loan growth and not have to wait two years for it? Yep, well, I think we're probably getting closer now because, in the big macro, we're in that transition period where, post-pandemic, the economy is sort of recovering, and rates are settling in, and it's changing people's behaviors, so we've actually got pretty good credit card, That's just offset by the fact that, for example, with securities-based lending at rates that are 5% higher, people are doing But revolver utilization is still suppressed because it costs a lot more.

Kenneth Michael Usdin: Not so much just green shoots, but in terms of where that incremental productivity is in terms of.

Kenneth Michael Usdin: Getting that IV line to a more permanent higher level. Thanks.

Right.

Kenneth Michael Usdin: I.

Kenneth Michael Usdin: Think about it that if you go back and sort of the.

Kenneth Michael Usdin: Period prior to the run up in a couple of years. After the pandemic you you've had sort of mid.

Kenneth Michael Usdin: And a half ish type of.

Kenneth Michael Usdin: The.

Kenneth Michael Usdin: Numbers a quarter, we think we're fundamentally stronger and our market position as you said so we feel very good about the work Matthew and her team have done and we you know as we look at it we believe that though.

Kenneth Michael Usdin: Continue to gain share and I think this is a more normalized level and whether it's pull forward a novel find out, but it's a more normalized level given those dynamics and one we should be able to build off, especially as I said earlier the penetration in the middle market side of our business or whether those clients working off our wealth management and the markets generally plus.

Brian Thomas Moynihan: So as the Fed has raised rates, it's changed some of the borrowing patterns of our clients, but that's not going to last forever. Because, as you point out, if the economy powers through at 3%, 3.5%, whatever it ends up being, loan growth is going to catch up to that over time.

Kenneth Michael Usdin: Working up across the globe and we've done better work international So we feel good everything the team has done the combination of corporate and investment banking is very strong.

Brian Thomas Moynihan: So for right now, we're in that transition period, but we're anticipating that loan growth will pick up at some point in the future, but it's not an enormous part of our NII guidance. And just remember that the capital markets opened up, and a lot of the larger clients accessed them as they, frankly, have gotten used to the higher rate structure and need to refinance. If you look across the businesses, you've got the commercial run, but if you look across the commercial businesses in the middle market and business banking, the segment up to $50 million in revenue companies and up to $2.5 billion, they actually saw, you know, Progress and loan growth. It was really in the high-end global corporate investment banking business where you saw sort of paydowns and bring that down. That phenomenon is one that occurs from time to time.

Kenneth Michael Usdin: So we don't we don't think this is like an unusually high watermark and we should be able to build from here.

Speaker Change: Okay got it and then one question about wealth management.

Speaker Change: And just client choices in terms of where they are sitting relative to you know, earning earning NII or earning fees.

Speaker Change: Where do you sense that the kind of cash versus fully invested is in terms of the wealth management brokerage business and.

Speaker Change: In Quebec.

Speaker Change: Turning to the better return to the worst depending on how that how that mix answer goes thanks.

Speaker Change: Well wealth management, I think Lindsay K T and Eric highlight for US regularly just the elevated levels of cash that our clients have.

A lot of that is on us and you can see that in our deposit chart, but there's a lot that we've captured in the investment area to where there are a lot of their flows are coming into maybe it's money market funds, maybe the short dated treasuries, but theres a lot of cash at this point. So that would tell you it's supporting the ability to see continued assets under management.

Brian Thomas Moynihan: It's probably stabilized now, and we'll see it play out, but we are fighting for loan growth. And frankly, line usage stabilized and is better than it's been for the last few quarters in terms of trend. And so, again, that all speaks to people feeling fine, but they're not quite as aggressive as they would be when you read the economic statistics, and that's one of the great debates that you can read about in the paper every day. Thank you both for all that. We will now take our next question from Matt O'Connor of Deutsche Bank. Good morning.

Speaker Change: Going forward, depending on how the up that the obviously the stock market shakes out over time, but.

Speaker Change: Were all struck by just the sheer amount of cash on the sidelines at this point.

Speaker Change: Okay got it alright, thank you.

Speaker Change: And once again that is star one if you would like to ask a question one moment, while we queue.

Speaker Change: Yeah.

Speaker Change: And once again that is star one.

Matt O'connor: So obviously, there's been a lot of questions on interest income and a lot of good color, I guess, just when you put it all together, like when you think about the hire for longer environment, you know, obviously, it's good for the reinvestments, you're trying to match the deposits, like you talked about, but how would you just boil it down? Your rate disclosures still show $3 billion. Transcripts provided by Transcription Outsourcing, LLC.

Speaker Change: And we'll take our next question from Gerard Cassidy of RBC.

Gerard Sean Cassidy: Hi, Brian.

Gerard Sean Cassidy: Hey, Gerard.

Gerard Sean Cassidy: They're.

Gerard Sean Cassidy: Coming back to that slide eight which is obviously quite impressive on deposits, particularly in the upper left hand graph you presented.

When you go back to maybe 2014, and 15 and take a look at the positive levels of your company from 2015 to 2019.

Matt O'connor: Well, I'd say, generally speaking, hiring for longer is probably better for banks. That's a general statement. The question will become, why are rates higher? Like, what's going on in the economy? Are we talking about inflation? Is it under control?

Gerard Sean Cassidy: Just didn't have the growth that you experienced from the end of the 19th through today can you guys share with us what.

Gerard Sean Cassidy: What drove this meaningful increase not only excess deposits, but all deposits.

Speaker Change: Well I think.

Alastair M. Borthwick: Is it coming down? Right now, that appears to be the case. So that's obviously a good place to be.

Speaker Change: George So you've been around long enough to understand some of the dynamics. So as we move through the post financial crisis.

Alastair M. Borthwick: And the Fed's in a good place because they appear to have rates, a real rate, that's high enough to make sure that inflation stays in a good place. But things can change, Matt, so an awful lot will depend upon just... The Y for H. But, generally speaking, if it's just because it's taken a little while longer for inflation to nudge down before the next set of cuts, that's probably a good environment for us.

Speaker Change: We had.

Speaker Change: In terms of that chart.

Speaker Change: You looked at it you know you had a lot of loans that.

Speaker Change: We ran off because they weren't core loans anymore and kind of dropped out the 900 billion level and then grow from there and in 2015, that's when we started driving.

Pottsville growth it was a call to grow now that we've pushed out a lot of stuff in the financial crisis got it behind us.

Alastair M. Borthwick: I would expect us to perform relatively better than we've disclosed so far. And then you're asking a second question, which is around, you know, the, what does the sensitivity look like to plus 100 or minus 100?

Speaker Change: So the loans and then start picking up and if you remember back then I think we had almost 300 billion if I remember right and if you looked at the slide on loans in the non line of business loans are 200 billion or something like that and its down to 10. So think about that dimension. So it was we ran that down and could grow we could overcome it and so then on the growth on the loan side is it driven by.

Alastair M. Borthwick: We've tried to just make sure that we continue to stay balanced, and if anything, that corridor of plus 100 minus 100 has gotten narrower and narrower over time as we're trying to lock in NII that's $4 or $5 billion higher per quarter today than it was three years ago. And just make sure that the shareholder benefits from that through the course of time. Let me see how the environment plays out. It's only been, you know, a quarter since we were last here talking about six cuts. Now there are three.

Speaker Change: And where we want to play on the card business is getting good position right now we can start to push from there whether it's on the home equity business on the auto loan business and on the commercial side. It was we had less issues after the financial crisis, and commercial but kind of getting through all that it was getting to the credit quality wanted in a source of great growth for us.

Alastair M. Borthwick: So we just have to watch this play out and stay patient. Okay, fair enough. That's helpful.

Kenneth Michael Usdin: Thank you. We'll take our next question from Ken Usdin of Jeffreys. Thanks very much. Good morning.

Speaker Change: From 2010 and beyond has been we've probably gone from I don't know 20 30 billion of outstanding loans out in the international part of Matthews business and GCI bead, almost 100 billion type of number so our expansion of our international capabilities and done with great credit work by.

Brian Thomas Moynihan: A real breakout quarter for the IB fee line. And just wondering a couple of things about that. One, there was a bit of a back and forth from some of the other banks about whether or not DCM was pulled forward a little bit from the future. I wonder what you think about that.

Brian Thomas Moynihan: But more broadly, you guys have done a good job taking share. What inning do you think you are in terms of not so much just green shoots but in terms of where that incremental productivity is in terms of getting that IB line to a more permanent higher level? Thanks. So I think... Think about it.

Speaker Change: By Jeff Green and her team and Bruce Thompson team. So put all that together that's alongside on deposit side. It really started with a focus that began.

No.

Speaker Change: Really proud of them.

In the middle of the financial crisis beyond where he said we're gonna go for core checking accounts and consumer primarily primary checking accounts drive customer satisfaction drive organic growth and end and not care about the number of sales as much as the net growth in net sales and as the team at DN Tong overtime and in the Air and then Holly now.

Brian Thomas Moynihan: If you go back and sort of the period prior to the run-up in the couple years after the pandemic, you've had sort of mid billion and a half numbers like this type. You have numbers a quarter. We think we're fundamentally stronger in the market position, as you said. So we feel very good about the work Matthew and the team have done, and as we look at it, we believe that they'll continue to gain market share. And I think this is a more normalized level. Whether it's pulled forward or not, we'll find out.

Speaker Change: We have continued to push that you know, adding a million ish net new checking accounts all core we've gone from 60% CT at 92% you've got from customer satisfaction.

Brian Thomas Moynihan: But it's a more normalized level, given those dynamics, and one we should be able to build off, especially, as I said earlier, the penetration in the middle market side of our business, whether those clients working up for wealth management in the markets generally, plus working across the globe. We feel good about everything the team's done. The combination of corporate and investment banking is very strong, so we don't have to take this as an unusually high watermark, and we should be able to build from here. Okay, I got it.

Speaker Change: To the highest levels ever in the mid eighties top two box, it et cetera, et cetera, attrition down to lowest ever preferred rewards kicked in and all of that has led to higher and higher balance retention per account and then also you know more accounts and so we've probably grown yep.

Speaker Change: And a consumer from I think around 300 billion at the beginning of the 2010 11 to now 900 billion now there's economic growth in the economy grows, but that's way outside and that's what's driven the real value of the deposit franchise.

Kenneth Michael Usdin: And then one question about wealth management and just client choices in terms of where they're sitting relative to, you know, earning NII or earning fees, you know, where do you sense that the kind of cash versus fully invested is in terms of the wealth management broker business? And, and could that, you know, turn out better or turn out worse, depending on how that mixed answer goes? Thanks.

Speaker Change: And then wealth management again after Merrill putting it together and then driving that core aspects between the team there has kept us up to 300 billion.

Speaker Change: That's from 200, and something pre pandemic and probably less than that English 200 at the time of the merger. So all these things are just part of it and the GTS business investments out of driven those products so that spread is.

Kenneth Michael Usdin: Well, wealth management, I think Lindsay, Katie, and Eric highlight for us regularly just the elevated levels of cash that our clients have. A lot of that is on us, and you can see that on our deposit chart. But there's a lot that we've captured in the investment area, too, where a lot of their flows are coming into, maybe it's money market funds, maybe they're short-dated treasuries. But there's a lot of cash at this point.

Speaker Change: Hi Inn growing again, which is kind of counterintuitive to the narrative that even one of your colleagues mentioned earlier, which is.

Speaker Change: Leave aside all the quantitative tightening all of that straight and all the stuff that's supposed to happen.

Speaker Change: Quarter after quarter, we're now growing the amount of deposits over the top of the loans and the loans that hopefully will kick back in and grow a little faster, but theres still don't use a lot of those balances up and so we feel very good about that position and those deposits as you can see on the bottom of page eight our left hand side. All in cost is 193 basis points I guess the fed funds rate.

Alastair M. Borthwick: So that would tell you it's supporting the ability to see continued assets under management flows going forward, depending on how the, obviously, the stock market shakes out over time. But we're all struck by just the sheer amount of cash on the sidelines at this point. Okay.

Brian Thomas Moynihan: All right. Thank you. And once again, that is star number one if you would like to ask a question. One moment while we queue.

Speaker Change: Five and a half in the you know the rate of change in those deposit prices have flattened out to be very modest quarter over quarter, and that's just a tremendous leverage for the company.

Gerard Sean Cassidy: And once again, that is Star One. And we'll take our next question from Gerard Cassidy of RBC. Hey Alastair, how are you doing?

Alastair M. Borthwick: Alastair, coming back to slide eight, which is obviously quite impressive in terms of deposits, particularly the upper left-hand graph you presented. When you go back to maybe 2014 or 15, and take a look at the deposit levels of your company from, let's say, 2015 to 2019, you just didn't have the growth that you experienced from the end of 19 through today. Can you guys share with us what drove this meaningful increase in not only excess deposits but all deposits? Well, I think Gerard, you've been around long enough to understand some of those dynamics.

Very helpful. Bryan Thank you.

Speaker Change: Maybe as a follow up I think Alistair you pointed to that unit CET one ratios if Basel three endgame went in and delusion propose youre very comfortable with it.

Bryan: Can you guys share with us what's the latest.

Alistair: We all read about the working down of Boswell three indeed do you guys have a sense when we may actually see.

The final proposal could it get kicked into next year, possibly.

Alistair: Look we don't have an update on the timing yet Gerard where we're in the same place you are we're kind of waiting for the rules to.

Alistair: Come out and.

Alistair: We're still listening for updates from the fed chair and the Vice chair and we'll wait till we see those come out.

Brian Thomas Moynihan: So as we move through the post-financial crisis, you know, we have. In terms of that chart, if you looked at it, we had a lot of loans that we ran off because they weren't core loans anymore and kind of dropped out at the $900 billion level and then grew out from there. And in 2015, that's where we started driving responsible growth. It was a call to grow now that we had pushed out a lot of stuff in the financial crisis and got it behind us.

Alistair: The key is starting to do that.

Alistair: We were sitting even under the current interpretation. We told you earlier on without any modifications were sitting on an up C. T. One nominal amount of 197 billion.

It exceeds what we need for the increase in our WD under the current version of the rules to propose anything to change isn't that it would be positive drugs. So yeah. We we don't need to retain capital to meet those standards. We don't you know so we're we're often running.

Brian Thomas Moynihan: So the loans then start picking up. But if you remember back then, I think we had almost $300 billion, if I remember right, if you looked at the slide on loans in the non-line of business loans, or $200 billion or something like that, and it's down to $10 billion. So think about that dimension.

Speaker Change: Great. Thank you.

Speaker Change: Or at least one more question.

Speaker Change: We'll take that question from Jim Mitchell of Seaport Global.

James Francis Mitchell: Good morning, Jim Oh, Hey, Hey, good morning, Good morning, sorry, maybe just one last follow up on that last question from Gerard.

James Francis Mitchell: If Basel III is reduced as Paul suggested.

Brian Thomas Moynihan: So as we ran that down and could grow, we could overcome it. And so then on the growth and loan side, it's driven by discipline, where we want to play in the car businesses, getting it positioned right now. We could start to push from there, whether it's a home equity business or the auto loan business. And on the commercial side, we had fewer issues after the financial crisis than commercial banks, but kind of getting through all that, it was getting to the credit quality we wanted.

James Francis Mitchell: Is it with limited loan growth just more likely to be put towards buybacks or do you see opportunities beyond just loan growth, whether it's building growing the trading balance sheet or are there other opportunities to deploy that capital to drive growth just curious how you deploy that.

Speaker Change: Well number one our primary interest is just use the capital to support our customer businesses. So you've seen that happen in the markets business.

Brian Thomas Moynihan: And a source of great growth for us from 2010 and beyond has been, we've probably gone from, I don't know, $20 billion, $30 billion of outstanding loans in the international part of Matthew's business, and GCI beat almost $100 billion in terms of numbers. So our expansion of our international capabilities, done with great credit work by Jeff Green and the team and Bruce Thompson's team. So put all that together, that's the loan side, really part of the. In the middle of the financial crisis and beyond, we said we were going to go for core checking accounts and consumer primary checking accounts, drive customer satisfaction, drive organic growth, and not care about the number of sales as much as net growth and net sales.

As we said it was one of the best quarters in a decade first quarters, if that that is a multi year process of building up not only the balance sheet.

Speaker Change: Capital committed to the business, but importantly, also the investment in systems, and technology and risk management and other things.

Speaker Change: They continue to make money almost every trading day over the last several years, so that that that's where we'd like to use it supporting that business supporting loan business supporting you all of the businesses. The reality is is outside of the capital markets business. Then you go to loan growth and you know in the data you know in the car.

Speaker Change: Loan growth in mid single digits that doesn't eat a lot of the capital up so that it's just there to be returned in and so we got two basic phenomenon. One is we had we storehouse of a bunch of capital. If you think about the last few years between the changes in CCAR, a few years ago that changed the capital dimension than the proposed rules and then now whatever happens.

Brian Thomas Moynihan: And as the team, Dean and Tong, over time, and then Aaron and Holly now have continued to push that, adding a million-ish net new checking accounts, all core, we've gone from 60% core to 92%, we've gone from customer satisfaction to the highest levels ever in the mid-80s, top two box, et cetera, et cetera, attrition down to the lowest ever, preferred rewards kicked And then wealth management, again, after Merrill put it together and then driving the core aspects between the team there, has kept us up to $300 billion. That's from $200 and something pre-pandemic and probably less than that.

Speaker Change: With them. So they were sort of sit in the pandemic before that we were sitting on a fair amount of capital.

Speaker Change: That should be released over time here and then secondly, you know the.

Speaker Change: The question will be what.

Speaker Change: What those rules are going forward and a third would be what do you need to support the business, which again, that's our primary responsibility, but generally that is a modest amount of capital.

Speaker Change: And so you know most of our.

Speaker Change: Yep desires to.

Speaker Change: Really deploy more expenses in technology investments and we've gone from 3 billion to $3 8 billion in annual technology investments a lot across the last couple of years more branches those but that's more of an expense question than a capital question here.

Brian Thomas Moynihan: I think it was $200 at the time of the merger. So all these things are just part of it, and the GTS business investments that have driven those products. So, you know, that spread is... You know, high and growing again, which is kind of counterintuitive to the narrative that even one of your colleagues mentioned earlier, which is to leave aside all the quantitative tightening, all this straight, and all the stuff that's supposed to happen.

Right right, Okay. Thanks, a lot.

Speaker Change: Alright, I think thats all the correct.

Speaker Change: Okay.

Speaker Change: While we wrap it up here. Thank you for your time and attention.

Speaker Change: This quarter marks another quarter of strong organic growth across every business continued this.

Brian Thomas Moynihan: Quarter after quarter, we're now growing the amount of deposits over the top of the loans, and the loans, hopefully, will kick back in and grow a little faster, but they still won't use a lot of those balances, and so we feel very good about that position. And those deposits, as you can see on the bottom of page 8, on the left-hand side, all in cost is 193 basis points against a Fed funds rate of 5.5. And the rate of change in those deposit prices has flattened out to be a very modest quarter to the length of a quarter, and that's just tremendous leverage for the company. Very helpful, Brian.

Speaker Change: This quarter.

Speaker Change: Good fees and fees and what we call fees and commissions in the wealth management business investment banking and trading NII continues to outperform what we told you last quarter for the quarter first quarter, we rolled that into second quarter and we expect continued performance and that is as we go through the trough and meet the.

Speaker Change: Second half of the year, we continue to manage expenses well into the inflation rate and we start with strong capital and liquidity and a strong balance sheet. So we our team did a great job this quarter and we look forward to talking to you next quarter. Thank you.

Brian Thomas Moynihan: Thank you. Maybe as a follow-up, I think, Alastair, you pointed out that your CET1 ratios, if Basel III's endgame went in as originally proposed, you're very comfortable with it. Can you guys share with us what's the latest? We all read about the watering down of Basel III's endgame. Do you guys have a sense when we may actually see a final proposal? Could it get kicked off into next year, possibly?

Speaker Change: This does conclude the bank of America earnings announcement amount you may now disconnect and everyone have a great day.

Speaker Change: Yeah.

Speaker Change: [music].

Yeah.

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Yeah.

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Gerard Sean Cassidy: Look, we don't have an update on the timing yet, Gerard. We're in the same place you are. We're kind of waiting for the rules to come out. And, you know, we're still listening for updates from the Fed Chair and the Vice Chair, and we'll wait till we see those come out. You know, the key is to remember that we're sitting, even under the current interpretation we told you earlier, without any modifications, we're sitting on enough CET-1 nominal amount, $197 billion, that exceeds what we need for the increase in RWA under the current version of the rules that are proposed. Anything that changes in that would be positive, Gerard, so we don't need to retain capital to meet those standards. We don't, you know I appreciate it, Brian.

Speaker Change: Yeah.

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Alastair M. Borthwick: Thank you. All right, Lee, is that one more question? Okay. Yep. We'll take that question from Jim Mitchell of Seaport Global. Morning, Jim. Oh, hey. Hey, good morning. Good morning.

Speaker Change: Hum.

Speaker Change: [music].

James Francis Mitchell: Sorry. Maybe just one last follow-up on that last question from Gerard. You know, if Basel III is reduced, as Powell has suggested, is it with limited loan growth just more likely to be put towards buybacks? Or do you see opportunities beyond just loan growth, whether it's building, you know, growing the trading balance sheet or other opportunities to deploy that capital to drive growth? Just curious how you would deploy that.

Okay.

Speaker Change: [music].

Brian Thomas Moynihan: Well, number one, our primary interest is to use capital to support our customer businesses. So you've seen that happen in the markets business. You know, as we said, it was one of the best quarters in a decade for first quarters.

Brian Thomas Moynihan: That is a multi-year process of building up not only the balance sheet and capital committed to business but, importantly, also, you know, the investment systems and technology and risk management and other things. They have continued to make money almost every trading day for the last several years. So that's where we'd like to use it, supporting that business, supporting loan businesses, supporting all the businesses. But the reality is it's outside of the capital markets business.

Speaker Change: Yeah.

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Yeah.

Speaker Change: Yeah.

Brian Thomas Moynihan: Then you go to loan growth, and you know. And the kind of loan growth in the mid-single digits, that doesn't eat up a lot of the capital. So then it's just there to be returned. And so we have two basic phenomena. One is we've stored up a bunch of capital, if you think about the last few years, between the changes in CCAR a few years ago that changed the capital dimension, then the proposed rules, and then now whatever happens with them. So they were sort of sitting in the pandemic before that.

Speaker Change: Hum.

Speaker Change: [music].

Speaker Change: Hum.

Speaker Change: Mhm.

Speaker Change: [music] with Bank of America earnings announcement has concluded you may now disconnect your lines.

Brian Thomas Moynihan: We are sitting on a fair amount of capital that should be released over time here. And then, secondly, the question will be what those rules are going forward. And then thirdly, what you need to support the business, which again is our primary responsibility. But generally, that is a modest amount of capital. So, you know, most of our desire is to really deploy more expenses in technology investments, and we've gone from $3 billion to $3.8 billion in annual technology investments across the last couple of years. More branches, but that's more of an expense question than a capital question.

Speaker Change: Yeah.

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Hum.

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Speaker Change: Okay.

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James Francis Mitchell: Right, right. Okay. Thanks a lot. Alright, I think that's all Lee, correct?

Speaker Change: The Bank of America earnings announcement has concluded you may now disconnect.

Brian Thomas Moynihan: Quarter of strong organic growth across every business that's continued this quarter. Good fees and what we call fees and commissions from the wealth management business, investment banking, and trading. NII continues to outperform what we told you last quarter for the first quarter. We rolled that into the second quarter, and we expect continued performance in that as we go through the trough and meet the higher second half of the year. We continue to manage expenses well under the inflation rate, and we start with strong capital and liquidity and a strong balance sheet.

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Speaker Change: Okay.

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Operator: So we are a team that did a great job this quarter. We look forward to talking to you next quarter. This does conclude the Bank of America earnings announcement. You may now disconnect, and everyone have a great day. BF-WATCH TV 2021. The Bank of America earnings announcement has concluded. You may now disconnect your lines. ,,,,,, The Bank of America earnings announcement has concluded. You may now disconnect. BF-WATCH TV 2021, The Bank of America earnings announcement has concluded; you may disconnect.

Speaker Change: Has concluded you may disconnect.

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Okay.

Speaker Change: Hum.

Speaker Change: Uh huh.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Okay.

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