Q3 2024 Bank of America Corp Earnings Call

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Operator: Good day, everyone, and welcome to Bank of America's earnings announcement. At this time, all participants are in listen-only mode. 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 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 will be standing by if you should need any assistance.

Speaker Change: Good day, everyone, and welcome to Bank of America's earnings announcement. At this time, all participants or any listen only mode. 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 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 will be standing by if you should need any assistance. It is my pleasure to turn the program over to Lee McIntyre. Thank you.

Lee Back Entire: It is my pleasure to turn the program over to Lee Back Entire. Good morning, welcome, and thank you for joining the call to review our third quarter results. Our earnings release documents are available on the Investor Relations section of the Bank of America dot com website. They include the earnings presentation that will make reference to during this call. I hope everyone's had a chance to review those documents.

Lee McIntyre: Good morning. Welcome and thank you for joining the call to review our third quarter results. Our earnings release documents are available on the investor relations section of the bank of america.com website. They include the earnings presentation that will make reference to during this call. I hope everyone has had a chance to review those documents.

Lee Back Entire: Our CEO, Brian Moynihan, will take make some opening comments before Alastair Borthwick, our CFO, discusses the details of the quarter. 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 risks and uncertainties. Factors that may cause our actual results to materially differ from expectations are detailed in our earnings materials and our SEC filings that are available on the website. Information about non-GAAP financial measures, including reconciliation to US GAAP, can also be found in our earnings materials that are available on the website.

Lee McIntyre: will take make some opening comments before Alastair Borthwick, our CFO discusses the details of the quarter. Let me just remind you that we may make forward-looking statements and refer to non-gap financial measures during the call. Forward-looking statements are based on management's current expectations and assumptions that are subject to risks and uncertainties.

Lee McIntyre: Factors that make calls are actual results to materially differ from expectations, are detailed in our earnings materials and our SEC filings that are available on the website.

Lee McIntyre: Information about non-gap financial measures, including reconciliations to US gap, can also be found in our earnings materials that are available on the website.

Brian Moynihan: So, with that, Brian, take it away. Thank you, Lee, and good morning. And thank all of you for joining us for our discussion of our third quarter results. Bank of America continue to demonstrate strength this quarter and an economy that continue to be stable, be it with slower growth and falling inflation. So many may be asking from time to time what do we see in our own consumer customer base. As we talked about many times, our consumer payments is an indicator of activity. Those payments are up four to five percent year over year for the quarter in the total money those consumers moved in the economy.

Lee McIntyre: Thank you for joining us for our discussion of our third quarter results.

Lee McIntyre: Bank of America continued to demonstrate strength this quarter and an economy that continued to be stable, albeit with slower growth and falling inflation.

Lee McIntyre: So, many of you asked me from time to time, what have we seen in our own customer base? As we talked about many times, our consumer payments is an indicator of activity.

Lee McIntyre: does payments are up 4 to 5% year over year for the quarter.

Brian Moynihan: The pace of year-to-year money movement has been steady since late summer this year after having fallen in spring and early summer. This growth and consumer payments continues into the October. This activity is consistent with how customers are spending money in the 2016 to 2019 timeframe when the economy was growing and inflation was under control. This report is not meant to gainsay that consumers are aware of the cost of living, worried about higher rates and other matters, but overall activity is fine. Unemployment is low and wage growth is steady, both which well for the consumer overall and for consumer asset quality.

Lee McIntyre: in the total money those consumers moved in the economy. The pace of year to year money movement has been steady since flight summer this year.

Lee McIntyre: And after having fallen in a spring and early summer, this growth and consumer payments continues into the October. This activity is consistent with how customers are spending money in the 2016-2019 timeframe, when the economy was growing inflation was under control.

Lee McIntyre: This report is not meant to gain, say, that consumers are wary of the cost of living, worried about higher rates in other matters. But overall activity is fine, unemployment is low and wage growth is steady, both which both the consumer overall and consumer asset quality.

Brian Moynihan: With respect to what we see in our commercial businesses, it is consistent with a lower growth economy. Line of credit usage rates remain lower than pre-pandemic levels. This does not surprise us, what with a dramatic increase in the cost of borrowing for small and medium-sized businesses. They are being indolent; they want to grow; they are simply being more careful and worry a final demand will hold. Therefore, they are being cost-conscious across the board.

Lee McIntyre: With respect to what we see in our commercial businesses, it is consistent with a lower growth economy. Line of credit usage.

Lee McIntyre: Rates remain lower than pre-pendemic levels. This does not surprise us what would the dramatic increase in the cost of borrowing for small and medium-sized businesses. They are being indignant and want to grow, they are simply being more careful and worry a final demand will hold. Therefore they are being cost conscious across the board.

Brian Moynihan: So how did Bank of America do against this backdrop? Bank of America, our commitment to response will go through means unwavering as quarters and other illustration of that. We grew; we did it the right way. And the third quarter, Bank of America generated $5.5 billion in revenue and earned $6.9 billion in net income after tax. Year to date, we've generated net income of just over $20 billion. Four quarters ago, we called that a bottom would occur in net interest income in the second quarter of 2024. Even with the rate environment that has bounced around quite a bit since we said that, we got it right.

Speaker Change: So, how did Bank America do against this backdrop? A Bank of America are commitment to response will go through means unwavering as a quarter as another illustration of that. We grew, we did it the right way.

Speaker Change: and the third quarter bank of America generate $25.5 billion in revenue earned $6.9 billion net income after tax.

Speaker Change: Here today we've generated net income of just over $20 billion. Four quarters ago we called that a bottom would occur in our net interest income in the second quarter of 2024.

Speaker Change: Even with the rain environment that has bounced around quite a bit since we said that, we got it right. As we expected then, and I, indeed, dropped in the quarter two. And now I grew 2% this quarter. As Alastair will note later, we expect that I, to grow again in quarter four, even as the market expects two more rate cuts in quarter four.

Brian Moynihan: As we expected then, and I indeed troughed in the quarter two. And I grew 2% this quarter. As Alastair will note later, we expect that I to grow again in quarter four, even as the market expects two more rate cuts in quarter four. This quarter, we saw a healthy revenue growth in our wealth and investment management business and in our global markets business. We return 5.6 billion of capital shareals, while supporting the needs of our clients.

Speaker Change: This quarter we saw a healthy revenue growth in our wealth and investment management business and in our global markets business.

Speaker Change: Rear turn 5.6 billion of capital sharerows while also supporting the needs of our clients. So with that brief overview, let's dive into slide two.

Brian Moynihan: So, with that brief overview, let's dive into slide two. Earnings per share came in at 81 cents this quarter. At $25.5 billion in revenue, we grew modestly from the third quarter, 23, as improvement in non-interest income more than that offset a year-to-year decline in net interest income. Fees grew 5% year-to-year and represented 45% of total revenue. The strong year-to-year fee performance was led by a 15% improvement in investment and brokerage services, mostly in our Global Wealth Management business. We also grew investment banking fees 18% year-to-year. Sales in trading revenue increased 12% year-to-year, and aggregate these market-related revenue streams rose an impressive 13% year-to-year.

Speaker Change: Earnings per share, came in at 81 cents this quarter. At $25.5 billion in revenue, we grew modestly from the third quarter, 23, as improvement in non-interesting come more than that offset a year-by-year decline in net interest income.

Speaker Change: FESCOO 5% year-year and represented 45% of total revenue.

Speaker Change: The strong year of year fee performance was led by a 15% improvement in investment in broker services.

Speaker Change: Mostly in our global wealth management business.

Speaker Change: We also grew on best in banking fees 18% year over year.

Speaker Change: Sales and Trading revenue increased 12% year every year. And aggregate these market-related revenue streams rose in impressive 13% year every year. Our total expense in the company increased 4%. You can attribute most of the year-rear expense growth to these market-related areas. Overall, a good job by the team.

Brian Moynihan: Our total expense in the company increased 4%. You can attribute most of the year-to-year expense growth to these market-related areas. Overall, a good job by the team. On asset quality, a few quarters ago, we told you that consumer credit losses would go down this quarter, given the lengthy trends we'd seen at the time. We also told you that office losses would be lower. Both asset quality resulted in net charge in provision expense for this quarter at 1.5 billion, which was unchanged from last quarter. Our performance is partly attributable to the diversity and balance of the company.

Speaker Change: On Asset Quality, a few quarters ago we told you the consumer kind of losses will go down this quarter given to lengthy trends we had seen at the time.

Speaker Change: We also told you that office losses would be lower, both of these proved true again this quarter. Good ask the quality result in that charge offset in provision expense for this quarter at 1.5 billion, which was unchanged from last quarter.

Speaker Change: Our performance is partly attributable to the diversity and balance of the company. A little more in half our earnings come from our consumer and G-Win businesses serving people. And the other half come through from our global banking and market businesses serving companies and institutional investors.

Brian Moynihan: A little more than half earnings come from our consumer and G-win businesses serving people. Any other half come through from our global banking markets businesses serving companies and institutional investors.

Brian Moynihan: So let's turn to see how we grew organically this quarter. We are now in slide three. Our organic growth has been driven by a continued focus on customers and clients' experience throughout our businesses. Consumer leads the way, delivering solid organic growth, but high quality accounts engage clients. For the 23rd consecutive quarter, we added significant net new consumer checking accounts and expand our customer base and market share. We added 360,000 net new checking accounts this quarter, which brings our first nine months of 24 to more than 880,000 net new checking accounts. In wealth management, we added another 5,500 net new relationships this quarter.

Speaker Change: So, let's turn to see how we grew organically this quarter, where we are now in slide three. Our organic growth has been driven by a continued focus on customer and client experience throughout our businesses.

Speaker Change: Consumely is a way delivering sought organic growth but high quality accounts and gauge clients. For the 23rd consecutive quarter, we had a significant net new consumer checking accounts in expander, a customer base and market share.

Speaker Change: We added 360,000 net new check-in counts this quarter, which brings our first nine months of 24 to more than 880,000 net new check-in counts.

Speaker Change: and Welch Manager, we added another 5,500 net new relationships as a quarter. In our commercial businesses, we added hundreds of small businesses and commercial banking relationships.

Brian Moynihan: In our commercial businesses, we added hundreds of small business and commercial banking relations. Partnerships. Also note that we saw strong organic growth of investment balances with banking customers and growth and banking products for our investment clients and our G1 business. This has led us to now manage $5.9 trillion in client balance that loans to pods and investments across the consumer and wealth management clients. We saw flows of $62 billion into those businesses in the past four quarters. In our global banking business, we saw loan demands start to pick up late in the course. We again ranked third in theologic IB fees received and have a solid pipeline.

Speaker Change: Also note that we saw strong organic growth of investment balances with banking customers and growth in banking products for our best in clients and our G1 business. This has led us to now manage 5.9 trillion dollars in client balance of loans to our lives and investments across the consumer and wealth management clients.

Speaker Change: We saw Flow as a $62 billion in those businesses in the past four quarters.

Speaker Change: In our global banking business, we saw a loan demand start to pick up late in the quarter.

Speaker Change: We're getting ranked third in theologic IB fees received and have a solid pipeline. A global transaction services platform continues to grow around the world and shows strong deposit growth for a commercial businesses of the last year and a quarter.

Brian Moynihan: Our global transaction services platform continues to grow around the world and shows strong deposit growth for our commercial businesses over the last year in a quarter. This quarter, global markets saw a continuum of momentum. Global markets recorded the 10th consecutive quarter of year-rear growth in sales and trading. Investments we've made in this business and the intensity of the teams has enabled a 35% improvement in sales and trading revenue in the past three years. Good work by Jimmy Demar and the team. Our customers and clients continue to want more from us, especially when it comes to our digital capabilities.

Speaker Change: This quarter global market stock continued momentum.

Speaker Change: Global Markets recorded the 10th consecutive quarter of year over your growth in sales and trading. Investments we've made in this business and the intensity of the teams is enabled a 35% improvement in sales and trading revenue in the past three years. Good work by Jimmy Demar on the team.

Speaker Change: Our customers and clients continue out more from us, especially come to our digital capabilities. So let's discuss this on slide four.

Brian Moynihan: Let's discuss this on Slide four. Slide four highlights this continued success across our digital platforms. As usual, we include our disclosures on digital stats across the business, which we believe lead the industry. I commend you the pages and the appendix, which give you more grain to the disclosure for each of the businesses' digital activities. Our fully integrated consumer banking investment application drives the utility for our customers across the U.M. and consumer. These the uses stats you see are strong proof points. Our second language capabilities also enhance the customer's experience. We have grown to more than 48 million active digital users, and those digital users logged in more than 3.6 billion times this quarter.

Speaker Change: Slide 4 highlights this continued success across our digital platforms. As usual, we include our disclosures on digital stats across the business, which we believe lead the industry. I commend you to the pages and the appendix, which give you more grain of the disclosure for each of the business's digital activities.

Speaker Change: are fully integrated consumer banking investment, application drive as the utility for our customers across the U.M. and consumer. The uses stats you see are strong proof points. Our second language capabilities also enhance the customer's experience.

Speaker Change: We have grown to more than 48 million active digital users, and those digital users logged in more than 3.6 billion times as quarter.

Brian Moynihan: We also continue to see more sales for their digital properties. Digital sales represent a 54% of our total consumer sales in quarter. Note that it simply takes both high touch and high tech to drive continued growth with individual clients across the well-spectrum in America. Eric, our AI enabled virtual assistant, reached 2.4 billion client or action since its launch and Zell show continued user and usage increases. In our wealth management business, we continue to see full relationships increase with both investing and banking relations being open. 75% of the new accounts in Merrill were open digitally, whether they were banking accounts or investing accounts.

Speaker Change: We also continue to see more sales for their digital properties. Digital sales represent a 54% of our total consumer sales is quarter.

Speaker Change: Note that it simply takes both high-touch and high-tech to drive continued growth with individual clients across the well-specked of an America. Eric, RAI, enabled virtual system, reached 2.4 billion client interactions since its launch. In Zell Show continued user and usage increases.

Speaker Change: In our wealth management business, we continue to see full relationships increase with both investing and banking relationships being open. 75% of the new accounts in Merrill were open digitally, whether they were banking accounts or investing accounts.

Brian Moynihan: This enables more efficient customer coverage for our advisory teams. Finally, 87% of our global banking relationship clients are digitally active. We have innovated in significantly streamlined service requests by naming clients directly initiate and track inquiries within our award-winning cashflow platform. As a result, app sign-ins with these clients increase nearly 80% in just the last 24 months.

Speaker Change: This enables more efficient customer coverage for our advisory teams.

Speaker Change: Finally, 87% of our global banking relationship clients are digitally active. We have innovated in significantly streamlined service requests by name and clients directly initiate and track inquiries within our award-winning cash vote platform.

Speaker Change: As a result, App Signance with these clients increased nearly 80% in just the last 24 months.

Brian Moynihan: In summary, the economic environment rains solid. Wishes remain out there to external factors that can affect our business and economy generally. We still see great opportunities for continued growth across all our businesses. We are focused on driving market share in all our businesses, investing in technology to further enhance the customer experience, and continue to increase our efficiency. Agency. With that eye now growth, with that eye now growing and complementing our fee growth, along with our continued solid expense discipline, we expect to return to operating leverages who move through the quarters in 2025.

Speaker Change: In summary, the economic environment reigns solid, which used to remain out there to external factors that could affect our business and economy generally.

Speaker Change: We still see great opportunities for continue growth across all our businesses, where our focus on driving market share and all our businesses, investing in technology to further enhance the customer experience and continue to increase our efficiency.

Speaker Change: With that eye now growth, with that eye now growing and compiming our fee growth, along with our continued solid expense discipline, we expect to return to operating leverages who move through the quarters in 2025. With that, I'll turn to Alastair for additional details.

Alastair Borthwick: With that, I'll turn to Alastair for additional details.

Alastair Borthwick: Thank you, Brian. I'm starting on slide five of the earnings presentation. We'll touch on more highlights noted here as we work through the material. And I just add that we delivered solid returns, with a return on average assets of 83 basis points and a return on tangible common equity of 12.8%. So let's move to the balance sheet on slide six, where you can see that the balance sheet ended the quarter at 3.3 trillion of total assets, up 66 billion from the second quarter as global markets, client demands expanded, and commercial loans grew $16 billion in the quarter.

Alastair Borthwick: and I'm starting on slide five of the earnings presentation.

Alastair Borthwick: We'll touch on more highlights noted here as we work through the material and I just had that we delivered solid returns with a return on average assets of 83 basis points and return on tangible common equity of 12.8%.

Alastair Borthwick: So let's move to the balance sheet on slide 6, where you can see that the balance sheet ended the quarter at 3.3 trillion of total assets, up 66 billion from the second quarter, as global markets client demands expanded, and commercial loans grew $16 billion in the quarter.

Alastair Borthwick: Otherwise, in the quarter, the investments of our access liquidity saw a $10 billion reduction in the whole to maturity securities. And the combination of shorter term liquidity investments of cash and available for sale securities were relatively flat to the second quarter. On the funding side, global markets grew to support balance sheet needs of our clients, and total deposits grew $20 billion on an ending basis. It's not worthy that our average deposits are now up for the fifth consecutive quarter. Liquidity remains strong with 947 billion of global liquidity sources. And that was up $38 billion compared to the second quarter.

Alastair Borthwick: Otherwise, in the quarter, the investments of our excess liquidity, so a $10 billion reduction in hold-to-matured securities, and the combination of shorter-term liquidity investments of cash and available for sale securities were relatively flat to the second quarter.

Alastair Borthwick: On the funding side, global markets grew to support balanced seed needs of our clients and total deposits drew 20 billion on an ending basis. It's not where they fed our average deposits are now up for the fifth consecutive quarter.

Alastair Borthwick: Lequidity remains strong with 947 billion of global liquidity sources and that was up 38 billion compared to the second quarter.

Alastair Borthwick: Shareholder's equity was up $2.6 billion, with common equity up $4.6 billion and a preferred redemption driving a $2 billion decline in preferred equity. The increase in common equity compared to Q2 included $5.6 billion in capital return to shareholders, partially offsetting our earnings, and it included an improvement in AOCI, driven by an improvement from cash flow hedges, given the drop in the long term rates in the quarter. The $5.6 billion in capital distributions includes $2 billion in common dividends and the repurchase of $3.5 billion in shares. Tangible book value per share of $26.25 rose 10% from the third quarter of $23.

Alastair Borthwick: Shareholder's equity was up 2.6 billion with common equity up 4.6 billion and a preferred redemption driving a 2 billion decline in preferred equity.

Alastair Borthwick: The increase in common equity compared to Q2 included 5.6 billion in capital return to shareholders, partially offsetting our earnings and it included an improvement in AOCI driven by an improvement from cash flow hedges given the drop in long term rates in the quarter.

Alastair Borthwick: The 5.6 billion capital distributions includes 2 billion common dividends and the purchase of 3.5 billion shares.

Alastair Borthwick: tangible book value per share of 26.25, rose 10% from the third quarter of 23.

Alastair Borthwick: And turning to regulatory capital, our CET1 level improved to $200 billion, and the CET1 ratio was 11.8%. And that remained well above our new 10.7% requirement as of October 1. Risk weighted assets increased modestly, driven by both lending activity and global markets needs to support clients. And our supplemental leverage ratio was 5.9% compared to the minimum requirement of 5%, which leads plenty of capacity for balance sheet growth. Our $463 billion of total loss absorbing capital means our T-LAC ratio remains comfortably above our requirements.

Alastair Borthwick: And turning to regulatory capital, our CET-1 level, improved to $200 billion, and the CET-1 ratio was 11.8%. And that remains well above our new 10.7% requirement as of October 1st.

Alastair Borthwick: Risk-rated assets increased modestly driven by both lending activity and global markets needs to support clients. And our supplemental leverage ratio was 5.9% compared to the minimum requirement of 5% which leaves plenty of capacity for balance sheet growth.

Alastair Borthwick: Our 463 billion of total loss absorbing capital means our T-Liq ratio remains comfortably above our requirements.

Alastair Borthwick: So let's dig a little deeper on deposits and the growth from the second quarter using slide seven. Here we show you deposits and rates by line of business. Average deposits grew $45 billion or 2% year-over-year and the increased modestly linked court. Nautably, quarter-over-quarter increases in rates paid continue to slow again this quarter, rising seven basis points to 210. Consumer banking increased modestly, driven by product mix in higher rate product offerings. And global banking rate paid increased modestly, driven by growth in interest bearing balances. It's worth noting the wealth management declined to basis point. We acted quickly following the September 50 basis point rate cut in our wealth business and our global banking business.

Speaker Change: So, let's take a little deeper on deposits and the growth from the second quarter using slide seven. Here we show you deposits and rates by line of business. Average deposits grew $45 billion or 2% year over year and the increased modestly linked quarter.

Speaker Change: Notably, quarter over quarter increases in rates paid to continue to slow again this quarter, rising 7 basis points to 210. Consumer banking increased modestly, driven by products in higher rate product offerings.

Speaker Change: and global banking rate paid increased modestly driven by growth in introspearing balances. It's worth noting that wealth management declined a basis point.

Speaker Change: We acted quickly following the September 50 basis point rate cut in our wealth business and our global banking business and since late in the quarter only a small portion of those cuts are reflected.

Alastair Borthwick: And since late in the quarter, only a small portion of those cuts are reflected. Total rate paid for all deposits from these actions is expected to fall below 2% later in October as the fuller effect of the pass-throughs occurs.

Speaker Change: Total repaid for all deposits from these actions is expected to fall below 2% later in October as the fuller effect of the past throughs occur.

Alastair Borthwick: Let's turn to loans by looking at average balances on slide 8. Loans in Q3 of 1.06 trillion improved 1% year over year, driven by solid commercial loan growth as well as credit card and vehicle loans. Overall, commercial loans grew 2% year over year. And importantly, this included a drop in commercial real estate loans of 6%. Commercial loans excluding commercial real estate grew 3% year over year and were up 6% annualized from the second quarter. Consumer banking loan growth was driven by credit card, small business, and vehicle borrowing. And the overall consumer growth was muted by a decline in mortgage balances as paydowns exceeded originations in a higher rate environment.

Speaker Change: Let's turn to loans by looking at average balances on slide 8.

Speaker Change: Loans in Q3 of 1.06 trillion improved 1% year over year driven by solid commercial loan growth, as well as credit card and vehicle loans.

Speaker Change: Overall, commercial loans grew 2% year over year.

Speaker Change: An importantly, this included a drop in commercial real estate loans of 6%.

Speaker Change: Commercial Loans, excluding commercial real estate, grew 3% year over year, and were up 6% analyzed from the second quarter.

Speaker Change: Consumer Banking loan growth was driven by credit card, small business and vehicle borrowing. And the overall consumer growth was muted by a decline in mortgage balances as paydowns exceeded originations in a higher rate environment.

Alastair Borthwick: Let's turn our focus to NII performance and Slide 9. So note that our trended investment of excess deposit slide is in our appendix on page 21. Deposit levels were 855 billion in excess of loans at the end of Q3 and continue to be a good source of value for shareholders. Nearly 625 billion, or 52% of our excess liquidity, is in short dated cash and AFS securities. The longer dated lower yielding hold to maturity book continues to roll off, and we reinvest that in higher yielding assets. The blended yield of cash and securities on page 21 remains well above our deposit rate paid.

Speaker Change: Let's turn our focus to NI Performance and Slide 9.

Speaker Change: So note that our trended investment of access deposit slide is in our appendix on page 21.

Speaker Change: Deposit levels were 85 billion in excess of loans at the end of Q3 and continue to be a good source of value for shareholders. Nearly 625 billion or 52% of our excess liquidity is in short-dated cash and AFS securities.

Speaker Change: The longer dated lower-yielding, hold-to-maturety book continues to roll off and we reinvest that in higher-yielding assets. The blended yield of cash and securities on page 21 remains well above our deposit rate paid.

Alastair Borthwick: So going back to slide 9 regarding NII on a gap non FTE basis, NII in Q3 was 14 billion, and on a fully tax equivalent basis, NII was 14.1 billion. On our third quarter earnings call last year, we first provided our expectation that the second quarter would be the trough and then we would begin to grow in the third quarter of 24, marking an inflection point for NII, and that's what you see this quarter. NII increased by 252 million from the second quarter, driven by a number of factors. Global market's activity and pricing fixed asset repricing, and one extra day all benefited NII, while higher funding costs partially offset those benefits.

Speaker Change: So going back to slide nine regarding NAI on a gap.

Speaker Change: Narn FTE basis NII and Q3 was 14 billion.

Speaker Change: and on a fully tax-acrevalent basis, NII was 14.1 billion.

Speaker Change: On our third quarter earnings call last year, we first provided our expectation that the second quarter would be the trough.

Speaker Change: And then we would begin to grow in the third quarter of 24 marking an inflection point for NII and that's what you see this quarter.

Speaker Change: NII increased by 252 million from the second quarter driven by a number of factors.

Speaker Change: Global Markets Activity and Pracing.

Speaker Change: Fixed asset repricing and one extra day all benefited NI while higher funding costs partially offset those benefits.

Alastair Borthwick: The 50 basis point rate cut in September also negatively impacted NII. With regard to a forward view of NII, there are obviously several variables at play in the fourth quarter, and we still expect fourth quarter NII to grow, and we expect it to be 14.3 billion or more on a fully tax-equivalent basis. Now we note the following assumptions first. We assume that the forward curve on October 10th is the one that materializes, so that includes a 25 basis point cut in November and another 25 basis points in December. We also assume very modest balance increases in both loans and deposits in Q4, building off the activity seen in Q3.

Speaker Change: The 50 basis point rate cut in September, also negatively impacted NII.

Speaker Change: With regard to a forward view of NII, there are obviously several variables at play in the fourth quarter and we still expect fourth quarter NII to grow and we expect it to be 14.3 billion or more on a fully tax equivalent basis.

Speaker Change: Now we know the following assumptions first. We assume that the forward curve on October 10th is the one that materializes. So that includes a 25 basis point cut in November and another 25 basis points in December.

Speaker Change: We also assume very modest balance increases in both loans and deposits in Q4, building off the activity scene in Q3.

Alastair Borthwick: Last quarter, we told you we expect about 20 billion in the aggregate of fixed rate loans and securities to reprice on a quarterly basis, and those are expected to reprice into higher yielding assets and provide a benefit to NII for many periods ahead. And as described previously, we expect to see roughly 200 million benefit in Q4 from the BISB alternative rate transition, so we think this sets us up well for 2025.

Speaker Change: Last quarter we told you we expect about 20 billion in the aggregate of fixed rate loans and securities to reprise on a quarterly basis and those are expected to reprise into higher building assets and provide a benefit to NII for many periods ahead.

Speaker Change: and this described previously we expect to see roughly 200 million benefit in Q4 from the Bisby alternative rate transition. So we think this sets us wet up well for 2025.

Alastair Borthwick: With regard to interest rate sensitivity on a dynamic deposit basis, we provide a 12-month change in NII for an instantaneous shift above or below the forward curve. On that basis, a 100 basis point increase would benefit NII by 1.8 billion dollars, while a decrease of 100 basis points would decrease the NII over the next 12 months by 2.7 billion.

Speaker Change: With regard to interest rate sensitivity on a dynamic deposit basis, we provide a 12-month change in NII for an instantaneous shift above or below the forward curve.

Speaker Change: On that basis, a 100 basis point increase would benefit NII by $1.8 billion, while a decrease of 100 basis points would decrease the NII over the next 12 months by 2.7 billion.

Alastair Borthwick: Okay, let's now turn to expense, and we'll use slide 10 for the discussion. We reported 16.5 billion in expense this quarter, up 1% from the second quarter, driven by the revenue improvement in three primary areas that Brian noted earlier. Investment banking, investment brokerage fees, and sales and trading revenue all have more activity and incentive variability than other revenues, and they were up 3% in aggregate versus the second quarter and up 13% year over year. In Q3, our head count of 213,000 was up a little more than 1,000, and this quarter we saw the departure of roughly 2,000 summer interns, and we welcomed roughly 2,500 college graduates from the nearly 120,000 applications received.

Speaker Change: Okay, let's now turn two expense and we'll use slide 10 for the discussion.

Speaker Change: We reported 16.5 billion in expense this quarter, up 1% from the second quarter, driven by the revenue improvement in three primary areas that Brian noted earlier.

Speaker Change: Investment Banking.

Speaker Change: Investment Group and brokerage fees and sales and trading revenue all have more activity and incentive variability than other revenues and they were up 3% in aggregate versus the second quarter and up 13% year over year.

Speaker Change: In Q3, our head kind of 213,000 was up a little more than 1,000. And this quarter we saw the departure of roughly 2,000 summer interns. And we welcomed roughly 2,500 college graduates from the nearly 120,000 applications received.

Alastair Borthwick: Regarding a forward view, in Q4, we don't expect much change in our head count, and with continued investments, we expect expense to be in line with Q3 at 16.5 billion. As we look into 2025, with an expected return of NII growth, and through our expense discipline, we expect a return to operating leverage and improvement in our efficiency ratio.

Speaker Change: Regarding a forward view and Q4 we don't expect much change in our head count and with continued investments we expect expense to be in line with Q3 a 16.5 billion.

Speaker Change: As we look into 2025, with an expected return of NIA growth and through our expense discipline, we expect a return to operating leverage and improvement in our efficiency ratio.

Alastair Borthwick: Let's turn to credit on slide 11, and the good news is there's not a lot to report here compared to the second quarter. Net charge-offs of 1.5 billion were flat compared to Q2. We've seen consumer losses in a pretty tight range for a few quarters now. Outside of that, we saw lower losses from office exposure, and otherwise we had two somewhat unrelated commercial losses. The net chargeoff ratio was 58 basis points, down one basis point from Q2. Q2. Provision expense was unchanged from Q2 at 1.5 billion, as reserve levels remain constant. And with regard to reserve levels on a weighted basis, we remain reserve for an unemployment rate of 5% by the end of 2025, compared to the most recent 4.1% rate reported.

Speaker Change: Let's turn to credit on slide 11 and the good news is there's not a lot to report here compared to the second quarter. That charge-offs of 1.5 billion were flat compared to Q2, we've seen consumer losses in a pretty tight range for a few quarters now.

Speaker Change: I was sight of that, we saw lower losses from office exposure, and otherwise we had to somewhat unrelated commercial losses. The net charge offer ratio was 58 basis points down one basis point from Q2.

Speaker Change: Provision expense was unchanged from Q2 at 1.5 billion as reserve levels remain constant.

Speaker Change: And with regard to reserve levels on a weighted basis, we remain reserved for an unemployment rate of 5% by the end of 2025 compared to the most recent 4.1% rate reported.

Alastair Borthwick: On slide 12, we highlight the credit quality metrics for both our consumer and commercial portfolios, and there's nothing really noteworthy to highlight on this page.

Speaker Change: and Slide 12 we highlight the credit quality metrics for both our consumer and commercial portfolios.

Speaker Change: and there's nothing really noteworthy to highlight on this page.

Alastair Borthwick: So let's move to the various lines of business and some brief comments on their results, starting on slide 13 with Consumer Banking. Consumer banking continues to lead the company in organic growth, and this included another strong quarter of net new checking growth, another strong period of card openings, and a 528% year-over-year to a record $497 billion. It also included 12 months of strong flows at 29 billion in addition to market appreciation. As noted earlier, loans grew nicely year-over-year from credit card and vehicle, as well as small business, where we remain the industry leader. One highlight to note are Practice Solutions Lending Group for doctors, and dentists, and related professionals saw loans grow 11% year-over-year.

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

Speaker Change: Consumer Banking continues to lead the company in Organic Growth, and this included another strong quarter of Net New Checking Growth.

Speaker Change: Another strong period of card openings and investment balances for consumer clients, which claimed 28% year over year to a record $497 billion. It also included 12 months of strong flows at $29 billion in addition to market appreciation.

Speaker Change: As noted earlier, Lowens grew nicely year over year from credit card and vehicle, as well as small business where we remain the industry leader. One highlight to note are practice solutions lending group for doctors and dentists and related professionals saw Lowens grow 11% year over year.

Alastair Borthwick: All of this organic growth helped to drive 2.7 billion in net income in 2.3. So reported earnings remain strong, declining 6% year-over-year as revenue declined from lower NII, partially offset by higher card income. With the trajectory shifting in NII, we should see earnings in this business begin to shift as well. Expense rose 5% as we continued our business investments. And those investments included those in our people, including the announcement of moving our minimum wage to $24 per hour, and that raises the minimum annual salary for our associates to nearly $50,000. As you can see on the Appendix page 25, digital adoption and engagement continue to improve, and customer satisfaction scores remain near record levels, illustrating the appreciation of enhanced capabilities from our continuous investments.

Speaker Change: All of this organic growth helped to drive 2.7 billion in net income in Q3.

Speaker Change: So reported earnings remain strong, declining 6% year over year, as revenue declined from lower NII, partially offset by higher card income. But the trajectory shifting in NII, we should see earnings in this business begin to shift as well.

Speaker Change: Expense rose 5% as we continued our business investments.

Speaker Change: and those investments included those in our people.

Speaker Change: Including the announcement of moving on minimum wage to $24 per hour, and that raises the minimum annualized salary for our associates in nearly $50,000.

Speaker Change: As you can see on the appendix page 25, digital adoption and engagement continue to improve and customer satisfaction scores remain near record levels illustrating the appreciation of enhanced capabilities from our continuous investments.

Alastair Borthwick: Bank of America's 23 million Zelle users are up 10% in the past 12 months, and their volume usage is now up more than 20%. Customers are now using Zell at nearly three times the rate in writing checks, and Zell usage has meaningfully surpassed the combination of checks written and ATM withdrawals.

Speaker Change: Bank of America's 23 million Zell users are up to 10% in the past 12 months, and their volume usage is now up more than 20%.

Speaker Change: Customers are now using Zellot nearly three times the rate to lighten checks.

Speaker Change: and Zell usage is meaningfully surpassed the combination of checks written and ATM withdrawals.

Alastair Borthwick: Moving to wealth management on slide 14, we produce good results, reflecting healthy organic growth and client activity, with increased banking activities of our clients, and the impacts of increased market levels together with strong assets under management flows. With a continued increase in banking product usage from our investing clients, the diversity of our revenue base continues to improve. More than 60% of our wealth clients now have banking products with us, and 30% of our revenue is now in net interest income to complement the fees earned in our advice model. Net income rose from the third quarter 23 to 1.1 billion this year.

Speaker Change: Moving to wealth management on slide 14, we produce good results reflecting healthy, organic growth and client activity, with increased banking activities of our clients.

Speaker Change: and the impacts of increased market levels together with strong assets under management flows.

Speaker Change: With a continued increase in banking product usage from our investing clients, the diversity of our revenue-based continues to improve.

Speaker Change: More than 60% of our wealth clients now have banking products with us and 30% of our revenue is now in net interest income to complement the fees earned in our advice model.

Speaker Change: Netting come rose from the third quarter 23 to 1.1 billion this year.

Alastair Borthwick: In 2.3 we reported revenue of nearly 5.8 billion dollars, growing 8% over the prior year, led by 14% growth in asset management freeze. Brian highlighted earlier. Expand growth reflects the fee growth and other investments for our future growth as we continue to grow our advisor force through hiring of both experienced advisors and graduates from our training program. We welcomed 5,500 Merrill and Private Bank net new households this quarter, and more than a third of those Merrill openings were driven by graduates from our training program. The business had a 25% margin and generated a strong return and capital of 23%. Average loans were up to 3% year over year, driven by growth and custom lending and a pickup in mortgage lending.

Speaker Change: In Q3, we reported revenue of nearly $5.8 billion, growing 8% over the prior year, led by the 14% growth and asset management freeze, Brian highlighted earlier.

Speaker Change: Expand Scroat reflects the figure of

Speaker Change: and other investments for our future growth as we continue to grow our advisor force, through hiring of both experienced advisors and graduates from our training program.

Speaker Change: We welcome 5,500 Merrill and Private Bank net new households this quarter and more than a third of those Merrill openings were driven by graduates from our training program.

Speaker Change: The business had a 25% margin and generated a strong return on capital of 23%.

Speaker Change: Average loans were up to 3% year over year driven by growth in custom lending and a pick-up in mortgage lending.

Alastair Borthwick: Both Merrill and the Private Bank continue to see healthy organic growth, producing strong assets and management flows of 65 billion year over year, which reflects a good mix of new client money as well as existing clients putting money to work. We should also highlight the continued digital momentum that you'll find on slide 27 as an example: three quarters of Merrill bank and investment accounts were open digitally this quarter.

Speaker Change: Both Merrill and the private bank continue to see healthy organic growth, producing strong assets under management flows of 65 billion year over year, which reflects a good mix of new client money, as well as existing clients putting money to work.

Speaker Change: We should also highlight the continued digital momentum that you'll find on slide 27 as an example, three quarters of Merrill Bank and Investment Accounts were open digitally this quarter.

Alastair Borthwick: On slide 15, you see global banking results. This business produced earnings of 1.9 billion dollars, down 26% year over year, as improved investment banking fees and treasury services revenue. Overcome by lower net interest income and higher provision expense, revenue to clients 6% driven by the impact of interest rates and deposit rotation in our global treasury services business. Fees for managing the cash of clients continue to offset some of the NII pressure from higher rates. Investment banking at a strong quarter growing fees 18% year over year to 1.4 billion, led by debt capital markets fees, mostly in leverage finance and investment grade.

Speaker Change: On slide 15 you see global banking results. This business produced earnings of $1.9 billion.

Speaker Change: Down 26% year over year has improved investment banking fees and treasury services revenue were overcome by lower net interest income and higher provision expense.

Speaker Change: Revenue decline 6% driven by the impact of interest rates and deposit rotation.

Speaker Change: In our Global Treasury Services business, these for managing the cash of clients continue to offset some of the NI-I pressure from higher rates.

Speaker Change: Investment Banking at a strong quarter, growing fees 18% year over year to 1.4 billion, led by deck capital markets fees, mostly in leverage finance and investment grade. We finished the quarter strong, maintaining our number three investment banking fee position.

Alastair Borthwick: We finished the quarter strong, maintaining our number three investment banking position.

Alastair Borthwick: But began as a slow quarter this summer, gained some momentum through September, and the pipeline looking forward looks solid. An increase in provision expense from last year was driven by the previously noted commercial and CRE losses. Expense increased 7% year over year, including continued investments in the business, particularly around technology. Switching to global markets on slide 16. The focus comments on results excluding DVA as we normally do, and the team continued their impressive streak of strong revenue and earnings performance. The achieved operating leverage and continued to deliver good return on capital. Earnings of 1.6 billion drew 23% year over year, and return on average allocated capital was 14%.

Speaker Change: Well, began as a slow-courtier this summer, gained some momentum through September and the pipeline looking forward to look solid. An increase in provision expanse from last year was driven by the previously noted commercial.

Speaker Change: and C.R.E. losses.

Speaker Change: expense increase 7% year over year, including continued investments in the business, particularly around technology.

Speaker Change: Switching to global markets on slide 16, a focus comments on results excluding DVA as we normally do.

Speaker Change: and the team continued their impressive streak of strong revenue and earnings performance. They achieved operating leverage and continued to deliver good return on capital.

Speaker Change: Learning of 1.6 billion, 20% year over year, and return on the average allocated capital was 14%. Revenue, again, XDVA, improved 14% from the third quarter of last year as both sales and trading and investment banking fees for institutional clients improved nicely year over year.

Alastair Borthwick: Revenue again X DVA improve 14% from the third quarter last year, as both sales and trading and investment banking fees for institutional clients improve nicely year over year. focusing on sales and trading, XDVA revenue improved 12% year over year to 4.9 billion. FIC increased 8%, while equities increased 18% compared to the third quarter of 23. FIC revenues remain strong, growing over both the prior year and the second quarter, driven by momentum in currencies trading. Equities had a record third quarter driven by strong trading performance in derivatives and cash. Year over year, expenses were up 6% on revenue improvement and our continued investment in the business.

Speaker Change: Focusing on sales and trading, XDVA revenue improved 12% year over year to 4.9 billion. Fick increased 8% while equities increased 18% compared to the third quarter of 23.

Speaker Change: Thick revenues remain strong growing over both the prior year and the second quarter, driven by momentum in currencies trading.

Speaker Change: Aquities had a record third quarter driven by strong trading performance in derivatives and cash.

Speaker Change: Year over year expenses were up 6% on revenue improvement and are continued investment in the business.

Alastair Borthwick: Finally, on slide 17, all other shows a loss of $295 million; revenue is lower and included a charge to other income of roughly $200 million related to Visa's increase in its litigation escrow account. The decline in expense was driven by reduced costs of a liquidating business and lower legal expense.

Speaker Change: Finally, on Slight 17, all other shows a loss of $295 million, revenue is lower and included a charge to other income of roughly $200 million, related to visas increase in its litigation escrow count.

Speaker Change: The decline in expense was driven by reduced costs of a liquidating business and lower legal expense.

Alastair Borthwick: Our effective tax rate for the quarter was 6%, and excluding discrete items and the tax credits related to investments in renewable energy and affordable housing, the effective tax rate would have been approximately 24%.

Speaker Change: Art effective tax rate for the quarter was 6% and excluding discrete items and the tax credits related to investments in renewable energy and affordable housing. The effective tax rate would have been approximately 24%.

Operator: So that's where I'll stop, and with that, we'll open it up for Q&A.

Speaker Change: So that's where I'll stop and with that we'll open it up for Q&A.

Operator: 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. That is the pound key.

Speaker Change: At this time, if you would like to ask a question, please press star 1 now on your telephone keypad.

Jim Mitchell: Once again to ask a question, star 1 on your telephone keypad will take our first question from Jim Mitchell of Seaport Global. Hey, good morning. I guess I'll ask the N.I. question, Alistair. You talked about still feel comfortable trapping in the second quarter, poised to grow. So can you maybe give us a little bit more based on the forward curve, any kind of rough thinking on how the trajectory from here beyond 4Q and what kind of growth you may be thinking about in 25, just any kind of bigger than a bread box. The conversation will be helpful.

Speaker Change: To withdraw yourself from the queue that is the pound key. Once again to ask a question, sir one on your telephone keypad will take our first question from Jim Mitchell, a C-Port Global.

Jim Mitchell: Hey, good morning. I guess I'll ask the N.I. question Alastair, you talked about, um...

Jim Mitchell: Still feel comfortable troughing in the second quarter, poised to grow. So can you maybe give us a little bit more on, based on the forward curve, any kind of rough?

Jim Mitchell: I'm thinking on how and I took the trajectory from here beyond 4.2 and what kind of growth you may be thinking about in 25 just any kind of bigger than a bread box, the conversation would be helpful.

Alastair Borthwick: Jim, good morning. I think if we went back to three quarters ago, we sort of saw this trough appearing in the second quarter, and we felt like as the deposits were beginning to find the floor, we'd be in a position where we could begin to see N.I. grow. So obviously that happened in Q3, and at this point we feel like we're in a good position to do that again in Q4.

Speaker Change: Jim Good Morning. I think, you know, if we went back to the quarters ago, we sort of saw this trough appearing in the second quarter.

Jim: And we felt like as the deposits were beginning to find a floor, we'd be in a position where we could begin to see an eye grow. So obviously that happened in Q3.

Jim: And at this point we feel like we're in a good position to do that again in Q4.

Alastair Borthwick: We'll provide guidance, I think, for 2025 when we get back together again, a quarter from now. Part of the reason we try not to do 15 months in advance is because an awful lot moves with the rate curve. Remember this year, at one point we had six cuts, and another point we had one cut, and even this past quarter I think the market was surprised with an extra cut. What we're focused on then is just driving the underlying organic growth. So deposit growth, we're getting to a point now we've had five quarters in a row.

Jim: Will provide guidance for 2025 when we get back together again, a quarter from now. Part of the reason we try not to do 15 months in advance is because an awful lot moves with the rake curve. Remember this year, at one point we'd six cuts and another point we had one cut. And even this past quarter, I think the market was surprised with an extra cut.

Jim: What we're focused on then is just driving beyond a lane, organic roof. So, you know, deposit growth, we're getting to a point now, we've had five quarters in a row.

Alastair Borthwick: Global banking's back to normal seasonality. Wealth is flattening out, and consumer is slowing and is in a place now where we think we're pretty close to finding that floor. So deposits in a good place, the rotation is slowing. We've got a little pickup in loan growth this past quarter. That's good. We've got the fixed rate asset repricing over time from which we'll benefit, and we've got some cash flow swaps resetting as well. So, look, we're in a position where we believe we're going to grow NII again in the fourth quarter. That's going to set us up, I think, quite well in terms of 2025.

Jim: Um...

Jim: Global Banking's back to normal seasonality.

Speaker Change: Well, it's planning on.

Speaker Change: and consumer is slowing and is in a place now where we think we're pretty close to finding that for.

Speaker Change: The buzz it's in a good place, the rotation is slowing.

Speaker Change: We've got a little pick up in the long growth of this product's quarter, that's good.

Speaker Change: We've got the fixed rate asset repricing over time from which we'll benefit and we've got some cash flow swaps resetting as well. So look what we're in a position where we believe we're going to grow NII again in the fourth quarter. That's going to set us up, I think, quite well in terms of 2025. And importantly, we've acted fast with that first couple of rate cuts. So feel like we've put ourselves in a good position to grow from here.

Jim Mitchell: And importantly, you know, we've acted fast with that first couple of rate cuts. So, feel like we've put ourselves in a good position to grow from here. Okay, that's helpful.

Jim Mitchell: And maybe just to follow up on the deposit question, you guys had really strong growth in net new checking accounts, but consumer deposits still shrinking a little bit. Do you see any change in behavior since the rate cuts, or how are you thinking about consumer deposit growth and wealth too? I guess we're seeing commercial growth, but sort of those other pieces on the retail side that have yet to sort of influence. So, I'll carry on thinking about that. If you look across the last several weeks, the wealth management space, we've been flat at that $280 billion dollar level. Gym and the consumer business.

Speaker Change: Okay, that's helpful. And maybe just to follow up on the deposit question, you guys had really strong growth in net new checking accounts, but consumer deposits still shrinking a little bit. Do you see any change in behavior since the rate cuts, or how are you thinking about consumer deposit growth and wealth, too? I guess we're seeing commercial growth, but those other pieces on the retail side that have yet to sort of inflect, how are you thinking about that?

Speaker Change: If you look across the last several weeks, the Walsh Management Space Group had been flat at that 280 odd billion dollar level gym in the concern of business.

Alastair Borthwick: Your bounces around, you know, move $10 billion on a payday to give you a sense, but basically the major moves are over and we're out of now. We're about around 935 to 940 on a given day. Importantly, the non-interest-bearing peace going back to your generation of checking accounts, you know, seems to be stable. Much of the movement in the consumer business writ large has been for more interest rate sensitive clients with higher balances, having moved, and you're seeing that also slow. So, we feel good about the stability of consumer at this point. And we can, you know, the deposits do accounts are putting on today, you know, are the future of the franchise.

Speaker Change: You're bouncing around in a move, you know, $10 billion on a payday to give you a sense, but basically the major moves are over and we're now about around 9.35 to 9.40 on a given day. Importantly, the non-insure sparing piece come back to your generation new checking accounts. You know, seems to be stable.

Speaker Change: Much of the movement in the consumer business writ large has been for...

Speaker Change: You're more interested in sensitive clients with higher balances.

Speaker Change: Having moved in your seeing that also slow so we feel good about this stability, consumer at this point.

Speaker Change: and we can know that deposits

Alastair Borthwick: And that's when we keep building towards, so investing. To generate those accounts that are primary accounts in the household and start with an average balance of, you know, 356,000, move up to 789,000 over time. So, you're good about it.

Speaker Change: New Council are putting on today, you know, are the future of the franchise, and that's when we keep building towards so investing to generate those accounts that are primary accounts in the household and start with an average balance of 36,000, move up to 789,000 over time, so you'll get about it.

Jim Mitchell: Okay, thanks.

Operator: We'll take our next question.

Speaker Change: Okay, thanks.

Gerard Cassidy: You know, as you think about it, remember that we're sitting in the consumer; we want to basically $750 billion in balances to the 940 level now, which is a significant difference in the earnings power of that business. We'll take our next question from Gerard Cassidy of RBC.

Speaker Change: Well, take our next thing, I want to take it out to you, I just, you know, as you think about it, remember that we're sitting at the consumer, we want to basically $750 billion in balance at the 940 level now, which is a significant difference in the earnings power of that business.

Gerard Cassidy: Let me try one more thing. I haven't drawn. And Mr. Cassidy, your line is open. Please proceed with your question.

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

Betsy Grossick: We'll move next to Betsy Grossick of Morgan Stanley. Hi, good morning. Morning.

Speaker Change: and the machine is better.

Speaker Change: We'll move next to Betsy Grossic of Morgan Stanley.

Betsy Grossick: Just to follow up on this last thread of questions, two things. One, the deposits. How much do you feel that the rate environment has impacted you in terms of the deposit growth that you've generated here and, you know, the degree of shrinkage rate that you've seen in some of the businesses? Is it rate driven, do you think?

Speaker Change: Hi, good morning!

Speaker Change: Good morning, Arcee.

Betsy Grossic: Just to follow up on this last Threader question, two things, one.

Betsy Grossic: The Deposit, how much do you feel that the rate environment has?

Betsy Grossic: Impacted you in terms of the deposit, a growth that you've generated here, and the degree of shrinkage rates that you've seen in some of the businesses.

Alastair Borthwick: I guess, Betsy, in the end of the day, remember that we've grown deposits for four straight quarters. What is rate driven is at the margin, consumer customers that have, you know, 300,000, 500,000 have moved, you know, have less than the deposit counts, honestly, the pre-pandemic, when the aggregate hole is up, so think about that, you know, the constant customers that have been with us since then. And so, you know, and so the movement now just bumping around based on seasonal flows of people paying taxes and people, you know, having spent money in the summer and paying down the bills from that and things like that.

Betsy Grossic: Is it up to the rate driven do you think?

Betsy Grossic: I guess Betty.

Betsy Grossic: In the end of the day, remember that we've grown deposits for it.

Betsy Grossic: for Stray Corps. What is rate driven is at the margins.

Betsy Grossic: Consumer Customers have, you know, 300,500,000.

Betsy Grossic: have moved, you have less than a deposit, count honestly, the pre-pandemic when the air good holes up so they can't get to the customers that are dead with it since then.

Betsy Grossic: And so the movement now is just bumping around based on seasonal flows of people paying taxes and people. You haven't spent money in the summer and paying down the bills from that and things like that. So we feel it's stability on the consumer side.

Alastair Borthwick: So we feel there's stability, you know, stability on the consumer side, stability on the wealth management side, including the movement of the higher imbalances in the market, and a lot of that pricing on both those businesses just automatically given the rate cut. And then on commercial balance, that's just evidence of that build up a cash and corporate balance sheets and the activity levels of those customers. So we feel good across the board and, you know, basically for sub-course in the road, we continue to grow the balances. The rate impacts really the higher end balances because, remember, non-interesting and the consumers in low interest cost checking is driving a lot of the value and is a stable balance.

Betsy Grossic: Ab.

Betsy Grossic: Stability on the wealth management side, including the movement of the higher imbalances in the market, and a lot of that pricing on both those businesses just automatically given the rate cut. And then on commercial balances, that's just evidence of they've built up a cash and corporate balance sheets and the activity levels of those customers. So we feel good across the board and, you know, basically for suffocores in the road, we continue to grow the balances. The rate impacts. And then on the other side, we continue to grow the balance. And then on the other side, we continue to grow the balance.

Betsy Grossic: really the higher end balances because remember, not just bearing in the consumers in low interest.

Betsy Grossic: Cost checking is driving a lot of the value and it's a staple balance.

Betsy Grossick: Right, and I know last quarter, we were talking a lot about the sweeps and, you know, that whole pricing dynamic. Anything this quarter to say about that, reflecting on how you indicated in the slide, you know, you're at 313, you can jam one basis point, I mean, it's like the minimums, right. So just the underlying question here is, are we past this whole sweep thing? We fully affected that through a cost of basis, if that's a creation last quarter.

Speaker Change: and I know last quarter we were talking a lot about the sweeps and you know that cold pricing dynamics, anything this quarter to save out that reflecting on how you indicated in the slide, you know you're at 313 and it came down one basis point I mean it's like the minimums, right? So just that's the underlying question here is, are we past this cold sweep thing?

Speaker Change: We believe fully affected that through our custom basis if that's the aggression last week.

Betsy Grossick: Okay, and then the other question I had just was on the global banking. Alistair, you mentioned that corporate loan demand picked up late in the quarter. Maybe you could give us some color on what's driving that? Is that mainly a function of the M&A picking up? And the legs that you see to that demand would be really helpful to understand.

Speaker Change: Okay, and then the other question I had just was on the global banking, Alastair, you mentioned that corporate loan demand picked up late in the quarter. Maybe you could give us some color on what's driving that? Is that mainly a function of the M&A picking up? And the legs that you see to that demand would be really helpful to understand. Thanks so much. Thank you.

Alastair Borthwick: Thanks so much. Yeah, so look, we've obviously seen pretty modest loan growth over the course of the past year. And it's modest loan growth that we've put in our forward and I guidance. But we were; we were pleased to see a little bit more loan growth at the end of the quarter there. That's why you see the balances up a little more, end of period, than perhaps the prior quarter. And the last two quarters have been better than the previous quarters. So I don't know if that's early to call it a streak, but we're obviously pleased to see it.

Speaker Change: Yeah, so we've obviously seen pretty modest long growth over the course of the past year.

Speaker Change: and its modest loan growth that we've put in our forward N.A. guidance.

Speaker Change: But we were pleased to see a little bit more long growth at the end of the quarter there. That's why you see the balance is up a little more and a period than perhaps the prior quarter. And the last two quarters have been better than the previous quarter. So...

Speaker Change: I don't know if that's early to call it a streak, but we're obviously pleased to see it. It's been pretty consistent across our small business, our business banking, our commercial banking clients.

Alastair Borthwick: It's been pretty consistent across our small business, our business banking, our commercial banking clients. And I'd say, you know, we're not, we're not really seeing revolver utilization picking up yet. Probably too early for that. You know, rates haven't come down that much or hadn't come down to really late in the quarter. So that potentially is a place for some upside and loan growth over time, but we haven't put that in our guidance at this stage.

Speaker Change: and I'd say we're not really seeing revolver utilization picking up yet. Probably too early for that. Rates haven't come down that much or hadn't come down to really late in the quarter. So that potentially is a place for some upside and one growth over time. But we haven't put that in our guidance at this stage.

Betsy Grossick: Okay, perfect. Thanks so much.

Glenn Shore: We'll take our next question from Glenn Shore of Evercore. Hi, thank you. One quicky follow-up on the NII front.

Speaker Change: Okay, perfect, thanks so much.

Speaker Change: will take our next question from Glenn Shaw of Evercore.

Glenn Shaw: Hi. Thank you. I'm quick you follow up on the NIH front. I'm just curious current duration of the 60 degrees portfolio and maybe a fixed and floating mix split and how you're thinking about that short duration as the forward curve starts to play out.

Alastair Borthwick: I'm just curious, the current duration of the security portfolio and maybe a fixed and floating mix split and how you're thinking about that short duration as the forward curve starts to play out. Yeah, so not a great deal of change, Glenn, for us in terms of the security's portfolio from what we said before. Obviously, the ultimate maturity continues to run off. I think it's now 13 quarters in a row. Now, the 9 billion or so this quarter, which allows us to reinvest at higher yields. So, so that remains basically our first thought with respect to the investment strategy is just allow that to continue rolling down.

Speaker Change: Yeah, so not a great deal of change, Glenn, for us in terms of the Securities portfolio from all we've said before. Obviously, the ultimate charity continues to run off, I think it's now 13 quarters in a row.

Speaker Change: Now the 9 billion are so this quarter which allows us to reinvest at higher yields.

Speaker Change: So, that remains basically our first thought with respect to the investment strategy, is just below that to continue rolling down.

Alastair Borthwick: And we're going to continue to prioritize supporting loan growth for our clients. And you can sort of see that HTM runoff over time, funding the loans growth that we've had. Then whatever's left over from deposits growing, we're normally putting into cash and cash equivalents, or we're paying down expensive short-term liabilities. So, if you look, you'd see that we've allowed about 15 billion or so of institutional CDs to roll off this quarter. And at the margin, we're taking a little bit of one to three year fixed rate, maybe 10 or 20 billion in the last couple quarters.

Speaker Change: and we're going to continue to prioritize supporting loan growth for our clients and you can sort of see that HTML run off over time, funding the loans growth that we've had over time.

Speaker Change: What ever's left over from deposits growing? We're normally putting into cash and cash equivalents or we're paying down expensive short-term liabilities. So if you look, you'd see that we've allowed about 15 billion or so of institutional CDs to roll off this quarter.

Speaker Change: and at the margin, you know, we're taking a little bit of one to three year fixed rate.

Alastair Borthwick: But remember, we're trying to balance capital, liquidity, earnings, and it's less about a rate view. And it's more about just how the portfolio composition is changing over time.

Speaker Change: may be 10 or 20 billion in the last couple quarters. But remember, we're trying to balance capital, liquidity, earnings, and it's less about a rate for you and it's more about just how to portfolio composition is changing over time.

Glenn Shore: Yeah, good color. I appreciate it.

Alastair Borthwick: Want to maybe get a little bit more color you in the opening remarks. You mentioned the 10th straight quarter of quarter-on-quarter improvements in markets revenue. It's clear. It's it's to see.

Speaker Change: Yeah, good color. I appreciate it. Want to maybe get a little bit more color in the opening remarks. You mentioned the 10th straight quarter of quarter on quarter improvements and markets revenue. It's clear it's it's to see. Can you remind us exactly where you've been investing the line share of both people and balance sheet and is that an ongoing process that we can obviously we can't get a quarter every single quarter, but it's meaning is this an ongoing capital effort to continue to boost boost results across markets. Thanks.

Alastair Borthwick: Can you remind us exactly where you've been investing the lion's share of both people and balance sheet, and is that an ongoing process that we can obviously, we can't get a quarter every single quarter. But the meaning is this an ongoing capital effort to continue to boost results across markets. Thanks. Yeah, well, look, we've pointed out before, and I think you see it again in our results. This quarter, if you look at the organic growth highlights on page three, you'll see pretty good growth in each of our four big segments. Markets is no different in that regard relative to the other three, and that we continue to invest in that business.

Speaker Change: Well, look, we've pointed out before and you can see it again in our results this quarter. If you look at the organic growth highlights on page three, you'll see pretty good growth in each of our four big segments.

Speaker Change: Markets is no different in that regard relative to the other three in that we continue to invest in that business.

Alastair Borthwick: I wouldn't pick out any particular area and fixed income or equities for people's investments. I think, as Jimmy DeMar has highlighted, it's about for us filling gaps with existing clients and making sure we're there for them over time. So we've we've added people across across the various businesses. And then, with respect to balance sheet, it's a little bit of our WAs, as Brian highlighted. It's a little bit of liquidity, allowing us to support the financing businesses. And I'd say, you know, we're benefiting from the fact that we've got a leading sales and trading franchise in each of the major elements of fixed income and equities that allows us to capture the benefits of having a diversified business with an organic growth strategy.

Speaker Change: I wouldn't pick out any particular area in fixed income or equities for people investments.

Speaker Change: I think as Jimmy Demar has highlighted, it's about for us filling gaps with existing clients and making sure we're there for them over time. So we've added people across across the various businesses.

Speaker Change: and then with respect to balance sheet, it's a little bit of RWA's, is Brian highlighted, it's a little bit of liquidity, allowing us to support the financing businesses.

Speaker Change: and I'd say, you know, we're benefiting from the fact that we've got a leading sales and trading franchise in each of the major.

Speaker Change: Elamance of fixed income inequities that allows us to capture the benefits of having a diversified business with an organic growth strategy.

Brian Moynihan: You know, I think it's a planet. You know, if you've even fallen our company for a long time and it's been, you know, five, six, seven years where we started saying our position was set in the business so we could start to grow, keeping it balanced to the overall company. So, you know, at $800 to $900 billion of balance sheet in the market every day in the security with Jim and the team, they do a great job, you know, turning it over, managing the risk well of ours, well managed. You can see the, you know, no trading losses for many, many quarters.

Speaker Change: I think it's quite nice.

Speaker Change: If you even fall in our company for a long time and it's been, you know...

Speaker Change: Five, six, seven years where we started.

Speaker Change: is saying our position was set in the business so we can start to grow, keeping it balanced to the overall company. So at $980-$900 billion a balance sheet in the market every day in the security, with Jim and the team, they do a great job turning it over, managing the risk well of ours, while managing, you can see that.

Brian Moynihan: In a row or one, maybe, and so they're the way they're running it, but the long term investment in this business requires investment around data, controls, you know, measurement, financial reports, you know, non financial reports, trade reports, you know, billions of trades a day reported. So it's a business where we think we have a good, very good position because a talent in the team does a good job, but it's not something we decided to do yesterday. It's been a long-term build that we've been building and growing and keeping the balance of the rest of the company.

Speaker Change: You'll know trading loss is served.

Speaker Change: Many, many quarters in a row or one, maybe. And so the way they're running it, but it was a long-term investment. In this business requires investment around data, controls, measurement, financial reports, non-financial reports, trade reports, billions of trades a day reported. So it's a business where we think we have a good, very good position because a talent in the team does a good job. But it's not something we decided to do yesterday. It's been a long-term build that we've been building and growing and keeping the balance of the rest of the company so it, and it continues to do good job.

Brian Moynihan: So it, and it continues to do a good job.

Operator: Great, thanks for all that.

Matt O'connor: We'll take our next question from Matt O'Connor of Deutsche Bank. Good morning.

Speaker Change: Great, thanks for all that.

Speaker Change: We'll take our next question from Maddo Connor of Deutsche Bank.

Matt O'connor: We're wondering if you could talk about the outlook for shared buybacks. You did three and a half billion, that's quarter, obviously, generating a lot of capital, have access capital. So yeah, look for many ways for some, but not a time.

Speaker Change: The more I wanted to talk about the Outlook for Share Buybacks, you did a 3.5 million quarter obviously generate a lot of capital, have access capital and certainly the Outlook for many ways for some, but at nine o'clock.

Alastair Borthwick: Morning, Matt. No change to the capital strategy. Obviously what's what's become very clear over the course of the past years, we've got the capital. So we built the capital over time to make sure that we were in a good position. For Basel 3 final as originally proposed, if it were put together today. And we have the time to build more over time because after dividend, you're talking about 30 basis points of capital generation every quarter. So we're waiting at this point to see the final rules as they come out. That's going to allow us to give you a much more precise answer over time.

Speaker Change: Morning Matt, no change to the capital strategy. Obviously, what's become very clear over the course of the past years, we've got the capital.

Speaker Change: So we don't cap it all over time to make sure that we were in a good position for Basel 3 final as originally proposed if it were put together today.

Speaker Change: and we have the time to build more over time because after dividend you're talking about 30 basis points of capital generation every quarter.

Speaker Change: So, we're waiting at this point to see the final rules as they come out, that's going to allow us to give you a much more precise answer over time.

Alastair Borthwick: And the waterfall of priority remains exactly the same. It's number one; we've got to support the clients. You saw that last quarter with the loan growth; that's always going to be our priority. Support the clients, invest in the future of the business. Number two, we want to maintain and grow the dividend over time. We've added another 8% to the dividend this quarter. And we want to make sure that we're in a great place to hurdle the regulatory minimum. So we feel good there. And then number three, we'll use what's left to return it to you, the shareholder.

Speaker Change: and the Waterfall of Priority remains exactly the same. It's number one, we've got to support the clients. You saw that last quarter with the loan growth. That's always going to be our priority. Support the clients, invest in the future of the business. Number two, we want to maintain and grow the dividend over time. We've added another 8% to the dividend this quarter, and we want to make sure that we're in a great place to hurdle the regulatory minimum. So we feel good there. And then number three, we'll use what's left to return it to you, the shareholder. This quarter, that's another $3.5 billion. That's on top of the 3.5 last quarter. So we're in a good position, I think, to support the future growth of the company and to continue to buy back shares over time.

Alastair Borthwick: This quarter, that's another $3.5 billion. That's on top of the $3.5 last quarter.

Alastair Borthwick: So we're in a good position, I think, to support the future growth of the company and to continue to buy back shares over time.

Matt O'connor: Okay, and then just a different topic you guys have talked about with concept that we normalize net interest margin, about 2.3%. Looking at a couple of two years, any updates on the timing of that. And then I think a lot of that is being given by the picture and absolutely person. But how does low rates impact it? Can you reach that level? Really hard for example.

Speaker Change: Okay, and then just a different topic you guys have talked about this concept of enormalized net interest margin, about 2.3 per cent, looking at a couple of two years. Any updates on the timing of that, and then I think a lot of that is being given by the fixed rate of absolute repression, but how does low rates impact it? Can you reach that level with a lower curve, for example? Thank you. Yeah, well look the most important thing is we've got to get back to growing NII, and we've been saying that now for three quarters, believing the Q2 would be the trough.

Alastair Borthwick: Thank you. Well, look, the most important thing is we've got to get back to growing NII. And we've been saying that now for three quarters, believing the Q2 would be the trough. So we demonstrated the growth of this quarter. We're in a good position to do it again next quarter. And we're on the path. We're poised to improve with NII from here. It's a grind every quarter. We've got to continue to grow the deposits. We've got to grow the loans. We've got to make sure that we think about pricing across the board. You are right to highlight we've got some attractive fixed rate asset repricing over time.

Speaker Change: So we demonstrated the growth of this quarter. We're in a good position to do it again next quarter. And we're on the path. We're poised to improve with NII from here. It's a grind every quarter. We've got to continue to grow the deposits. We've got to grow the loans. We've got to make sure that we think about pricing across the board. You are right to highlight. We've got some attractive fixed rate asset repricing over time. We've got some reinvestment over time. And then, you know, obviously, we have to watch what goes on with the rate curve when, you know, there's a surprise, like an extra 25 basis points. And then, you know, we're on the path. We're on the path. We're on the path. We're on the path. We're on the path.

Alastair Borthwick: We've got some reinvestment over time. And then, you know, obviously we have to watch what goes on with the rate curve. When you know, there's a surprise, like an extra 25 basis points that will flow through the entire fourth quarter. It might set us back a few weeks. But we just keep doing what we're doing. The organic growth is going to fuel the net interest income growth over time. And then NII will be an output. And NII will remain our focus.

Speaker Change: that will flow through the entire fourth quarter it might set us back a few weeks.

Mike Mayo: Okay. Thank you.

Speaker Change: Okay, thank you.

Mike Mayo: We'll take our next question from Mike Mayo of Wells Fargo. Hi. You know, I guess I'm asking the same question each quarter, but it's because the efficiency ratio seems to be getting worse.

Speaker Change: Thank you, we'll take our next question from Mike Mayo of Wells Fargo.

Mike Mayo: Hi, um

Mike Mayo: I guess I'm asking the same question each quarter but it's because the efficiency ratio seems to be getting worse.

Alastair Borthwick: So, reconciling slide 4 was slide 10. Once again, slide 4 is your digital adoption slide, which shows 75% to 90% adoption in all of your lines of business, and the trends are all getting better. So much more of a digital company. And then we look at slide 10, and your efficiency ratio is 65% versus 64% last quarter versus 63% a year ago, with non-copic events up this quarter. So, when we get back to those days, when we count the number of quarters, consecutive positive offering leverage, and kind of what's the disconnect here? Yeah. Okay. So, look, that's what we're focused on.

Speaker Change: Reconciling slide 4, slide 10, once again, slide 4 as your digital adoption slide, which shows.

Speaker Change: 75 to 90% adoption and all of your lines of business and the trends are all getting better. So much more of a digital company and then we look at slide 10 and your efficiency ratio is...

Speaker Change: 65% versus 64% last quarter versus 63% a year ago with non-copy expense up.

Speaker Change: This quarter, so when we get back to those days, when we count a number of quarters consecutive positive offering leverage, and kind of what's the disconnect here.

Alastair Borthwick: It's getting back to that operating leverage, Mike. The pressure right now is coming largely from incentive comp related to the fee businesses. So, think about sales and trading up 12%, investment banking up 18%, asset management up 14%. If you look at wealth management alone, we're talking about $200 million there just in that segment alone. So, that's a good investment, and it's a good return. I think if you strip that out, you see, we're doing pretty well in an inflationary environment. We expect good fees from here. We expect the good expense that comes with that. And then it's about managing the rest.

Speaker Change: Yeah, okay, so look, that's, that's where we're focused on, is getting back to that operating leverage mic.

Speaker Change: Um...

Speaker Change: The pressure right now is coming largely from incentive comp.

Speaker Change: Related to the fee businesses, so think about sales and trading up to 12 percent, investment banking up 18 percent.

Speaker Change: Asset Management Up 14% If you look at...

Speaker Change: Well from management alone, we're talking about $200 million there just in that segment alone. So that's good investment and it's good return.

Speaker Change: I think if you strip that out, you see we're doing pretty well in an inflationary environment.

Speaker Change: We expect.

Speaker Change: Good fees from here, we expect the good expense that comes with that and then it's about managing the rest.

Alastair Borthwick: It's about operational excellence. It's about the digital. And as the NII shines through, together with the fees, and as the credit costs continue to normalize, we think we're in a good position to deliver operating leverage again. So, we're looking forward to getting back to that period. And it's just about grinding out NII growth at this point. And when do you think, you know, the NII shining through will help that inflection? Is this a fourth-core event? Is it next year? And can you give us a sneak preview next year on what you're thinking just because it's been a little bit of a slog, admittedly? Yeah, well, look, I think, again, this is one of those things where we've got to see the deposits turn around in all of the businesses and we've got to make sure that we've got the NII trajectory.

Speaker Change: It's about operational excellence, it's about the digital, and as the NII shines through

Speaker Change: Together with the fees and as the credit costs continue to normalize, we think we're in a good position to deliver operating leverage again. So we're looking forward to getting back to that period, and it's just about grinding out an I-goeth at this point.

Speaker Change: And when do you think, you know, the NI shining through will help that inflection as a support query event, as it next year, and can give us a sneak preview for next year on what you're thinking just because it's been a little bit of a slog, I've met it with the headwind from NI.

Speaker Change: Well, look, I think, again, this is one of those things where we got to see the deposits turn around in all of the businesses and we got to make sure that we've got the NI-I trajectory. We kind of feel like that's going to be at 225 operating leverage question, and we'll be able to update you, I think, with some precision as we get into the fourth quarter.

Alastair Borthwick: But we kind of feel like that's going to be a 2025 operating leverage question, and we'll be able to update you, I think, with some precision as we get into the fourth quarter. Some of that's going to depend on the rate curve. You know, we just, and we'll point it by year as we go through.

Speaker Change: I'm going to go through some of that's going to depend on the rate curve, you know, we'll just, I'm going to play it by year as we go through.

Operator: Okay, thank you.

Vivek Juneja: We'll take our next question. From Vivek Juneja of JP Morgan. Hi, thanks, Alastair. Just wanted to go through this waterfall slide you had in the second quarter decade NII. Obviously, you've got the day count. And we, you've talked about the BISB hedge benefit coming on. Can you talk through the other pieces that you had on that slide?

Speaker Change: Okay, thank you.

Speaker Change: We'll take our next question from the back, Janayja of JP Morgan.

Speaker Change: Hi, thanks, Alastair. Just wanted to go through the waterfall slide you had in the second quarter deck or NII. Obviously you've got the day count and you've talked about the BISB hedge benefit coming on. Can you talk through the other pieces that you had on that slide and the slide was not there? Can you have this quarter?

Alastair Borthwick: And the slide was not that can get this quarter. Yeah, I think if you were to look, you know, we haven't, we haven't updated it here because we're trying to give a six-month forward view back at the time, and it was just helpful to do it that way. Now we're just giving the three months; we just figured we would give you the overall guidance. You're going to see the same component parts, Vivek, as we laid out there. So, you know, largely speaking, I'd say Q3 laid out the way that we thought it would. And Q4 setting up pretty much the same way also.

Speaker Change: Yeah, I think if you were to look, you know, we haven't updated it here because we're trying to get a six month forward view back at the time and it was just helpful to do it that way. Now we're just giving the three months we just figured we would give you the overall guidance.

Speaker Change: Um...

Speaker Change: You're going to see the same component parts Vivek as we laid out there. So, you know, largely speaking, I'd say Q3 laid out the way that we thought it would, and Q4 setting up pretty much the same way also. We're going to get some benefit from the BISB transition feeding back into the P&L. We're going to get some benefit from the fixed rate assets repricing over time. Some of that comes from things like residential mortgage on our books. Some of it comes from CVL. We're going to get some benefit from the fixed rate assets repricing over time. We're going to get some benefit from the fixed rate assets repricing over time.

Alastair Borthwick: We're going to get some benefit from the BISB transition feeding back into the P&L. We're going to get some benefit from the fixed rate assets repricing over time. Some of that comes from things like mortgage residential mortgage on our books. Some of it comes from CVL. Some will come from HTM securities rolling off and reinvestment. And we'll get some benefit from cash flow swap. So that remains something that sort of underlying all of the quarters going forward. And then the remaining remaining piece is the part that we work so hard on. It's the growing deposits, growing loans.

Speaker Change: Some will come from HTM Securities Rolling Off and Reinvestment and we'll get some benefit from cash flow swap so that remains something that sort of underlying all of the quarters going forward.

Speaker Change: and then the remaining peace is the part that we work so hard on. It's the growing deposits, growing loans, it's the organic growth showing forward and coming through in the numbers.

Alastair Borthwick: It's the organic growth showing forward and coming through in the numbers versus what happens with the rate curve.

Alastair Borthwick: So I think as we get together in Q4, we'll probably give you a pretty good sense for what that looks like as it goes through 2025.

Speaker Change: Versus, what happens with the rate curve? So I think as we get together in Q4, we'll probably give you a pretty good sense for what that looks like as it goes through 2025.

Alastair Borthwick: So what about the other two pieces? So you had 225 million negative impact from rate cuts, obviously more there, and then you have the global market and any color on those two components. Well, I'd say on the rate cuts, if you were to go back to when we provided Q3 guidance, the time we said one cut in September, one in October, one in November. And as it turns out, we all know that there were two cuts in September. That extra cut flows all the way through the fourth quarter. It's not just two weeks in the quarter or six weeks.

Speaker Change: I was talking about the other two pieces, so you had 225 million negative impact from red cuts, obviously more than any other global markets and any color on those two components.

Speaker Change: What's down the rate cuts if you were to go back to when we provided Q3 guidance at the time we said one cut in September.

Speaker Change: 1 and uptober.

Speaker Change: 1 in November.

Speaker Change: And as it turns out we all know that there were two cuts in September. That extra cut flows all the way through the fourth quarter. It's not just two weeks in the quarter or six weeks, it's the full quarter.

Alastair Borthwick: It's the full quarter. So that's that's a additional headwind, if you like. So that obviously hurts overall. Global markets is liability sensitive and they've continued to grow their loans. So I think if the rate cuts hurt us a little bit more in that original waterfall, you get a little bit of that back in global markets and I. So that probably answers those two elements.

Speaker Change: So that's a additional headwind if you like. So that obviously hurts overall. Global markets is liability sensitive and they've continued to grow their loans. So I think if the rate cuts hurt us a little bit more in that original waterfall, you get a little bit of that back in global markets, NII.

Operator: Thank you.

Speaker Change: So that probably answers those two elements.

Sharon Leong: We'll take our next question from Sharon Leong of Wolf Research.

Speaker Change: We'll take our next question from Sharon Lyong of Wolf Research.

Sharon Leong: I am calling in for Steven Chubak. Just on the security side, I know the last quarter you had laid out the repricing tailwind of about 300 basis points on securities, a little bit less on the loan side. Can you just give us an update on where those figures sit today? Yeah, I'd say I just use probably 250 on the securities, probably 250 on the mortgages, probably 100 on the CVL. That probably gets you in the right ballpark, Sharon.

Speaker Change: Hi, I'm Collean for Steven Chewback. Just on the security side, I know last quarter you had laid out the repricing tailwind of about 300 basis points on securities a little bit less on the loan side. Can you just give us an update on where those figures sit today?

Speaker Change: Yeah, I'd say I'd just use probably 250 on the securities.

Speaker Change: Probably 250 on the mortgages, probably 100 on the CVL, that probably gets you in the right ballpark share.

Alastair Borthwick: Perfect. And then just another quick follow-up on the securities portfolio. I know you guys are seeing some repricing tailwinds there, but you know, have you ever given any thought on like doing a bigger repositioning action? Just because the market seems to be responding favorably to some similar actions, that's going to appear. Well, at this stage, we don't see any need for that. Remember, most of our securities in the available for sale, we've got those held at this point in treasury swap to floating, and we feel like if you look at the NII sensitivity of the company over time, it's come down with the composition of our portfolio.

Speaker Change: Perfect. And then just another quick follow-up on the security's portfolio. I know you guys are seeing some reprising tailwinds there, but you know, have you ever given any thought on, like, doing a bigger repositioning action just because the market seems to be responding favorably to some similar actions or something to be appears?

Speaker Change: Well, at this stage, we don't see any need for that. Remember, most of our securities in the available for sale, we've got those held at this point in treasury swap to floating. And we feel like if you look at the NII sensitivity of the company over time, it's come down with the composition of our portfolio. So we feel like we're in a good position at this point to grow NII, grow earnings. And we obviously start with a very good base of liquidity and capital. So no plans to reposition at this point.

Alastair Borthwick: So we feel like we're in a good position at this point to grow NII, grow earnings, and we obviously start with a very good base of liquidity and capital, so no plans to reposition at this point.

Operator: Okay, perfect.

Operator: Thank you so much.

Operator: Thank you.

Erica Najarian: We'll take our next question from Erica Najarian of UBS.

Speaker Change: Thank you, we'll take our next question from Erica Nacharian of UBS.

Erica Najarian: Hi, good morning. I appreciate that you want to wait until January, Alistair, to give us an NII update, given how much is changing or how much has been changing in a curve. So maybe I'm going to ask this this way. You know, you've talked about hedges in the past in terms of the sensitivity of your floating rate low and specifically in commercial. As we think about forecasting for whatever rate curve turns out and we think about your floating rate loans X card. Should we assume a similar sensitivity or on the way down is on the way up excluding Busby or will the hedges essentially give you some floor in that your sensitivity to repricing going forward.

Erica Nacharian: Hi, I'm good morning, I appreciate that you want to wait until January Alastair to give us an NNI update given how much is changing or how much has been changing in a curve. So maybe I'm going to ask this this way, you know, you've talked about had just in the past in terms of the sensitivity of your floating rate, low and specifically in commercial.

Erica Nacharian: as we think about forecasting for whatever rate curve turns out and we think about your floating rate loans, X card. Should we assume a similar sensitivity or on the way down is on the way up, excluding Busby or will the hedges essentially give you some floor in that your sensitivity to repracing going forward? Again, X Busby is not as significant as it was on the way up.

Alastair Borthwick: Again, X Busby is not as significant as it was on the way up. Yeah, so I think it's okay to start with the same sensitivity on the way down as up because the company's, largely speaking, position in the same way. At the same time, you put your finger on it. We are going to benefit from repricings over time. And we mentioned last quarter, and we've talked about already on this call the fact that we've got the various securities and the various new originations that replace those loans that are maturing. So that remains the case. Lewis, and then we've got some cash flow swaps; the number of them are pointed against the commercial, and as we particularly get into the third quarter and fourth quarter of 25, you'll see a benefit in commercial yields there because those ones are at lower rates, and they will be repriced in Q3 and Q4.

Speaker Change: Yeah, so I think it's okay to start with the same sensitivity on the way down as up because the company is largely speaking position in the same way. At the same time, you put your finger on it, we are going to benefit from reprisings over time. And we mentioned last quarter, and we've talked about already on this call the fact that we've got the various securities and the various new originations that replace [inaudible]

Speaker Change: Those loans that are maturing, so that remains the case.

Speaker Change: and then we've got some cash flow swaps, a number of them are pointed against the commercial.

Speaker Change: And as we particularly as we get into the third quarter and fourth quarter of 25, you'll see a benefit in commercial yields there because those ones are at lower rates.

Alastair Borthwick: So, a little bit of cushion there. That's one of the reasons that we look forward to NII. We can sort of see how this repricing that's taking place. Remember, we're coming off of a period now with a long period, 15 years of a very, very low set of yields, and we're coming back now to something where you can really see the full value of our deposit base. It takes a while; it's quarter by quarter. We just got to let it develop over time.

Speaker Change: and they will be reprised in Q3 and Q4. So, little bit of cushion there. That's one of the reasons that we look forward to NII. We can sort of see how this repricing that's taking place. Remember, we're coming off of a period now with a long period, 15 years of a very, very low set of yields.

Speaker Change: And we're coming back now to something where you can really see the full value of our deposit base. And it takes a while, it's quarter by quarter, we just got to let it develop over time.

Alastair Borthwick: And my follow-up question is clearly you have one of the best views on deposit behavior in the US, and it's been so long since we've seen a neutral rate that's not zero. I guess a two-part question: the first is, should we similarly assume the same ability to recapture on deposit repricing on the way up in terms of the same deposit beta? And as we think about 2025, it may have better loan growth. Where do you think, if our neutral rate is 275%, where does Bank of America's natural deposit cost fall relative to that? I think much discussion over the last couple of years about betas and everything, but if you look where we sort of stand in the third quarter, the difference between Fed funds and the total interest-bearing cost of our deposits is around 250, almost 260 basis points.

Speaker Change: and my follow-up question is...

Speaker Change: Clearly, you have one of the best views on the positive behavior in the US.

Speaker Change: and it's been so long since we've seen a neutral rate that's not zero. I guess the two part question, the first is, should we similarly assume the same ability to recapture on deposit repricing on the way down as it was on the way up in terms of the same deposit beta?

Speaker Change: And you know as we think about it, the 2025 it may have better lone growth.

Speaker Change: You know, where do you think, if we, if our neutral rate is 275-3%, where does Bank of America's natural deposit cost fall relative to that?

Speaker Change: America Ethics.

Speaker Change: Yes, much discussion.

Speaker Change: Over the last couple of years about betas and everything but if you look where we sort of stand in the third quarter, the difference between Fed funds and the total interest-bearing cost of art deposits.

Alastair Borthwick: If you looked at quarter two in 19, when the Fed funds hit the highest rate in the last cycle, that difference was 160 basis points, 170 basis points. So, what you're pointing out, leave aside beta, isn't everything else. There's a fundamental difference of 100 basis points and spread against interest-bearing side, and we take the non-experting piece that obviously has a bigger impact. So, this will settle in, but you are right for the, and you've been around this industry for a long time. If you go back and think about when the Fed funds rate was sustained in the 2.75, 3.3 and a quarter level, this industry was able to make more money due to the extra value of relative to the last 15 years of the non-experting deposits and the consumer businesses and the small business business in the commercial business of wealth management business.

Speaker Change: is around 250, almost 260 basis points.

Speaker Change: If you looked at quarter two and 19, when the...

Speaker Change: when the Fed funds hit the highest rate in the last cycle that difference was 160 basis points, 170 basis points. So there's a fund, what you're pointing out, leave a side bait is everything else.

Speaker Change: There's a fundamental difference of 100 basis points in spread against the interspereying side and we take the 90s sparing piece that obviously has a bigger impact.

Speaker Change: This will settle in, but at you are...

Speaker Change: Right for the new Benaround industry for a long time, if you go back and think about when.

Speaker Change: The Fed's funds rate was sustained in the 2.75-3-3 in a quarter-level. This industry was able to make more money due to the extra value of relative to the last 15 years of the...

Speaker Change: of the non-experying deposits in the consumer businesses and the small business business, you know, in the corporate commercial business of wealth management business. So we feel good about positioning. We feel good about our deposit makeup, which is driven by core operating activity, the primary household, in consumer side, the operating accounts in the businesses and small businesses, and even the wealth management.

Alastair Borthwick: So, we feel good about positioning. We feel good about our deposit makeup, which is driven by core operating activity: the primary household and the consumer side, the operating accounts, and the businesses and the small businesses, and even the wealth management. So, you should see more value; you will see more value. I'm confident, and that's what we're looking forward to as the rate structural settles in. And so, the key to your point is not the path of 25 or whether the cuts come in one quarter or another quarter. The key that I think is different is the blue chip economist, your economist, I'm sure an art economist all predict that we'll end up with a terminal rate at a 3% level as opposed to the past cycles where we didn't ever get there and rates were started to be cut at the end.

Speaker Change: You should see more value, you will see more value. I'm confident.

Speaker Change: and that's what we're looking forward to as the great structure of settles in and so the key.

Speaker Change: to your point is not.

Speaker Change: The path of 25 of whether the cuts come in one quarter or another quarter. The key that I think is different is the blue chip economists, your economists, I'm sure an art economist, all predict that we'll end up with a terminal rate at a 3% level as opposed to the past cycles where we didn't ever get there and rates were started because at the end of the 19.

Alastair Borthwick: That was super helpful, guys. Thank you.

Gerard Cassidy: We'll take a follow-up question from Gerard Cassidy of RBC.

Speaker Change: I was super helpful guys, thank you.

Speaker Change: and we'll take a follow-up question from Gerard Cassidy of RBC.

Gerard Cassidy: Thank you, hi, Alastair. Hi, I'm Brian. I apologize for missing that earlier cue. I was a lot of you, Gerard. We're going to fill into the ocean. Alastair, you touched on the Basel in one of your comments regarding how you're in good position from your capital standpoint from the original proposal. Can you give us any color on what you guys have seen from that presentation that Vice Chair Barr gave earlier in the quarter? What your views are, where you might come in. I think they said there was an average increase of capital for the group, about 9%, and how you might stack up against that.

Gerard Cassidy: Thank you. Hi, Alastair. Hi, Brian . I apologize for missing that earlier cue. I was a lot of you to argue with a little bit. Fell into the ocean. Alastair, you touched on the Basel in one of your comments regarding how you're in good position from your capital standpoint from the original proposal. Can you give us any color on what you guys have seen from that presentation that Vice Chair Bar gave earlier in the quarter? What your views are, where you might come in. I think they said there was an average increase of capital for the group about 9% and how you might stack up against that.

Alastair Borthwick: I'm not sure we have enough detail jar to give you a specific at this point. When reproposal comes out, what we're told is that it will not only be about repropose the whole entire picture, including the changed outline by Chair Barr's speech, but you can take it for granted that that was more favorable than the original proposal, so therefore we'll benefit from it. Once we see something that's a little more detail, we might be able to give you a better estimate, but it's favorable to us.

Speaker Change: Yeah, I'm not sure we have enough detail, Gerard, to give you a specific at this point, when reproposal comes out, what we're told is it'll not only be about, it'll repropose a whole entire picture, including the changes outlined by Chair Bar's speech, but you could take it for granted that that was more favorable than the original proposal, so therefore, we'll benefit from it. And once we see something that's a little more detail, we might be able to give you a better estimate, but it's favorable to us.

Brian Moynihan: I see. Brian, do you think that could step up your activity of returning more capital? If it comes in, you know, better than expected, you would take that as an opportunity, maybe to return more capital to shareholders? In the end of the day, we have access capital based on the estimates of the old one, so yes, it would at the margin. But remember that at the end of the day, we are sending capital back to shareholders because of the fact that the franchise generates activity without using a ton of capital and grows its loans, its deposits, earnings, et cetera.

Speaker Change: I see, and Brian, do you think that could step up your activity of returning more capital? If it comes better than expected, you would take that as an opportunity, maybe to return more capital to shareholders.

Speaker Change: In the end of the day, we have access capital based on the estimates of the old ones. So yes, it would at the margin. But remember that in the end of the day, Gerard, we are sending capital back to shareholders because of the fact that the franchise generates activity without using a ton of capital and grows its loans, its deposits, earnings, et cetera. So we will continue to be disciplined with the capital and the capital return and we'll continue to return more of it if more is available. We're sitting with a fair amount of access over the current set of rules and the new set of rules are more favorable than the original proposal. That would set us up better, no question.

Brian Moynihan: So we will continue to be disciplined with a capital and a capital return, and we'll continue to return more of it if more is available. We're sitting with a fair amount of access over the current set of rules, and the new set of rules are more favorable in the region of proposal.

Brian Moynihan: That would set us up better, no question.

Brian Moynihan: Great.

Brian Moynihan: And then just as a follow-up, you guys have been building out your obviously branch banking systems throughout the country in markets in which you don't have a big presence. Can you just give us an update on how that is progressing? And what are you seeing that makes you, you know, because you got great consumer numbers, you got great read on your customers? What really makes you guys excited that this is really the way to go a combination of the digital and these branches? I think if we look at markets, we just celebrated 10 years in Denver from the first opening, which is the first, among the first five markets we went after.

Speaker Change: Great. And then just as a follow-up, you guys have been building out your obviously branch banking systems throughout the country in markets in which you don't have a big presence. Can you just give us an update on how that is progressing? And what are you seeing that makes you, you know, because you got great consumer numbers, you got great read on your customers? What really makes you guys excited that this is really the way to go, a combination of the digital and these brands? How many inches?

Speaker Change: Alright, I think.

Speaker Change: if we look at markets.

Speaker Change: We just celebrated the 10 years in Denver from the first opening, which is the first among the first five markets we went after in.

Brian Moynihan: And so if you look at this market, as I always look at the FDIC data, and you kind of look at Alaska years, it's kind of chopped up because of the stimulus and everything, but you see continued progress by us in all these markets moving from nowhere to, you know, into the 10th and 7th and 8th. And we keep building that out. What that does is we believe in high touch, high tech across all individuals and even small businesses and even a little bit in the middle market. And what we mean by that is, for even wealthy customers, there are times when they need to utilize a branch.

Speaker Change: So if you look at this market, as I was looking at the FDIC data and you kind of look at it in the last couple of years, it's kind of chopped up because of the stimulus and everything, but you see continue progress by us and all these markets moving from.

Speaker Change: know where to, you know, into the, you know, 10th and 7th and 8th and we keep building that out.

Speaker Change: What that does is we believe in high touch, high tech across all individuals and even small businesses and even a little bit in the middle market and what we mean by that is for even wealthy customers, there are times when they need to utilize a branch and if you have no branch in Denver or Columbus or Minneapolis or Minneapolis or...

Brian Moynihan: And if you have no branch in Denver or Columbus or Indianapolis or Minneapolis or et cetera, it's a little hard for them to get the full experience. So we've done that.

Brian Moynihan: Now, as we think about it, we had extreme discipline. We're going after this to build out markets to a level we feel comfortable that we have the market covered. And so instead of putting one in every place, we're trying to build out a network in a place like Columbus, where I think we are 15-20 branches now. And that allows us to build the business. We already have and a major mayoral presence there. We already had a commercial banking presence there. This allows us to build underneath it. And so that's why you're seeing our deposits in those branches push past $100 million per branch, which is much different than we see in others doing it because of the density and the capacity and the digital and the prior customer-based lack of a better term that we now can get more from.

Speaker Change: etc., it's a little hard for them to get the full experience so we've done that. Now as we think about it, we had extreme discipline, we're put...

Speaker Change: Going after this.

Speaker Change: to build out markets.

Speaker Change: To a level we feel comfortable we have the market covered and so instead of putting one in every Every place we're trying to build out a network in a place like Columbus where I think we are 15-20 branches now and that allows us to build the business we already have

Brian Moynihan: So the team is doing a good job.

Brian Moynihan: We expect you have to go down Bell's Pass. But in the end of the day, you know, we're trying to get coverage in the top markets across the country so that we cover the American population in an efficient and effective way. And, you know, the truth of the matter is, even though we're 54% sales across all the businesses and consumer, all the different types of products, you know, a lot of the checking, the checking sales only digital or about in the 30s as opposed to the 50s, which means people still like to walk in a branch and start a relationship.

Brian Moynihan: And that's what we're doing.

Operator: Very good. Appreciate the color as always.

Operator: Thank you.

Brian Moynihan: And this does conclude today's Q&A.

Brian Moynihan: I'd like to return the call to Brian Moynihan for closing comments. I thank all of you for joining us. We operated well in the quarter, delivering $6.9 billion earnings after tax, 81 cents a share. As we told you, we continue to see good health among an asset quality overall and good spending behavior by the consumers, considerable of solid economy. We told you a couple of things in the past that I would hit an inflection point in the second quarter. It's done that. We told you that we continue to see the ability to drive operating leverage in the future.

Brian Moynihan: Now we can see that as NIA starts to pick up and have a drive, the efficiency ratio and operating leverage. We can do to go organically across the board, and we continue to return capital to you as we did 3.5 billion this quarter.

Brian Moynihan: So thank you and look forward to talking to X quarter.

Operator: This does conclude today's Bank of America earnings announcement. You may now disconnect your lines, and everyone have a great day. Once again, today's conference has concluded. You may now disconnect.