Q4 2024 Bank of America Corp Earnings Call
Good day everyone and welcome to today's Q4 Bank of America earnings announcement. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session.
Speaker Change: Please note, today's call will be recorded, and I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to Lee McIntyre. You may begin.
Speaker Change: Good morning. Thank you. Welcome. Thank you for coming to the call to discuss our fourth quarter results.
Speaker Change: Our earnings release documents are available on the Investor Relations section of the BankofAmerica.com website, and they include the earnings presentation that we'll make reference to during this call. I hope everyone had a chance to review the documents.
Speaker Change: Our CEO Brian Moynihan will make some opening comments before Alastair Borthwick, our CFO, discusses the details of the quarter.
Speaker Change: Let me just remind you before we start that we may make forward-looking statements and refer to non-GAAP financial measures during the call.
Speaker Change: Forward-looking statements are based on management's current expectations and the assumptions that are subject to risk and uncertainties.
Speaker Change: Information about our non-GAAP financial measures, including reconciliations to U.S. GAAP, can also be found in our earnings materials that are available on the website.
Brian Moynihan: So, with that, I'm happy to turn the call over to Brian.
Brian Moynihan: So good morning everyone and thank you for joining us. Before we begin today, I just want to express our deep concern for our communities, clients, and teammates impacted by the California wildfires.
Our top priority
Brian Moynihan: of course is ensuring the safety and welfare of our team and helping our clients and customers.
Brian Moynihan: Our imperturbable market president, Raoul Anaya, is leading our team out there.
Brian Moynihan: We have teams on the ground assisting in any way we can and are monitoring the situation to extend support and resources. So far, we have activated our client assistance program, donated $1 million in disaster relief to the American Red Cross, and additional contributions to the L.A. Food Bank and the L.A. Chamber of Commerce small business efforts.
Brian Moynihan: With that, let's turn to earnings starting on page 2 of the presentation.
This morning we reported $6.7 billion in net income.
Brian Moynihan: That is 82 cents in EPS for the fourth quarter. That was a solid finish to another good year at Bank of America. We grew revenue on a year-over-year basis in every category in quarter four. We saw good loan and deposit growth.
Brian Moynihan: And Alastair is going to walk you through some of the details of the court in a moment, but I want to thank our team for another great year.
Brian Moynihan: For the full year of 2024, we generated $102 billion of revenue and reported net income of $27.1 billion of EPS of $3.21. We produced 83 basis points return on assets and 13% return on tangible common equity.
Brian Moynihan: We generated these results working from a strong balance sheet that allowed us to support clients and economies continue to grow. The economy appears to be now settled into a 2-3% GDP type growth environment.
Brian Moynihan: The amacity of the American consumer can be seen in our data. So far in the first two weeks in January, they're spending money at a 4-5% clip over last year, similar to what they did in the fourth quarter. In our business side, the clients are profitable, they're liquid, and seeing good productivity.
Speaker Change: For Bank of America, the year was characterized by a few important highlights that played out as expected and were consistent with our communications to you throughout the year. First, we saw net interest income bottom out at $13. 9 billion on an FTE basis in the second quarter of 2024.
Speaker Change: We ended the year with a fourth quarter on the same FTE basis at 14.5 billion dollars
Speaker Change: then that was a bit better than we expected. This obviously provides a great starting point for 2025, and based on the assumptions Alastair is going to discuss a little later, we should report record NII in 2025.
Speaker Change: So how did we do that? We drove organic growth in all the businesses, and that we have highlighted on slide three. We saw continued growth in net new checking, new households, new companies and commercial banking, growth in our institutional markets business.
Speaker Change: This organic activity enables us to grow loans and deposits at a pace we believe is to be ahead of our industry average and our peers. A key for us, obviously, is the growth in our deposit franchise.
Speaker Change: If you look at slide four, you can see we've now grown deposits for six consecutive quarters. In the most recent quarter, we saw growth in consumer balances and stability around non-interest-bearing balances across all the businesses.
Speaker Change: We continue to price in a disciplined manner, and rates paid move lower this quarter across the board. Overall rate paid on deposits moved from 210 basis points in the third quarter to 194 basis points this quarter. In the fourth quarter, we're lower in every business segment.
Speaker Change: for the fourth quarter, and a much faster analyzed pace when comparing the third quarter to the fourth quarter of 2024.
Speaker Change: So back to slide three. In our wealth management business, we added 24,000 new households in 2024. We ended the year with six trillion dollars in total client balances that we manage for people in America across our global wealth and consumer businesses.
Speaker Change: Our consumer investments team, what we call Merrill Edge, crossed a new milestone this quarter and now sits in excess of $518 billion in balances.
Speaker Change: Investment banking gained share of industry revenue in 2024. Our sales and trading team put up the 11th straight quarter of year-over-year revenue growth and achieved a new full-year record of nearly 19 billion dollars in revenue.
Speaker Change: Asset quality stabilized and remained strong with net charge loss declining modestly from third quarter.
Speaker Change: which drove incentive and transaction processing costs higher. We managed to create operating leverage in the fourth quarter.
Speaker Change: Our digitalization and engagement expanded across all our businesses. We saw more than 14 billion logins to our digital platforms in 2024.
Speaker Change: Our Erika capability surpassed 2.5 billion interactions from its inception. And our CashPro app surpassed $1 trillion in payments made through the app in 2024.
It was all it's also worth noting that
Speaker Change: Digital sales in our consumer product areas crossed 60% in the fourth quarter again.
Speaker Change: You can see all these trends in our industry-leading digital disclosure on slides 26, 28, and 30 in the appendix.
Speaker Change: All the success in Balance Sheet Straits allowed us to deliver more capital back to our shareholders.
Speaker Change: So, in summary, for both the fourth quarter and for the year, we enjoyed good profitability, we drove healthy returns, we saw good organic client activity across all the businesses, we continued to manage the risk well, and we increased the capital delivered back to our shareholders. And we positioned ourselves well for growth in 2025.
Speaker Change: I want to again thank my team for continuing to drive another year of responsible growth. And with that, I'll turn it over to Alastair.
Alastair Borthwick: For the fourth quarter, as Brian noted, we reported $6.7 billion in net income, or $0.82 per share.
Alastair Borthwick: And before we talk about comparisons between periods, I just need to remind you that our fourth quarter 2023 GAAP net income number included two notable items.
Alastair Borthwick: In the fourth quarter of 23, first we recorded $2.1 billion of pre-tax expense for the special assessment by the FDIC to the industry to recover losses from the failures of Silicon Valley Bank and Signature Bank. And that reduced EPS last year by 20 cents.
Alastair Borthwick: Second, we recorded a negative pre-tax impact to our market-making revenue of approximately $1.6 billion related to the cessation of Bisbee as an alternative rate, and that reduced earnings per share last year by 15 cents.
Alastair Borthwick: So, when you adjust for the large FDIC assessment and the Bisbee cessation charge, fourth quarter 23 net income was $5.9 billion, or $0.70 per share.
Alastair Borthwick: On slide 6, we note some of the highlights of the quarter. And we reported revenue of $25.5 billion on a fully taxable equivalent basis, up 15% from the fourth quarter of 2003.
Alastair Borthwick: and if you exclude the fourth quarter 23 Bisbee cessation charge
Our revenues grew 8% year-over-year.
Alastair Borthwick: And investment brokerage fees rose 21%, with both assets under management flows and market levels contributing nicely to the growth. Our card income and service charges grew 7%.
Alastair Borthwick: Non-interest expense was $16.8 billion and was up when adjusted for the FDIC special assessment driven by incentives paid for the strong revenue growth as Brian noted and the related activity cost that comes with that.
Alastair Borthwick: Expense also included additional investments in people, technology and brand, with some major partnerships announced recently. And it included what we expect to be the peak in quarterly costs associated with enhancing our compliance costs and controls.
Alastair Borthwick: The good news is we created operating leverage in the quarter. Provision expense for the quarter was $1.5 billion and was consistent with the previous two quarters. And lastly, returns in the fourth quarter were 80 basis points of ROA and 13% return on tangible common equity.
Alastair Borthwick: Turning to the balance sheet on slide 7, we ended the quarter at $3.26 trillion of total assets, down $63 billion from the third quarter, driven by seasonally lower levels of client activity in global markets, while loans across the businesses grew $20 billion in the quarter.
Alastair Borthwick: Otherwise in the quarter, the investments of our excess liquidity saw a $9 billion reduction in hold-to-maturity securities. And at the same time, the combination of shorter-term liquidity investments of cash and available-for-sale securities increased $28 billion.
Alastair Borthwick: Long-term debt fell $14 billion, driven by net redemptions and valuations, and global markets funding declined in line with assets.
Alastair Borthwick: Liquidity remains strong with $953 billion of global liquidity sources. That is up modestly compared to the third quarter, even as we paid down some debt and retired some preferreds.
Alastair Borthwick: shareholders equity was flat at around 295 billion and within all of that we returned 5.5 billion dollars of capital back to shareholders with 2 billion dollars in common dividends paid and the repurchase of 3.5 billion in shares this quarter
Alastair Borthwick: Tangible book value per share of $26.58 rose 9% from the fourth quarter last year.
Alastair Borthwick: Turning to regulatory capital, our CET1 level improved to $201 billion and the CET1 ratio rose to 11.9%, remaining well above our new 10.7% requirement.
Alastair Borthwick: Risk rated assets increased modestly as increases in loans were mostly offset by lower RWA supporting our global markets client activity.
Alastair Borthwick: Our supplementary leverage ratio was 5.9% versus a minimum requirement of 5%, which leaves some capacity for balance sheet growth, and our $460 billion of total loss-absorbing capital means our TLAC ratio remains comfortably above our requirements.
Alastair Borthwick: Let's turn to slide 8. We can go a little deeper on loans by looking at average balances.
Alastair Borthwick: And loans in the fourth quarter of 1.08 trillion improved 3% year-over-year, driven by solid commercial loan growth. Overall, commercial loans grew 5% year-over-year.
Alastair Borthwick: And importantly, this included an 8% drop in commercial real estate loans.
Alastair Borthwick: Commercial loans excluding commercial real estate grew 7% year-over-year and the consumer loans grew modestly both linked quarter and year-over-year.
Brian Moynihan: As Brian said, on a linked quarter basis, every category of consumer lending grew, and you can see that at the bottom of slide 8.
Speaker Change: If we turn our focus to NII performance and use slide 9,
Speaker Change: Regarding NII, on a GAAP non-fully taxable equivalent basis, NII in Q4 was $14.4 billion.
Speaker Change: And on a fully taxable equivalent basis, NII was $14.5 billion.
Speaker Change: Several quarters ago we signaled our expectation that NII would trough in the second quarter of 2024 and begin to grow from there.
Speaker Change: And this represents now our second quarter of NII growth, and we expect that growth to continue in 2025.
Speaker Change: In fact, if you look at the two quarters after the inflection point, NII is already growing at a 5% rate.
Speaker Change: Fourth quarter NII, on a fully taxable equivalent basis, increased by $399 million from the third quarter, driven by a number of factors.
Speaker Change: First, it was led by improvement in deposits across the businesses, and even as deposit balances increased length quarter, our interest expense on those deposits declined by $600 million.
Speaker Change: Loan growth and fixed rate asset repricing also benefited us again this quarter.
Speaker Change: With regard to a forward view, interest rate expectations continue to drive volatility and predictability, but will provide some thoughts for future NII.
Speaker Change: We expect to start the year in the first quarter with NII modestly higher than the fourth.
Speaker Change: Remember that the first quarter has two fewer days of interest and that's roughly the equivalent of about 250 million dollars of NII equivalent.
So, even with that, we expect to grow modestly.
Speaker Change: Then we expect that growth to increase through the year to the point where it could be six to seven percent higher in 2025 than 2024
Speaker Change: We expect to exit the year at least a billion higher in the fourth quarter, and that would put us in a range of $15.5 to $15.7 billion on a fully taxable equivalent basis, and that's obviously significantly higher than the Q2 2024 trough of $13.9 billion.
I have to note the following assumptions.
Speaker Change: We assume that the current forward curve materializes, and while the interest rate curve has changed significantly over a fairly short period of time, as of the 10th of January,
Speaker Change: The curve was expecting only one rate cut in 2025 that may come in May or June.
Speaker Change: Based on our more recent growth experienced, we're assuming loan and deposit growth in 2025 that's higher than 2024 and more consistent with growth in a 2 to 3 percent GDP environment.
Speaker Change: The other elements of anticipated growth in NII expected are the benefits of asset repricing as fixed-rate securities and loans and swaps roll off.
Speaker Change: and those get repriced at higher rates. And those themes all remain consistent with our prior conversations with you in the last several earnings calls.
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 in the curve.
above or below the forward curve.
Speaker Change: And on that basis, a 100 basis point increase would benefit NII by roughly $1 billion, while a decrease of 100 basis points would decrease NII over the next 12 months by $2.3 billion.
Speaker Change: Lastly, note that our slide showing the trended investment of excess deposits is in our appendix. It's on page 21. Deposit levels grew to $870 billion over loans at the end of Q4, and that's an incredible source of value for shareholders.
Speaker Change: And $649 billion or 54% of our excess liquidity is now in short-dated cash and available for sale securities.
Speaker Change: The longer dated Lower Yielding Hold to Maturity book continues to roll off and we continue to reinvest in higher yielding assets.
Speaker Change: Okay, let's now turn to expense and we'll use slide 10 for the discussion.
Speaker Change: We reported $16.8 billion in expense this quarter, and the fourth quarter of 2023 included the large FDIC special assessment charge, and excluding that, expense increased.
Speaker Change: The increased expense from prior periods was driven by a number of factors and was partially offset by a roughly $300 million release of prior period accruals for the FDIC Special Assessment.
Let's talk about the drivers of the expense.
Speaker Change: First, in regard to revenue, are markets-related businesses of investment banking, investment and brokerage, and sales and trading.
Those were up 20% year-over-year.
Speaker Change: Incentives for the firm were up 15 percent versus the fourth quarter of 23 and were in large part related to these markets related revenue streams.
Speaker Change: and we increased our investments around technology as well as financial centers. This quarter alone we added 17 financial centers with nine of those in our new expansion markets. We're a growth company and we continue to invest in our future.
Speaker Change: As far as headcount goes, we've managed our headcount carefully and we've held it fairly flat.
through the four quarters of 2024 at around 213,000 people.
Speaker Change: Lastly, we incurred additional costs to accelerate work on compliance and controls. As you likely saw in late December, the OCC issued a compliance consent order to Bank of America.
Speaker Change: And that's the result of exams done more than a year ago.
Speaker Change: The Order doesn't limit any of our growth plans, and the Order acknowledges we began taking corrective actions before the Order was announced.
Speaker Change: And as a result of the work-in process, we increased our resources substantially in the second half of 2024, and those costs are already embedded in our quarterly run rate.
Speaker Change: Okay, let's go back to expense and how to think about a forward view. First, most importantly, we remain focused on growing the company and driving operating leverage. Second, we expect the first quarter to include
Speaker Change: Some normal seasonal elevation and we believe this amount will be roughly six hundred to seven hundred million dollars primarily for payroll tax expense
Speaker Change: So we think $17.6 billion is a good number to expect for Q1 before seasonally declining in Q2.
Speaker Change: And that's all part of our expectation that expense should be roughly 2-3% higher in 2025 compared to 2024.
Speaker Change: Let's now move to credit and turn to slide 11, where you can see net charge-offs of a little less than $1.5 billion, improving modestly compared to Q3. That's the fourth quarter now that net charge-offs are around $1.5 billion.
Speaker Change: We've seen consumer losses in a pretty stable range of $1 to $1.1 billion over those past few quarters.
Speaker Change: And on the commercial side, we saw losses of $359 million, which is down from the third quarter, driven by the continued decline in commercial real estate office losses.
Speaker Change: And that charge-off ratio this quarter was 54 basis points down 4 basis points from the third quarter.
Speaker Change: We don't see overall net charge-offs or the related ratio changing much in 2025.
Speaker Change: Without much change in current GDP or the employment environment, we expect the net charge-off ratio to be in the range of 50 to 60 basis points of loans for 2025.
RATE REPORTED.
Thank you. Bye-bye.
Speaker Change: On slide 12, we highlight the credit quality metrics for both consumer and commercial portfolios, and there's nothing really noteworthy here that I want to highlight on this page.
Speaker Change: So let's move to the various lines of business, starting on slide 13 with consumer banking.
Speaker Change: A business made nearly $11 billion, or 40% of the company's earnings in 2024.
Speaker Change: In the fourth quarter, consumer banking generated $10.6 billion in revenue and $2.8 billion in net income.
Speaker Change: Both grew modestly from the fourth quarter of 23, as fee improvement for card and service charges is now being complemented by the growth in NII.
Speaker Change: and they achieved a new record of client experience scores in December.
Speaker Change: and we show another strong period of card openings and investment account growth.
Speaker Change: Investment balances grew 22% to $518 billion with full year flows of $25 billion and market improvement throughout the year.
Expense rose 8% as we continued investments in our business.
Speaker Change: And in the last six months, we believe we've seen the floor begin to form after several periods of slowing decline.
Speaker Change: Looking at averages, you can see then the deposits grew $4 billion from the third quarter to $942 billion, all while our rate paid declined to 64 basis points.
Speaker Change: And the professionalism of these teams earned them numerous best in class industry rankings as you can see on slide 27 in the appendix.
Speaker Change: With a continued increase in banking product usage from our investing clients, the diversity of revenue in the wealth business continues to improve.
Speaker Change: The number of GWIM clients that now have banking products with us continues to grow and at this point it represents more than 60% of our clients.
Speaker Change: Importantly, about 30% of our revenue remains in net interest income, which complements the fees earned in our advice model, and those have also grown.
Speaker Change: In the fourth quarter, we reported revenue of $6 billion, growing 15% over the prior year and led by 23% growth in asset management fees.
Speaker Change: While expenses were up year over year, they grew slower than revenue, creating the operating leverage in the business.
Speaker Change: Average loans were up 4% driven by growth in custom lending, securities based lending, and a pickup in mortgage lending.
Speaker Change: Both Merrill and the private bank continue to see strong organic growth.
Speaker Change: And that helped to produce excellent asset under management flows of $79 billion this year, reflecting a good mix of new client money as well as existing clients putting money to work.
Speaker Change: We also want to draw your attention to the continued digital momentum that you'll find on slide 28.
Speaker Change: Because, for example, three quarters of Merrill Bank and brokerage accounts were opened digitally this quarter.
Speaker Change: Slide 15 shows the global banking results, and this business generated 8.1 billion dollars, or 30% of the company's earnings in 2024, and it continues to be the most efficient business in the company at less than 50% efficiency ratio.
In Q4, global banking produced earnings of $2.1 billion.
Speaker Change: Pre-tax pre-provision results were flat year over year, as improved investment banking fees offset lower NII and higher expense.
Speaker Change: The total earnings were down 13% year-over-year, driven by higher provision expense that came as a result of prior period reserve release.
Speaker Change: Investment banking fees were $1.7 billion in Q4, growing 44% year-over-year.
Speaker Change: This was led by mergers and acquisitions. We also saw strength across debt capital markets fees, mostly in leveraged finance.
Speaker Change: and in equity capital markets fees. And we finished the year strong, maintaining our number three investment banking fee position.
Speaker Change: The fourth quarter saw strong momentum as the election results provided a lift to sentiment for a more pro-business climate and expectations for more deals to be completed.
Speaker Change: Expense in this business increased 6% year over year, driven by the 13% growth in non-interest income.
and continued investments in people and technology.
Speaker Change: The balance sheet saw good client activity and it was muted somewhat by the strength of the US dollar. Year-over-year flatness in global banking loans includes this foreign exchange impact and a six billion dollar decline in commercial real estate from paydowns.
Otherwise, loans in global banking were up 2%.
Thank you. Thank you. Thank you.
are commercial and corporate clients.
Speaker Change: And total global banking deposits are now up 10% year over year, reaching a new record.
Speaker Change: So, we're seeing strong growth across all the categories from our corporate and commercial clients all the way from the larger end to business banking on the lower end. And we also saw 10% growth in our international deposits.
Speaker Change: Turning to global markets on slide 16, I want to focus my comments on results, excluding DVA as we normally do.
Speaker Change: Our team continued their impressive streak of strong revenue and earnings performance. They achieved operating leverage and they continue to deliver a good return on capital.
Speaker Change: For the year, record sales and trading results of nearly $19 billion grew 7% from 2023, and they've been growing consistently now on a year-over-year basis for almost three years.
Speaker Change: This led to $5.7 billion in full-year profits and represents more than 20% of the company's full-year results.
Speaker Change: In the fourth quarter, earnings of $955 million grew 30% year-over-year.
Speaker Change: Revenue, and again this is ex-DVA, improved 15% from the fourth quarter of 23 as both sales and trading and investment banking fees improved nicely year-over-year.
Speaker Change: Focusing on sales and trading XDVA, revenue improved 10% year-over-year to $4.1 billion.
Speaker Change: This is the first time we've recorded more than $4 billion in our Q4 results, and it included Q4 records for both FIC and equities.
Speaker Change: Fake growth 13%, while equities improved 6% compared to the fourth quarter of 2023.
Speaker Change: Borthwick benefited from tighter credit spreads as well as increased volatility in interest rates while equities benefited from increased activity around the U.S. election.
Speaker Change: Year-over-year expenses were up 7% on revenue improvement and our continued investment in the business.
Speaker Change: And then on slide 17, you can see all other with a loss of $407 million in the fourth quarter.
Speaker Change: We spoke earlier about the fourth quarter 23 charges for Bisbee and the FDIC special assessment charge.
Speaker Change: Their reversal impacts the comparisons on revenue, expense, and net income in this segment. Otherwise, there really isn't anything significant to report here. Our effective tax rate for the quarter was 6%.
Speaker Change: and excluding discrete items in the tax credits related to investments in renewable energy and affordable housing.
The effective tax rate would have been approximately 26 percent.
Speaker Change: Looking forward, we expect the tax rate for 2025 to be in a range of 11 to 13 percent, and this just includes our expectation for higher expected earnings in 2025 and relatively stable tax credits.
Speaker Change: Finally this quarter on page 18 we thought it was important to summarize some of the guidance points we talked through this morning and we hope you find this page helpful.
Speaker Change: We aren't expecting much movement around credit based on a pretty solid economic outlook.
Speaker Change: And we remain with a very strong balance sheet with excess capital that we can deploy to grow the business and deliver back to shareholders as appropriate. So with that, I'll stop there. I'll thank everybody and we'll open it up for Q&A.
Speaker Change: At this time, if you would like to ask a question, please press the star and 1 on your telephone keypad. You may withdraw yourself from the queue at any time by pressing star 2.
Speaker Change: And we'll take our first question from Stephen Chubok with Wolf Research. Your line is open.
Hi. Good morning, Brian. Good morning, Alastair.
Morning.
Speaker Change: run off of legacy swaps, what have you, and does that acceleration NII you cited for the second half continue into 26 given some of those tailwinds should remain in place beyond 25?
Well, first of all, I admire you asking about 26.
Speaker Change: I'm always reluctant to talk about the back half of 25, so I'll leave 26 for another time, but
Speaker Change: We don't have a whole lot new, Stephen, relative to what we've talked about in the prior quarters.
Speaker Change: We're obviously pointing right now to deposit growth in particular because it's beginning to get back to something more normal. There was a period there where deposit balances were declining as people got back to something more normal in their accounts.
But we're highlighting here consumer found its floor in August.
Speaker Change: Wealth found its floor in July and that's giving some support then as we grow deposits that that's helping us with the NII growth.
Speaker Change: That hasn't changed, it's just that now we've got successive quarters of growth that we can actually point to.
Speaker Change: The loan growth that you asked about is interesting in that in there were several quarters there where we were bouncing around flattish on loans.
Speaker Change: In Q2 we added $9 billion of loans. In Q3 we added $19 billion.
Speaker Change: In Q4, we added $20 billion. So the loan growth has picked up a little bit. We can sort of see a little more optimism with clients, a little more activity, a little more demand from clients for loan growth.
Speaker Change: So those two things, you know, a little more confidence around deposit growth, a little more confidence around loan growth, those obviously compound through the course of the year. So that will help us in the back half of 25.
Speaker Change: So, that's what leads us to this idea of we think the NII growth will accelerate to 6-7%.
Speaker Change: and you know for the full year so a little bit of it a little bit faster in the back half of the year we kind of just see that but but that that's what gives us the confidence on NII
Speaker Change: That's great, Alastair. And maybe a follow-up for Brian. Just at a recent conference, you spoke about the expectation of delivering 200 bps of sustainable operating leverage, laying out an algorithm where revenues grow 4% to 5%, expenses grow 2% to 3%,
Speaker Change: What gives you confidence in that ability to deliver that level of top-line growth on a sustainable basis? Just want to unpack that a little bit further
Speaker Change: So, I think what gives us confidence, we have periods with stable rate environments, a stable economy, growing at a slow rate than it is now, and having produced that for five years in a row, I think it was, by quarters or something like that, and so it's not something we haven't done. But if you think about the current environment, what's driving
Speaker Change: is different. Our revenue growth is going at twice that rate plus, and the expense growth is growing, you know, close to that number. But when you get to higher growth rates, especially where it's coming from, well, financial business, markets-based business.
Speaker Change: the quickest move relative to expense. I'll give you an example of that. If you normalize last year's expense and think about our expectations from 2023-2024, and you look at the growth rate...
Yep, yep.
Speaker Change: A big part of the growth rate and expense, about 45-50% of it, is the incentives to the wealth management teammates.
Speaker Change: which is a good thing. And so that means revenue is growing and we're taking about half of that in.
Speaker Change: and if you look at the other pieces added to that.
Thank you.
Speaker Change: more incrementally profitable because of NII. You see that kick in.
Speaker Change: based the company broaden out, you'll see that we'll get back to the operating leverage that we expected, albeit it may be a little slower year over year growth rate, unless you're gonna tell me the market is gonna go up, you know, 25, 30 percent every year, and drive the wealth management. When that slows down a more normal growth rate,
Speaker Change: that will slow down its expense growth rate also. Therefore, you'll see the opening up at that level. So it's not something we make up. It's something we put in our operating principles, and it's something we have done a lot of quarters. But we have to sort of get the stability and the relative business position.
That's great, Collar. Thanks so much for taking my questions.
Speaker Change: And Steve, the easiest thing to think about is headcount. The other day, our costs were all people and, you know, that's been relatively stable and that'll start to flow through because during the course of last year we basically kept the headcount relatively stable.
Speaker Change: We had some offbeat expenses that we had to deal with, but now we're sort of settling into that 213,000 level people.
Speaker Change: with a take out on stuff through operating excellence and a putting in on stuff into client coverage, expanding our pipes to draw more marketing, more client coverage, more technology investment. So we always are shifting expenses and that's how we make that operating leverage happen.
Speaker Change: No, it's a really good point. Thanks for the additional headcount nugget, Brian. Much appreciated.
Speaker Change: We'll move next to John McDonald with Truist Securities. Your line is open.
John Mcdonald: Hi, good morning. I wanted to ask as a first question just a follow-up to Steve's NII questioning Alastair
Brian Moynihan: John, before Alastair starts out, welcome back from the cold to be able to be back in coverage and covering our company. And it's always good to know that you're going to consistently ask about NII, but I'll turn it to Alastair to give you the answer. Thanks, Brian. I've got to be typecast.
Alastair Borthwick: There you go. So I think your first question was, if we get the deposit growth we anticipate, do we think we'll use some of that to pay off some of the higher cost liabilities on the balance sheet? The answer is yes. That's consistent with what we said in prior calls. We've done that.
Alastair Borthwick: other institutional CDs. You'll see they came down by another $7 billion this quarter. So, as we grow the really high-quality parts of the deposit franchise, it allows us to take those down.
Alastair Borthwick: and that's one of the things that's going to help grow net interest yield on an ongoing basis. It's not NII accretive necessarily, but it helps us with net interest yield. So, that remains a part of the strategy, John. You'll see that continue.
Alastair Borthwick: As it relates to the cash flow swaps and and how those reprice
Alastair Borthwick: No, we typically don't lay out the table of what we've got on and how it reprices over time But it is embedded in our guidance. So each quarter when I give you guidance for the next quarter
Alastair Borthwick: That will incorporate what we know is coming off on the cash flow swaps and how that does.
Alastair Borthwick: The other fixed-rate assets you can kind of see in our Supplemental information just based on the originations of resi mortgage the originations of auto loans
Alastair Borthwick: And every time, obviously, we're booking new residential mortgage and old residential mortgages coming off, we're picking up 250 basis points every time there. So you can see that happening each time you pick up the supplemental. We just don't tend to disclose the cash flow swaps. So I will do that for you each quarter as we go through the year.
John Mcdonald: Okay, and then just to switch topics so Brian doesn't make fun of me, on terms of capital, how are you thinking about the CET1 target and the buffer that feels appropriate in this environment and how does that play into your thinking on buybacks?
Alastair Borthwick: So I think we bought $3.5 billion this quarter. We'd expect to continue to...
Alastair Borthwick: We think that at a 10-7 requirement, a buffer of 50, that's 11-2, obviously there's going to be some sort of changes in the CAPA rules and we'll have to settle it after we see that and we hope.
Alastair Borthwick: you know, some relief in the volatility of the CCAR outcomes. Because remember that last year we jumped quite a bit without a lot of.
Alastair Borthwick: correlation to the actual Risk of the company and stuff. So we'll hopefully we'll see that settle back in
John Mcdonald: Does that leave you towards a mid-teens ROTC target, Brian, as NIM normalizes and capital normalizes?
Yeah, I think the capitalization...
There will be more.
Yeah, I'm starting.
Matt that helps us favorite but
John Mcdonald: a couple hundred basis points more. It's the huge zero-interest deposit base, especially in consumer and low-interest deposit base, that provides a lot of leverage. So that'll be a driver. The capital return would help some, but I think that'll be more complex based on all the different rules and what happens.
Got it. Thank you.
Speaker Change: We'll take our next question from Glenn Skor with Evercore. Your line is open.
Hi, thanks very much.
Glenn Skor: You just put up record revenues in SIC and equities, as you mentioned, but when we see good environments like this, some companies tend to really blow out numbers. You guys have zero lost days, you don't tend to blow, blow out numbers. Is that a comment about…
Speaker Change: gaps in the business mix that you'd like to invest more and fill in. Is that a comment about risk tolerance? I'm just curious how to think about it on a relative basis.
Speaker Change: You know, I think you have to back up. Jim DeMar and the team are driving the business. Eleven straight quarters of year-over-year growth.
Obviously something we asked ourselves and we looked at the...
Speaker Change: is imperturbable. It just keeps calmly growing forward and driving itself up without, you know, having maybe some of that more traditional trading house up and down. Not because we're not good at it, they're very good at it. Not because they aren't gaining share because frankly if you won't look at the last three or four years they continue to gain share. It's just we have a little less volatility and principal activity on a given day.
Okay, I appreciate that
This might be a simple follow-up on your comments.
Speaker Change: When talking about credit and reserves, your reserve for unemployment a little below 5%, we're at 4.1% now. I think that's the way this cycle has played out. I think that's typical B of A conservatism. I think that's the accounting.
Speaker Change: But I guess my question is, your reserves will be fine, your P&L will be fine, but if that plays out, does that completely change how we're thinking about the pickup in consumer spending, overall loan growth, things like that? Because that is, we're talking about just the next four quarters.
Alistair Borthwick, Brian Moynihan
I'm good.
Speaker Change: We'll move next to Erica Najarian with UBS. Your line is open.
Erica Najarian: Yes, hi, good afternoon, about to be good afternoon. My first question, just as a follow-up, Brian, I think I heard you say
Erica Najarian: in response to John's question that you think the exit rate net interest margin will be 2.1%. I think in 4Q25, I just wanted to confirm that I
Speaker Change: heard that correctly. And underneath that, Alastair, could you talk about the repricing or down deposit beta dynamics that you would assume to get to that net interest margin?
Speaker Change: Yes, so the simple answer is you've stated what I stated to John, but I'll let Alastair answer the second part of your question.
Alastair Borthwick: So generally, Erica, we're obviously following the Fed rate cuts, just repricing things accordingly.
Alastair Borthwick: Obviously at the other extreme, on the non-introspiring, there's nothing we can do with that. It's already non-introspiring.
Alastair Borthwick: But we're following the Fed cuts, we're moving the rates with discipline accordingly.
Alastair Borthwick: 2 years where there have been a lot of things going from non-interest bearing into interest bearing across the different parts of our businesses.
That has slowed significantly.
You look at, for example, consumer non-interest-bearing?
Alastair Borthwick: That seems to have bottomed out in February of last year. And the non-interest bearing balances are growing now again. So, that rotation is slowing also. Both of those things are factoring into our guidance. Yes. So, Eric, if you look at...
And the interesting part...
Speaker Change: that's gone on in the last couple quarters, just from deposit behavior. If you look at our accounts that were here prior to the pandemic to now, you saw a run-up.
Speaker Change: And then you saw a little depletion, and it's basically stabilized at a level.
Speaker Change: and the others are still multiples of where they were before.
Speaker Change: That's been going on, and they've been growing, and they're growing 9% year over year in the lower balance accounts as people make more money and store more cash.
Speaker Change: have cash flow. So, if you think about what happened is our average balance account was around 7,000, went up to 11,000, and now it's basically stable at 9,000 checking accounts. And that's kind of, and you can go out from there. That is very valuable because...
Speaker Change: You know checking is either zero or very low interest and so it's where the growth we see coming as the deposits grow and consumer that helps produce
Speaker Change: irrespective of the market dynamics of the higher at the market price deposits.
Speaker Change: where you see the impact of the deposit franchise coming through. So consumer being down a basis point, quarter, quarter, doesn't sound like a lot, but you've got to remember a lot of their stuff is, it doesn't really price. But are they growing that stuff and each, you know, $10 billion of growth in that area is very, very important to us.
Got it. That's very helpful. And just as a follow-up...
Alastair Borthwick: Both you and Alastair have, over the course of 2024, started introducing the concept of a normalized net interest margin of 2.3%, with a neutral rate maybe around 4%.
Alastair Borthwick: Can B of A get there more quickly, particularly given the deposit dynamics that you mentioned, Brian? I guess I'm trying to, we're just trying to figure out, you know, you know, you guys did introduce the concept of normalized NIM. So, you know, I'm not trying to seek out guidance in terms of 26 or 27 or whatever. But, you know, you had had to have told us that for a reason. And I'm just wondering if the forward curve or what the dynamics are, you know, that would lay out the path to achieve that.
Alastair Borthwick: over the medium term. If the Fed funds rate?
Alastair Borthwick: Stays higher, we'll get there faster. It's a simple equation, because that's obvious, because of the sheer volume of low answers. So, if we were sitting here in the...
Alastair Borthwick: October, I think, when we were talking about that, the amount of rate cuts was still, I don't know how many more, three or four more than we've had so far. Now we're down to one. So as it stays at a higher nominal rate.
Alastair Borthwick: There are two caveats to that. One is we're carrying a larger markets balance sheet, which by definition is a little less robust in that area. And then secondly, we're carrying a lot of low...
a lot of excess liquidity just because
Speaker Change: We're running that down, as Alastair said, so during the pandemic, we built up a lot of term financing and running off, so all that will help us, but it will go faster than we'd otherwise say, mid-last year to now, just because the nominal rate environment stays higher.
Thank you.
Speaker Change: We'll take our next question from Mike Mayo with Wells Fargo Securities. Your line is open.
Hi, so you kind of upped your NII
died the next day.
several quarters and
Speaker Change: You know, this was the first question asked, you know, but how much is short rates? How much is long rates? But most importantly how much of this is a little bit more Steepness in the yield curve and what part of the yield curve is most important for that and what's this the sensitivity, you know? For every 10 basis points of additional steepness that adds how much to NII or something along those lines. Thanks
Speaker Change: So Mike, it's still the short end that drives probably 90% of the sensitivity around NII, because if you think about it, we just don't have enough fixed rate assets repricing to really drive NII. In any given quarter you've got
Speaker Change: A few billion of resi mortgage, a few billion of CVL repricing, let's call that 10 to 12.
You've got...
Speaker Change: You know eight to ten billion of ultimate maturity securities repricing
Speaker Change: But that's in the context of a $3.3 trillion balance sheet.
Brian Moynihan: So it's still the short end that drives most of the NII. So when Brian says obviously we're helped by the fact that there might be two or three rate cuts less than there were previously, that's obviously helpful.
Brian Moynihan: But the big thing is always for us in terms of year over year growth, it's always about deposit growth and loan growth.
The fixed-rate asset repricing is...
Brian Moynihan: It turbocharges a little bit at the margin, but it's about deposit and loan growth, and those are the important ones. And getting back to growth now in each of our businesses gives us a stronger foundation leading into 2025 than we had this year when we still had, at the beginning of the year, consumer coming down, wealth coming down. Now that they've found a floor, it's slightly different.
Brian Moynihan: And then a big picture question, Brian, with the new incoming administration and a different tone as it relates to bank regulation. In fact, the incoming Treasury Secretary said he would like to reinvigorate banks.
Brian Moynihan: So, if you were to talk to them, and maybe they're listening...
Speaker Change: And then a specific question, I know it's going to be tough. If you give me any sense, it'd be great, but your CET-1 ratio, if you didn't have gold plating, if you had a level playing field, if you took out some of the extraneous, you know, operating risk penalty, how much would your CET-1 ratio increase in that sort of world? Thanks.
A little bit of a...
pre-pandemic to post-pandemic where you've seen.
Speaker Change: This concept of Basel III making an equivalent around the world is completely off the table.
Speaker Change: though play to what everyone talked about and just apples and oranges and so I would never think that we go we ever got to Europe our numbers would be probably you know a lot lot higher but that's not going to happen because just to we're going to we as society will have a more conservative really a capitalized industry so I think yep.
I think it's simply put if they
clear
statement, a clear advocacy about, as an industry, about index-adhesive.
Speaker Change: You know, take the volatility out of CCAR, how can it change so much in the relatively same scenario? And also, you know, behind the scenes, all the changes in accounting, not accounting, but accounting, you know, for risk, you're increasing capital requirements and without any explicit decision to do so. And we think that that would be worth, you know, probably a hundred basis points or so if you really sat back and thought about it. How do you get there?
Speaker Change: We went up by, I don't know, 50, 70 basis points last year, whatever it was.
Speaker Change: The regular agencies cooperate on things like BSA and AML and things that, you know, everybody's all over the place and the industry's trying to sort it out in the middle. And we've given them precise points to look at and we'll see what happens.
All right. Great, thank you.
Speaker Change: We'll move next to Jim Mitchell with Seaport Global Securities. Your line is open.
Jim Mitchell: Hey, good afternoon. Maybe just dialing in on the deposit growth. You clearly have been outperforming the peer group, but maybe just want to focus on consumer for a second. You generated $1.1 million of net new checking accounts.
Jim Mitchell: which seems best among peers. I think that's showing up in better consumer deposit growth in 4Q. So what do you think you're doing differently that's generating that kind of consistent success in adding new accounts?
But at the end of the day
Jim Mitchell: Our customer service capabilities are scoring at the highest they've ever come. The fairness of our account structures, the transparency, the digital capabilities, it's just winning in the market. It's in a billion net new checking accounts.
Then, on top of that, we've layered in ways...
Jim Mitchell: Relentless and sustainable, you know, and yet we still have lots of ways to grow and we weren't in You know, we just entered a lot of markets over the last five years, you know, Denver, Cleveland, Columbus, Cincinnati, Indianapolis
Jim Mitchell: Minneapolis, Milwaukee now, Lexington, etc. That's one way. And then if you think about in...
Jim Mitchell: Wealth Management teammates and Katie Knox and Lindsey and Eric do a great job there but we have a lot of room to go where we continue to outfit those clients for the full range of services of Bank of America and even Merrill Edge has a lot going on there so there's a fair amount of room.
Jim Mitchell: Deposits that come from our Merrill Lynch originations, which are 300,000 accounts year over year and you know Those are all hundred thousand dollars starting accounts. Not, you know, not three thousand
Speaker Change: That all makes sense. And then maybe pivoting on the expense side, the guidance of two to three percent growth, you know, it's kind of a pretty decent step down for what we saw in the back half of the year. So what areas do you see sort of slowing on the expense side, given the, you know, your optimism on organic growth? How do you kind of.
But I think...
Speaker Change: three key things. One is, if we get the year-over-year growth in the markets-related businesses,
in the high double digits, 20% growth.
Speaker Change: You know if that expense guides might be a little tight
Speaker Change: But again, you would cheer for that. So this is assuming a 5% to 6% growth in the S&P type of numbers.
Speaker Change: So that takes some of the growth pressure off, the aggregate numbers are...
Speaker Change: you know, locked in at a high level and growing from there. And then the second thing is, frankly, just getting, you know, a lot of this work behind us and some remediation and look backs and things are all completed and behind us. And then, you know, third is just...
Speaker Change: you know, keeping the head count and getting, continuing to focus on OPEX and generating capabilities. And so, you know, as we stepped into some of these national brand campaigns around some of the major properties we've affiliated with, most recently yesterday, women's soccer, U.S. soccer, including men's and women's teams, FIFA.
Okay, yeah, no, that's fair. Thank you very much.
Speaker Change: We'll move next to Vivek Junaidja with J.P. Morgan. Your line is open.
Vivek Junaidja: Hi. I have two separate questions. First one with expenses. Just want to clarify to the last question, Brian, what you said. So what are you assuming for incentive comp in 25 in your guidance? Is it
Speaker Change: Flat Euroneo? Are you assuming some increase? Any color on that? It would grow. It would grow with the markets and stuff, but we have other efficiencies that offset some of that.
Okay
Speaker Change: Second one, I guess, you know, I can't leave you disappointed. I must, given you and Alastair love NII, so let me ask a little nitty question on that.
Speaker Change: Bisbee hedges since those started to accrete this quarter. How much was the benefit this quarter and what is the cadence of that as we look out over 25?
Speaker Change: So we think about the Bisbee accreting back into the P&L kind of like the same way we do with the other cash flow swaps, Vivek. So I'd say a couple hundred this quarter and then when we give you the guidance with all the cash flow swaps it's all included in there so
Speaker Change: When I say that we think this year Q1 should be up modestly, that is after the $250 million of day count adjustment?
Speaker Change: and it's including budget growth, loan growth and all the cash flow swap activity.
Speaker Change: At least that particular item... Most of it will take place in 2025, it sort of burns back into the P&L And then there will be a little bit in 2026 and a tiny bit in 2027
The End
Speaker Change: Brian, to your comment on capital, you said you want to keep a 50 basis point buffer, your CET 1-11-9, 50 basis point 1-11-2, is there a plan to go down to the 1-11-2 at some point and therefore step up your buybacks, or what's the thinking there?
Speaker Change: I wouldn't assume that we're going to take it down through buybacks in your modeling. It's going to be there to support growth. But, Vivek, the simple answer is we've got to get a set of rules that quit moving around on us. And once we get them, then we can give you better guidance on that.
goes with the, you know
It's just hard to...
Speaker Change: So don't expect us to deplete that ratio down quickly, but I hold my right to change that if we get the capital levels straightened out of the new rules.
Makes sense. Thanks.
Speaker Change: Our next question comes from Matt O'Connor with Deutsche Bank. Your line is open.
Speaker Change: Just other areas that you're like, you know, if we had that extra 100 basis clients or 50 or 150, you would do a little bit more in some areas than you have been.
Speaker Change: None of our businesses are constrained because of capital. So if the consumer team had more credit card loan growth that was based on what they think the right risk balance is and getting paid for it, etc.
Speaker Change: that's gone on. He saw us just grow balances last quarter, the auto loans or whatever. And so I think it, you know, I don't see that. Wealth management, obviously not much of a RWA user in a lot of ways. And then, you know, the real question is
Speaker Change: is in a global banking business again. They're getting strong loan growth, there's nothing.
Careful that we don't
Speaker Change: do it, but Jim and the team have done a great job, and we've...
Speaker Change: Basically, their balance sheet is $300 billion larger than it was four or five years ago. We've grown through the G-SIBs as you've...
No, from...
Speaker Change: 2 1⁄2 to 3, and we'll keep probably growing through those, and that we use some, but...
Speaker Change: It's not like we'd say you can't have it because of capital.
Speaker Change: It's really just abutting the company, keeping the balance, and the overall management of the risk and where we want to take risk and how we do it. And then, frankly, they come up with business plans, and we've never had to say we don't have enough capital to do that. That's not the issue.
And I guess so.
Speaker Change: like depending on how the capital rules are tweaked it could make some businesses just more profitable right so even though you have enough capital to put those businesses if the returns aren't making your hurdles you know maybe it could with some tweaks and you know I've heard some of your peers talk about like equity prime brokerage.
Speaker Change: as one area that could have higher returns if capital requirements are reduced. And again, we don't know exactly how it's gonna play out, but do you envision any kind of changes to how you evaluate businesses? Thank you.
Yeah, I think.
Speaker Change: It won't change how we evaluate businesses because regulatory capital is only one of the ways we look at it. We look at the risk and
Speaker Change: you have sort of market-based capital and other things, but it could...
Speaker Change: I don't expect to see change in how we do it, but also don't think that any of our businesses are constrained because we're not having capital. So if Jim and the team have a chance to go prime brokerage and make it work, in our company, we could have other businesses which have very high ROAs to make up for it. In some other companies, it'd be more important for them because they don't have those other businesses, you know, in relative size in the markets business.
Okay, thank you, that was helpful.
Speaker Change: We'll move next to Gerard Cassidy with RBC. Your line is open.
Hi Brian, hi Alastair.
When you guys look at credit quality, is it...
Speaker Change: Due to better underwriting standards, or sticking to your underwriting standards, or is it your customers themselves, because we all went through the pandemic, are just much stronger balance sheets, more resilient? What would you account for so far that this credit cycle has been fairly benign for you and your peers?
Yeah, look it's definitely been benign.
I think
Speaker Change: One thing that hasn't changed, our underwriting strategy, our standards, our risk appetite, our client selection, those really haven't changed, Gerard.
Speaker Change: But I think you're right. Look, things are obviously different than 2019. In 2019, we didn't have this rate structure. So that's a little bit harder at the margin for the consumer.
Speaker Change: At the same time consumers stronger, I mean we can see that in the deposit balances we can see it right now and
Speaker Change: Look, 2019 was freakishly low in terms of like a historical norm.
Speaker Change: But things have settled in here. We sort of said a year ago we thought they would plateau right around where we are.
Speaker Change: We're glad to see three or four quarters now of some stability. It feels pretty good on the consumer side.
Speaker Change: It feels very good still on the commercial side. So that's why we're sort of laying out our expectation is unless there's a big change in the economy, we think we're going to be around in this 50 to 60 basis points over the course of the next year or so.
Speaker Change: Very good. And then, as a follow-up, I share your optimism on the outlook for the economy and many of your peers in the capital markets business. I think many investors do.
Speaker Change: What are the risks? I mean, when you guys sit down at night and, you know, everything's going well, what do you talk about as what curveballs do we have to watch out for? Is it a rate environment that changes quickly without anybody really expecting it? Is it complacency? What are some of the risks that you guys think about?
Thank you.
You have.
Speaker Change: a lot of countries are pretty low and so can you get the productivity to keep growing the economy you know but and you know all the usual things but if you think about it
Speaker Change: And then, you know, a lot of it's outside the banking system. So we worry about that and how it reverberates into the banking system because.
Speaker Change: the Federal Debt Levels and the pinch that will come out of state and federal spending if they need to slow down the growth, all those things are factors which we think about and the way we manage the company is to run it so that given those events we can continue to operate and that's why the stress testing, quite frankly,
Speaker Change: is a good thing because it makes you think about the parade of horribles happening even though they don't happen and make sure that you are positioned to survive them and if you said to...
Speaker Change: The question Alastair answered, one of the big impacts across time here in the bank industry is because the top 30 institutions are doing stress testing.
Speaker Change: which assumes that you're wrong in your underwriting and the economy goes from 4% unemployment to 10% unemployment overnight think about the impact of that on bringing the underwriting narrower so that you can afford the capital that you have to hold for that outcome even though that outcome hasn't occurred.
Speaker Change: That's going to cross a big portion of the bank industry, so I just think it's more fundamentally structured but leverage is going to be the issue, it always is, and you're always trying to find the P. Where's excess leverage and how do you make sure you're avoiding it?
Alastair Borthwick: That's very helpful, thank you. And Alastair, I liked your comment about when you were talking about the 17 financial centers that you're a growth company. Hopefully that will be reflected in the PE shortly.
Alastair Borthwick: Well, there's plenty of room on the P multiple, but I'll let you work on that, Gerard. You work on the E part. Okay. Fair enough. Thank you, gentlemen.
Thank you.
Speaker Change: And we'll take our final question from Betsy Grasick with Morgan Stanley. Your line is open.
Betsy Grasick: and you've got a flat curve at the front end. And so I'm kind of wondering how that feeds into C&I demand. And I'm wondering what your conversations with not only small business, mid-business, corporates, it'd be really interesting to hear how you think they're preparing for this change. Thank you.
Sir, Betsy, so small business...
Betsy Grasick: So in our business banking category, we have small business, business bank, and we have
Betsy Grasick: Global Commercial Bank, you think middle market, across that environment, the draw rates on lines of credit stuff are still much lower than they were in a pre-pandemic and things like that.
Betsy Grasick: And to your point, the higher interest rate environment affects them most quickly and importantly because they use lines of credit to do things, buy a piece of equipment.
Betsy Grasick: to hire some more people in the payroll dynamics of that, whatever it is. And they might permanently finance that, but immediately they use lines. And the draw rates, you have 400 basis points over where it normally runs, so to speak, which means that they're drawing at less rate, and that probably means they're doing a little less.
Betsy Grasick: And so we haven't seen that move a lot. That's a to-come in terms of loan growth, as Alastair mentioned earlier. But their optimism has changed, and you saw that, you know, and that's really around the other things. When you talk to our small business customers, and we made a
Speaker Change: You have staffs that we do and other companies do that can deal with all that and so it all confuses It slows them down and makes them hesitate
Their belief is that
Speaker Change: That's change, and that's why you see the optimism come up, and then we've got to translate that optimism into activity, and then you'll see the long growth come. But I think it's a quick change, and it's based on their view of how easy it will be for them to get things done, both at a state and federal level.
Speaker Change: I'm just looking at you, Bank of America is one of the few that actually has small business loan growth year-on-year, and I know a lot of that came a couple quarters ago, but with this very sharp increase in small business optimism.
Speaker Change: I would think that, you know, could potentially be something you could benefit from. No, no question. And, you know, so
But the real dollar volume of benefits going to be
Yeah, we feel good about that.
Speaker Change: But the dollar volume change in the middle market business from a little more drawing on the lines consistent with what people have done before is a lot of loan balances. There's $200 billion of balances in that business, so it doesn't take a lot to kick it up. Right, I got that, yeah. So I think, look, we're the largest lender to small business and those customers tell us.
Speaker Change: They're optimistic, and they see forward. And the issues were, I couldn't get enough people, and that's something we've got to be careful of. The regulations were hurting me, and then the interest rates. And the interest rates coming down a little bit helps them, and the other two, the strong belief is that'll be more readily available.
Thanks so much, appreciate it.
Speaker Change: And it does appear that there are no further questions at this time. I would now like to turn it back to Brian for any additional or closing remarks.
Brian Moynihan: Sure. Well, thanks everyone for joining us today. We finished 2024 with good momentum as we enter 2025.
Brian Moynihan: The economy is resilient and healthy. The consumers continue to spend at a solid and healthy rate.
Brian Moynihan: The employment levels are strong. The asset quality we can see is very good.
Brian Moynihan: Our loans have now grown for several quarters in a row here. The pods have grown for six straight quarters.
Brian Moynihan: The rate environment continues to be constructive. And then the added value in the last couple quarters of the fee businesses have come on strong, given the extra market activity. All that sets us up well for 2025. Thank you for your support. We look forward to talking to you next time.
Speaker Change: This does conclude today's program. Thank you for your participation. You may disconnect at any time and have a wonderful afternoon.
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