Q1 2025 Bank of America Corp Earnings Call

Good day everyone and welcome to today's Bank of America Q1 Earnings Results. At this time, all participants are in a listen-only mode. I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Lee McIntyre.

Speaker Change: Thank you Lee and thank all of you to.

Lee McIntyre: Good morning, and thank you for joining us.

Given the recent events.

Lee McIntyre: We want to do a couple of things that are time today first we want to provide a clearer picture of how well the fundamentals of the company performed.

Speaker Change: It produced another good quarter of earnings in the first quarter of 2025, so I'm going to talk to a little those highlights and I'm going to turn it over to Alastair for details on the quarter and some forward guidance.

Speaker Change: Second given the market volatility and concerns of potential changes in the economy and its outlook at.

Speaker Change: At the end of the quarterly presentation. We're gonna give you give you some facts to set the context about the quality of our credit portfolios, our capital and liquidity as we may face periods of economic change and set that in the context of how we fared prior to past periods of economic stress. So let.

Speaker Change: Let's get going on slide two of the discussion.

Speaker Change: This morning Bank of America reported a $7.4 billion in net income and 90 cents and EPS for the first quarter 2025.

Speaker Change: A solid start to 2025 and great work by our teams.

Speaker Change: On a year over year basis, we grew revenue by 6%. We grew net income at 11%. We grew earnings per share, 18% and we'd live in more capital back to shareholders and we reduced shares in the aggregate by 3%.

Speaker Change: We produced an 89 basis points return on assets and a 14% return on tangible common equity in the first quarter.

Speaker Change: So let me hit on a few highlights that drove that performance.

Speaker Change: Net interest income grew 3% year over year is up from quarter four to the high end of our guidance range. We gave you three months ago we.

Speaker Change: We grew deposits for the seventh straight quarter.

Speaker Change: <unk> nearly two trillion at quarter end and have now grown 8% from their mid 2023 low point.

Speaker Change: We grew commercial loans and every nearly every line of business that is a second corner road they've grown across the board.

Speaker Change: Although when you're on a consumer team marked the 25th straight quarter of net new checking.

Speaker Change: Count growth.

Speaker Change: Annual flows truck consumer investments business of $22 billion over the last 12 months.

Speaker Change: Our wealth management businesses led by Eric and Lindsay and Katy Knox and the private bank together added 7200 net new households in this quarter and saw net inflows of 24 billion in the quarter.

Speaker Change: Jim Tomorrow, and the team recorded the 12th straight quarter of year over year sales and trading revenue growth and achieved a 16% return on allocated capital.

Speaker Change: We generated these results working from a strong balance sheet with over $200 billion in regulatory capital nearly one trillion dollars and liquidity.

Speaker Change: This allows us to provide strong support and solutions for our clients.

Speaker Change: Turning to slide three.

Speaker Change: And again a growth one of the keys to our earnings improvement has been our ability to consistently drive organic growth organic growth remained strong across the businesses as highlighted on slide three I won't go through all the statistics.

Speaker Change: All the points on the page, but as you can see the momentum has continued I noted I note that continued growth in net new checking.

Speaker Change: Households, new companies of commercial banking and growth in our institutional markets business.

Speaker Change: Clients continue to see the value in our capabilities and connected businesses as a company.

Speaker Change: Our digital engagement and sales continued to expand across all our businesses, we saw more than $14 billion 14 billion logins and 2020 for Eric.

Speaker Change: Eric has now surpassed $2 7 billion interactions since its inception.

Speaker Change: Our cash pro App for our commercial customers continued strong adoption and usage rates as you can see.

Speaker Change: Transactions sent through Zelle at Bank of America are not only three times the number of checks written by a bank of American customers, but also 1.3 times the number of checks written plus the number of cash transactions, taking money out of the Atms.

Speaker Change: It's also worth noting that digitally enabled sales in our consumer product.

Speaker Change: Across the board reached 65% of total sales.

Speaker Change: You can see these trends in digital in our slides we show you each quarter on slides 26, 28, and 30 in the appendix and we commend those to you.

Speaker Change: As you go to slide four we showed you some of the highlights in economic activity.

Speaker Change: We provide some of the current spending data by our consumers of bank of America.

Speaker Change: There's a lot that could potentially change given the uncertainty around the tariffs and other policies in the future path of the economy.

Speaker Change: And our communications to all of you guess, if we've done during other stress periods. We wanted to rely relate to you those facts, which we think gives you some context.

Speaker Change: But before we do that our research team like many research teams led by Qantas Sprouting does not currently believe we will see a recession 2025, however, they've lowered their GDP growth rates for 2025 and continue to see no rate cuts during twenty-five but expect as inflation gets under control you may see them in the future.

Speaker Change: And I in 'twenty six.

Speaker Change: But going more to what our customer data shows it shows that the money moving across all our consumer spending methods debit and credit cards.

Speaker Change: A C H.

Speaker Change: Checks written.

Speaker Change: Well et cetera, all that aggregate shows that group about 4.4% pace in the first quarter of 2025 compared to the first quarter of 2024.

Speaker Change: As you look at the chart look across it you can note that consumer spending has been consistently growing year over year, but during last year, it actually slowed a bit, especially in the summer and pick back up in the fall.

Speaker Change: That resulted in the fourth quarter of 24 over the fourth quarter of 'twenty, three being about a 4% pace and that pace has continued.

Speaker Change: That pace is also continued for the first part of April.

Speaker Change: We know that some retailers may say that their sales are slower than others are picking up and it really reflects the change in consumer spending behavior, but in the aggregate the consumer keeps pushing money into the economy.

Speaker Change: As we look at our business side in water business clients are telling you in the current setting they remain profitable liquid and have strong results they're all.

Speaker Change: They all look ahead and worry about the same things that you hear reflected in your conversations with them also.

Speaker Change: So we continue to watch for signs of the environment actually changing but we thought it would be good to share with you what we're actually seeing in our customer base at this moment.

Speaker Change: So far so in summary for bank of America for the first quarter of 2025 I want to thank the team for another strong quarter.

Speaker Change: We saw good organic client activity, we saw enjoyed good growth in revenue and earnings.

Speaker Change: We continue to invest in the future growth of our company, we manage the risk well that drove healthy returns for you our shareholders and we increase the capital delivered back to our shareholders with that I'm going to turn it over to Alastair talk you through the quarter.

Alastair: Thank you Brian.

Alastair: I start on slide five of the earnings presentation to provide a little more context on the quarter.

Alastair: As Brian noted, we generated $7 $4 billion in net income or 90 cents per diluted share this quarter.

Alastair: And that represents good growth over both last quarter and the year earlier period.

Alastair: On slide six we know what some of the highlights of the quarter.

Alastair: Revenue of 27 5 billion on an FTE basis grew 6% from the first quarter of 'twenty for most.

Alastair: Most revenue items showed improvement year over year.

Alastair: And I agree with 3% investment in brokerage fees rose, 15% with both assets under management flows and market levels contributing nicely to the growth.

Alastair: This quarter's $5 6 billion in sales and trading revenue grew 9% from the year ago period.

Alastair: Service charges grew 8% with particular strength in our global payment solutions revenue.

Alastair: Card income improved 4%.

Alastair: And other income also improved driven by games, mostly associated with leveraged finance positions and these were positions that we disposed off during the quarter.

Alastair: Noninterest expense was $17 8 billion up from the fourth quarter, driven by seasonally elevated payroll taxes and markets revenue related costs of processing and incentives.

Litigation costs were also higher related to a recent decision and a long running better.

Alastair: With operating leverage this quarter as revenue grew 300 basis points faster than expense compared to Q1 'twenty four.

Alastair: Provision expense for the quarter was $1 5 billion with asset quality remaining in great shape.

Alastair: Dividends were $125 million less than the first quarter of 'twenty four as we redeemed some preferreds over the past year.

Alastair: And we use some of our excess capital to reduce our outstanding shares 4% from the first quarter of last year.

All of these things aided and EPS, improving 18% year over year.

Alastair: Let's move to a discussion of the balance sheet using slide seven and you can see assets ended the quarter at 3.35 trillion. That's up 88 billion from the fourth quarter driven by higher levels of client activity in global markets and.

Alastair: In addition loans grew 15 billion in the quarter supported by a $24 billion increase in deposits.

Alastair: Deposit growth exceeded loan growth, we continue to add to our liquidity.

Alastair: Long term debt increased 21 billion driven by funding needs to support the growth in client assets.

Alastair: Average global excess liquidity at 942 billion remained strong and up year over year.

Alastair: Shareholders' equity was flat with the fourth quarter.

Around 296 billion.

Alastair: And within that we returned $6 $5 billion of capital back to shareholders.

Alastair: With 2 billion in common dividends and the repurchase of $4 5 billion of chairs.

Alastair: It's worth noting that year over year equity is up $2 billion.

Alastair: And a $10 billion increase in common equity was partially offset by a 28% reduction in preferred stock.

Alastair: Tangible book value per share of $27 12 Rose 97, 9% from the first quarter of 'twenty four.

Alastair: Turning to regulatory capital on slide eight our CET, one level increased to 201 billion and the CET one ratio is 11, 8%. This.

Alastair: This is down 11 basis points and remains well above our 10.7% requirement.

Alastair: You can see in the waterfall, we deployed capital in a number of ways. This quarter. In addition to the increased amount of share repurchases, we allocated more capital to our global markets business and grew both consumer and commercial loans.

Alastair: Within the ending loan growth, it's worth, noting we bought an $8 billion portfolio of residential mortgage loans.

Alastair: That's both high in quality.

Alastair: And a lot has good potential to expand relationships with customers beyond those mortgage loans.

Alastair: And we expect these loans to add just over $100 million in and I I annually.

Alastair: Supplemental.

Alastair: Average ratio was five 7%.

Alastair: It is a minimum requirement of 5%, which leaves capacity for balance sheet growth.

Alastair: And our 468 billion of.

Alastair: Total loss absorbing capital it means our T Lac ratio remains comfortably above our requirements.

Alastair: As you see on slide nine.

Alastair: We've now grown deposits for the seventh consecutive quarter on an average basis and we're near two trillion on an ending basis.

Alastair: Typically we see some downward pressure on deposits as we move from Q4 to Q1 as commercial clients use their cash to pay bonuses and taxes.

Alastair: This year, we saw commercial deposits more stable as clients remain highly liquid.

Alastair: In addition, we remain disciplined on pricing as we pass through short rate declines and so at 24 basis point decline in rate paid and global banking.

Alastair: We saw continued stability around our consumer noninterest bearing balances.

Alastair: And as interest rates moved lower in Cds and preferred deposits on a brokerage platform. We saw a three basis point decline in rates paid on consumer banking this quarter to 61 basis points.

Alastair: Overall rate paid moved from 194 basis points in Q4.

Alastair: 117, nine basis points this quarter and were lower in every business segment.

Alastair: Let's turn to loans by looking at average balances on slide 10, and you can see loans in Q1 of 1.09 trillion improved 4% year over year, driven by 7% commercial loan growth.

Alastair: Excluding commercial real estate that year over year growth was 9%.

Alastair: We noted a modest increase in revolver utilization during the quarter as clients navigate the current environment.

Alastair: Consumer loans grew modestly year over year with linked quarter movement, reflecting seasonal credit card paydowns.

Alastair: And the $8 billion of residential loans, we purchased this quarter and that I noted earlier.

Alastair: Those will come onto the balance sheet, but they came on to the end of the balance sheet at the end of the quarter. So they don't really impact averages this period and will begin to impact them next.

Alastair: Let's turn our focus to NII performance on slide 11, where on a GAAP non FTE basis NII in Q1 was $14 4 billion.

Alastair: And on a fully taxable equivalent basis NII was 14 6 billion, that's up 3% from the first quarter of last year.

Alastair: We finished at the higher end of our expected range and NII grew $75 million on a fully taxable equivalent basis over Q4, even as we incurred.

Alastair: Approximately $250 million headwind from two fewer days of interest accrual.

Alastair: The improvement was driven by global markets activity as well as deposit favorability and loan growth and.

In fixed rate asset repricing also benefited NII.

Alastair: 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.

Alastair: So that means interest rates would have to move instantaneously.

Alastair: Other 100 basis points lower.

Alastair: Then the four cuts already expected and contemplated in the April 10th curve.

Alastair: On that basis, a 100 basis point decline with decrease in NII over the next 12 months by $2 2 billion.

Alastair: And if rates went up 100 basis points again more than the forward curve.

Alastair: And I would benefit by roughly $1 billion.

Alastair: With regard to a forward view of NII, given the uncertainty of the announced tariffs we've seen expectations for more cuts in interest rates and more variability now in the market expectations for economic growth.

Alastair: So let us provide a few thoughts for you using slide 12 illustrates.

Alastair: In Q4, we provided our expectation that we could exit Q4 of 2025 with NII on a fully taxable equivalent basis in a range of 15.5 to $15 7 billion.

Alastair: And that included an acceleration of NII growth in the second half of the year.

Alastair: Our assumptions underlying that and I believe that included an interest rate curve.

Alastair: Which anticipated one rate cut in the middle of the year and modest loan and deposit growth.

Alastair: Well the interest rate environment has changed a little our current expectation for the exit rate of and I I in Q4 remains unchanged.

Alastair: Using the first quarter 'twenty five as the base.

Alastair: What's your phone. It gives you some idea of our assumptions to bridge to our Q4 25 expected exit rate.

Alastair: First we pick up two additional days of interest one in each of the next couple of quarters.

Alastair: Fixed rate asset repricing also benefits, our NII and it takes into account the impact of the current interest rate curve.

Alastair: There are three primary buckets for that benefit securities mortgage loans and cash flow hedges.

Alastair: Security pay downs are running about eight to 9 billion a quarter mortgage loans or another four to 5 billion a quarter and each gains a little more than 200 basis points as they're replaced.

Alastair: Cash flow swap repricing benefits are a little more staggered and their roll down and make up the rest of the benefit here.

Alastair: We assumed the early April interest rate.

Alastair: Curve, which reflects four cuts.

Alastair: And a couple are later in the year. So that will have some negative impact near term on our expected NII growth.

Alastair: It improves as the funding costs more fully reflect those cuts.

Alastair: The best proxy for that impact is our asset sensitivity, which again assumes instantaneous rate reductions even below the rates.

Alastair: What's currently in the curve.

Alastair: We provide our best estimate using the timing of those cuts.

Alastair: And at the same time with lower rates, we would expect just a little more loan and deposit activity and we estimate the NII impact of that growth would offset some of the interest rate impact from lower rates.

Alastair: You saw modestly better deposit growth in the first quarter than we expected.

Alastair: In addition, we believe our liability sensitive global markets business will also likely benefit NII more as we move through the year I know that obviously depends on the way clients choose to trade with us.

Alastair: Bottom line, our fourth quarter exit rate expectation for NII is unchanged at $15 five to $15 7 billion from our previous expectation and.

Alastair: And that means we're still expecting strong full year NII improvement this year of 6% to 7%.

Alastair: Okay, let's turn to expense and will use slide 13 for the discussion.

Alastair: We reported a little less than $17 8 billion in expense this quarter and that included roughly $500 million and seasonal elevation from payroll tax expense.

Alastair: And some markets related revenue related costs.

Alastair: We also had higher litigation expense to $160 million driven by a recent decision and a long running better.

Alastair: And remember as you think about the expense increase from Q4.

Alastair: That quarter included a $300 million release of accruals for the FDIC Special assessment.

Alastair: Expense compared to Q1, 'twenty four is up a little less than 3% consistent with our full year 'twenty five growth expectations.

Alastair: The increase reflects costs of higher sales and trading and wealth management fees and then the investments made to add more sales associates and to support increased technology and marketing costs.

Alastair: Lets move to credit and turn to slide 14, where our asset quality remains sound.

Alastair: Net charge offs were 1.45 billion modestly down compared to Q4 this.

Alastair: This is the fifth consecutive quarter that net charge offs of hovered around $1 5 billion.

Alastair: Total net charge off ratio this quarter was 54 basis points flat with Q4.

Alastair: Q1 provision expense was $1 5 billion and matched net charge offs.

Alastair: Consumer net charge offs were $1 1 billion consistent with the past few quarters.

Alastair: 90% of our consumer net charge offs are driven by credit card, which highlights the importance of prudence and underwriting that portfolio as we note on slide 22.

Alastair: On the commercial side, we saw losses of $333 million down modestly from Q4.

Alastair: Near term, we don't expect much change in net charge offs as you can see improvement in both early and late stage delinquencies from the fourth quarter that tells us that net charge offs could even be a touch lower next quarter on the consumer side.

Alastair: On Slide 15 in addition to the improvement in consumer delinquency statistics note the modest changes in other states for both our consumer and commercial portfolios.

Alastair: Okay, let's move to the various lines of business and some brief comments on their results starting on slide 16 with consumer banking.

Alastair: For clients consumer banking continues to deliver strong organic growth driven by high touch and high tech capabilities convenience and security.

Alastair: For shareholders through NII in particular this business is increasingly seen benefits fall to the bottom line for its high quality deposit book with only 61 basis point rate paid on nearly 950 billion of deposits.

Alastair: In Q1 consumer banking generated $10 5 billion in revenue.

Alastair: And $2 5 billion and net income.

Alastair: Revenue grew 3% from the first quarter of 'twenty four as NII growth was complemented by improvement in cards and service charges.

Alastair: Expenses rose, 6% as we continued our business investment and work through elevated compliance costs.

Alastair: The organic growth that Bryan noted on slide three included nearly 250000 net new checking accounts this quarter another strong period of card openings and strong investment growth.

Alastair: Investment balances grew 9% to 498 billion with full year flows of 22 billion in market improvement.

Alastair: Consumer banking deposits continued to increase from their mid August low that was 928 billion and it's now at 972 billion on an ending basis.

Alastair: Looking at averages deposits grew 5.2 billion from the fourth quarter to 948 billion and our rate paid declined to 61 basis points.

Alastair: Finally, as you can see on the appendix slide 26, digital adoption and engagement continued to improve customer experience scores rose to record levels illustrating the appreciation of enhance capabilities from these investments.

Alastair: Moving to wealth management on slide 17, the business had another strong quarter with a continued increase in banking product usage from our investing clients. The diversification of the revenue in this business continues to grow.

Alastair: The number of clients that have banking products with US continues to grow also in its now approaching two thirds of the client base importantly, about 30% of our revenue remains in net interest income, which complements the fees earned in our advice driven model and those are also growing.

Alastair: Net income of $1 billion rose modestly from the first quarter of 'twenty for a solid revenue growth was mostly offset by higher revenue related costs and continued investments.

Alastair: In Q1, we reported revenue of 6 billion growing 8% over the prior year led by 15% growth in asset management fees.

Alastair: Expense growth of 9% supported both the cost of the increase in fees as well as investment in technology and the cost of hiring to add experienced advisors to the platform and merrell.

Alastair: And the private bank.

Alastair: Average loans were up 6% year over year that was driven by growth in custom lending securities based lending and a pickup in mortgage lending.

Alastair: Deposits were relatively stable compared to Q4, and our pricing discipline resulted in a 25 basis point decline in rates paid.

Alastair: Both Merrill and the private bank continued to see organic growth and produce strong assets under management flows of 17 $9 billion over the past 12 months, which reflects the good mix of new client money as well as existing clients putting money to work.

Alastair: We also want to draw your attention to the continued digital momentum that you'll find on slide 28.

Alastair: Our new accounts continued to be predominantly opened digitally.

Alastair: On Slide 18, you see the global banking results and the loan and deposit gathering success of the team.

Alastair: In the first quarter Global banking produced earnings of $1 9 billion modestly lower than the year ago quarter as lower credit costs from C. R. E office losses were more than offset by higher expense of investment in the business.

Alastair: Revenue of 6 billion was flat to the prior year as lower and I I was offset by roughly 230 million higher other income.

Alastair: Related to leverage finance positions as well as higher Treasury services revenue.

Alastair: Firm wide investment banking fees were 1.5 billion in Q1 similar to last year's first quarter. We maintained our number three investment banking fee position and looking forward, we've got a healthy pipeline and our clients are simply waiting on more clarity on trade policy and the regulatory environment before committing to deal.

Alastair: <unk>.

Alastair: Expense increased 6% year over year, driven by continued investments in technology and operations to support clients.

Alastair: On the balance sheet, we saw good client activity.

Alastair: Noted earlier, we saw good growth in commercial loans mitigated by decline in C. R E loans.

And total average global banking deposits are up 9% year over year, where we saw strong growth across all categories from corporate and commercial clients on the larger end to business banking on the lower end.

Alastair: Switching to global markets on Slide 19, I'll focus my comments on results, excluding DVA as we normally do.

Alastair: As Brian said, we continued our streak of strong revenue and earnings performance achieved operating leverage and continued to deliver a good return on capital.

Alastair: In Q1, we earned 1.9 billion.

Alastair: That grew 8% year over year.

Alastair: Revenue again ex DVA improved 10% from the first quarter of 'twenty four on good sales and trading results and $230 million of other income on leveraged finance positions similar to global banking.

Alastair: Focused on sales and trading ex D V a.

Alastair: Revenue improved 9% year over year to $5 6 billion.

Alastair: Equities led the way this quarter growing 17% year over year, while FIC grew 5%.

Alastair: Equities in FIC, both benefited from increased client activity among the market volatility.

Alastair: Year over year expenses were up 9% on revenue improvement and our continued investments in the business.

Alastair: On Slide 20, we show all other with a loss of $4 million in Q1, and the driver of the year over year improvement in expense and net income is the absence of the first quarter 'twenty four FDIC special assessment.

Alastair: Our effective tax rate for the quarter was 9%, which reflects the discrete impact of share based compensation awards.

Alastair: As a reminder, our tax rate remains well below our typical corporate tax rate driven by tax credits related to investments in renewable energy and affordable housing.

Alastair: Looking forward as we said last quarter, we expect the tax rate for the full year 2025 to be in a range of 11% to 13% excluding unusual items.

Alastair: So let's shift gears to finish them.

Alastair: We will use slide 21.

Alastair: Over the last couple of weeks investors had signaled concerns for the bank industry over potential changes in the economy.

Alastair: And in light of that we added the next few slides to illustrate how much stronger our risk profile and balance sheet are today or.

Alastair: Or whatever economic outcome, we might face.

Alastair: And let me offer three important takeaways as you see the next few slides.

Alastair: We are a vastly improved risk profile from previous periods of economic dislocation.

Alastair: Second at.

Alastair: At the same time, we strengthened our balance sheet by adding billions of capital.

Alastair: And liquidity.

Alastair: Third following 15 years of operating under responsible growth our portfolio and our balance sheet are well prepared to support our clients in various economic outcomes.

Alastair: The left side of slide 21 highlights the shift in the loan portfolio to a more balanced mix of commercial and consumer as well as a more geographically diverse mix are.

Alastair: Our high quality commercial loan portfolio at this point is more than 90% investment grade or collateralized and it also includes a more diversified geographic mix as you see at the bottom of the page.

Alastair: At the top right you see the improved mix toward a more secured collateralized balance of our consumer book.

Alastair: The bottom right illustrates the nine quarter loss rate and how our nine quarter. So this isn't annualized this is nine quarter stress loss ratios fared in the fed models in CCAR exams, and we compare quite favorably to peers in each of the past 12 years of exams.

Alastair: Yeah.

Alastair: CCAR provides investors an annual independent the U.

Alastair: Analyze adverse impacts in the most severe circumstances. So just to recap if you went to the latest results from 2024.

Alastair: Those scenarios include a drop of 6% to 8% in real GDP from peak to trough.

Alastair: It includes a rapid increase in unemployment up to 10%.

Alastair: And significant changes in inflation.

Alastair: It also assumes housing prices falling 35%.

Alastair: It assumes short rates basically go to zero and the 10 year goes to 1%.

Alastair: And it assumes bond spreads widened dramatically.

Alastair: Real estate prices declined 40% in equity prices would drop by 50% together with significant weakness in international economies.

Alastair: It also assumes the portfolio size doesn't change from any management actions that we might take in that environment and.

Alastair: And we obviously do quite well in that CCAR stressed environment.

Brian: With that I'm going to stop I'll turn it back to Brian for a couple of thoughts to wrap up.

Brian: Thanks, Alister and I'm on slide 22.

Brian: On this slide we highlight some of the key balance sheet or asset quality statistics of the company fate has faced an important periods of economic disruption and we compare those to the current stat status.

Brian: The left side side of that of the columns you can see that the fourth quarter of 2009 illustrates what the company look like.

Brian: After a couple of years in the financial crisis and after the acquisition of Merrill.

Brian: Second column, obviously, it's fourth COVID-19, which represents what we look like heading into the pandemic.

Brian: And now we show you what the company looks like today.

Brian: We have a multifarious loan book.

Brian: Cross types of clients geographies and various asset classes that holds us in good stead in total our consumers loans are down more than 200 billion is home equity loans are down more than $125 billion in credit card loans unsecured credit card loans or downloaded by more than $60 billion.

Brian: Reflected a concentrated effort on us to focus on our relationship loans, rather than loans as a product and deepen those relationships with the highest quality prime credit customers.

Brian: Our wealth management business has doubled in size in those consumer categories and the relative exposure to those borrowers.

Brian: Those loans is very secure as a highly collateralized and the strength of the borrowers underneath it.

Brian: And in a commercially.

Addition to the more geographic dispersion that Alastair discussed.

Speaker Change: You can also see that the construction lending and land development exposures have been greatly reduced.

Speaker Change: At the same time, our equity is $93 billion and higher.

Speaker Change: Bank of America.

Speaker Change: After it about our strength of our balance sheet.

Speaker Change: Well reserved for our portfolio and risk profile.

On a weighted basis, including our model reserves are <unk>.

Speaker Change: In precision reserves in our judgment of reserves and positions us at a 6% approximately 6% unemployment rate.

Speaker Change: The current reserve allocation on car to seven 4% for example.

Speaker Change: Against the charge off rate of about four points, 4%.

When you go to slide 31, you can see some more statistics about our portfolios.

Speaker Change: Excuse me 23, you can see some more statistics about our portfolios.

Speaker Change: Let's take a deeper look at those just a couple of points on slide 23, you can see that in regards to mortgage between the first and second lien products. Today, we have a total of about 260 billion on average our borrowers have FICO scores above 770 <unk>.

Speaker Change: Debt to income ratios at 35% for the residential mortgage product and 39% for the home equity product loan to value is also leave us strong equity positions being below 50%.

Speaker Change: For comparative purposes, we ended the financial crisis in early 2007, and you can see the exposures were more than 400 billion.

Speaker Change: With average FICO scores for 50, 650 to 60 points lower and higher Ltvs, So 400 billion more imbalances.

Speaker Change: Lower credit scores and higher Ltvs.

Speaker Change: We significantly repositioned those portfolios across the last several years.

Speaker Change: Moving through the other consumer loan types, you can see the high quality of the collateral securities based asset lending and auto portfolios and on consumer credit card. We have about 100 billion in Outstandings with a current net charge off ratio as I said about 4%.

Speaker Change: The FICO score of our average borrower is 777 and thinking about exposure bars are less than a current FICO score of 660, we have about 12% exposure.

Speaker Change: Part is really our only consumer unsecured exposure in our portfolio.

Speaker Change: As comparison heading into the financial crisis in fourth quarter or seven we had 150 billion in credit card balances about one 5% of one and half times, our current balance of card loans. The average FICO score was 50 FICO points lower and you're on your use lines of those books were much much higher.

Speaker Change: This strong position allows us to better serve our clients in times of stress, which may come ahead, according to our projections.

Speaker Change: Bank of America stands ready to support them as never before whether its a commercial client.

Speaker Change: She just helped to borrow and navigate the changing economy around the world.

Speaker Change: It's a commercial client needs to reposition our debt structure and move money.

Speaker Change: To help the.

Speaker Change: Dissipate and the economy will be there for them, if it's a wealthy client needs advice and counsel and rocky periods, our loan to get them through we're there for them if consumers needs access to cash or borrowings were also there for that bottom line operating the company in this way allows us to stand tall in times of stress and these slides highlight the importance of having done.

Speaker Change: Across the last many years and the relative important strengths of our company compared to others. Thank you and now we'll go to questions and answers Q&A.

Speaker Change: Certainly at this time, if you would like to ask a question. Please press the star and one on your telephone keypad you may withdraw yourself from the queue at any time by pressing star two.

Speaker Change: We will take our first question from Stephen <unk> with Wolfe Research. Your line is open.

Speaker Change: Hi, Good morning, Brian Good morning Alastair.

Speaker Change: Morning.

Speaker Change: I appreciate you guys, taking my questions wanted to start off with one on capital management.

Speaker Change: Certainly encouraging to see the acceleration in the buyback towards that $4 5 billion level at the same time, you are still running well.

Speaker Change: More than 100 basis points of cushion and I was hoping you could speak to given the uncertainty in the environment what level of CET, one you're currently comfortable running with in terms of the ratio.

Speaker Change: And whether this $4 5 billion buyback level is something that we expect to be sustained over the near to medium term.

Speaker Change: Yeah, So Steve.

You look at what we did this quarter just take a look at slide eight in the earnings materials.

Speaker Change: You know here's a quarter, where we ended up earning $7 billion.

Speaker Change: And.

Speaker Change: It allowed us to step up the share buyback.

Speaker Change: From $3 5 billion up to $4 5 billion in an environment, where we also invested more.

Speaker Change: Our W as in global markets.

Speaker Change: And into higher loan balances so not only do we grow the loans I'll call them organically, but we also purchased a loan portfolio this quarter. So.

Speaker Change: We're sort of growing into our capital at this point by investing in the business.

Speaker Change: And we still have some flexibility to increase the share buybacks. So I don't think we have an ultimate destination in mind right now on C. E T. One.

Speaker Change: Recognizing that we don't have full clarity yet on all the aspects of capital and we'd like to see that before we before we determinant, but obviously as you point out we've got a lot of flexibility.

Speaker Change: Remember, we're more focused on just make sure that the CET. One is in a good place and then grow into the capital base that we have and that's probably the best way to articulate it.

Speaker Change: That's great and for my follow up just on the outlook for loan and deposit growth you delivered better growth across both kpis relative to peers I was hoping you could speak to what drove the strength in <unk> beyond the portfolio purchase you alluded to earlier and just bigger picture of the outlook for.

Speaker Change: Loan growth is tariffs and policy uncertainty have certainly raised concerns regarding weakening loan demand weaker capex what have you.

Steve: This is Steve.

Speaker Change: Stephen just on that.

Speaker Change: I'll give you the broader thing analysis, you can talk about some of the specifics you remember over the last several years. So we are investing in basically building up more commercial bankers across the world, including build outs in Switzerland, and the U K and things like that we built more commercial loan officers in United States and are a couple of.

The banking business under a blending of the team we've gotten more.

Speaker Change: Private bankers and more.

Speaker Change: And the wealth management team under Merrell will be called wealth management bankers to support those teams have done them. So those investments are sort of kicking in on that sort of 2020 mile March way just more of a more of a more of and that just keeps driving it through so that's why you're seeing a sort of do better than the competition just in linked quarter loan growth when we look forward.

Speaker Change: With all the things you described.

Speaker Change: That's changing economy business views people draw.

In anticipation of tougher economic times, we'll see all of that play out, but the real way that the real reason that we're driving our capabilities is more capacity and then making up honestly, you're also making that capacity more efficient using some artificial intelligence machine learning to direct that calling capacity and that's allowed us to.

Speaker Change: Take what we call new logos in the commercial business, adding new companies for the first time and Youre seeing that having started a couple of years ago is now maturing of the balances in Cape and outstanding switch it takes a while to bring those clients and get them underwritten.

Speaker Change: They renew once every couple of years getting the flow et cetera. So we've those investments are paying off and we expect that to continue across the board.

Speaker Change: That's great color. Thanks, so much for taking my questions.

Speaker Change: Well move next to John Mcdonald with Truest Securities. Your line is open.

John Mcdonald: Thank you.

Morning, guys. Thanks for the longer term perspective on the credit.

John Mcdonald: I just wanted to follow up that on terms of the loan loss reserve what would the dynamics of the setting of the reserve. This quarter in terms of is there any change in waiting of scenarios for the tariffs and was it set with a 331 view or early April view.

John Mcdonald: So John.

John Mcdonald: We said it all the way through the close but normally we're focused on the data that we have on 331.

And then we have the ability to layer on top after we muddle our reserves, we have the ability to layer on and precision and judgmental on top of that so.

John Mcdonald: We did this quarter the same way that we've done in other quarters, we went through and assessed using the blue chip economic indicators. So the consensus view of all of the various macro assumptions, that's sometimes different than others, who use their own proprietary we feel like the right answer is to use the blue chip consensus it's more independent.

John Mcdonald: And then we've got that as our baseline and.

John Mcdonald: And we've got four other scenarios around that we've got upside in.

John Mcdonald: Three downside.

John Mcdonald: And so in this particular quarter already the Blue chip economic indicators have moved down in terms of economic growth, So GDP lower and the baseline.

John Mcdonald: And a little higher uninflated.

So that's reflected in the baseline before we even get to the weightings.

John Mcdonald: And then wait things this quarter, we those are unchanged for us.

John Mcdonald: And by the time, we then take that module dancer, and then layer on top of it the judgmental piece all the way through the close.

John Mcdonald: Where reserve closer to an unemployment rate thats right around 6% and 25 26, just to give you. Some idea so that should give you an idea we feel like we're pretty well reserved at this point.

John Mcdonald: Hey, John one of the things we've been looking.

John Mcdonald: A lot of sort of what happened because obviously seasonal came in the pandemic hit sort of the buildup in and things like that but.

John Mcdonald: As Alistair said, while the hard concepts as the baseline that we use continues moved negative over the last couple of quarters, obviously due to the <unk>.

John Mcdonald: Outlook. Your last couple of months and will continue to reflect that but we have a strong reserve position with that when you add it all up at about the 6% implied levels. So we feel good.

Speaker Change: Thanks, that's helpful. And then on expenses you previously were looking for the full year expenses this year to be up 2% to 3% over last year.

Speaker Change: How are you feeling about that is that still kind of your current thinking.

Speaker Change: Yes, that's still our current thinking John I mean, I think we said 2% to 3% for the full year, we feel like we're on course there.

Speaker Change: It might be towards the higher end, but we just got to see what happens with fees over the course of this year.

Got it thanks.

Speaker Change: We'll take our next question from Jim Mitchell with Seaport Global Securities. Your line is open.

Jim Mitchell: Great Good morning.

Speaker Change: Alastair you were able to absorb four cuts this year and your assumptions.

Speaker Change: Maintain the <unk> target, which which is a good thing.

Speaker Change: As we think about the full impact of the four cuts felt in 'twenty six and potentially a few more does that make it a little more difficult to reach that intermediate term target.

Speaker Change: NIM of 1.3% by the end of next year or the fact that youre getting them out of the way. This year is helpful. Just trying to think through that intermediate term target. Thanks.

Jim: So Jim first of all that targets two points 1.3, I'm, sorry, yes, [laughter], yeah, you're letting us off the hook you attach a yeah.

Jim: Well where were aiming at two 3% and we still feel like over the course of the next couple of years, that's the right answer.

Speaker Change: You know for this year's NII.

Speaker Change: Those rate cuts, we got four of them in there, but a couple of them are later in the year. So it doesn't have a tremendous impact on 2025.

Speaker Change: A little bit of a headwind in 'twenty six if that in fact is the case.

Speaker Change: But again, we've got a lot of time between then and there I feel like last year at one point, we thought there'd be one rate cut in the curve than there was six than we were back to one so we got to see how the interest rate curve develops but our management team's focus and goal has not changed.

Speaker Change: And Jim one on the rate sensitivity I remember there was an instantaneous drops.

Speaker Change: And it takes time for the fixed.

Speaker Change: Our debt portfolio, our debt issuance portfolio some of its floating someone's fix it replaces over time, so if they come more overtime.

Speaker Change: You can't quite equate it to the instantaneous drop type of things. If you got my pointed because you have other dynamics, which helps so you'll remember the long term.

Speaker Change: Most economists believe that with a inflation coming back towards the target rate you'd see the fed funds rate ultimately get down to three three and a half type of levels, which is more of a traditional normal it's hard to say in the world. We're in now level. So if that happens we feel very comfortable if you look back historically the earnings power of this cup.

Speaker Change: And the NIM percentages you've talked about.

Speaker Change: With the fed funds rate in that range pushing up two three and beyond is strong.

Speaker Change: Okay, Yeah that makes sense and just as a follow up on just sort of the near term in April we saw a big jump in volatility just any what are you seeing across your business segments, whether we've seen you've seen deposit flight.

Speaker Change: Flight to safety flows and the volatility and trading has that been good volatility bad volatility just trying to get a little window into the near term. Thanks.

Well, we've seen significant pickups in customer activity in global markets. So the environment there remains constructive.

Speaker Change: We have seen you know I'd say continued.

Speaker Change: How is it sort.

Speaker Change: Similar to what we would expect we haven't seen anything like you know if you were to go back a couple of years.

Speaker Change: Around regional banking crisis that nothing like that its been pretty regular way I would say, we just keep driving the deposit state today.

Speaker Change: And Jimmy Okay, I've mentioned it earlier, but just.

Speaker Change: You did specific aspect, but what's interesting as you watch the consumer money flow.

Speaker Change: Spending if you take a four week average, including up to the first 12 days April it's running at 5%. So it hasn't fallen off you have to be careful just using two weeks because of where Easter fell this year versus last year, and all that stuff, but basically.

It's maintaining that pace. So the consumers are still so.

Speaker Change: And the game what they'll do next different question, but right now theres still solidly even through the first party.

Speaker Change: Okay, great. Thank you.

Speaker Change: Yeah.

Speaker Change: Well move next to Glenn Schorr with Evercore.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Hi, Thanks very much.

Speaker Change: Another good trading quarter for you guys.

Speaker Change: But I'm curious.

Speaker Change: You bet.

Speaker Change: Yeah.

Speaker Change:

Speaker Change: Probably about $3 billion.

Speaker Change: I'm just curious big.

Speaker Change: Big gaps appear.

Speaker Change: Perhaps that you're choosing to pursue you you mentioned you have the SLR room, you have a great equities franchise I'm just curious on your approach towards is it a capo thing is it list thing.

Speaker Change: Just curious on the high level thoughts thanks.

Speaker Change: So I think.

Speaker Change: Starting a number of years ago. This has been a relentless climb up the ladder and not overshooting. It and then having to cut off so that you have three years of year over year.

Speaker Change: Growth consecutive quarters that other people don't do because theres more volatility so Jim and the team is basically building up so what have we done more capital.

Speaker Change: Probably over five or six years $300 billion more balance sheet capacity, even though the loss of this quarter was 68 billion. So we keep adding capabilities capacity, but remember that.

Speaker Change: Youll ever led to the smart shield for certain categories third second is category you keep moving up and just keep pursuing it in some areas like physical commodities, that's not a business where a.

Speaker Change: Heavily into it and we made a decision about that a number of years ago versus core fixed income, where we're stronger and we gain we've been gaining share. So the idea is to keep gaining share but at a pace for lack of better term in the business, which has volatility in it.

Speaker Change: To capitalize as that you know that.

Speaker Change: Volume of revenue into the business and then grow from there as opposed to grab that and gives it back and grabs it gives it back it's just the way that Jim and the team have driven it and they've done a frankly, a very good job doing it and so expect us to keep gaining share will keep closing the gaps that you mentioned, it's getting closer to the third place gap, but.

Speaker Change: Given quarter other people may shoot up a little higher because of this element of that element, but our job is to just to be consistent across all the elements that we participate in and keep driving that and there's plenty of opportunity ahead, and it's not for a lack of capital or lack of a risk.

Speaker Change: Risk, taking they're taking more risk and the other major thing is the investment in systems here is a competitive.

Speaker Change: Moat, frankly that the amount of work you have to do to get this all to work right on a worldwide basis, there's very few of us can do it.

Speaker Change: I very much appreciate that and similar to what John said, we definitely like to drill down on the extra detail around the credit book and history Guide I'm curious on the right now when you're talking about the reserving and you took now to give us the further drill down on.

Speaker Change: On the exposures.

Is it a traditional <unk>.

Speaker Change: Regular way, we're marching towards closer towards a higher likelihood of a recession.

Speaker Change: Hum.

Speaker Change: Or have you gone through and assess the loan book from exposures to shifting tariffs and tax environment, and that's bringing the higher attention I hope that the questions clear I'm, just I'm more talking about the why now and what's driving the increased attention.

Speaker Change: <unk>.

Speaker Change: The why now why we put the extra disclosures just to remind people. If we actually if you look back like we did a lot of this around.

Speaker Change: 'twenty because of the same discussion came up and then in 'twenty.

Two or three they're the same discussion about we're heading into a recession as consumer goods spend down their money to consumers quite turned out not to be true frankly in that 'twenty. Two 'twenty three time frame the consumer held in so if you look we always are testing every year.

Speaker Change: On a continuous basis and a trading book stress test, but on a quarterly basis cross of things. If you think about all the different ways the economy can.

Speaker Change: Get.

Speaker Change: Knocked into recession or potential recession, or lower growth and have the whole world is predicting a lot low growth this year than last year, that's not new that's just all the streets are economist etcetera. So that the growth is slowing down from the 3% growth rate in the third quarter of last year to one ish type of numbers are a little bit less than one.

Speaker Change: Youre in the Blue chip and the <unk>.

Speaker Change: First quarter, so over two quarters of pretty good drop so that's all embedded in it but why we're just trying to give you.

Speaker Change: Reassurances or look at our in depth is because it's a source of strength for us and we've been we've been working at that hard to ensure that as we go through a crisis and we've had a couple of bumps in the road.

Speaker Change: As we go through a more traditional.

Speaker Change: Economic downturn, we will be in great shape, and we test that every quarter and lots of different ways. So, but if you sit there and said what happens if the tariffs happened. This happens and this happens it's going to result in either GDP negative growth higher inflation, which may then cause G. D. P nave goes higher unemployment et cetera, all those are the facts.

Speaker Change: We actually test in granular detail.

Speaker Change: So it's not necessarily how you get there to the outcome of getting there.

Speaker Change: P follow up housing price fall off unemployment levels, that's what we do and we wanted to make sure. We're positioning the end of the day that we could serve our clients well and not have to be pulling back and so that's where the underwriting discipline.

Speaker Change: Last decade hold you in good stead, if in fact, we do enter a.

Speaker Change: Recession in the future.

Brian: Thanks for that Brian.

Speaker Change: Well move next to Mike Mayo with Wells Fargo Securities. Your line is open.

Mike Mayo: Hey, Brian.

Speaker Change: Hearing this call and.

Speaker Change: Sounds like you're kind of in the fourth quarter earnings call. You know loans are growing deposits are growing credit fine consumer.

Speaker Change: Consumer spending slowing but still growing.

Speaker Change: Buying back more stock and.

Speaker Change: I'm just trying to reconcile the seven trillion dollars of loss stock market well with <unk>.

Speaker Change: Comments from you sounds like you're not blanking and by the way I don't think you're alone it just.

Speaker Change: Teams.

Speaker Change: No more upbeat.

Speaker Change: Relative to what the stock market is down and I'm trying to reconcile those two things so what am I missing or what are you seeing or at what point do you say hey wait a minute. This is really might be a bigger problem.

Speaker Change: But I think Mike.

Speaker Change: Laying out the different scene is and could and might and should future right. So.

Speaker Change: What we're trying to do is make sure people see what is going on today and like you said for the and that's why you actually split the two piece of the presentation for the first quarter. Everything you said is true loans deposits credit's good charge offs went.

Speaker Change: Down.

Speaker Change: Delinquencies are down at the end of the quarter versus fourth quarter Youre looking at all that and say okay. That's that's what we did then if we look forward.

Speaker Change: Economists your economist I'm sure all predicting a slowdown in growth in the core question won't be when all these different policies and stuff come together and responsive to policies by other trading partners to the tariff policies by the up the.

Speaker Change: Policies on deregulation working for that the tax Bill which comes out all that well mixed together and come to an outcome and our job is to have positioned the company well and take advantage of opportunities for that outcome.

Speaker Change: Hasn't happened, yet and when it comes to be in a good position and that's why this latter part of this was geared to show you the strength of the credit portfolios and another things. So can any day you you and I know that the you know the real risk in our balance sheet of a bank is going to be its credit posture heading into a general recession are our colleagues are.

Speaker Change: Have raised their probability reception recession lowered their growth as have the blue chips, but even if you look at the people. We did its a very slight recession, and we should fare well in that but we just don't nobody has a perfect.

Speaker Change: Perfect.

Speaker Change: Crystal ball or whatever the right word is into the future, but we're.

Speaker Change: <unk> come through everything, but we don't want people to lose sight of the strong performance of the company and our team in the first quarter of 2025.

Speaker Change: Let me take the other side of that I thought the idea was to make it easier to do business with deregulation.

Speaker Change: And you can see the nominations.

Speaker Change: People and then you get the policies.

Speaker Change: If that.

Speaker Change: Narrative plays out.

Speaker Change: How do you think it'll be easier to do business at bank of America, and with your with your customers as it relates to deregulation.

Speaker Change: I think the new administration has made it clear that they're going to reduce the.

Speaker Change: Regulatory burden along two dimensions dimension one is.

Speaker Change: Zinc less regulations, new and getting other regulations off the book and refine and based on the view that depend on them swung too far that I'll talk about banking regulations, but it's actually more broad across the second way is actually reduce the size of the.

Speaker Change: Federal administration.

Speaker Change: That brings the regulatory inquiries and things like that so we're seeing some.

Speaker Change: Some relief, we look forward to seeing more relief is as the nominees getting a position in the policy outlines can be done drilled throughout the teams, but you know it's it's critically important that we get this rebalance we run around a company that is going to be.

Speaker Change: Well, well capitalized great liquidity fair to consumers et cetera, Mike, but sometimes you know the regulation gets in the way of that way overshot the issues and we look forward to having to come back in the middle and just take the all the debate about treasury trading your SLR requires us to yep.

Speaker Change: Home capital level against risk assets in treasuries and cat.

Speaker Change: Cash that doesn't make a lot of sense and we've been saying that for a long time and we expect now you've heard it said it there'll be relief and that that will help us to provide liquidity to our clients. Both in good times and times of stress, but you know that.

Speaker Change: Our cash and our yep.

Speaker Change: Government guaranteed securities and government issued securities just 1.2 trillion dollars of our balance sheet right now Mike. So you have to think about that in terms of and capitalize on that under the SLR.

Speaker Change: A 5% or whatever it is that's a big number.

Speaker Change: None of that has a risk catastrophe as you well know and so.

Speaker Change: So that's one thing the second thing we saw it again this quarter on some of the expenses is the operational cost to deal with.

Speaker Change: The regulatory.

Speaker Change: Push that happened that we tried to talk the last set of administrators into you're going way too far and you've gone past the substance into form.

Speaker Change: As is our cost that we're going to see come out of the system and ought to be reinvested in helping our customers and clients growth.

Speaker Change: And short follow ups, and then one two trillion in cash and government where would that be kind of in a more ideal world and the operating costs, how much of that could potentially be say, even if you want to give semester, if the industry just order of magnitude.

Speaker Change: Yeah, I'm not sure it would be.

Speaker Change: Tremendously.

Speaker Change: Hundreds of billions of dollars, but I'd say, a few hundred billion of its pure.

Speaker Change: Size, if we all added to meet a bunch of metrics that I'm not sure as important as people.

Speaker Change: I think they are you know and and and and that's proved out so.

Speaker Change: Think of that as our long term debt posture of being up higher et cetera. So you know our job is to you know we got two trillion dollars of positive train alone we need to extract the value of that deposit or size that would be more generated by that question unless about well. We want you to just add stuff because we're not sure that the trade.

Speaker Change: Treasury the.

Speaker Change: The market for repo off of asset backed securities will be available in a time of stress or even treasuries and so therefore, you have to hold more capital and more term funding against it yeah. Those are the things I think what's changed so you'd probably see it most in our long term debt footprint coming down relative size, and and and and our sheer size coming down I don't know 100 Hunter.

Speaker Change: $50 billion, maybe I think Alastair would probably be a good guess, if we grow and really just flipped off the balance sheet to make metrics that are not that important look good.

Speaker Change: Alright, thank you.

Speaker Change: We'll move next to Erika Najarian with UBS. Your line is open.

Erika Najarian: Thank you good morning.

Understanding that there's a lot of potential moving pieces in the regulatory agenda Deregulatory agenda I did notice that at the end of the year.

Erika Najarian: Your G. SIB score would indicate that if you didn't take down your exposure. This year, you would have a higher G SIB surcharge.

Erika Najarian: By January one 2027, and from what I understand all else being equal.

Erika Najarian: I'm just wondering you.

Speaker Change: You know, Brian Alistair if your plans are to them.

Speaker Change: <unk> reduced this exposure or the message is look you know, our ROTC 13, 9% and improving and so.

Speaker Change: Crossing is not going to be a big deal because of the P. P. NR and return power that we see going forward.

Speaker Change: So I think that relates back to <unk>.

Speaker Change: I think it was glenn's question about the markets business, if I remember who asked it the other day.

Speaker Change: Most of what drives that change as the markets business or other factors, obviously, Eric but the big factor is the market's business and if they're out there getting market share and getting a return on that we'll keep we'll keep growing through that that's in fact, why we have gone up.

Chuck: Chuck we've gone up now.

Speaker Change: Go back to Mike's point.

Speaker Change: Frankly, I think embedded in your question.

Speaker Change: Think about the facts that the G. SIB calculations at the time. They were set I think it was off a 12 data or something like that 2012 data the idea and it's right in the rules was that they should be indexed so that our relative position banc of America relative position to the industry and the economy audit.

Speaker Change: To be able to grow we've had a nominal economy growth of 30% in the last since the pandemic to now just sheer size growth of which there was no adjustment in the G SIB calculations for that.

Speaker Change: It was in the statute it hasnt been implemented yet you've heard in some of the even discussion by the fed that they would index a lot of that one of the proposals was from sort of now Ford, which then skips all the growth our belief is it should be indexed more fairly as designed the statute because our relative size hasnt grown even though our.

Speaker Change: Balance sheet has grown.

Speaker Change: And to the economy or to the industry. So why are we more G. SIB size than we were before so I think that's the two sides of the trade, yes, we'd let the market business can get the returns and grow and do it in a way that sticks to the ribs, Jim and the team will grow and that will probably push our G SIB, but backup and think about the reality of it.

Speaker Change: Now looking at Bank of America, and our peers circa 2014 15 off of 2012 data if I remember the exact date and think about the sheer size of the U S economy, probably.

Speaker Change: 50, 60% bigger and we have not indexed anything.

Speaker Change: For this and therefore, we're shrinking our banking size relative to the economy for the state.

Speaker Change: Without kind of the logic behind it and that's what we've been pushing for that.

Speaker Change: Got it.

Speaker Change: And I'll follow up offline I just wanted to squeeze my second question and follow up on the net interest income outlook for the fourth quarter.

Speaker Change: You you helped us with the exit points on both balance sheet and.

Speaker Change: Net interest margin in the last call.

Speaker Change: Call them.

Speaker Change: It was flat to fourth quarter levels in 2024, and I think if you will five to 10 net interest margin are those point still.

Speaker Change: So valid in terms of what's underneath the surface of that for Q25 exit NII no obviously, the balance sheet, a sneaker because of market in the first quarter.

Speaker Change: I think you've captured it Eric you're exactly right, that's what we're comfortable with it.

Speaker Change: Okay. Thank you.

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

Matt O'connor: Hi, Good morning, I, just wanted to follow up on the concept of growing into the capital on slide eight here.

Matt O'connor: How does it really good work on the capital on the puts and takes and I guess I wanted to hone in on the <unk> growth and just think about that going forward.

Matt O'connor: Obviously, there is some increase in one queue from seasonal property markets.

Matt O'connor: Maybe it won't be as much going forward in the loan growth might pick up a little bit, but what I'm getting at is.

Matt O'connor: It's not that clear to me that you're going to use all the capital that you're generating and the access from organic growth.

Matt O'connor: And it does feel like the buybacks at some point, we'll be in a pretty robust pace. So alright luxury one question just to summarize like talk about the capital consumption and a little more detail.

Matt O'connor: Again, it grows and the interplay of buyback thanks.

Matt: Hello, Matt.

Matt: I think you've sort of answered your own question into question because you could see that.

Matt: $16 billion <unk> increase in a quarter, where markets tends to be bigger just because of the nature of it.

Matt: So that's on one seven trillion, so less than a percent.

Matt: Growth in <unk> and in the earnings grow through so we will always always always deploy.

Matt: Deploy capital into the businesses at whatever they need to grow the businesses with the right returns that that to give it in fact, the efficiency of our <unk> deployment is something we work all the time and that's why you can see.

Matt: Growth in size relative to <unk>, and we think we have room to go on this is always less than the overall growth in the loans and deposits and so you will continue to work at efficiencies, but you've got exactly right. The capital goes to deploy to support the business, it's growing at a much.

Matt: Businesses demands for that are much lower rates than the capital accumulation and then we turn around and say what do we do with it will you have a common dividend obviously and then the rest goes to to buybacks and you saw stepped that up this quarter as Alastair said early two four and a half a billion dollars.

Matt: Many of the first quarter, Okay and then.

Matt: That's helpful. And then just separately that all other fee line on a consolidated basis.

Matt: It was pretty close to breakeven versus normally a loss because of some of your tax credits is that just.

Matt: Some lumpy items like loan sale gains remarks, given nothing can be found in the marketplace this quarter too.

Matt: Yeah, no you've got that mostly right.

Matt: Other income line this quarter.

Matt: Every quarter, it's generally most impacted by what's going on with our tax credit activity and often it depends on the timing of the completion of really long dated projects it could be solar could be wind farms could be housing.

Matt: So in any given quarter there can be some timing there where we catch up in later quarters.

Matt: But in this particular quarter in addition to that we've got.

Matt: You know that the leverage finance positions that we referred to.

Matt: We'd written those down in prior quarters.

Matt: So when we sold them this period for a game.

Matt: That accounts for a reasonable amount of the delta.

Matt: And then the only other thing you just got to remember as you know we had that legal settlement pretty long dated one got that cleaned up a little bit of visa be cleaned up this quarter.

Matt: So there's some one timers that offset that but it's probably worth about three cents. This quarter just to give you some idea.

Matt: Okay alright, thank you.

Matt: Yeah.

Speaker Change: Well take our next question from Betsy <unk> with Morgan Stanley. Your line is open.

Betsy: Hi, Good morning, how are you doing.

Speaker Change: Great. Thanks, Betsy how are you.

Speaker Change: Excellent great quarter I did have two quick questions one was on Brian earlier.

Speaker Change: Earlier in the call we talked about how some of the commercial loan growth was being generated by the investments you've been making in particular one of the areas International So I just wanted to with the tariff overhang that we have.

Speaker Change: Going forward.

Speaker Change: How do you think about that investment spend in the international markets.

Speaker Change: Do you step it up do you pull it back.

Speaker Change: Is it an opportunity as a threat or risk just wanted to understand that angle from you. Thank you.

Speaker Change: So I think.

Speaker Change: A lot of that has to be played out but.

Speaker Change: But we would continue to invest where we see the opportunities and where we see opportunity outside the United States is with the teams that we have that have been in these countries.

Speaker Change: Japan for.

Speaker Change: Since the day after World War, two ended India for 65, plus years, Australia for 60, plus years of European countries for many years, we are deeply embedded in those countries and the idea was to cut bait.

Speaker Change: Basically.

Speaker Change: Coming from pure multinational largest companies and those national champions and taken them around the world and taken.

Speaker Change: He is from outside that particular country into those countries Yep, We will then.

Speaker Change: Now moving down a notch in size.

Speaker Change: <unk> family owned businesses and the production supply change their business, we understand it I don't think that will change dramatically.

Speaker Change: The goods and products start to be produced and so we'll continue to work with it we're watching our clients in helping them try to figure out what this all means to them in terms of supply chain alignment and things like that so.

Speaker Change: I think it's yes.

Speaker Change: It may ebb and flow, but remember when you then take the other side of where the investment is in United States.

Speaker Change: That's where it's just a larger factor in terms of the overall commercial business, meaning small business. We're the largest small business lender in nine states by quite a bit and those loans are growing siding in the small business, meaning FDIC loans under 1 million, which we both have in our consumer business and our business banking area and then middle market largest my logic.

Speaker Change: Lenders in nine states and in large corporates, so well is because of the diversity of our company will see you know.

Speaker Change: What might not be as possible in a place due to the dynamics youre describing.

Speaker Change: Maybe more possible in a place like.

Speaker Change: Georgia, So you'll we'll keep playing this out but the goal was to add relationship manager investments on a relentless pace to keep adding yep.

Speaker Change: Team, that's dedicated towards handling client relationships, and then frankly, making more efficient by the use of machine learning now AI to make them more and more efficient and also where to call who to call on the prospect list, we have and we're seeing that take hold and that's where you're seeing these logos just buildup in new client acquisition.

Speaker Change: Okay. Thank you and that was my second question on the small business side can you help us understand what you're seeing today from small business.

Speaker Change: I know you've you are.

Speaker Change: As you mentioned the largest small business lender and you've had significant loan growth over the past several years and small business.

Speaker Change: Were ahead of peers.

Speaker Change: And.

Speaker Change: Yeah. The closest to these folks in our world and I would love to understand how are they thinking about.

Speaker Change: Investing in this environment with the tariff overhang. Thanks.

Speaker Change: Betsy there, they're just trying to figure it out and so they see the policies up along multiple dimensions deregulation the tariff policy.

Speaker Change: Immigration policies.

Speaker Change: Et cetera, and they look at all of it and say and tax policy and so they're trying to figure out how effects of business and the end of the day today, they're producing the goods into goods are going out in the stream and being sold but they're trying to figure out how the how that relates to it and there's the concerns I think that we're interesting is for a while as inflation, obviously coming through last year when that was.

Speaker Change: The discussion then it interesting flipped to labor again, which was a little bit unique in that they're trying to make sure they get the call.

Speaker Change: Our qualified employees they need to operate but if you look about it they're basically sanguine on the current environment, but they're worried they're worried about how this will affect their businesses and where they should invest and I think that slowing down.

Speaker Change: Some of their decision paths right now because they're trying to figure out if my goods and services will I be able to pass through the price do I need to change my business plans in terms of growth should I buy that piece of equipment. That's why line usage has been relatively muted still and we continue to.

Speaker Change: Try to grow it now there's areas, which in our small business growth which are.

Speaker Change: Sort of.

Speaker Change: Recession resistant which is like in health care, we do we have a big business lending to docs and and veterinarians and other people involved in practice those things tend to have less impact by the issues of moment, because the services business and things like that so I think it depends on the business depends on location depends on weather and services or whether in goods, but right now.

Speaker Change: Now if they look at the last quarter, just like we got to look at it looks pretty strong and then theyre going to sit there and say read the papers and see all the things coming at them and saying should I slow down my Decisioning that I think is the worry is because once they talk themselves and slowing down it'll be a while till they get restarted right now I think it's more thoughts and then worries and they've got to see that.

Speaker Change: Settle in and when it settles and then they know how to run the business, but right now it's very it's very unsettling for them.

Speaker Change: Thank you.

Speaker Change: Well move next to Ken Houston with Autonomous Research Your line is open.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: Good morning.

Speaker Change: Thank you again for the interest income outlook slide the waterfall I wanted to ask on the fixed rate asset repricing bucket could you help us understand how much is rolling off each quarter in the HTM securities and mortgage loan books, and what Youre getting from that and then also as we get closer to that second half benefit on the cash flow hedges what type of pickups are you.

Speaker Change: Imagining in terms of like new fixed rate versus receive rate versus what's rolling off. Thank you.

Speaker Change: So Ken on hold to maturity. If you look back over the last 14 quarters, it's sort of been around.

Speaker Change: Eight 9 billion a quarter it depends a little on the seasonality as we go through the year, so $8 billion this quarter, but.

Speaker Change: I mean 9 billion next quarter and normally windows are rolling off we're picking up 200 225 basis points just to give you. Some idea so that's that bucket.

Speaker Change: Around residential mortgages, let's say, we're originating 5 billion a quarter.

Speaker Change: Typically we're picking up a couple of hundred basis points, sometimes more on those just depends on prevailing market rates. So think about that being 5 billion at a couple of hundred basis points or more.

Speaker Change: And then the cash flow swaps will talk more about those as we go into the second half.

Speaker Change: But you can think about that as being something we're probably picking up.

Speaker Change: 150 basis points or so it just depends it depends on any given quarter. So we'll give you a little more guidance as we get closer.

Speaker Change: Okay, Great and then second question you guys did another great job getting deposit costs down 20 basis points for the second straight quarter as you contemplate this growth that youre seeing and continuing how do you think about you know just.

Speaker Change: How much you can continue to reduce rates paid relative to how you are seeing just.

Speaker Change: Overall cost of funding.

Speaker Change: Yes, I don't think well if any change in our philosophy there.

Speaker Change: Felt like when it comes to the commercial and the wealth clients in particular, where they have interest bearing balances, we just pass through the cuts.

Speaker Change: And then as it relates to the consumer book, we've got an awful lot of noninterest bearing there obviously.

Speaker Change: So really your focus there on the piece that's in the Cds and then the preferred deposits and there again, we tend to pass that through as it comes through so it's a.

Speaker Change: It's trickier, obviously in consumer where we're paying 61 basis points $950 billion, but even there just because we still have some Cds outstanding and we still have some preferred we were able to take that down last quarter and look to do that again in the future.

Speaker Change: Thanks Ashwin.

Speaker Change: And we will take our last question from Gerard Cassidy with RBC. Your line is open.

Gerard Cassidy: Hi, Brian Hi, Alastair.

Speaker Change: Hi, there.

Speaker Change: You guys did a very good job in giving us the details about what it looked like back in 2009 versus today on slide 22.

Speaker Change: And if we move up to slide 21, you can see the consumer loan portfolio has obviously been derisked as you pointed it out.

Speaker Change: I'd like to ask a question about as the commercial loan portfolio.

Speaker Change: Particularly the growth can you share with us some of the confidence you have that we're not going to see some issues here, particularly you look at the dark blue non U S. Commercial has grown very very strongly over this time period.

Speaker Change: What can you share with us about the risk in this portfolio relative to maybe 2009.

Speaker Change: Yeah, So I'll start Gerard I'd say, we felt like over time as we become a more global and international company than maybe we were in 2007. It was important for us to diversify the loan book outside of just the U S.

Speaker Change: And it was appropriate because we've got to support clients, who are multinationals in the United States operating around the world and multinationals around the World, who also operate and sell into the United States and other places. So that's natural I think we've kind of supported that over time, that's been a big part of our <unk>.

Speaker Change: With over a 15 year period.

Speaker Change: So in terms of.

Speaker Change: Actual if you look at the loan growth overall I'd say.

Speaker Change: We're we're pretty diversified in the way we look at that so.

Speaker Change: All lines of business grew last quarter, so that small business banking, it's business banking, it's the commercial bank excrete.

Speaker Change: It's the global corporate investment bank its global markets.

Speaker Change: And its wealth in terms of their commercial exposure, so a little bit of it is diversification in all lines of business.

Speaker Change: And then if you looked at the book itself for the most part as we talked about it's secured.

Speaker Change: It's investment grade.

Speaker Change: We always think about good client selection is sort of people who can make it through any environment, that's where we're investing and partnering.

Speaker Change: And we've had virtually no charge offs.

Speaker Change: So then when you turn to like the.

Speaker Change: The global markets business that again, very diversified all assets all client types across things like asset backs and mortgage warehouse and credit financing and subscription so.

Speaker Change: We feel like this book is in very good shape, and we feel like that the right clients.

Speaker Change: And then you know for our teams, it's just about driving the relationship deepening to make sure that we're seeing benefit not just in the loan portfolio, but in the other things we do across the platform.

Speaker Change: Very good very insightful. Thank you and then as a follow up Alastair.

Speaker Change: You guys mentioned that the credit card charge off ratio was the seasonally higher number.

Speaker Change: Over 4% and when we go back to the first quarter of 'twenty, four and 'twenty three obviously the charge offs levels were lower.

Speaker Change: Can you, especially with the unemployment rate remaining as low as it has over the last couple of years.

Speaker Change: Is the higher level due to some of the FICO score inflation move read about during the pandemic. What do you guys account for the number being where it is today versus the last couple of first quarters of each of those prior years.

Speaker Change: Considering that the unemployment rate for example that has not gone up that much.

Speaker Change: Yes, I think.

Gerard Cassidy: I'd flip it around the other way Gerard.

Net.

Speaker Change: With all the stimulus and all of those.

Speaker Change: You know after the pandemic.

Speaker Change: Wage growth for inflation the stimulus that came in just sheer cash you saw these things dropped to levels that we do wouldn't wouldn't hold right, meaning charge off rates and card what way down and all of you have seen now is that sort of normalized around where it was in a very good credit.

Speaker Change: A period for our company.

Speaker Change: 2019, pre pandemic type of ore. So yeah, that's just normalization I wouldnt over read that it's a comparative periods. So if you look you know.

Speaker Change: Relative to 2019, 2018, you'd see that those charge off rates run at three and a half ish.

Speaker Change: Plus or minus percent are similar we have now so.

Speaker Change: So we feel good about it.

Speaker Change: The important thing is.

Speaker Change: If you look at.

Speaker Change: Stressing that portfolio like we do either you could see that the.

Speaker Change: The losses are projected whether it's in the CCAR process, our own internal stress test if you take taken across nine quarters. It doesn't come it's closer to honestly the charge off rate, we actually underwrote to prior to the financial crisis, we underwrote to like a five 5% charge off rate in normal times and then it would go up from there and so it's a much more.

Speaker Change: Our core book driven at a very strong performance through crisis, So I take.

Speaker Change: I just I think it's just normalizing more to wear.

Speaker Change: Where where it was in a relatively good credit times in 2019, rather than any significant movement and in fact, we said that as we came through last year over and over again people kept out again, what you've seen is delinquency actually have fallen and it's flattened out.

Speaker Change: You have $1 billion charge off level in cards.

Speaker Change: Got it thank you Brian.

Speaker Change: Okay.

Speaker Change: Okay well. Thank you I think that's all our questions I just wanted to think about the 332 or three things one thanks to the team for another good quarter. Thank you and thank you all for participating in our call number two as I said earlier the story of the first quarter as the strong operating performance going to get a client activity growth in revenue and earnings manage expenses.

Speaker Change: Well.

Speaker Change: At period of time, we continue to make investments to position the company for the future on the other hand, we gave you. The latter part of this presentation to show you our multifarious loan book and how that diversity of types of clients and collateral types and geographies and all of that.

Speaker Change: Holds us in good stead as not only by our own internal models, but also by the comparison of stress tests. In addition, we talked about how well reserved heading into whatever it may be in front of us. So our job is to serve our clients in all times and that's what we plan to do thank you.

Speaker Change: This does conclude today's program. Thank you for your participation you may disconnect at any time and have a wonderful afternoon.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].