Q2 2025 Bank of America Corp Earnings Call

Good day, everyone, and welcome to today's Bank of America second quarter earnings call. 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. Please note, today's call will be recorded and I will be standing by should you need any assistance.

Please stand by your program is about to begin.

Good day, everyone and welcome to today's Bank of America, second quarter earnings call.

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.

It is now my pleasure to turn the conference over to Lee McIntyre, please go ahead. Thank you, Chloe. Good morning, everyone. Thank you for joining us to review the second quarter results. Our earnings release documents are available on the Investor Relations section of the BankofAmerica.com website. Those documents include the earnings presentation that we'll make reference to during the call.

Please note today's call will be recorded and I will be standing by. Should you need any assistance?

Speaker Change: It is now my pleasure to turn the conference over to Lee McIntyre. Please go ahead.

Lee McIntyre: Uh, thank you Chloe. Good morning everyone. Thank you for joining us to review the second quarter results. Our earnings released documents are available on the investor relations section of the bank of america.com website.

Brian Moynihan, our CEO, will make some opening comments before he turns the call over to Alastair Borthwick, our CFO, to discuss more of the details. Let me just remind you that we may make forward-looking statements and refer to non-GAAP financial measures during the call. Forward-looking statements are based on management's current expectations and assumptions that are subject to risks and uncertainties. Factors that may cause our actual results to materially differ from expectations are detailed in our earnings materials and the SEC filings available on the website.

Those documents include the earnings presentation that will make reference to during the call.

Lee McIntyre: Brian Mahon, our CEO will make some opening comments before he turns the call over to Alastair Borthwick, our CFO to discuss, more of the details.

Lee McIntyre: Let me just remind you that we may make forward-looking statements and refer to non-gaap financial measures during the call.

Lee McIntyre: Statements are based on Management's, current expectations, and assumptions that are subject to risks and uncertainties.

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

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

With that, Brian, I'll turn the call over to you.

Lee McIntyre: Information about our non-gaap financial measures including reconciliations to us. Gaap can also be found in our earnings materials available on our website.

Good morning, and thank all of you for joining us for our second quarter 2025 earnings results. First, a couple of words on environment. We continue to see a solid consumer. Spending data, you can see on our page 21 of the deck, improving credit quality, Alastair talked about from already strong statistics, plenty of household net worth growth in the market growth, and also the account balances, again, staying strong above where they were pre-pandemic. We see solid commercial loan growth, and we see good credit quality, with the exception of CRE in office, which we'll talk about. We also see our clients continue to see clarity with the changes in trade and tariffs, and now with the tax bill passing, we can see them start to understand the future and expect them to behave accordingly.

Speaker Change: With that Brian. I'll turn the call over to you.

We saw improving market conditions during the quarter and that leads our worldwide leading research team to continue to predict no recession, a modestly growing economy, about 1.5 percent at the end of the year, and continued no Fed rate cuts until next year. So with that backdrop, we talk about our second quarter.

Speaker Change: See them start to understand the future and expect them to behave accordingly.

Key points on the second quarter are as follows. We produced another solid quarter of revenue growth, earnings, and returns. These earnings are, second point is these earnings are driven by strong organic growth across all the businesses. The third is we continue to drive technology innovation, both on the product side that we offer our customers, but also on the operational excellence side. We're continuing to see the benefits of our long-term investment in technology capabilities, digitization, machine learning, and now we're starting to see at the beginnings of the AI practices that we develop pay off, and we're looking forward to much more.

Speaker Change: Uh, we saw improving market conditions during the quarter and that leads our, uh, worldwide, uh, leading research team to continue to predict no recession, modestly growing economy. Uh, about 1 and a half percent at the end of the year uh and continued know Fed, rate Cuts till next year. So with that backdrop, we talk about our second quarter key points on the second quarter as follows. We produce another solid quarter of Revenue, growth earnings and returns

These earnings are second point is, these earnings are driven by strong and organic growth across all the businesses.

Speaker Change: The third is, we continue to drive Technology Innovation, both on the product side that we offer our customers. But also on the operational excellence side

On slide two, we start the earnings discussion. This morning we reported revenue of $26.6 billion on an FTE basis, net income of $7.1 billion after tax, and earnings per share of $0.89 for the second quarter. On a year-over-year basis, we grew revenue 4% and grew earnings per share 7%. We produced a return on assets of 83 basis points and a return on tangible common equity of 13.4% in the second quarter. We've produced $14.8 billion in NII, a record for the company, growing 7% from the second quarter in 2024. This represents the fourth quarter of NII growth in line with the guidance we've been giving.

We're continuing to see the benefits of our long-term investment in technology. Uh, capabilities digitization machine learning. And now we're starting to see at the beginning at the AI practices that we developed payoff and we're looking forward to much more

On slide 2. We start the earnings discussion. This morning, we reported revenue of 206.6 billion on an FTE basis. Net, income of 7.1 billion after tax and earnings per share of 89 cents for the second quarter.

Speaker Change: On a year-over-year basis. We grew Revenue 4% in G, earnings per share 7%. We produced a return on assets of 83 basis points, and return on tangible. Common Equity of 13.4% in the second quarter.

Speaker Change: We've produced 14.8 billion dollars in AI a record for the company.

Growing 7% from the second quarter in 2024.

Supporting that average deposits have now grown for eight consecutive quarters and we have achieved this while maintaining very disciplined deposit pricing. That's great work by our team. Markets-Related Revenue gained momentum throughout the quarter. We recorded our 13th consecutive quarter of year-over-year sales and trading growth, given Devar and the team continue to do a good job there. Revenue was up 15% over the prior year quarter. We also produced more than $1.4 billion in firmwide investment banking fees, and the better the quarter really results improved as each month of the quarter progressed. We report an expense below $17.2 billion this quarter, $600 million lower than the first quarter of 2025, in line with the expectations we gave you.

Speaker Change: This represents the fourth quarter of Nia growth in line with the guidance. We've been giving you

Speaker Change: Supporting that average deposit of now. Grown for 8 consecutive quarters. And we have achieved this while maintaining very disciplined deposit pricing. That's great work by our teams.

markets related, Revenue gained momentum throughout the quarter, we recorded our 13th consecutive quarter of year-over-year, sales, and trading growth,

Speaker Change: Jim, the bar and the team continued to do a good job. Their revenue was up 15% over the prior year quarter. We also produce more than 1.4 billion dollars in firmwide Investment, Banking fees and the better, the quarterly results improved as each month of the quarter progressed.

We reported our sixth consecutive quarter of net charge-offs at around the $1.5 billion level. This is a little bit of a tale of two cities. Consumer net charge-offs were lower. Setting that, we had elevator commercial real estate office charge-offs. We resolved a number of credits in this quarter in the second quarter. When those credits close in the third quarter, you'll see the reduction in MPLs related there too. The good news is that most of those second quarter charge-offs were previously reserved so it had a modest impact on the profitability for the quarter. We provided capital in support of our customers and clients to help them grow.

Speaker Change: We reported expense below 17.2 billion. This quarter, 600 million lower than the first quarter of 2025 in line with the expectations we gave you

Speaker Change: Report, our 6 consecutive quarter of net charge offs at around the 1.5 billion dollar level. This is a little bit of a tale of 2 cities consumer, net charges were lower us setting that we had elevator commercial, real estate office charge us, we resolved a number of credits in this quarter in the second quarter. When those credits close in the third quarter, you'll see the reduction in mpls related there too. The good news is most of those second quarter charge us previously reserved. So it had a modest impact on a profitability for the quarter,

For example, we delivered strong commercial loan growth, as you can see. We also provided more balance sheet to our institutional clients for their financing needs. At the same time, we also increased the capital return to our shareholders. In the second quarter, we repurchased $5.3 billion in shares and paid $2 billion in dividends. In the first half of 2025, we have returned $13.7 billion in total capital, 40 percent higher than the first half of 2024. tangent book value per share continue to grow this quarter.

Speaker Change: We provided capital and support of our customers and clients to help them grow. For example, we delivered strong commercial loan growth, as you can see, we also provided more balance sheet to our institutional clients for their financing needs at the same time. You also increase the capital return to our shareholders in the second quarter. We repurchased 5.3 billion in shares and paid 2 billion dollars in dividends. And the first half of 2025, we have returned 13.7 billion in total Capital 40% higher than the first half of 24.

Let's move our discussion to organic growth. You can see that on slide three. We added new clients and deepened relationships with our existing clients. That was across all our businesses, consumer, wealth, commercial, and our markets business. Our teams are winning in the marketplace by putting the client first. For example, in consumer banking, we continue to grow primary checking accounts. We grew average consumer deposits for a third consecutive quarter. balances it up year over year for the first time since 2022, putting the effects of the pandemic surges behind. This quarter we crossed the milestone of five million net new checking accounts over the last six years.

Speaker Change: Tangent, book value per share. Continue to grow this quarter.

Let's move our discussion to organic growth. You can see that on slide 3, we added a new clients and deeper relationships with our existing clients that was across all our businesses consumer. Wealth commercial in our markets business, our teams are winning in the marketplace by putting the client. First, for example, in consumer banking, we continue to grow primary checking accounts. We do average consumer deposits for a third consecutive.

Speaker Change: Quarter.

Speaker Change: Balances are up year-over-year for the first time since 2022, uh, putting the effects of the pandemic surges behind us.

We saw increases in the average consumer checking account balance of our clients for two consecutive quarters. Now the average balance per account is over $9,200 and 92% of the primary checking account in the household. On the investment side, our clients carry an average funded balance of more than $130,000, strong when compared to the industry. Our home and auto originations grew on a year-over-year basis this quarter. We continue to be a leading supplier of credit to small businesses, helping the core segment of the economy grow. Loans are once again up year over year, and we're reflecting the commitment to add more bankers in the markets that we serve across the United States.

Speaker Change: This quarter regrow crossed the Milestone of 5 million net new checking accounts. Over the last 6 years, we saw increases in the average consumer, checking account. Balance of our clients for 2 consecutive quarters and now the average balance per count is over 9,200 and 92% of the primary C uh checking account in the household.

On the investment side, our clients carry an average funded balance of more than 130,000 strong when compared to the industry.

Our home Auto originations grew on a year-over-year basis. This quarter.

In Walton Investment Management, client balances reached $4.4 trillion. We saw strong AUM flows and loan demand, as well as market appreciation. Our advisors continue to deliver comprehensive banking solutions to help our clients achieve their goals. In our global banking business, client activity remains solid. Commercial clients are actively using their credit facilities, albeit at still a lower level than they used them as a percentage prior to pandemic. And our risk management approach remains very disciplined. We've added more than 1,000 net new clients, most of them driven by our payments capabilities. Global markets continue to perform well with a record second quarter level of sales and trading revenue.

Speaker Change: We continue to be a leading supplier of credit to small businesses. Helping the the core segment economy grow loans, were once again up year-over-year and reflecting the commitment to add more banking, Bankers in the markets that we serve across the United States.

In Walton Investment Management client balances reached 4.4 trillion.

Speaker Change: Saw a strong AUM Flows In loan demand, as well as Market appreciation.

Speaker Change: Our advisors continue to deliver comprehensive banking solutions to help. Our clients achieve their goals and our global banking business client activity remains. Solid commercial clients are actively using their credit facilities albeit at still a lower level than they used them as a percentage, prior to pandemic and our risk manager approach remains very disciplined.

We added more than a thousand, net new clients. Most of them driven by our payments capabilities.

Institutional clients sought funding of their warehouse of loans and other needs and increased pace for high quality collateral. Organic growth means that we're also investing in our own capabilities, our people and our technology to serve our clients more effectively. Those investments have led to continued expansion in digitalization and engagement across all our lines of business. Nearly 80% of our consumer households are now fully digitally engaged, and they have benefited from our award-winning platform. Just to give you a sense of the volumes, in the second quarter alone, 4 billion logins were made by our consumer. In the second quarter, 65% of our consumer product sales were digital.

Global markets can continue continue to perform well with a record, second quarter level of sales and trading Revenue, institutional clients stop funding of their warehouse of loans and other needs that increase pace for the high quality collateral.

Organic growth means that we're also investing in our own capabilities, our people and our technology to serve our clients more effectively. Those Investments that led to continued expansion in digitalization and engagement across all our lines of business.

You can see all these trends in our disclosures on slides 24, 26, and 28 in the appendix. I commend you to review them to see how the technology application can be scaled and applied across the business. We also continue to invest in our teammates and are moving more money into the AI side and machine learning side. And as we think about the quarters ahead and the operating leverage returning in the company. do the NII growth. It's key to know we have fully absorbed the cost of the last several years of inflation and wages and other third-party-provided services.

Speaker Change: Nearly 80% of our consumer households are now fully digital digitally engaged and they have benefited from our award winning platforms. Just to give you a sense of the volumes. In the second quarter Alone, 4 billion loans were made by our consumer in the second quarter of 65% of our consumer product sales were digital.

Speaker Change: You can see all these Trends in our disclosures on slides 24/26 and 28 in appendix I commend you, to review them to see how the technology application can be scaled and applied across the businesses.

Speaker Change: We also continue to invest in our teammates and are moving more money into the AI side and machine learning side.

And as we think about the, the quarters ahead and the operating leverage, you're turning in the company.

15 years ago to make it. and understanding how much an impact technology has had. Fifteen years ago, the company had a head count of 300,000. Today, we have 212,000. We did that with a relentless application of scalable, secure, resilient technologies. Customer behavior also changed to match. Digitization, Simplification of Products, Machine Learning and Models, and Process Improvements helped us get there. Now we have a chance to capture the value of that with the new enhanced capabilities of AI machine learning. Artificial intelligence allows us to change the work across many more areas of our company, effective than prior tools allowed us.

Speaker Change: Do the knee growth is key to know. We have fully absorbed the cost of the last several years of inflation and wages of inflation and wages and other uh third party provided services.

15 years ago to make it

Speaker Change: An understanding how much an impact technology had 15 years ago? The company had a headcount of 300,000

Speaker Change: Today we have 212,000. We did that with a Relentless application of scalable secure. Resilient Technologies, customer Behavior, also changed and matched it.

Speaker Change: Digitization simplification of products, machine learning and models and process improvements to help us get there.

We have deep scaling experience in AI capabilities. With Erika, our AI assistant is the most recognized aspect. As you can see on slide four, we think about the way we apply artificial intelligence and augmented intelligence in four different pillars, AI agents, search and summarization, content generation, and importantly coding and automated processing. First off, as an example, is our virtual assistant, Erika. This is a model we introduced back in 2018 and developed prior to that. It was the first true banking industry virtual agent. It averages over 58 million interactions per month today, helping to make it easier for clients to bank how they want and where they want.

Now we have a chance to capture the value that with the new enhanced capabilities of AI and machine learning artificial, intelligence, allows us to change the work across many more areas of our company effective than prior tools. Allowed us, we have deep scaling experience and AI capabilities with Eric. Our AI assistant is the most recognized aspect of that. As you can see on slide 4, we think about the way we apply artificial intelligence and augmented intelligence in 4 different pillars.

Speaker Change: AI, agents searched and summarization content generation importantly, coding and automated processes.

We also leveraged Erika's capabilities for use with our commercial clients in Cash Pro, as well as with our employees in Erika for Employees. To give you a sense, 90 percent of our more than 210,000 teammates have now utilized Erika for Employees to complete such tasks as password updates, equipment refreshes, et cetera. In wealth management and our other relationship manager banking businesses, AI is helping those relationship managers and advisors search and summarize information, preparing them to deliver personalized planning and personalized pitches to clients for their business and help with their advice. Co-pilots help them organize the prospecting process, and all this is implemented in going through the system.

First off as an example is our virtual assistant Erica. This is a model we introduced back in 2018 and developed prior to that. It was a first true banking industry. Uh virtual agent, it averages over 58 million interactions per month today, helping to make it easier for clients to bank how they want and where they want, we also leveraged Erica capabilities for use. Our commercial clients and cash Pro, as well as with our employees, in Erica for employees. To give you a sense. 90% of our more than 210,000 teammates, have dialed utilized Erica from employees to complete. Such tasks as password updates, equipment refreshes, Etc,

In our operations group, AI tools to help improve our process around customer satisfaction. One chat-based AI product works between markets and operations and allows us to have 750 people engage with AI agents to allow them to reconcile trades, which has saved many FTE already. In addition, as you can see, we have 17,000 programmers using AI coding technology today, saving 10 to 15 percent in code generation costs, and we expect that to continue to rise. Overall, we have 1,400 AI patents and have created over 250 AI and machine learning models in the company. We're currently working through many dozens of our AI proof-of-concepts beyond what I just spoke about.

And wealth management and our other relationship manager banking businesses, AI is helping those relationship managers and advisors search, and summarize information preparing them to deliver personalized planning and personalized. Uh, pitches to clients, uh, for their business and help with their advice, co-pilots helped them organize, the prospecting process and all this is implemented and going through the system.

In our operations group, AI tools help improve our process around customer satisfaction.

Speaker Change: 1 chat based AI product works between markets and operations allows us to have 750 people engage with the AI agents to allow them to reconcile trades which as say many FTE already in addition, as you can see, we have 17,000 programmers using AI coding technology today. Saving 10 to 15% in code generation costs and we expect that to continue to rise.

These investments are intended to help both improve the client experience and our own productivity.

So if you think about the quarter, before I turn it over to Alastair, just a few points. We saw good organic client activity, we enjoyed good growth in revenue and earnings per share. We continue to invest in that growth and are beginning to see the impacts of AI, again, aiding our efficiency. We managed risk well, that drove healthy returns, and we kept delivering more capital back to you as our shareholders.

Overall, we have 1400, AI patents and have created over, 250 Ai and machine learning models. In the company, we're currently working through many dozens of our AI proof of Concepts beyond what I just spoke about these Investments are intended to help both improve the client experience and our own productivity.

So, if you think about the quarter, before I turn it over to Alistair, just a few points, we saw a good organic client activity, we enjoyed good growth and revenue and earnings per share. We continue to invest in that growth and are beginning to see the impacts of AI again aiding our efficiency.

With that, I'll turn it over to Alastair. All right, well, thank you, Brian. I'm going to skip slide five of the earnings presentation, since Brian covered most of that already. And I just want to provide a little more context on the highlights of the quarter starting on slide six. where you can see revenue of $26.6 billion on an FTE basis. grew more than 4% from second quarter last year. Now we saw the year-over-year revenue growth in several areas. NII grew 7% and represented 55% of total revenue. Investment and brokerage fees rose 11% with both assets under management flows and market levels contributing nicely to the growth.

Alistair: Returns and we kept delivering more Capital back to you as our shareholders with that. I'll turn it over to Alistair.

All right. Well, thank you, Brian.

Um I'm going to skip slide 5 of the earnings presentation since Brian covered, most of that already. And I just want to provide a little more context on the highlights of the quarter starting on slide 6.

Alistair: Where you can see revenue of 26.6 billion on an FTE basis.

Alistair: Grew more than 4% from second quarter last year.

Alistair: Now we saw the year-over-year revenue growth in several areas. Nii grew 7% and represented 55% of total revenue.

This quarter's $5.4 billion of sales and trading revenue grew 15% from the year-ago period. Service charges grew 7% with particular strength in global payment solutions, and card income improved 4%. And while investment banking was down 9% from the second quarter of 2014, momentum built across the quarter with a good pipeline. Non-interest expense was a little less than $17.2 billion and down nearly $600 million from Q1, driven by the absence of Q1 seasonal elevation in payroll taxes. Provision expense for the quarter was $1.6 billion, with asset quality remaining in great shape. And we reduced our outstanding shares by almost 4% from the second quarter of last year.

Alistair: Investment and brokerage fees Rose, 11% with both assets under management flows and market levels, contributing nicely to the growth.

Alistair: This quarter is 5.4 billion of sales and trading Revenue. Grew 15% from the year ago. Period.

Alistair: Service charges grew 7% with particular strength, in global Payment Solutions.

Alistair: And card income improved 4%.

Alistair: and while Investment Banking was down 9% from the second quarter of 24,

Alistair: Momentum, built across the quarter with a good pipeline.

Alistair: Non-interest expense was a little less than 17.2 billion and down. Nearly 600 million from q1 driven by the absence of q1 seasonal elevation in payroll taxes.

Provision expense for the quarter was 1.6 billion dollars with asset quality remaining in great shape.

So together these things resulted in earnings per share improving 7% year over year.

Let's transfer to a discussion of the balance sheet using slide 7. And here, total assets ended the quarter at $3.44 trillion. That is up $92 billion from Q1, driven by strong loan growth and a higher level of client activity in global markets. Deposits were up $22 billion on an end of period basis from Q1, and up a little more than $100 billion from the year-ago period. Deposits reflect the seasonal headwind from income tax payments and saw inflows that more than offset the tax payment activity. Average global liquidity sources of $938 billion remain strong. Shareholders' equity at $300 billion was up $4 billion from last year, as we issued $3 billion of preferred stock this quarter to replace redemptions from last quarter.

Alistair: And we reduced our outstanding shares by almost 4% from the second quarter of last year. So together these things, resulted in earnings per share in improving 7% year-over-year

Alistair: to a discussion of the balance sheet using slide 7.

Alistair: And here total assets ended the quarter at 3.44 trillion that is up. 92 billion from q1 driven by strong loan growth and a higher level of client activity in global markets.

Alistair: Deposits were up 22 billion on an end of period basis, from q1 and up a little more than 100 billion from the year ago. Period.

Deposits. Reflect the seasonal headwind from income tax payments.

Alistair: And so inflows, that more than offset the tax payment activity.

Average global liquidity sources of 938 billion remain strong.

and we saw modest improvement in AOCI. Otherwise, net income was offset by distributions of capital to shareholders. We return $7.3 billion of capital back to shareholders with $2 billion in common dividends paid and $5.3 billion of shares repurchased.

Alistair: Shareholders Equity at 300 billion was up 4 billion from last year. As we issued, 3 billion of preferred stock this quarter to replace redemptions from last quarter.

Alistair: And we saw modest Improvement in aoci.

Alistair: Otherwise, net income was offset by distributions of capital to shareholders.

With regard to dividends, as we noted in our July 1st press release following the CCAR results, we announced our plan to increase our common quarterly dividend by 8%, starting in September, pending board approval. We were pleased to see our stress capital buffer requirement move lower in the results and it was good to see some of the industry comments about the annual exam coming through the new proposals. Tangible book value per share of $27.71 rose 9% from a year ago. And looking at regulatory capital, our CET1 level remains stable at $201 billion, and the ratio is 11.5%.

Alistair: We returned 7.3 billion of capital back to shareholders with 2 billion in common dividends paid and 5.3 billion of shares repurchased.

Alistair: With regard to dividends as we noted in our July 1st, press release following the secar results. We announced our plan to increase our common quarterly dividend by 8%. Starting in. September pending board approval.

Alistair: We were pleased to see our stress Capital buffer, requirement move lower in the results and it was good to see some of the industry comments about the annual exam coming through the new proposals.

Tangible book value per share of $27.71 Rose 9% from a year ago.

That's down 26 basis points and remains well above our regulatory minimum today, which will move lower upon finalization of the new stress capital buffer from CCAR, as well as the newly proposed rules. Now our calculated stress capital buffer and related CET1 ratio from CCAR is 10% and that takes effect on October 1st. through the newly proposed roles. which include two-year averaging of CET1 depletion. Our CET1 ratio would be 10.2% and would be effective on January 1st, 26. Either way, we have a lot of flexibility. Our supplemental leverage ratio was 5.7% versus a minimum requirement of 5% and that leaves plenty of capacity for balance sheet growth and we have $473 billion of total loss absorbing capital, which means our TLAC ratio remains comfortably above our requirement.

And looking at regulatory Capital, our cet1 level remains stable at 2011 billion and the ratio is 11.5%

Alistair: Patch down, 26 basis points, and remains well above our regulatory minimum today.

Which will move lower.

Alistair: Upon finalization of the new stress Capital buffer from car as well as the newly proposed rules.

Alistair: Now, our calculated stress, Capital buffer and related, cet1 ratio from car is 10% and that takes effect on October 1st.

Alistair: Through the newly proposed roles.

Alistair: Which include 2 year averaging of cet1 depletion.

Alistair: Our cet1 ratio would be 10.2% and would be effective on January 1st 26. Either way, we have a lot of flexibility.

On slide 8 we show a 9 quarter trend of average deposits to illustrate the growth across those periods. Deposits are now 9% higher than their bottom in May of 2023, and that momentum continued as we averaged $2 trillion for the first week of July. Typically, we see downward pressure on deposits as we move from Q1 to Q2, as clients pay their income taxes. And this year, we had enough growth to more than offset those tax payments. Average consumer deposits rose $4 billion from Q1, concentrated in non-interest-bearing We also saw significant growth in global banking deposits.

Our supplemental leverage ratio was 5.7% versus a minimum requirement of 5% and that leaves plenty of capacity for balance sheet growth. And we have 473 billion of total loss absorbing Capital, which means our T, like ratio remains comfortably above our requirements.

Alistair: On slide 8, we show a 9 quarter trend of average deposits to illustrate the growth across those periods.

Alistair: Trillian for the first week of July.

Alistair: Typically, we see downward pressure on deposits. As we move from q1 to Q2 as clients pay their income taxes.

Alistair: And this year, we had enough growth to more than offset those tax payments.

Alistair: Average consumer deposits Rose. 4 billion from q1.

Concentrated in non-interest bearing.

28 billion or 5% from Q1, and this included some shorter-term deposits from deal-related activity. And that allowed us to outpace the tax payment related declines in our wealth business, as well as corporate CD placements that matured with our institutional clients. In addition, we remained disciplined on pricing to achieve that growth. Overall rate paid on total deposits declined three basis points. led by a three basis point decline in consumer and the rate paid on 952 billion of consumer deposits was 58 basis points in the second quarter.

Alistair: We also saw significant growth in global banking deposits.

Alistair: 28 billion or 5% from q1 and this included some short-term deposits from deal related activity.

Alistair: And that allowed us to outpace the tax payment related declines in our wealth business as well as corporate CD placements. That matured with our institutional clients

In addition, we remained disciplined on pricing to achieve that growth.

Alistair: Overall rate paid on total deposits declined 3 basis points.

led by a 3 basis, point decline in consumer,

Let's turn to loans by looking at the average balances on slide 9. Loans in the second quarter of 1.13 trillion, improved 7% year over year, driven by 10% commercial loan growth. Every business segment recorded higher average loans on both a year-over-year basis and a linked quarter basis. Drilling down on commercial loans, we saw linked quarter growth in every segment of the commercial lending spectrum. Small business and business banking both grew, and we recently combined the coverage model here to provide more calling capacity for our bankers. In middle market lending, we saw a nice increase in revolver utilization during the quarter as clients navigated the current environment.

Alistair: and the rate paid on 952 billion of consumer deposits was 58 basis points in the second quarter

Alistair: let's turn to loans by looking at the average balances on, slide 9

loans in the second quarter of 1.13 trillion, improved 7%, year-over-year driven by 10% commercial loan, growth

Alistair: Every business segments recorded higher average loans on both a year-over-year basis and a linked quarter basis.

Alistair: Drilling down on Commercial loans, we saw linked quarter growth in every segment of the commercial lending Spectrum, small business and business banking, both grew. And we recently combined the coverage model here to provide more calling capacity for our bankers.

And in GCIB, we had a little more demand from our larger corporate clients. In global markets, we've been able to take advantage of strong financing demand in the marketplace from institutional borrowers, where we lend against diversified collateral pools. Now, the largest growth areas year over year have been in asset-based securitization and in credit. And in ABS, we're providing financing solutions for corporate and asset manager clients collateralized by loan, lease, or other receivables portfolios. In credit, we provide term and warehouse financing collateralized by diversified pools of corporate loans for private credit and asset manager clients. We feel very good about the lending and we feel good about the growth opportunity in these areas and our expertise has enabled us to participate in a number of attractive deals.

Alistair: in Middle Market, lending, we saw a nice increase in revolver utilization during the quarter as clients navigated the current environment

And in gcib, we had a little more demand from our larger corporate clients.

In global markets, we've been able to take advantage of strong, financing demand in the marketplace from institutional borrowers, where we lend against Diversified collateral pulse.

Alistair: Now, the largest growth areas year-over-year have been in asset based securitization and in credit and in ABS, we're providing financing solutions for corporate and asset manager, clients collateralized by loan, lease or other receivables. Portfolios.

Alistair: And credit, we provide term and Warehouse financing collateralized by Diversified pools of corporate loans for private credit and asset manager clients.

Alistair: We feel very good about the Lending.

Let's turn our focus to NII performance in slide 10. On a GAAP non-FTE basis, NII in Q2 was $14.7 billion, and on a fully taxable equivalent basis, NII was $14.8 billion, and as I said earlier, that's up 7% from the second quarter. NII grew $227 million on a fully taxable equivalent basis over Q1, driven by higher loan and deposit balances, one additional day of interest, and fixed rate asset repricing. lower loan yields from lower foreign interest rates partially offset those positive contributors. The Net Interest Yield, or NIY, declined five basis points, reflecting a roughly $80 billion increase in earning assets driven by global markets activity.

And we feel good about the growth opportunity in these areas and our expertise has enabled us to participate in a number of attractive deals.

Alistair: Let's turn our Focus to nii Performance in slide 10.

Alistair: On a gap non FTE basis. Nii in Q2 was 14.7 billion and on a fully taxable equivalent basis, knee was 14.8 billion and as I said earlier, that's up 7% from the second quarter.

Alistair: Nii grew 227 million on a fully taxable, equivalent basis, over q1 driven by higher loan and deposit, balances 1 additional day of Interest.

Alistair: And fixed rate asset repricing.

Lower loan yields from lower foreign interest rates partially offset. Those positive contributors

Loans and trading assets generated in global markets contribute solid net interest income, but at a lower relative yield to the overall company net interest yield. Additionally, some of the deal-related commercial deposit growth with relationship clients was net interest income accretive. and modestly net interest yield dilutive. My point here is that net interest income growth continues to be the focus with net interest yield being an output. With regard to interest rate sensitivity, on a dynamic deposit basis, we provide a 12-month change in net interest income for an instantaneous shift in the curve. And that means interest rates would have to move instantly another 100 basis points lower than the expected cuts contemplated in the current curve.

Alistair: The net interest yield or knee, why declined, 5 basis, points reflecting a roughly 80 billion increase in earning assets driven by global markets activity.

Alistair: Loans and trading assets generated, in global markets, contribute, solid net interest income.

Alistair: But at a lower relative yield to the overall company. Net interest yield.

Additionally, some of the deal related commercial deposit. Growth with relationship. Clients was net interest. Income accretive

And modestly net interest yield dilutive my point here.

Is that net interest income growth continues to be the focus.

Alistair: With net interest, yield being an output.

With regard to interest rate, sensitivity on a dynamic deposit basis. We provide a 12-month change in net interest income, for an instantaneous shift in the Curve.

Alistair: And that means interest rates would have to move instantly.

And on that basis, a 100 basis point decline would decrease NII over the next 12 months by $2.3 billion. And if rates went up by 100 basis points, net interest income would benefit roughly $1 billion.

Another 100 basis points lower than the expected Cuts contemplated in the current curve.

Alistair: And on that basis of 100 basis. Point decline would decrease nii over the next 12 months by 2.3 billion,

When we turn to a forward view of NII, let's turn to slide 11. And there remains a good amount of uncertainty from the impacts related to announced tariffs and the potential for continued uncertainty. We've also seen volatility in expectations of future interest rate cuts. So let us give you a few thoughts about the rest of 2025. In January, and again in April, we provided our expectations that we could exit the fourth quarter of 2025 with net interest income on a fully taxable equivalent basis in a range of $15.5 to $15.7 billion. We also noted our expectation that that growth would accelerate in the second half of 2025.

Alistair: And if rates went up by 100 basis points, that interesting come would benefit, roughly a billion dollars.

Alistair: Played 11.

Alistair: And there remains a good amount of uncertainty from the impacts related to announced tariffs and the potential for continued uncertainty.

Alistair: We've also seen volatility in expectations of future, interest rate Cuts. So let us give you a few thoughts about the rest of 2025.

In January. And again, in April we provided our expectations that we could exit the fourth quarter of 2025

Alistair: with net interest income, on a fully taxable equivalent basis in a range of 15.5 to 15.7 billion.

Our expectation for the exit rate of NII in the fourth quarter remains unchanged. and the drivers of the improvement remain largely the same as those we've discussed. We will pick up one additional day of interest. Additionally, the fixed-rate asset repricing of assets and cash flow swaps is expected to provide the biggest near-term benefits to our NII, and that takes into account the impact of the current interest rate curve. Loan and deposit activity is anticipated to also aid second half NII growth. And lastly, global markets businesses also expected to benefit NII a touch from lower rates as we move through the year.

We also noted our expectation. That that growth would accelerate in the second half of 2025.

Our expectation for the exit rate of knee in the fourth quarter remains unchanged.

Alistair: And the drivers of the Improvement remain largely the same as those we've discussed.

Alistair: We will pick up 1 additional day of Interest.

Alistair: Additionally, the fixed rate asset repricing of assets and cash flow swaps is expected to provide the biggest near-term benefits to our knee and that takes into account the impact of the current interest rate curve.

Loan and deposit activity is anticipated to also Aid. Second half nii growth.

Bottom line is our range of NII expectation for the fourth quarter of this year remains unchanged at $15.5 to $15.7 billion. And that would result in records. NII and a full year NII improvement of six to seven percent.

Alistair: And lastly, Global markets businesses. Also expected to benefit nii, a touch from lower rates as we move through the year.

Alistair: Bottom line is our range of knee expectation. For the fourth quarter of this year, remains unchanged at 15.5 to 15.7 billion.

Alistair: And that would result in record.

Okay, let's turn to expense and use slide 12 for the discussion there. We reported a little less than $17.2 billion in expense this quarter, and this reflects a nearly $600 million decline from Q1, driven by the absence of seasonal elevation from payroll tax expense and modestly lower litigation costs. The expense compared to the second quarter of last year is up a little more than 5%. That increase reflects an aggregated 9% improvement in wealth management fees. Higher Sales and Trading Revenue, and Investment Banking. It also reflects the impact of ongoing inflationary costs and continued investments in people and technology.

Nii and a full year, nii Improvement of 6 to 7%.

Alistair: Okay, uh, let's turn to expense and use like 12 for the discussion there.

Alistair: We reported a little less than 17.2 billion and expense this quarter. And this reflects a nearly 600 million decline from q1 driven by the absence of seasonal elevation from payroll tax expense and modestly lower litigation costs,

Expense, compared to the second quarter of last year is up a little more than 5%.

Alistair: That increase reflects an aggregated, 9% Improvement in wealth management fees.

Alistair: Higher sales and trading revenue, and Investment Banking fees.

Inflation is evident across our employee costs of health care and hardware and leased space among many other areas. On the people side, we continue to be an employer of choice with a strong 92% retention rate among our employees. And this quarter, we welcome more than 1,700 interns. and our headcount, excluding those summer additions, has fallen 1,500 from the beginning of the year, proving that we continue to manage our headcount effectively and the associated expense. Next quarter, we'll bring on more than 2,000 campus graduates to begin their careers. And as we move through the back half of the year, we believe expenses will flatten out here and potentially move a touch lower if we see seasonally lower markets-related costs.

Alistair: It also reflects the impact of ongoing inflationary costs and continued investments in people and Technology.

Inflation is evident across our employee costs of healthcare and hardware and leased space among many other areas.

Alistair: On the people's side, we continue to be an employer of choice with a strong, 92% retention rate, among our employees.

Alistair: And this quarter, we welcome more than 1700 interns.

Alistair: And our headcount excluding those summer. Editions has fallen 1500 from the beginning of the year proving that we continue to manage our headcount effectively and is associated expense.

Alistair: Next quarter will bring on more than 2,000 campus graduates to begin their careers.

That, coupled with the expectation of improved NII, is anticipated to provide operating leverage in the second half of the year and an improved efficiency ratio.

Let's move to credit. We'll turn to slide 13, where you can see that asset quality remains sound. Net charge-offs were $1.5 billion, up modestly compared to Q1, and that's the sixth consecutive quarter that net charge-offs have hovered around $1.5 billion. The total net charge-off ratio this quarter was 55 basis points, up a basis point from the first quarter. Q2 provision expense was $1.6 billion and mostly matched the net charge-offs. Modest reserve builds in some areas, primarily for loan growth, were mostly offset by releases associated with lower office exposures and mainly from sales. Consumer net charge-offs were $1.1 billion, down modestly linked quarter and consistent with the past few quarters.

Alistair: And as we move through the back, half of the year, we believe expenses will flatten out here and potentially move a touch lower. If we see seasonally lower markets related costs, that coupled with the expectation of improved nii is anticipated to provide operating leverage in the second half of the year and an improved efficiency ratio.

Alistair: Let's move to credit. We'll turn to slide 13 where you can see that asset quality remains sound that charge offs were 1.5 billion up modestly compared to q1 and that's the sixth consecutive quarter of the net charge offs of hovered around 1.5 billion.

Alistair: The total net charge off ratio this quarter was 55 basis points up a basis point from the first quarter.

90% of our consumer net charge-offs are driven by credit card and that highlights the importance of prudence in the underwriting growth of that portfolio. It's worth noting the net loss rate on credit card declined year over year for the first time this quarter since early 2016, outside of the pandemic period. On the commercial side, we saw losses of $466 million. That's up from Q1, driven primarily by office exposures and their associated sales, as I noted earlier. The net charge-off ratio for total commercial loans remained low at 29 basis points this quarter. Importantly, our C&I book, Commercial and Industrial, so that excludes the small business and CRE loans, that Commercial and Industrial loan book is $564 billion, and the loss on this book was nine basis points this quarter.

Alistair: Q2 provision expense was 1.6 billion and mostly matched the net charge offs. Modest, Reserve, builds in some areas primarily for loan growth, where mostly offset by releases associated with lower office. Exposures and mainly from sales consumer, net charge offs were 1.1 billion down modestly, linked quarter and consistent with the past few quarters.

Alistair: 90% of our consumer. Net charge offs are driven by credit card and that highlights the importance of prudence in the underwriting and growth of that portfolio. It's worth noting the net loss rate on credit card, declined year-over-year for the first time this quarter since early 2016.

Outside of the pandemic, period.

Alistair: On the commercial side, we saw losses of 466 million that's up from q1 driven primarily by office exposures and their Associated sales as I noted earlier.

Alistair: The net charge off ratio for total commercial, loans, remained low at 29 basis points. This quarter

It's averaged eight basis points from 2013 until now. Focusing on total net charge-offs again, and looking forward, in the near term, we would not expect much change in the total net charge-off ratio, given the steadiness of consumer delinquencies, stability of C&I, and the reductions in our CRE office exposures. On slide 14, in addition to the lower consumer delinquency statistics, note the modest changes in other stats for both our consumer and commercial portfolios.

CRA Lawns that commercial and Industrial loan book is 564 billion. And the loss on this book was 9 basis points. This quarter it's averaged 8 basis points from 2013 until now

Alistair: Focusing on total net charge offs again, and looking forward in the near-term. We would not expect much change in the total net charge off ratio given the steadiness of consumer delinquencies, stability, of cni, and the reductions in our CRA office. Exposures

Okay, let's move to the various lines of business and some brief comments on their results, starting on slide 15 with consumer banking. Consumer delivered strong results with $10.8 billion in revenue that grew 6% year over year and $3 billion in net income that grew 15%. Results were driven by the increasing value of our low-cost deposit franchise. Innovation in deposit products like family banking and new higher-value cash-back credit cards, coupled with our industry-leading Preferred Rewards Program, deliver total value for clients which we believe they don't get elsewhere. This value recognition and discipline pricing also drove a 7% improvement in NII.

Alistair: Slide 14. In addition to the lower consumer. Delinquency statistics note the modest changes in other stats for both our consumer and Commercial portfolios.

Alistair: Okay, let's move to the various lines of business and some brief comments on their results. Starting on slide, 15 with consumer banking,

Consumer delivered strong results, with 10.8 billion in Revenue That Grew 6% year-over-year and 3 billion in net income that grew 15%.

Results were driven by the increasing value of our low-cost deposit. Franchise Innovation and deposit products, like family, Banking, and new higher value. Cashback credit cards coupled with our industry-leading preferred Rewards program. Deliver total value for clients which we believe they don't get elsewhere.

While the revenue growth was led by the NII improvement, it also included solid fee performance in card income and service charges. And through good expense management, we drove 400 basis points of operating leverage in the business as expense growth year-over-year rose only 2% compared to the 6% revenue growth. The efficiency ratio improved more than 200 basis points in the last 12 months to 51% in the quarter. Investment balances grew 13% to $540 billion, with market improvement and full-year flows of $19 billion. And as I noted earlier, consumer net charge-offs improved linked quarter following the move lower in delinquency.

Alistair: This value recognition and discipline pricing. Also drove a 7% Improvement in knee.

While the revenue growth was led by the knee Improvement. It also included solid fee performance in card income and service charges and through good expense management. We drove 400 basis points of operating leverage in the business as expense. Growth year-over-year, Rose only 2% compared to the 6% Revenue growth

Alistair: The efficiency ratio improved more than 200 basis points in the last 12 months.

To 51% in the quarter.

Alistair: Investment balances grew. 13% to 540 billion with Market Improvement and full year flows of 19 billion.

The loss on credit card fell 23 basis points to 3.82% and delinquencies declined for the second consecutive And finally, as you can see in the appendix on slide 24, digital adoption and engagement continue to improve, and customer experience scores rose to record levels, illustrating clients' appreciation of enhanced capabilities from our investments. Moving to wealth management on slide 16, the business delivered another solid quarter where we added new households, deepened existing relationships, and saw strong client flows. The business generated net income of $1 billion on strong loan growth and solid AUM flows. We saw a modest decline in net income as solid revenue growth was more than offset by higher revenue related costs and continued investments to build the business.

Alistair: and as I noted earlier, consumer, net charge offs improved linked quarter following the move lower in delinquencies,

Alistair: The loss on credit cards.

Alistair: Fell 23 basis points to 3.82%.

Alistair: And delinquencies declined, for the second consecutive quarter.

Alistair: And finally as you can see in the appendix on slide 24, digital adoption and engagement continue to improve and customer experience scores Rose to record levels illustrating client's appreciation of enhanced capabilities from our investments.

Moving to wealth management on slide 16, the business. Delivered, another solid quarter where we added new households deepened, existing relationships and saw strong client flows.

Alistair: The business generated net income of a billion dollars on strong, lung growth and solid AUM flows.

Merrill and the private bank now manage nearly $4.4 trillion in client balances and continue to see organic growth that produced strong AUM flows of $82 billion in the past year, contributing nearly 5% growth in AUM balances. And that all reflects a good mix of new client money, as well as existing clients putting money to work. During the quarter, between Merrill and the private bank, we added 7,100 net new relationships. And in both businesses, the size of the relationships added continued to expand. We also continue to add financial advisors to the sales force in Merrill and the private bank through our extensive training program and experienced hire.

We saw modest decline in net income, a solid Revenue. Growth was more than offset by higher Revenue related costs, and continued Investments to build the business.

Alistair: Merrill and the private bank. Now manage nearly 4.4 trillion in client, balances, and continue to see organic growth that produce strong AUM. Flows of 82 billion. In the past year contributing nearly 5% growth in AUM. Balances

Alistair: And that all reflects a good mix of new client money as well as existing clients. Putting money to work.

Alistair: during the quarter between Merrill and the private bank, we added 7,100 net, new relationships and in both businesses, the size of the relationships added continue to expand

We also continue to add financial advisors to the Salesforce in Merrill.

hiring of advisors. Approximately one-third of net new households in Q2 were added by our newly trained advisors. We're not only growing relationships, but we're also deepening as the number of clients that have banking products with us grew to nearly 63%. And while this is primarily a fee-based, advice-driven model, about 30% of our revenue is now net interest income derived from GWIM clients and the large loan and deposit balances on us. In Q2, we reported revenue of $5.9 billion, growing nearly 7% over the prior year, led by that 9% growth in asset management fees. Expense growth of 9% supported both the cost of the increase in revenue-related incentives as well as investment in technology and cost of hiring to add experienced advisors to the platform in Merrill and the private bank.

Alistair: In the private bank, through our extensive training program and experienced higher.

Alistair: uh, hiring of advisors approximately 1/3 of net new households in Q2 were added by our newly trained advisors

Alistair: we're not only growing relationships, but we're also deepening as the number of clients that a banking products with us grew to nearly 63%

Alistair: And while this is primarily a fee based advice driven model.

Alistair: About 30% of our revenue is now net, interest income, derived from gwim clients and the large loan and deposit, balances on us.

Alistair: In Q2, we reported revenue of 5.9 billion, growing nearly 7% over the prior year, led by that 9% growth in Asset Management fees.

Average loans were up 7% year-over-year, driven by strong growth in custom lending, securities-based lending, and a pickup in mortgage lending. saw solid deposit inflows and overall deposits declined as a result of the seasonal headwind of income tax payments and some continued movements to other parts of our investment platform in search of higher yield. Our pricing discipline resulted in a three basis point decline in rate paid. We also draw your attention on slide 26 to the continued digital momentum in this business. New accounts continue to be opened, predominantly digital.

Alistair: Ben's growth of 9% supported both the cost of the increase in Revenue related incentives as well as investment in technology and cost of hiring to add experienced advisors to the platform in Merrill and the private bank.

Alistair: Percent year-over-year driven by strong growth in custom lending, Security based lending and a pickup in mortgage lending.

Alistair: We saw solid deposit inflows and overall deposits declined. As a result of the seasonal headwind of income tax payments and some continued movements to other parts of our investment platform in search of higher yield.

Alistair: pricing discipline resulted in a 3 basis, point decline in rate paid

Alistair: We also draw your attention on, slide, 26 to the continued digital momentum in this business.

Slide 17 shows the global banking results, where the prior year rate impacts lowered NII. And this segment has the toughest challenge to make that ground back through growth and pricing. In Q2, global banking generated net income of $1.7 billion. Business activity was solid in Q2. We already discussed the strong deposit growth, solid loan growth, and investment banking fees that gained momentum through the quarter. While business activity was solid, overall net income fell. NII declined year over year from lower rates on the variable loans. and and Lower Solar and Wind Investment Activity. Non-interest expense to support the business activity grew as we increased investment for the future with more relationship managers across the commercial spectrum and we invested in technology and marketing.

Alistair: New accounts, continue to be opened predominantly digitally.

Alistair: Slide 17 shows the global banking results, where the prior year rate impacts lowered nii. And this segment has the toughest challenge to make that ground back through growth and pricing.

Alistair: In Q2 global banking. Generated net, income of 1.7 billion dollars. Business activity was solid in. Q2 we already discussed the strong deposit growth, the solid loan growth and Investment Banking fees that gained momentum through the quarter.

Alistair: While business activity was solid. Overall, net income fell.

Alistair: Knee declined year-over-year from lower rates on the variable loans.

And higher funding costs for loan growth.

Alistair: Non-interest income included, both lower Investment, Banking fees.

Alistair: And lower solar and wind investment activity.

Term-wide investment banking fees were $1.4 billion in Q2, down 9% from a year ago, led by a decline in M&A and leveraged finance fees. We still maintained our number three investment banking fee position year-to-date.

Alistair: Non-interest expense to support the business activity grew, as we increased investment for the future, with more relationship managers across the commercial spectrum and we invested in technology and marketing.

Switching to global markets on slide 18, I'll focus my comments on results, excluding DVA as I normally do. And as Brian said, we continued our streak of strong revenue and earnings performance, achieved operating leverage, and once again delivered a good return on capital. In Q2, we generated net income of $1.6 billion, which grew 11% year over year. Revenue, and again this is XDVA, improved 10% from the second quarter of last year on good sales and trading results while investment banking was lower. Focusing on sales and trading, XDVA, revenue improved 15% year-over-year to $5.4 billion. Sales and trading built off the momentum of the first quarter.

Alistair: Firmwide Investment Banking fees were 1.4 billion in Q2 down 9%, from a year ago. Led by a decline in m&a and leveraged Finance fees, we still maintained our number 3 Investment Banking fee position. Year to date

Alistair: Switching to Global markets on slide 18. I'll Focus my comments on results, excluding DVA as I normally do. And as Brian said, we continue our streak of strong revenue and earnings performance achieved operating leverage. And once again, delivered a good return on Capital.

Alistair: in Q2 we generated net income of 1.6 billion, which grew 11% year-over-year

Alistair: Revenue and again this is X DVA improved 10% from the second quarter of last year on good sales and trading results while Investment Banking was lower.

Alistair: Focusing on sales and trading X DVA Revenue, improved 15% year-over-year to 5.4 billion.

FIC led the way this quarter, growing 19% year over year with rates and foreign exchange trading benefiting from the macro volatility. Our equities group had a strong quarter with 10% revenue growth from both trading and financing. And both FIC and equities are benefiting from investments in the international franchise as we saw increased activity across Europe, Asia, and Latin America. Year over year, expense was up 9% on revenue improvement and continued investments in the business.

Alistair: Sales and trading built off the momentum of the first quarter.

Alistair: thick, led the way this quarter growing 19% year-over-year with rates and foreign exchange trading benefiting from the macro volatility,

Our equities group had a strong quarter with 10% Revenue growth from both trading and financing and both Fick. And equities are benefiting from investments in the international franchise. As we saw increased activity across Europe, Asia, and Latin America.

And on slide 19, all other shows a loss of $77 million in Q2 with very little to talk about here. The tax rate ended at 7.4%. It was a little lower than last quarter, driven by $180 million of discrete items. And excluding those $180 million of discrete items and the tax credits related to investments in renewable energy and affordable housing, the effective tax rate would have been much closer to a normal corporate tax rate at approximately 24%.

Year-over-year, expense was up, 9% on Revenue Improvement and continued investments in the business.

And on slide 19. All other shows a loss of 77 million in Q2. With very little to talk about here, the tax rate ended at 7.4%. It was a little lower than last quarter driven by 180 million of discrete items.

Alistair: And excluding those 180 million of discrete items and the tax credits related to investments in renewable energy and affordable housing.

So with that, I'll stop there.

Alistair: The effective tax rate would have been much closer to a normal corporate tax rate at approximately 24%.

Thank you, everyone. And with that, we'll open up for Q&A, please, Chloe. Certainly.

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. Again, that is star and 1.

Alistair: So with that, I'll stop there. Thank you, everyone. And with that, we'll open up for Q&A, please Chloe?

Chloe: Certainly. 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.

We'll take our first question from John McDonald with Truist Securities. Your line is open. Hi, good morning. I wanted to ask about, morning guys, I wanted to ask about retail deposit progress. It's been a lot of talk about different ways to measure retail deposit share. And I know you may take issue with some of the methodologies out there.

Chloe: Again, that is star and 1.

John Mcdonald: We'll take our first question from John McDonald with truist Securities. Your line is open.

John Mcdonald: Hi, good morning.

But Brian, taking a step back, how do you look at and measure the team's progress in growing retail deposit share and what your report card and how you've done and what your ambitions are on that front? Well, in the end of the day, if you look at the consumer business with $950 billion in deposits. operated very efficiently. It's the cost of deposits, meaning all the cost over the deposits, running under 146 basis points, the total rate paid 58 basis points, 58% of the balances are in checking accounts. You know, it's a tremendous business, and we'll only get more and more profitable as the NII kicks in, because they're the biggest beneficiary of that.

John Mcdonald: I wanted to ask about morning guys, I wanted to ask about retail deposit, uh, progress. It's been a lot of talk about different ways to measure, retail, deposit, share. And I know, you may take issue with some of the methodologies out there but Brian taking a step back. How do you look at and measure the team's progress and growing retail deposit, share and what your report card and how you've done and what your Ambitions are on that front.

John Mcdonald: 146 basis points. The total rate paid 58 basis points. 58% of the

So if you think about it in terms of deposit growth, we look, brief pandemics now, our team's gone from 700 billion-odd numbers to 950 billion. We've grown our deposits as a company faster in the industry, grew from the pre-pandemic to now at 39% versus the industry, like 37%, and large banks at 32%. And obviously, we contribute to that large bank growth rate. So we feel very good about it.

The key is... Okay, thanks, Brian.

Balances are in checking accounts. You know, it's a tremendous business and we only get more and more profitable as knee kicks in because they're the biggest beneficiary. That, so, if you think about it, in terms of deposit growth, we look pretty pandemic. Now, our team's gone from 700 billion, odd numbers to 900 and 50 billion. Uh, We've grown our deposits as a company faster, in the industry group, from the pre-pandemic to now uh at 39% versus the in uh the industry like 37% in large Banks 32% and obviously we contribute to the large Bank growth rate. Um so we feel very good about it. The key is

They've grown checking accounts for 5 years. Now, they've grown retail deposits, which were influenced a lot because of our Mass Market. Customer base, being such a big amount. Uh, by the pandemic stimulus that has all gone through the system and you're seeing the the retail the consumer deposits growth. You know 3 quarters in a row now and the key is that the average checking account balance.

John Mcdonald: Is at 9,200 and it went in the pandemic about 6, 600 or 7,000. So you see in that growth. So we feel good about that. Overall, our average deposit size per branch is 500 million versus the next best at 400 and the 1 behind that at 300. So, I, I don't know all these methodologies. You guys can look at them. It's a lot of paver and a lot of debate, but at the end of the day is we're going to pause this fasting industry and they

John Mcdonald: And 92% of core, checking of the checking accounts consumer, uh, satisfaction is the highest it's ever been. So we feel very good about it.

Alastair wanted to follow up on your expense commentary. Can you elaborate on the outlook for the second half? I think your prior outlook implied some improvement in the second half. And I think you just said you may or may not see that depending on the strength of the markets business. Well, I think what we're trying to say is it always starts with us with headcount discipline. So the headcount's been pretty flattish. We've managed that pretty well all the way through the year. We don't see any change in that. So then the only variable that's left, really, is gonna be around revenue-related.

Speaker Change: Okay. Thanks Brian Alistair. Wanted to follow up on your expense commentary. Can you elaborate on the outlook for the second half? I think you're prior Outlook implied, some improvement in the second half and I think you just said you may or may not see that depending on the strength of the markets business,

Speaker Change: Well, I think what we're trying to say is always starts with us with had come discipline.

Speaker Change: So the head counts being pretty flat-ish with manage that pretty well all the way through the year. We don't see any change in that.

Now, we've seen pretty good growth, obviously, in sales and trading, up 15% year over year. We've seen pretty good growth in AUM fees, up 10%. So, you know, I anticipate that any expense growth would be revenue-related and that we should be pretty flattish. Maybe we benefit in Q4 from seasonally slower activity. Okay, thanks.

So then the only variable that's that's left really is going to be around um Revenue related. Now we've seen pretty good growth. Obviously in sales and trading

Speaker Change: Up 15% year-over-year. We've seen pretty good growth in AUM fees.

Speaker Change: Up 10%. So

Speaker Change: You know, I I anticipate that, um, any expense growth would be Revenue related, and that we should be pretty flattish. Maybe we benefited in Q4 from seasonally, slower activity,

Speaker Change: Okay, thanks.

We'll take our next question from Ken Huston with Autonomous Research. Your line is open. Unknown Speaker. Hey, good morning. Hey, Alastair, thanks for the update on that trajectory for the second half of the year.

Speaker Change: We'll take our next question, from Ken Houston with autonomous research.

Speaker Change: Your line is open.

Speaker Change: Line is open.

I'm just wondering, you know, as we move a step forward, if you can kind of just make sure we're still tracking right on that the split between the loan securities and swap repricing and and whether you know that step up in that bucket is linear in the third and fourth or kind of just builds up as we get towards the end of the year. Thank you. I think I would use linear. I think that's probably the easiest way to think about it. We said to everyone that we thought that the second half had a little bit more in the way of fixed rate asset repricing and cash flow swap repricing than the first half of the year.

Speaker Change: Hey good morning. Um hey Alistair thanks for the update on that trajectory for the second half of the year. I'm just wondering, you know, as we move a step forward if you can kind of

Just make sure we're so tracking right on that, the split between the loan Securities and Swap repricing and and whether, you know, that step up and that bucket is, is, is linear in the third and fourth or kind of just builds up as we get towards the end of the year. Thank you.

That accounts for the growth being larger in the second half of the year. But it's not different between Q3 and Q4. So it ought to be about the same.

Speaker Change: I think I would use linear. I think that's probably the easiest way to think about it. Uh we said to everyone that we thought that the second half had a little bit more in the way of fixed rate asset repricing and cash flow swap repricing than the first half of the year that accounts for the growth being larger in the second half of the year. But it's not different between Q3 and Q4. So, it ought to be about the same.

Okay, and then just on the I think we know that the securities and mortgage loans, but you can you kind of just dig us in a little bit on the on the cash flow hedges and what you're seeing in that are you still moving forward with the same strategy, the you know, the off and on and how much you're picking up on those? Yeah, so there's no change there at all. That's exactly what we're doing, just as the old ones roll off with lower coupons, we're replacing them with new ones with higher coupons. No new news there.

Okay and then just on the I think we know that 8 the Securities and mortgage loans but can you kind of just take a stand a little bit on the on the cash flow Hedges and what you're seeing in that are you still moving forward with the same strategy? The you know the off and on and how much you're picking up on those?

Yeah, so there's no change there at all. That's exactly what we're doing. Just as the old ones, roll off with lower coupons, we're replacing them with new ones with higher coupons.

is still in that plus 150 or so range that you said last quarter. That'll be true for some of the cash flow swaps this particular quarter, and it'll change from quarter to quarter, so our NII bridge that you can see takes that into account, and when we update that quarter after quarter, we'll just share that with you at the time. Okay, great. Thanks a lot, Alastair. Yep.

Speaker Change: Um, no new news there.

Speaker Change: So still in that plus 150 or so range that you said last quarter.

Uh that'll be true for some of the cash flow swaps this particular quarter and it'll change from quarter to quarter so our knee bridge that you can see takes that into account. And when we update that quarter after quarter, we we'll just share that with you at the time.

Okay, great. Thanks a lot also,

yep.

We'll move next to Matt O'Connor with Deutsche Bank. Your line is open. Good morning. Just want to follow up on the expenses. I guess if you kind of flatline it or flat the discount a little bit, that'll put you up, you know, call it three and a half percent or so on a full year basis. And I think the prior guide was up two to three or near the high end of two to three.

Speaker Change: We'll move next to Matt o'conor with Deutsche Bank. Your line is open.

Can you just kind of circle back to the cost versus what you were thinking? Okay. Thank you.

previously and maybe talk about some of the regulatory costs that I think are keeping a little bit higher. Hey, Matt, so if you look year over year, just to give you a simple thing about the expense growth from second quarter last year, second quarter this year, 400 of it was basically incentives in the wealth management business plus the, what we call BC&E, that cost of the market space transaction activity, largely market space. So that's kind of revenue-related growth, which we all cheer for growth there because that means the bottom line's grown. If you flip that around, then the rest of the stuff grew at a really relatively modest growth rate.

Matt O'Conor: Or, you know, the high end of 2 to 3, can you just kind of circle back to um uh the cost versus what you were thinking?

Um, previously. And um, maybe talk about some of the regulatory costs that I think are uh uh keeping a little bit higher.

Matt O'Conor: hey Matt, so let so if you look year over year just to give you a simple thing about of the expense uh growth from second quarter last year, second quarter this year 400 of it was basically

So if you think about it going forward, out of the orders on AML that were public and stuff, we obviously put 1,000 to 2,000 people to work to clean up a lot of stuff. That's now tipping over, so we feel good about that as we move into the second half of the year. And then, frankly, the overall inflation rate and expenses are starting to flatten out, even though you hear a lot of talk about the inflation rate outside in general. But at the end of the day, we've got stability in terms of headcount, in terms of third-party rents, and all that stuff is sort of flattening out.

Matt O'Conor: Uh, incentives in the wealth major business. Plus the, what we, what we call BCD that costed of the market space, transaction activity, largely Market space. So that's kind of Revenue related growth, which we all cheer for growth there because that means the bottom line is growing. Um, if you flip that around and then the rest of the stuff, you know, grew at a really relatively modest growth rate. So, on the if you think about it, going forward out of the orders on AML that were public and stuff. You know, we obviously put a, yep, a thousand to 2,000, people to work to clean up a lot of stuff that's now tipping over. So we feel good about that as we move into second half of the year and then frankly, the overall inflation rate and expenses are starting to flatten out. Um, even though you hear a lot of talk about the inflation rate outside,

Matt O'Conor: In general. But you know, in the end of the day, we've got stability in terms of uh, headcount ter in terms of uh,

So we feel good about that. And then the idea is then just to bring the headcount down. So if you think about it, over the last 15 years or so, we went from 300,000 people to 212,000 people. We just got to keep working that down, and we've been able to maintain flat headcount across the last four or five years as we've invested heavily in the front end of the business. And you expect us now with some of these new techniques, frankly, to make progress a little bit more faster. So we feel good about the expense trajectory, but the key is you're not going to change some of the revenue-related stuff, and you wouldn't want to.

On the other stuff, you control the heck out of it. Okay, so it does seem like the costs are coming a little bit higher, but I appreciate the kind of higher fees.

You know, third-party, uh, rents and all that stuff is sort of flattening out. So we feel good about that and then the idea is then just to bring the headcount down. So if you think about it over the last 15 years, or so, we went from 300,000 people to 212,000 people. We just got to keep working that down and we've been able to maintain Flathead count across the last, you know, 4 or 5 years as we've invested heavily in the front end of the business. And you expect us now, with these, some of these new techniques, frankly to make, uh, progress a little bit more faster. So we feel good about the expansion trajectory, but the key is you, you know, you're not going to change some of the Rel related stuff and you wouldn't want to on the other stuff you control the heck out of it.

I guess, as we think about, like, more sustainable expense growth, like, I know there's no official guidance for next year, but just kind of talk about, do you get back into that kind of just a couple percent growth or. Yeah, that was nice. That's that's an outside sort of market growth or market related activity growth, you know, way above what a normal absorption rate would be, we have a model where we can run the place on a couple hundred basis points, net of expense growth, which is inflationary cost of 3, 4%, and then offsetting it by a lot of activity.

Okay. Um, so it it does seem like the costs are coming a little bit higher, but I I appreciate the kind of higher fees. Um,

I guess, uh, as we think about, like, more sustainable expense growth, like, I know, there's no official guidance for next year, but just kind of talk about. Do you get back into that kind of just a couple percent growth, or, um,

Matt O'Conor: You know, how should we think about?

As the NII kicks in, each quarter, we see it go growing and then growing at a little faster rate, frankly, as Alastair talked about. That's the operating leverage kicking back in. So we had five years operating leverage disrupted by the pandemic got back in, and then the rates fall off, hurt us, obviously, from NII as that now hit a record level this quarter, and it's going to grow off of that record level. You'll see the operating leverage overall kick back in, and the size of that revenue stream in all the businesses is huge, and the company is obviously huge, and that all pretty much falls to the bottom.

That's, that's an outside sort of market growth, or Market related activity growth, you know, way above what a normal, uh, absorption rate would be we, we have a model where we can run the place, um, on a couple hundred basis points, net of expense growth, which is inflationary cost of, you know, 34% and then offsetting it by a lot of activity, as the knee kicks in you.

Okay, thank you We'll move next to Gerard Cassidy with RBC.

Matt O'Conor: Know each quarter, we've seen it, Go growing growing and then growing a little faster rate frankly, because our talked about, that's the operating level which kicking back in. So we had, you know, 5 years of operating leverage disrupted by the pandemic got back in and then the rates fall off, heard it. Heard us. Obviously, from knee, as that. Now hit a record level this quarter and, you know, is going to grow off of that record level. You'll see the operating leverage overall kick back in in the size of that Revenue stream in all the businesses is huge. And and the companies obviously huge, and that all pretty much follows the bottom line,

Speaker Change: Okay, thank you.

Your line is open. Hi, Brian. Hi, Alastair. You guys have had real success in having the digital adoption in your lines of businesses. And you pointed that out in the appendix slides that you referenced.

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

Speaker Change: Hi Brian. Hi Alistair.

What do you think you could ever get the efficiency ratio back down to the pre-pandemic levels of just under 60%? Or has the business changed so much since the pandemic that over time 59, let's call it, may be tough to achieve? Not near term, but over time? So Gerard, one of the things that we talked about, I think there's a couple hundred basis points of efficiency ratio difference due to the way the accounting treatment works for the the tax incentive, clean energy deals, not the housing because it won't change. But and so those are now changed under the statute in the room.

Speaker Change: And you guys have had real success in having the digital adoption in your lines of businesses. And you pointed that out in the appendix slides that you referenced.

Speaker Change: What do you think you could ever get the efficiency ratio back down to the pre-pandemic levels of just under 60%, or is the business changed?

Speaker Change: so much since the pandemic that over time, 59 let's call, it may be tough to achieve not near-term but over time

Speaker Change: so D, the 1 of the things that we talked about, I think there's a couple hundred basis points, efficiency ratio difference, due to the way the accounting treatment works for the, uh, uh,

But if you look at 19 and now 200 basis points of the efficiency ratio, it's just because we have an other income loss, which hurts revenue. It's made up in a tax line. So the bottom line effect is still positive for the company. So that's 200 basis points difference, because back then we ran about three hundred million dollars a quarter of tax benefit, but negative other income due to the tax exempt deals. Now we're running nine hundred. And so you'll see that close out, frankly, as these deals sunset. Then on top of that, the N.I.

kicking in just because of nature of it. And you'll see the consumer business get, you know, very, very efficient like it was back then, just because it's an I piece. You know, basically all follows the bottom line. So we feel very good about that. So, yes, we will move back down and, you know, low 60s and then potentially crack through it with two, you know, obviously just the N.I. lift in the operating leverage lift. But secondly, you know, quite frankly, the tax credit deals will start to run off just due to the change of statute.

Uh exempt deals. Now we're running 900 and so you'll see that close out frankly as these deals Sunset. Um then on top of that dni checking in just because of nature of it and you'll see the consumer business get you know, very very efficient. Um like it was back then just because it's an, i

Great, Brian. And as a follow-up, just a broader question for you. Obviously, there's been a lot of talk about stablecoins. Can you give us your view of where you see the adoption of stablecoins going forward and what that might have in terms of impact on payments, revenues, or deposit trends for Bank of America and possibly the industry? Yeah, so focusing on stablecoins as a transactional device, you know, if it's a new payment rail, and we have, you know, trillions of dollars we move for our clients every day, you know, we believe that if they want to use stablecoins to move part of that money, they'll move.

Speaker Change: Piece, you know, basically all follows the bottom line, so we feel very good about that. So yes, we will move back down and, you know, low 60s, and then, uh, uh, potentially crack through it with 2, you know, obviously, just the knee lift and the operating leverage lift. But secondly, you know, quite frankly, the tax credit deals will start to run off, just due to the change in statute.

Speaker Change: Great Bryant and then as a follow-up, just a broader question for you. Obviously, there's been a lot of talk about stable coins. Um, can you give us your view of where you see the adoption of stable coins going forward and what that might have in terms of impact on payments revenues or deposit trends for Bank America and possibly the industry?

So considering having an account, and they can send out money in US dollars, they could also initiate transaction, have it go into euros, and it could have a go to stablecoins and then transact to that system. So we feel both the industry and ourselves will have, you know, have responses, we've done a lot of work, we're still trying to figure out how big or small it is, because some of the places are not big amounts of money movement. So you expect us all to move, you expect our company to move on that. You know, in the end of day, you know, the debate will be how big an item this will be, and how much more an effective payment stream it is.

Speaker Change: The payment Rail and we have, you know, trillions of dollars we move for our clients every day. You know, we believe that if they want to use stable coins to move, part of that money, they'll move so consider them having an account and they can send out money and, and US dollars. They can also initiate transactions have a go into euros, and it could have a go at a stable coins and then transact in that system. So we we feel

Both the industry and ourselves will have, you know, have responses. We've done a lot of work. We're still trying to figure out how big or small it is because of some of the places are not big amounts of money movement. Um,

And, you know, there's places like small balance transfers across border that you can see the case, you can see it with, you know, sort of smart contracts and money movement, you can see it in Digital Native App payments and stuff, but we'll be there just like we were there when we moved from Chex to Zelle. And you can see that when the industry puts its mind to it, if you were talking to me six or seven, maybe ten years, you'd say this thing called Venmo is coming on, and you guys can be left behind, and here we are.

Speaker Change: so you'd expect us all to move, you expect our company to move on that, you know, in the end of the day, you know, the debate will be how big a item, this will be in, how much more an effective payment stream. It is, uh, and you know, there's places like small balance transfers across border that you can see, the case you can see it with, you know, sort of smart contracts and money movement, you can see it in, you know,

Our Zelle payments exceed Venmo's total volumes today, and the industry is at multiples. It's just because we can move money efficiently, and we have to be aware of the attack on the payment system, and we'll be there to defend it.

Speaker Change: Digital native apps in app payments and stuff, but, you know, we'll be there, just like we were there when we moved from, you know, checks to to uh, to zelle. And you can see that when the industry puts his mind to it, you know, if you were talking to me, 6 or 7, maybe 10 years, you'd say, you know, this thing called venmos coming on and you guys going to be left behind. And here we are, you know, our zelle payments exceed them, most total volumes today in the industries are multiples. It's just because

And just quickly, Brian, do you think there will be a consortium like Zelle on stablecoins where the industry defends itself and moves forward, or will the banks go individually? I think it will be all of the above. I think in the commercial side there might be applications more individually, but you need networks to make this all work. And we will partner with some of the stablecoins. We already have partnerships with some of them. And so it will be a complex array and hopefully not complex to the customer.

Speaker Change: You know, we can move money efficiently and we have to be aware of the attack on the payment system and we'll be there to defend it.

Speaker Change: And just quickly Brian, do you think there'd be a Consortium like zelle on stable coins, where the industry defends itself and moves forward or will the banks go individually?

Thank you for those insights. Appreciate it.

Speaker Change: I think it'll be all the Buffs. I think they're in the commercial side. There might be applications more individually but in a broad, you need networks to make this all work and we will partner with some of the stable coin we already have Partnerships with some of them and so it'll be a complex array and hopefully not complex to the customer. Frankly.

Thank you for those insights, appreciate it.

We'll move next to Mike Mayo with Wells Fargo Securities. Your line is open. Hey, how are you doing?

We'll move next to Mike Mayo with Wells. Fargo Securities. Your line is open.

I feel like you served up a good meal here. I mean, the main course, we don't lose sight of $2 trillion of deposits where you pay 1.76%, and that's certainly down. Quarter over quarter, year over year, the side dishes certainly look good with the NII going to escape velocity, I guess, from 14.8, you said, to 15.5, to 15.7 by the end of the year.

Speaker Change: I hate how you doing? Um,

Speaker Change: I feel like you served up a a good meal here. I mean the main course we don't lose sight of 2 trillion dollars of deposits where you pay 1.76% and that's certainly down

But I'm still left hungry. I guess I need my dessert or something. I'm just wondering why even with all that improved performance, the NII guide isn't even higher given the pace of loan growth. You certainly see the expectations, as Alastair said. Every segment of commercial lending is doing well. You seem very optimistic about that. You're also asset sensitive, and there's less rate cuts. So I guess I'm whining for some dessert, some extra. I'm left hungry. Why not more? Well, Mike, you got a future as a chef. Look, I think if you go to the NII bridge on page 11 for a minute, you know, we put this out at the beginning of the year, there's a lot can happen in a year.

Speaker Change: quarter of a quarter year of a year, the side dishes. Certainly look good with the knee going to escape, velocity, I guess from 148, you said to 155 to 157 by the end of the year, but I'm still left hungry. Um, I guess I need my dessert or something. I'm just wondering,

Why even with all that, you know, improved performance, um being I I guide isn't even higher, given the pace of loan growth, you certainly see the expectations as Alistair said, every segment of commercial lending is doing well, you seem very optimistic about that. You're also asked as sensitive and there's less rate Cuts, so I guess I'm whining, uh, for some dessert, some extra, I'm left hungry, why not more?

Well, Mike, you got a future as a chef. Um,

And I don't think any of us anticipated all the various things that happened in the course of the past six months. What's not on here, for example, is you think about international rates, they've been cut pretty significantly. That's a headwind that we don't include here. So you're absolutely right. There's some things that we've been really happy with in terms of loan growth. There are some other places which have maybe grown a little less quickly. So, you know, I'd still love to see the consumer non-interest bearing growing just a little faster. We've got some good growth, but we'd love to see a little bit more there.

Speaker Change: look, I think if you go to the knee bridge on page 11 for a minute, you know, we put this out at the beginning of the year. There's a lot can happen in a year.

Speaker Change: And I don't think any of us anticipated, all the various things that have happened in the course of the past 6 months.

Speaker Change: What's not on here? For example, is you think about international rates? They've been cut, pretty significantly.

But I think the balance of all of these various inputs, it all still hangs together six months later. We've removed a lot of risk from the equation, I think. And now we just have to see what happens with rates in the second half of this year. And then we've just got to keep driving the same organic growth that we've been driving. When we do that, NII growth for the year is six to seven percent.

Speaker Change: Less uh quickly. So you know, I'd love. I'd still love to see the the consumer non-interest-bearing growing just a little faster. We got some good growth but we'd love to see a little bit more there but um I think the the balance of all of these various inputs, it all still hangs together, 6 months later, we've removed a lot of risk from the equation. I think.

Speaker Change: And now we just have to see what happens with rates in the second half of this year.

Hopefully a record leaves you satisfied at the end of the year, but we'll be working on next year's course. in the second hour. All right.

Speaker Change: And then we just got to keep driving the same organic growth that we've been driving when we do that and I growth for the year 6 to 7%.

Speaker Change: Hopefully a record leaves you satisfied at the end of the year, but we'll be working on next year's. Uh, next year's course.

So when I go for my my next meal next year, or the year after any kind of foreshadowing of what you're preliminarily thinking about for next year? Well, the only thing I'll say, I mean, we'll talk more about next year when we get into the Q4 discussion, you know, three months from now, but I think what we're talking about, which is the organic growth Brian's just talked about, driving the deposits and the loans, that should continue, the fixed rate asset repricing, we're going to continue to benefit from again next year. So we're trying to make sure that we're replicating and sustaining results over a long period of time.

In the second hour.

Speaker Change: All right, so what I go for my, my next meal, uh, next year or the year after any

Speaker Change: Kind of foreshadowing of what your preliminarily thinking about for next year.

All right, thank you.

Well, the only thing I'll say I mean we'll talk more about next year when we get into the Q4 uh discussion you know 3 months from now. But but I think what we're talking about which is the organic growth Brian's, just talked about driving the deposits in the loans that should continue the fixed rate asset repricing. We're going to continue to benefit from again next year. So we're trying to make sure that we're replicating and sustaining results over a long period of time.

Speaker Change: All right. Thank you.

We'll move next to Steven Alexopoulos from TD Cowan. Your line is open. Hey, good morning, everyone. Morning. To start morning, I want to start the conversation.

Speaker Change: We'll move next to Steven alexopoulos from TD Cowen. Your line is open.

Good morning, everyone.

First, I love this AI slide four. I might frame it actually. But to start the conversation there, you know, as we've spoken to the banks, there seems to be a fairly wide range of how banks are thinking about AI. Some are using it really to boost productivity. Others are more fully embracing it to leverage digital workers. You seem to be in the second camp. I don't know if you guys saw the JPM Investor Day where Mary Antling put that slide up, looking at headcount coming down about 10% or so in the consumer bank over the next five years.

Speaker Change: Morning to start morning. I want to start the conversation first. I love this AI slide for I like to frame it actually. Um, but to start the conversation there, you know, as we've spoken to the banks there seems to be a fairly wide range of how banks are thinking about AI. Some are using it really to boost productivity, others are more fully embracing it to leverage digital workers. You seem to be in the second camp.

Speaker Change: I don't know if you guys saw it the JPM investor day where Mary had like put that slide up looking at headcount coming down.

Wherever that number ends up being, how should we think about your company as you leverage these tools? Should we think about you as leading fast followers to whatever JPMorgan does? I'd love to hear you unpack this for us.

Speaker Change: About 10% or so, in the consumer Bank over the next 5 years.

Speaker Change: Wherever that number ends up being, how should we think about your company as you leverage? These tools, should we think about you as leading fast follower to whatever JP Morgan does. I'd love to hear you unpack this for us.

Let me just walk up to coverage, Steven, but... Let's just step back and think about the application technology. Fifteen years ago, we had 100,000 people in our consumer business. Today, we have 53,000. The deposits, I think at the time, were, say, $400 billion. Now, they're $900 plus. The numbers of checking accounts are up 50 percent. Transaction volumes through the roof, et cetera, et cetera. And so, all that is enabled by application technology on scale with control and resiliency. And so, when you're now doing 2 billion digital interactions, you have to be up all the time.

Speaker Change: well, let me just, uh, walk up to coverage Stephen, but uh,

Speaker Change: Let's just step back and think about the application technology. 15 years ago, we had 100,000 people in our consumer business. Today, we have 53,000 the deposits. I think, at the time were say 400 billion. Now, they're 900. Plus the numbers of checking accounts were are up, 50% transaction, volume through the roof. Uh,

And we have invested, you know, probably $2 billion on what we call Never Down, hot, hot, hot backups so that those systems can run all time. So, you know, you don't have to – we don't have to debate the future. You know, we don't – you just look at what we've done. We're down half the people in this business, and it's bigger and more complex and more widespread, et cetera. So, that's one.

Speaker Change: Etc. Etc. And so all that is an enabled by application technology on scale with control and resilience. And so, when you're now doing 2 billion digital interactions, you have to be up.

As we look forward, you take something like – take something like Erika, and, you know, it was developed when none of us knew what a large language or small language model was. It is built. It's operating. And what I described earlier is it now does – 20 million consumers use it every quarter actively. They use it 60 million times a month. This is not – again, and every one of those would have been a phone call and stuff. So, as we bring it out to wider use case – wider things it can do and train it on, as we bring it across various parts of the company, commercial business with Cash Pro, Erika and full employees, et cetera, you're seeing these models that are – the data's carefully crafted so it works.

Speaker Change: All the time and we have invested, you know, probably 2 billion dollars on what we call never down. Uh, hot hot, hot, hot backups, so that those systems can run all time. So, you know, you you don't have to, we don't have to debate the future, you know, we don't you just look at what we've done, we're down half the people in this business and it's bigger and more complex and more, uh, widespread Etc. So, that's, that's 1 as we look forward, he takes something like, takes something like, uh, Erica and, you know, it was developed. When none of us do, what a large language or small language model? Was it is built its operating. And what I described earlier is it now does 20 million consumers, use it every every quarter actively. Uh they use it 60 million times a month. This is not again. And every 1 of those would have been a phone call and stuff. So we as we bring it out to wider, use cases, it wider things, it can do and and

They get the right decision. They can train them, and we're using it in more places. So, we just see that going and going and going. Now, meanwhile, in that consumer number, we have twice as many relationship bankers as we did at the start. So, we reinvest a part of that savings to drive that checking growth on a consistent basis for five years. And if you start to think about 5 million net checking accounts with $9,000 ever bound, you start to do some math. You start to think that we've grown a good-sized bank incrementally over the last four or five years.

So, you know, it enables you to do that while the cost structure went down a billion dollars a quarter in consumer over the time frame. So. That's what happens.

They take something like this Optimist model, which is a model that we built with others, third-party models that we've fine-tuned and the ability for fixed-income traders, which is relatively bespoke still. We have one common equity. We have 300 Q-SIPs for fixed income, to give an example, just as our company, to allow them to reconcile trades all through using bots and agents between operations itself instead of emails and shared drives and everything going on. It's pretty powerful, and we're just starting at 750 people. This is 90 days old for implementation, and we see the benefits that five people so far, 10 people.

Speaker Change: Training on as we bring it across various parts of the company, commercial business with cash Pro, Erica and full employees Etc. You're seeing these models, uh, that are the data's, uh, carefully crafted. So it works. They get the right decision. They can train them, and we're using it more places. So, we just see that going and going and going now, meanwhile, in that consumer. Number, we have twice as many relationship Bankers as we did at the start. So we reinvest a part of that savings to drive that checking growth on a consistent basis for 5 years. And if you start to think about 5 million net, checking accounts, with 9,000 dollars out of bounds, she doesn't start to do some math. You start to think that we grow in a, a good size Bank incrementally, uh, over the last 4 or 5 years. So, you know, it it it's it enables you to do that. Well, the cost structure went down a billion dollars, a quarter in consumer over the time frame. So,

You'll start to see more people, and we'll just stop adding more. Reconstructed Placing Headcount Attrition these areas or reapply that headcount somewhere else so we think there's a lot to go here and now I think I We've got to be careful. It's got to be done right. The decisions we make are meaningful to people's lives, so it can't be made in a way that's not correct, meaning it comes up with the wrong decision. The customers are vegacious, I mean, their confidence will come and go if you don't handle them right, so we have to be very careful, and that's why it's not a fast follower or a leader, it's can you apply it at scale.

Model that we built uh, with others, third-party models that we've fine-tuned and ability for fixed income trainers, which is relatively bespoke still. We have 1 common Equity, we have 300 qips for fixed income to give example just as our company to allow them to reconcile trades. Uh, all through using, uh, uh, Bots and agents, between operations itself, instead of emails, and, and share drives and everything going out, you know, it's pretty powerful. And we're just starting that 750 people, this is, you know, 90 days old for implementation. And we see the benefits that 5 people so far. 10 people, you'll start to see more people and we'll just stop adding

Speaker Change: Stock replacing head count, uh, uh, uh, attrition in these areas or reapply, that headcount somewhere else. So, we, we think there's a lot to go here. And now, I think I

Speaker Change: We've got to be careful. It's got to be done, right? The decisions we make are meaningful to people's lives, so it can't be made in a way. That's not correct. Um, meaning it it comes up with a wrong decision. Um, you

Speaker Change: know, the

That's a question. And if you can apply it at scale, then you can get the benefits. If you can't apply it at scale, meaning it isn't always up and operating, then you have problems. And that's what we're driving at. So you'll figure out in five years whether we were the leader or not the leader. We got the patents. We showed you we got the model. The question is, are you actually getting the benefits and the scale? We have and we will and we expect to continue. And yet we're still in the early stages.

Speaker Change: The customers of a I mean, they you know, their confidence will come and go if you don't handle them, right? So we have to be very careful and that's why it's not a fast follower or a leader. It's can you apply it at scale?

Speaker Change: That's a question. Um, and if you can apply it at scale, then you can get the benefits. If you can apply it at scale, meaning it isn't always up and operating, then you have problems and that's what we're driving that. So you you we'll you'll figure out in 5 years, whether we were the leader or not the leader, we got the patents, we showed you, we got the model. The question is, are you actually getting the benefits and the scale? And we, we have and we will and we expect to continue and yet, we're still in the early stages.

Great Color. For my follow up, just going back to your response, Brian, to Gerard's question on digital assets. You know, as I've studied B of A, I think you were the first bank out there with a mobile app. You're the first one out there with Erika, right, the digital agent. But it seems like the way you're thinking about stablecoin is your, it's a little wait and see, right? JPM has a tokenized deposit, Citi has a tokenized deposit. I haven't seen any announcement from you guys. You don't have a large cross-border business right now relative to others.

Okay.

Speaker Change: That's a great color for my follow-up. Just going back to your response. Brian to Gerard's question on digital assets. You know, as I study BFA I think you were the first bank out there with a mobile app. You're the first 1 out there with Erica right? The digital agent. But it it seems like the way you're thinking about stable coins

So you could be the disruptor in this new ecosystem, same way you were with mobile, same way you were with digital agent. Are you just skeptical on what this could mean long term? Like, why not lean in with this breakthrough technology, the same way you have with these others? Well, you're, you're forgetting that a lot of if you're going to go to customer facing activity in this area, we had to make sure we had legal clarity. And so that's still going on as we speak and to be able to apply it. Look, the business cases for it.

Speaker Change: is is your it's a little weight and see. Alright, JPM has a tokenized deposit city as a tokenized deposit, I haven't seen any announcement from you guys. You don't have a large cross border business right now relative to others. So, you could be the disruptor in this new ecosystem, same way. You were with mobile. Same way, you were with digital agent. Are you just skeptical? And what this could mean long term, like, why not lean in with this breakthrough? Technology. The same way you have with these others.

as incremental value are are still to be proven, frankly. And, and so that's, so on Bitcoin, or as you're on blockchain, you know, we have lots of patents, we've used it in the trade area and stuff where a lot of information has got to move with money and things like that. But we still, you know, in the end of day, remember, we'll move three or $4 trillion today, and all of it will be digital. you know, or 99% of it. So, you know, other than the cash out of the ATM and the checks written by consumers which are going down, you know, 8, 10%, you know, year over year and half the checks written that they were, you know, four or five years ago, everything else in our company was digital.

Speaker Change: Well you you you're forgetting that a lot of. If you're going to go to customer facing activity in this area we had to make sure we had legal Clarity and so that's still going on as we speak and and to be able to apply it, look, the business cases for it.

as incremental valued are, are

Still to be proven frankly. And uh and so that's so on uh Bitcoin or because you on blockchain uh you know we have lots of patents. We've used it in the trade area and stuff with a lot of information. It's got to move with money and things like that but you we still, you know, in the end of the day, remember we'll move 3 or 4 trillion dollars today and all of it will be digital.

And so, what's the improved process? And then there's real time and that's also connected. So, we're trying to figure that out. It's not cautious or not. It's just, what is the client demand? And when we start to see it, we have built the capabilities. We are understanding what we do and then we can roll it out. But the questions we aren't seeing, you know, clients are knocking on the door and saying, please give me this right.

Speaker Change: You know, or 99% of it. So, you know, other than the cache, all the ATM and the checks written by consumers, which are going down, you know, 8 10%, you know, if year over year and a half the checks written that they were, you know, 4 or 5 years ago, everything else in our company moves digital, and so what's the improved process and then there's real time and that's also connected. So we're trying to figure that out. It's not cautious or not it's just. What is the business client demand? And when we start to see it, we have built the capabilities. We are understanding what we do and then we can roll it out. But the questions we aren't seeing, you know, clients aren't knocking our door and saying please give me this right now.

Okay, thanks for the call.

Speaker Change: Got it.

Speaker Change: Okay, thanks for the caller.

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

Speaker Change: We'll take our next question from Erika. Najarian with UBS.

Your line is open.

I wanted to just refocus the conversation and just ask Brian, with the deregulatory momentum that seems to be taking place, how do you feel about when is the appropriate time to address that 130 basis point buffer? So, you know, granted the stress test has been quite volatile in the SCB result, but, you know, clearly there's reform to address that. I'm wondering if 130 basis points would still be an appropriate buffer and, you know, what you need to see to rethink that buffer. So we believe an appropriate buffer is 50 basis points. plus 50 basis points.

Erika Najarian: Yes. Hi. Good morning. Um, wanted to just refocus the um, the conversation. Um, and just ask Brian, would the deregulatory momentum? Um, that seems to be um, taking place.

Speaker Change: How do you feel about when is the appropriate time to address at 130 basis point buffer?

So, you know, granted the the stress, the stress test has been quite volatile in the Seb result.

Speaker Change: Um but you know, clearly there's reform to address that I'm wondering if 130 basis points would still be an appropriate buffer. And you know what you need to see, um, to rethink that buffer.

And that's what we were running down to, you know, pushing down before. We always want that. to be utilized, for lack of a better word, by the core businesses, because that's what we're here for. So we pay our dividends. We're basically using all the incremental capital, the purchase shares, and then letting the businesses use up the excess capital to grow. And at the high point, I think we were 12 percent, and now we're down to 11.5. So they're using it up. What we just did is increase the amount of which we have. So we expect them to use that and expect us to move down to 50 basis points.

So uh uh we believe in appropriate buffer is 50 basis points.

Speaker Change: You know, 50 basis points and that's what we are running down to, you know, pushing down before we always want that.

Now, remember, we've got this debate between averaging and not averaging. We'll see it happen. The SLR is really not relevant for us because, frankly, other ratios would catch us before the SLR. The G-SIB calibration is critically important because people are forgetting that. That has to happen because we're effectively using 2010, 11, or 12 data on the size of the economy in our company and other companies relative to size to judge how systemically important they are. It was meant to be indexed. It hasn't been. The proposal was indexed a year ago or so. From then on, that wasn't really right because it skips all the run-up in size at the pandemic.

Speaker Change: To be utilized for lack of better word by the core businesses, because that's what we're here for. So we pay our dividends. Uh, we're basically using all the incremental Capital to refer to shares and then letting the businesses use up the excess Capital to grow. And at the high point, I think we were 12%. Now, we're down to 115, so they're using it up. What we just did is increase the amount of which we have. So we expect them to use that and expect us to move down to 50 basis points. Now, remember we got this debate between averaging and not averaging, we'll see it happen. Uh, the SLR is really not relevant for us because to it, it frankly other ratios would catch us before. The SLR, the Gib calibration is critically important because people are forgetting that that has to uh, has to happen. Because we're effectively using 2010 11 or 12 data on the size, of the economy, and our company and other companies relative size to judge how systemically important. Our it was meant to be indexed, it hasn't been, uh, the proposal was indexed at the risk of a year ago.

So we have to see more of this come together. Expect us to work that capital down one way or the other way, but we're always trying to grow the company. And that's what that extra capital there is to grow the company, loans, deposits, loans, more interactions, more transactions. The balance sheet in markets is growing, and they've done a good job returning on it. So that's what we keep doing. So back up 50 basis points as target buffers. We just got a change in the last few weeks. The change is still being debated about the implementation timing.

Speaker Change: Or so from then on, you know, that wasn't really right because it skips all the run up in size at the pandemic. So we have to see more of this come together. Expect us to work that Capital down, uh, 1 way, or the other way, it, but we're always trying to grow the company, you know? And that's what that extra Capital, there is to grow the grow, the company loans deposit, you know, loans more interactions more transactions,

We got to get the G-SIB thing figured out because if they don't index it, we'll have an increase coming at us in another year or so. And all this we're working on. But the end of the day is we've just returned all the capital we earned back to the shareholders and we'll continue to do that and more if the business can't use the growth.

And just my follow up question here, Brian, is, you know, are there businesses that you're prioritizing in terms of redeploying that capital to that perhaps, you know, where the profitability looks better under this regime, and the 5.3 billion of stock that you bought back this quarter, would that be indicative of your appetite for the rest of the year? I think the answer on the size of my back is absolutely because We just did it, so obviously in the nick of our appetite. Every business has an opportunity for growth. Some will have more RWA intensity, some will have less.

Yeah, the balance sheet markets has grown and they've, uh, they've done a good job returning on it so that's what we keep doing. So, back up. 50 basis points is a target buffers, um, we just got to change and you know, the last few weeks, the the change is still being debated, uh, about, you know, the inflammation implementation timing. We got to get the gzip thing figured out because if they don't index it, we'll have an increase coming at us in a, in a another year or so and, you know, all this, we're working on, but the end of the day is we just returned all the capital. We earned back to the shareholders and will continue to do that. And more, if the business can't use the growth,

Speaker Change: Got it and just my follow-up question. Here, Ryan is, you know, are their businesses that you're prioritizing in terms of redeploying that Capital to that? Perhaps, you know, um where the profitability looks better under this regime and the 5.3 billion uh of of stock that you bought back this quarter with that being indicative of your appetite, um, for the rest of the year.

Speaker Change: so, I I think the answer on the size of ibac is absolutely, because

If you notice, the RWAs in the industry have grown, and ours have grown pretty rapidly. We all need to fine-tune that. That's part due to the models and stuff that are being pushed around behind the scenes that hopefully we get more rational discussion about. But every business has the opportunity to grow, and so the most discreet decision we made was to put You know, with Jim DeMar's team is to give them more capital and capacity to grow, and they've used that wisely. But if you look across our businesses, that's the lowest return on allocated capital.

We just did it so obviously didn't think of our appetite um the every business has an opportunity for growth, some will have more rwa intensity, some will have less. Uh if you notice the rwa is in Industry, have grown, in ours have grown pretty rapidly. We need to all need to fine-tune that that's part due to the models and stuff that are being pushed around behind the scenes.

Speaker Change: So hopefully we get more rational discussion about, um, but every business has the opportunity to grow. We, uh, and so the most discreet decision we made was to put

So we have to be careful to get the returns. We have to make sure that the wealth management business and the consumer business, which have very high returns on capital, are also growing. So everybody can grow if they need the capital. They'll take it down. And the issue is always how much expense you can deploy to grow more than is how much capital. Thank you.

You know, with Jim dear and team is to give them more capital and capacity to grow and they've used that wisely. But if, if you look across our businesses, that's the low lowest return on uh, allocated Capital. So we have to be careful to get the returns. We have to make sure that the wealth management business and the consumer business, which have very high Returns on Capital also growing, so everybody can grow if they need to Capital, um, they'll take it down and and we we there's no you know, the issue is always how much expense you can deploy uh to grow more than it is. How much Capital you get the point.

Speaker Change: I thank you.

We'll move next to Betsy Graseck with Morgan Stanley. Your line is open. Hi, good morning. Any questions, want to follow up on what we were just talking about? Unknown Speaker with Relation to Markets or thought in the past there I'm kind of sealing on that. And can you talk to how much RWA are you willing to allocate? As long as they get the returns, and that's the key, because we've got the dynamics of their, you know, return on allocated capital. We've got the dynamics of their impact on net interest income. So, you know, Jim and the team have got to get the returns.

Speaker Change: We'll move next to Betsy grasic with Morgan, Stanley. Your line is open.

Betsy Grasic: Hi, good morning. Um, 2 questions 1 to follow up on what you were just talking about. I was wondering with relation to markets or wha I thought in the past there had been, you know, a kind of ceiling on that that now is gone. Um, and can you talk to how much rwa are you willing to allocate to the Market's business?

And return on assets has to be moved towards 100 basis points and beyond. So there's no theoretical ceiling. It's just the dynamics of how far they can go before they do it. We went from a $600 or $700 billion balance sheet to basically a trillion. And that will happen flow based on client's activity. The G-SIB buffer calculation, you know, we're not worried about that. We've gone from basically $250 to $300, and it will move up. So we wouldn't worry about that, because as they're deploying, they're actually getting enough return that it's absorbing the impact to the rest of the company.

That's the other thing you always have to be careful of, is if markets, you know, can cause a G-SIB trigger, and everybody pays for it. And so we make sure that they can actually get the return it justifies, not only what goes into their business, but what the whole company experiences. And that's why the calibration is critical. They, you know, we've got to get. These things all work together, and the calibration of G-CIP is critical. And the reality is that you've had a 20% growth in the capital requirements. There's no major change in risk for most of us across the last three or four years, just by methodologies of G-CIP creep and RWA calculations behind the scenes, where they're pushing us on the models and stuff.

From basically 250 to 3 and it'll move up. So don't we wouldn't worry about that because as they're deploying, they're actually getting enough return. That it's it's absorbing the impact of the rest of the company. That's the other thing. You always have to be careful of is, if markets.

Betsy Grasic: You can cause a gzip trigger and it everybody pays for it. And so we, we make sure that they can actually get the return to justify is not only what goes into their business, but what the whole company experiences and that's why it's the calibration is critical that they they, you know, we got to get

But Betsy, we're not aware of any RWA ceiling. And the global markets business, as you've seen, it's just growing as the company grows. And we've just continued to invest. Okay, great. And then follow-up question is just on the Thank you. Thank you. You are approaching the end of your time.

these things all work together and the calibration of G7 is critical. And the reality is is that you've had a base, get 20% growth in the capital requirements. So there's no major change in risk for most of us across the last 3 or 4 years, just by methodologies of of gzip, creep, and rwa. You know, calculations behind the scenes, where, you know, they're pushing us on on the models and stuff like that. But Betsy, we're not, we're not aware of any rwa ceiling. Um, and the global markets businesses you've seen

it's just growing as the company grows and we've just continued to invest their

Betsy Grasic: Okay, great. And then follow-up question is just on,

Betsy Grasic: The.

your wind and solar invest. with the tax plan that is, you know, going through. Well, how are you thinking about that business and how should we be anticipating how that Yeah, so I read your report. I think it was pretty, pretty good in terms of laying out what the issues are. What we're anticipating is there's going to be a period here where our clients are still going to want to install wind and solar. So we're obviously going to support that. get them into production. And they have to get it all. They have to get construction started by a couple of different dates.

Speaker Change: Question on how you are approaching your wind and solar Investments with the tax.

Betsy Grasic: Um,

Betsy Grasic: Plan that is you know going through, yeah.

How are you thinking about that business? And how should we be anticipating how that will roll through your p&l?

Yep. So um, I read your report. I think it was uh, pretty pretty good in terms of laying out what the issues are.

Betsy Grasic: What we're anticipating is going to be a period here where our clients are still going to want to install wind and solar. So we're going to support that.

now, they have to

But you can think about it as between now and 2027. That's when you're going to see all of these things begin to slow and then stop. We happen to have, number one, an installed base of production tax credits, so that will stay with us. But those will begin to burn down over the course of the next eight years. That's the way I would think about that. And then the low-income housing tax credits are impacted. So we anticipate we'll continue to be involved with those. So I would say we're likely to be involved in deals for the next couple of years, and then you'll start to see the portfolio come down in the course of 2028 all the way through 2033, and it'll just burn down gradually over time, Betsy.

get them into production and they have to get it all. They have to get construction started by a couple of different dates, but you can think about it as between now.

And 2027. That's when you're going to see all of these things begin to slow and then stop.

Betsy Grasic: We happen to have number 1 and installed base of production tax credits so that will stay with us. But those will begin to burn down over the course of the next 8 years. That's the way I would think about that.

And then the low income housing tax credits aren't impacted. So we anticipate will continue to be involved with those

Betsy Grasic: So, I would say we're likely to be involved in deals for the next couple of years.

and the Housing to the House. investments increased to offset that Well, that's largely a question of the size of that market. So if that market sort of grows with GDP, it may not increase in terms of the size that we do as a company, because we're just supporting the clients that we're working with. But if it were to grow significantly, then it could take some of that gap. But I'm not sure that will happen. If the housing has been a relatively constant number, where the Clean energy, the wind and solar in particular, is going to be intertemporal now because of the stuff that goes on and the effects downstream, etc., like that.

Betsy Grasic: And then, you'll start to see the portfolio come down in the course of 2028, all the way through 2033, and it'll just burn down gradually over time Betsy.

Betsy Grasic: Fade, um, that that that's largely a question of the size of that market.

Betsy Grasic: So if that markets sort of grows with GDP, it may not increase in terms of the size that we do as a company because we're just supporting the the clients that we're working with. But

Betsy Grasic: If it were to grow significantly, then it could take some of that Gap.

Betsy Grasic: But I, I'm not sure that will happen.

Betsy Grasic: yeah, I think the

Betsy Grasic: Yeah, the housing has been a relatively constant number.

Betsy Grasic: Where the?

You know, the housing's pretty consistent. It's just a question of, as Alscher said, how big the demand can be and how competitive market other people go for it, too. So I would expect that to come close to absorbing. Okay, excellent. Thank We'll move next to Chris McGrady with KBW.

Betsy Grasic: Uh, clean energy. The wind and solar in particular is going to be in temporal now because of the stuff that goes on and the effects Downstream Etc like that, you know, the housing is pretty consistent. It's just a question of as Alistair, said, how big the demand can be and how you have some competitive market, other people go for it too. So I I would expect that to come close to absorbing

Betsy Grasic: Okay, excellent. Thank you.

Your line is open. I'm great, good morning. Good morning, Chris. Brian, you've talked a lot about this responsible growth and the credit's been tremendous over the years. In terms of the journey on the growth portion, I'm interested in your assessment of where you are versus where you desire to be. And then maybe secondarily, a little bit more comments or color on the loan growth in the quarter, the conversations that you're having with borrowers, a degree of confidence. Thank you. So I think, you know, we always are pushing our team to grow faster, you know, loan growth faster, and deposit growth faster, and the economy grows, and outgrow the economy, and then turn that into strong profit.

Chris McGrady: We'll move next to Chris McGrady with KBW. Your line is open.

Okay, good morning.

Chris McGrady: 20. Chris.

Speaker Change: Um, Brian, you talked a lot about this responsible growth and, and the credits been tremendous over the years, in terms of the journey on on the growth portion. Um, I'm interested in your assessment of where you are versus where you desire to be and then maybe secondary, you know, a little bit more comments or color on the on the loan growth in the quarter or the conversations that you're having with borrowers. A degree of confidence. Thank you.

Speaker Change: So I I think, uh, you know, we always are pushing our team to grow faster.

I think you've seen them do that. I think, you know, the commercial loan growth, leave aside the markets, which you can look at, and that has elements to it which are specific to the clients that we work with that are financing pools of assets and et cetera. If you look in the core middle market, Wendy and the team have done a good job growing the core middle market business, even within nature of the, frankly, the commercial real estate flat to down. So, you know, she's grown I think 6, 8 percent year over year, absent commercial real estate.

The small business banking area, the loan growth was okay over the years. We now have added a lot of capacity to that. That's up to 50 million to our revenue companies. We effectively doubled the size of Salesforce by converting some of the branch-based Salesforce into that group. They've started to grow the balances now. We'll see some growth there. It's a small portfolio, 13 billion. Small business generally, which is a much larger portfolio, is growing in mid-single digits or higher year over year. They've done a good job. So we feel good about loan growth. You know, I think The key is that, you know, this customer demand and line usage is still down.

Speaker Change: Market. Wendy and the team have done a good job growing the core Middle Market business, even within nature of the uh frankly the commercial real estate flat to down. So you know, if she's grown, I think 68% year-over-year of absent commercial real estate, a small business banking area. The loan growth was okay, okay? Over the years, we now have added a lot of capacity that that that's up to fifty million dollar. Revenue companies we effectively double the size of sales force by converting in some of the branch base sales force into that group. They've started to grow the balance is now we'll see some growth there. It's it's a small portfolio of 13 billion, small business generally which is a much larger portfolio is growing, your mid single digits are higher uh year over year. They've done a good job, so we feel good about loan growth. Um, you know, I think

So, you know, we've grown, you know, across the board, but we, line usage moving to where it was more traditionally is, you know, three or four percentage points of usage, which is a percent or two of loan growth on top of it. So we feel good about that, you know, just as customers get more used to the situation and do it. So we feel good about the growth, and we're seeing every consumer category, I think, grow a little bit this quarter. And we can probably push a little harder in some areas there, and the team works on that.

But, you know, you've got to be careful of the volatility of consumer credit when, you know, we still have unemployment predicted to go up in most of the surveys we look at. So we're being careful. Great. Thanks for that, Brian. And then secondarily, some of your peers have talked about the willingness to look externally for for uses of capital. I may have missed this in your earlier remarks, but is there any, aside from funding the balance sheet and some of your growth initiatives, is there anything within the franchise that you would be looking to perhaps allocate more capital externally?

Speaker Change: The key is that, you know, this customer demand and and and line usage is still down so it's, you know, we've grown, you know, across the board but we line usage moving to where it was more traditionally is, you know, 3 or 4 percentage points of usage which is a, a percent or 2 of loan growth on top of it. So we'd feel good about that, you know, just as customers, get more used to the situation and do it. So, we, we forget about the growth. Um, and we're seeing every consumer category. I think grew a little bit this quarter, and we can probably, uh, push a little harder in some areas there, and, and the teams works on that. But, you know, you got to be careful of the volatility of consumer credit. When you we still have unemployment predicted to go up. Um, in most of the surveys, we look at. So we're we're being careful.

Speaker Change: Too.

Yeah, I mean, well. I think if you're talking about acquisitions, you know, in the deposit side, you know, that's not available to us. But, you know, in technology space, we bought some companies over the last several years, but they're going to be relatively small uses. We bought one in the medical payments area, then we can bring it to our scale and work it through. And so, you know, there's possibilities in that area. But, you know, really, it's organic growth is the... This is a reality because our huge deposit share, for 30 years plus, we've not been allowed to buy another depository institution.

Speaker Change: Great. Uh, thanks for that. Brian. And then secondarily some of your peers have talked about the willingness to, to look externally for for uses of capital. I may have missed this in your earlier remarks. But is there any, uh, aside from funding the balance sheet in some, some of your growth initiatives? Is there anything within the franchise uh that you would be looking to perhaps um allocate more Capital externally? Thanks.

Speaker Change: yeah, I mean well,

I think if you're talking about Acquisitions, you know, in the deposit side, you know, that's not available to us. But, you know, in technology space we bought some companies over the last several years, but they're going to be relatively small uses to to uh we bought 1 in the medical payments area. Then we can bring it to our scale and

through and and so, you know, there's possibilities in that area, but

Speaker Change: yeah, the really it's organic growth. Um, is the is the

So that game's done. How we got to do it is organic expansion. And that's what we did in all the markets, and we're continuing that push. The expansion markets, we call them, and we're seeing success there, and we'll continue that push. But that's more of a deployment of resources, so we take them out of places and push them. So we're down over all branches year over year. You can see that. New markets have grown, so it's more of an expense redeployment question and a human being redeployment question as we get the efficiencies than it is a capital deployment question.

Speaker Change: Is the reality because the end day, our huge deposit share for 30 years plus we'd not have been allowed to buy another depository institution so that game's done how we got to do its organic expansion and that's you know what we did in all the markets and we'll continue in that push um you know the expansion markets, we call them and we're seeing success there and we'll continue that push. But that's more of a deployment of resources. So we take them out of places and push them. So we're down overall branches. You over a year you can see that but

Speaker Change: And these new markets have grown. So it's more of an expense for deployment question and a, uh,

Right, yeah, I was definitely referring to non-banks. So appreciate the color. Thanks, Brian.

Speaker Change: Uh human being redeployment question as we get the efficiencies than it is a capital deployment question, frankly.

Speaker Change: Right. Yeah, I was definitely referring to non-bank. So appreciate the color. Thanks Brian.

We'll move next to Jim Mitchell with Seaport Global. Your line is open. Hey, good morning, everyone. Alastair, I know you don't want to give a hard target for NII for next year. I appreciate that. But with the high jumping off point and then you have a little more puts and takes the most, I guess you have potential headwinds from the BISB accretion rolling off. You've got rate cuts embedded in the forward curve, but loan growth and deposit growth are picking up. Cash flow hedges are rolling off. Asset repricing. How does it all, in your mind, how does it all fit together next year?

Speaker Change: We'll move next to Jim Mitchell with Seaport global.

Speaker Change: Your line is open.

Can you grow off that 4Q jumping off point in your mind or just any thoughts would be great? And the answer is yes. Look, the answer to that is yes, because the company's built, as Brian said, for organic growth. So as we continue to add clients, as we do more with the existing client base, that's when you see the loan growth and the deposit growth coming through. So there's always headwinds in any given year. But our mentality will be we come off of Q4. How do we grow NII sequentially each quarter from there? And we're going to benefit again from that fixed rate asset repricing again next year.

Hey, good morning everyone. Um, Alistair. Um, I know you don't want to give a a hard target uh, for knee for next year. I appreciate that. Uh, but with the high jumping off point and then you have a little more puts and takes the most, I guess you have potential headwinds from The Bisbee accretion rolling off. You got rate Cuts embedded in the forward curve, but loan, growth and deposit, growth are picking up. Cash flow. Hedges are rolling off asset repricing. How does that all in your mind? How does it all fit together next year? Do you, can you grow off that 4q jumping off point in your mind or, um, yes. Just any thoughts would be great. And the answer is yes, no. Well, look, look, look the answer to that is. Yes. Um, because the companies built as Brian said for organic growth. So as we continue to add clients, as we do more with the existing client base, that's when you see the loan growth, in the deposit growth coming through, so

So that acts as a as a tailwind. The first quarter is just a little bit different because of day count. But in general, I think you should think about NII, at least our expectation is we're just going to keep growing it quarter after quarter. Okay, that's great.

Um, there's always headwinds in any given year, but our mentality will be let me come off of Q4. How do we grow? Nii sequentially each quarter from there and we're going to benefit again from that fixed rate, asset repricing again next year. So that acts as a um, as a Tailwind. The first quarter is just a little bit different because a day count

And it just maybe just you had highlighted that balance sheet mix has changed a little bit. And your focus more in Niagara than NIM. I know you had historically or previously talked about a 220 to 230 longer term target. Is that a different now? Or how do you think about that longer term target? No, it's not different. I just think, you know, any given quarter can be interesting. And this quarter was interesting, because number one, we had really high volumes in active markets. So in a period like that global markets, clients are asking us for balance sheet, we're going to provide that, assuming it's it's well priced, and we felt like it was.

Um but in general I I think you should think about knee is at least. Our expectation is we're just going to keep growing at quarter after quarter.

Speaker Change: I know you had historically, or previously talked about a 220 to 230 longer term Target. Is that a different now? Or how do you think about that, uh, longer term Target?

Speaker Change: No, it's not different. Um I I just think you know, any given quarter can be interesting and this quarter was interesting because number 1 we had really high volumes in active markets. So in a period like that Global markets clients are asking us for balance sheet, we're going to provide that

So we saw the global markets business take on more in the way of earning assets that sometimes NIY dilutive. but it can still be NII, slightly positive. So you've got a little bit of that going on.

assuming it's, it's well priced and we felt like it was

Speaker Change: so we saw the global markets business uh take on more in the way of earning assets that sometimes niy dilutive

And then in commercial this quarter, we just took on some, I mentioned this in the speech, but we took on a couple of very large commercial deposits at the end of the quarter. And those are, you know, NIY dilutive, but slightly NII positive. So I think in the grand scheme, this was just an interesting quarter where The NIY came in slightly differently, but the long-term remains exactly the same. We're going to drive it back to that 220 to 230 with every available opportunity. Okay, great. Thanks for taking my question. It does appear that there are no further questions at this time.

Right. But it can still be knee slightly positive. Um, so you got a little bit of that going on and then in commercial this quarter we just took on some, I mentioned this in the in the speech but we we took on a couple of very large commercial deposits at the end of the quarter.

Speaker Change: And those are.

You know, niy dilutive, but slightly nii positive. So I think in the grand scheme, this was just an interesting quarter where

Speaker Change: The niy came in slightly differently but the long term remains exactly the same. We're going to, we're going to drive it back to that, 220 to 230 with every available opportunity.

Speaker Change: Okay. Great. Thanks for taking my questions.

I would now like to turn it back to Brian for any additional or closing remarks. So thank you again for spending time with us this morning. Leave you where we started. We saw again a client activity across the board. We're now seeing the second half benefits of the kick in and we'll expect to get the kick in and NII pushing operating leverage back in the business. That'll continue to be solid revenue growth earnings per share as we look forward. And as we talked about and showed you some examples, we're now seeing the augmented intelligence, artificial intelligence capacity starting to build in the company, which will add to our efficiency efforts going forward.

Speaker Change: 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.

Speaker Change: So, uh, thank you again for, uh, spending the time with us this morning. Uh, leave you, where we started. We saw go go again, a client activity, across the board. We're now seeing the second half benefits of the kick in, uh, and we'll expect to get the kick in and then I I pushing operating leverage back in the business, that'll continue to be solid Revenue growth earnings per share. As we look forward.

Thank you for your time, and we look forward to talking next.

Speaker Change: And as we talked about and showed you some examples, we're now seeing the, uh, augment intelligence. Artificial intelligence capacity, starting to build in the company, which will add to our efficiency, efforts, going forward. Thank you for your time and we look forward to talking to you next time.

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

This does conclude today's program, thank you for your participation. You may disconnect at any time and have a wonderful afternoon.