Bank of America Q1 2025 Earnings Report

Bank of America EPS Results

• Actual EPS: $0.90
• Consensus EPS: $0.80
• Beat/Miss: Beat by +$0.10
• One Year Ago EPS: N/A

Bank of America Revenue Results

• Actual Revenue: $27.37 billion
• Expected Revenue: $26.83 billion
• Beat/Miss: Beat by +$531.49 million
• YoY Revenue Growth: N/A

Bank of America Announcement Details

• Quarter: Q1 2025
• Date: 4/15/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, April 15, 2025
• Conference Call Time: 8:30AM ET

Bank of America has a rich history dating back to 1800 and even earlier. It was begun by immigrants as a group of separate and unrelated banks that, over the years, merged and grew together. One such is the Bank of Italy which was founded in 1904 by Amadeo Giannini to serve Italian immigrants that were facing discrimination. He later buys out the Banca de America e de Italia (Bank of America and Italy) which was also located in San Francisco. Over the years additional mergers and changes in Federal banking legislation, as well as the boom brought on by WWI and then WWII, helped boost the bank to national prominence.

Things turned sour, however, in 1998 with a major bond default that led to yet another merger, this time with Charlotte, NC-based Nations Bank to officially become the Bank of America that exists today. At the time, the merger was the largest bank merger in history and the company has only grown in the time since.

Other additions to the new Bank of America include MBNA (a major credit card operator), Fleet Boston (then the US 7th largest and one of its oldest banks), and Merril Lynch, now Merril, which was added to the group in 2008 to provide an investment banking branch. Together the company dominates as one of the Big Four Banks in America. Bank of America lays claim to nearly 11% of all US deposits which ranks in line with its peer group and Bank of America Securities is listed as the world’s 3rd largest investment bank.

Today, Bank of America (NYSE:BAC) provides banking and financial services for individuals, small businesses, institutions, corporations, and governments worldwide. The bank operates in three segments Consumer Banking, Global Wealth & Investment Management, and Global Banking bringing in a combined revenue greater than $90 billion in 2022.

As of 2022, Bank of America serves approximately 67 million consumer and small business clients with approximately 4,200 retail financial centers. The bank also operates more than 16,000 ATMs and digital banking platforms with approximately 41 million active users.

Its Consumer Banking segment offers traditional banking and investment products for retail clients. These range from deposit accounts to savings, credit cards, consumer loans, and IRAs. The Global Wealth & Investment Management segment offers investment and wealth management solutions including, brokerage, banking, and trust and retirement products. The Global Banking segment provides lending products and services, including commercial loans and leases for businesses of all varieties. The Global Markets segment offers market-making, clearing, settlement, and custody services, as well as risk management, derivatives, and FX exchange services.

Bank of America Q1 2025 Earnings Call Transcript

Presentation

[Operator]

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

[Lee McEntire, SVP of Investor Relations at Bank of America]

Good morning. Thank you. Thank you for joining the call to review our first quarter results. Our earnings release documents are available on the Investor Relations section of the bankofamerica.com website. Those documents include the earnings presentation that we will make reference to during the call.

[Lee McEntire, SVP of Investor Relations at Bank of America]

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

[Lee McEntire, SVP of Investor Relations at Bank of America]

S. GAAP, can also be found in our earnings materials on the website. With that, Brian, let's get started.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

Thank you, Lee, and thank all of you to and good morning and thank you for joining us. Given the recent events, we want to do a couple of things with our time today. First, we want to provide a clear picture of how well the fundamentals of the company performed to produce another good quarter of earnings in the first quarter of twenty twenty five. So I'm going to talk through a little of those highlights and I'm going turn it over to Alistair for details on the quarter and some forward guidance. And second, given the market volatility and the concerns of potential changes in the economy and its outlook, at the end of the quarterly presentation, we're going to give you some facts to set the context about the quality of our credit portfolios, our capital and our liquidity as we may face periods of economic change and set that in the context to how we fared prior to past periods of economic stress.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

So let's get going on slide two of the discussion. This morning, of America reported $7,400,000,000 in net income and $0.90 in EPS for the first quarter twenty twenty five. That's a solid start to 2025 and great work by our teams. On a year over year basis, we grew revenue by 6%. We grew net income 11%.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

We grew earnings per share 18% and we delivered more capital back to shareholders and we've reduced shares in the aggregate by 3%. We produced an 89 basis points return on assets and a 14% return on tangible common equity in the first quarter. So let me hit on a few highlights that drove that performance. Net interest income grew 3% year over year and is up from quarter four to the high end of our guidance range we gave you three months ago. We grew deposits for the seventh straight quarter.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

They reached nearly $2,000,000,000,000 at quarter end and have now grown 8% from their mid-twenty twenty three low point. We grew commercial loans in nearly every line of business. This is the second quarter in a row they've grown across the board. Holly O'Neil and our consumer team marked the twenty fifth straight quarter of net new checking account growth. We saw annual flows to our consumer investments business of $22,000,000,000 over the last twelve months.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

Our wealth management businesses led by Eric and Lindsay and Katie Knox in the private bank together added 7,200 net new households in this quarter and saw net AUM flows of $24,000,000,000 in the quarter. Jim Demar and the team recorded a twelfth straight quarter of year over year sales and trading revenue growth and achieved a 16% return on allocated capital. We generated these results working from a strong balance sheet with over $200,000,000,000 in regulatory capital and nearly $1,000,000,000,000 in liquidity. This allows us to provide strong support and solutions for our clients. Turning to slide three on organic growth.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

One of the keys to our earnings improvement has been our ability to consistently drive organic growth. Organic growth remains strong across the businesses as highlighted on slide three. I won't go through all the statistics and all the points on the page, but as you can see the momentum has continued. I note the continued growth in net new checking, new households, new companies of commercial banking and growth in our institutional markets business. Clients continue to see the value in our capabilities in connected businesses as a company.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

Our digital engagement and sales continue to expand across all our businesses. We saw more than $14,000,000,000.14000000000 logins in 2024. ERIC has now surpassed 2,700,000,000 interactions since its inception. Our CashPro app for our commercial customers has continued strong adoption and usage rates as you can see. Transactions sent through Zelle at Bank of America are not only three times the number of checks written by our Bank of America America customers, but also 1.3 times the number of checks written plus the number of cash transactions taking money out of the ATMs.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

It's also worth noting that digitally enabled sales in our consumer product business across the board reached 65% of total sales. You can see these trends on digital in the slides we show you each quarter on Slides 26, 20 eight and 30 in the appendix and we commend those to you. As you go to Slide four, we showed you some of the highlights in economic activity, provide some of the current spending data by our consumers of Bank of America. There's a lot that could potentially change given the uncertainty around the tariffs and other policies in the future path of the economy. And our communications to all of you just what we've done during other stress periods, we want to relay to you those facts, which we think give you some context.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

But before we do that, our research team like many research teams led by Candace Browning does not currently believe we'll see a recession in 2025. However, they've lowered their GDP growth rates, for 2025 and continue to see no rate cuts during 2025, but expect as inflation gets under control you may see them in the future I. E. In 2026. But going more to what our customer data shows, it shows that the money moving across all our consumer spending methods, debit and credit cards, ACH, checks written, Zelle, etcetera.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

All that aggregate shows it grew about 4.4 pace in the first quarter twenty twenty five compared to the first quarter of twenty twenty four. As you look in the chart and look across it, you can note that consumer spending has been consistently growing year over year, but during last year it actually slowed a bit especially in the summer and picked back up in the fall. That resulted in the fourth quarter of twenty twenty four over the fourth quarter of twenty twenty three being about a 4% pace and that pace has continued. That pace has also continued through the April. We note that some retailers may say that their sales are slower and others are picking up and it really reflects the change in consumer spending behavior.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

But in the aggregate, the consumer keeps pushing money into the economy. As we look at our business side and what our business clients are telling you, in the current setting, profitable, liquid and have strong results. They all look ahead and worry about the same things that you hear reflected in your conversations with them also. So we continue to watch for signs of the environment actually changing, but we thought it would be good to share with you what we're actually seeing on our customer base at this moment. So in summary for Bank of America for the first quarter twenty twenty five, I want to thank the team for another strong quarter.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

We saw good organic client activity. We saw enjoyed good growth in revenue and earnings. We continue to invest in the future growth of our company. We managed the risk well that drove healthy returns for you our shareholders and we increased the capital delivered back to our shareholders. With that, I'm going to turn it over to Alistair to talk you through the quarter.

[Alastair Borthwick, CFO at Bank of America]

Thank you, Brian. I start on slide five of the earnings presentation to provide a little more context on the quarter. And as Brian noted, we generated $7,400,000,000 in net income or $0.90 per diluted share this quarter. And that represents good growth over both last quarter and the year earlier period. On slide six, we note some of the highlights of the quarter.

[Alastair Borthwick, CFO at Bank of America]

Revenue of $27,500,000,000 on an FTE basis grew 6% from the first quarter of twenty four. Most revenue items showed improvement year over year. NII grew 3%, investment and brokerage fees rose 15% with both assets under management flows and market levels contributing nicely to the growth. This quarter's $5,600,000,000 in sales and trading revenue grew 9% from the year ago period. Service charges grew 8% with particular strength in our Global Payment Solutions revenue.

[Alastair Borthwick, CFO at Bank of America]

Card income improved 4% and other income also improved driven by gains mostly associated with leveraged finance positions and these were positions that we disposed of during the quarter. Non interest expense was $17,800,000,000 up from the fourth quarter, driven by seasonally elevated payroll taxes and markets revenue related costs of processing and incentives. Litigation costs were also higher related to a recent decision in a long running matter. With operating leverage this quarter as revenue grew 300 basis points faster than expense compared to Q1 twenty twenty four. Provision expense for the quarter was $1,500,000,000 with asset quality remaining in great shape.

[Alastair Borthwick, CFO at Bank of America]

Preferred dividends were $125,000,000 less than the first quarter of twenty twenty four as we redeemed some preferreds over the past year. And we use some of our excess capital to reduce our outstanding shares 4% from the first quarter of last year. All of these things aided in EPS improving 18% year over year. Let's move to a discussion of the balance sheet using slide seven and you can see assets ended the quarter at $3,350,000,000,000 that's up $88,000,000,000 from the fourth quarter driven by higher levels of client activity in global markets. In addition, grew $15,000,000,000 in the quarter supported by $24,000,000,000 increase in deposits.

[Alastair Borthwick, CFO at Bank of America]

As deposit growth exceeded loan growth, we continue to add to our liquidity. Long term debt increased $21,000,000,000 driven by funding needs to support the growth in client assets. Average global excess liquidity at $942,000,000,000 remained strong and up year over year. Shareholders' equity was flat with the fourth quarter around $296,000,000,000 And within that we returned $6,500,000,000 of capital back to shareholders with $2,000,000,000 in common dividends and the repurchase of $4,500,000,000 in shares. It's worth noting that year over year equity is up $2,000,000,000 and a $10,000,000,000 increase in common equity was partially offset by a 28% reduction in preferred stock.

[Alastair Borthwick, CFO at Bank of America]

Tangible book value per share of $27.12 rose 9% from the first quarter of twenty twenty four. Turning to regulatory capital on slide eight, our CET1 level increased to $2.00 $1,000,000,000 and the CET1 ratio is 11.8%. This is down 11 basis points and remains well above our 10.7 requirement. You can see in the waterfall, we deployed capital in a number of ways this quarter. In addition to the increased amount of share repurchases, we allocated more capital to our global markets business and grew both consumer and commercial loans.

[Alastair Borthwick, CFO at Bank of America]

Within the ending loan growth, it's worth noting we bought an $8,000,000,000 portfolio of residential mortgage loans that's both high in quality and allows good potential to expand relationships with customers beyond those mortgage loans. And we expect these loans to add just over $100,000,000 in NII annually. Supplemental leverage ratio was 5.7% versus a minimum requirement of 5%, which leaves capacity for balance sheet growth and our $468,000,000,000 of total loss absorbing capital means our TLAC ratio remains comfortably above our requirements. As you see on slide nine, we've now grown deposits for the seventh consecutive quarter on an average basis and we're near $2,000,000,000,000 on an ending basis. Typically, we see some downward pressure on deposits as we move from Q4 to Q1 as commercial clients use their cash to pay bonuses and taxes.

[Alastair Borthwick, CFO at Bank of America]

And this year we saw commercial deposits more stable as clients remain highly liquid. In addition, we remain disciplined on pricing as we pass through short rate declines and saw a 24 basis point decline in rate paid in Global Banking. We saw continued stability around our consumer non interest bearing balances and as interest rates moved lower in CDs and preferred deposits on our brokerage platform, we saw three basis point decline in rates paid in Consumer Banking this quarter to 61 basis points. Overall, rate paid moved from 194 basis points in Q4 to 179 basis points this quarter and were lower in every business segment. Let's turn to loans by looking at average balances on slide 10 and you can see loans in Q1 of $1,090,000,000,000 improved 4% year over year driven by 7% commercial loan growth.

[Alastair Borthwick, CFO at Bank of America]

Excluding commercial real estate that year over year growth was 9%. We noted a modest increase in revolver utilization during the quarter as clients navigate the current environment. Consumer loans grew modestly year over year with linked quarter movement reflecting seasonal credit card pay downs. And the $8,000,000,000 of residential loans we purchased this quarter and that I noted earlier, Those will come onto the balance sheet, but they came onto the end of the balance sheet at the end of the quarter, so they don't really impact averages this period and will begin to impact them next. Let's turn our focus to NII performance on Slide 11, where on a GAAP non FTE basis NII in Q1 was $14,400,000,000 and on a fully taxable equivalent basis NII was $14,600,000,000 that's up 3% from the first quarter of last year.

[Alastair Borthwick, CFO at Bank of America]

We finished at the higher end of our expected range and NII grew $75,000,000 on a fully taxable equivalent basis over Q4 even as we incurred approximately $250,000,000 headwind from two fewer days of interest accrual. The improvement was driven by global markets activity as well as deposit favorability and loan growth and fixed rate asset repricing also benefited NII. With regard to interest rate sensitivity, on a dynamic deposit basis, we provide a twelve month change in NII for an instantaneous shift in the curve. So that means interest rates would have to move instantaneously another 100 basis points lower than the four cuts already expected and contemplated in the April 10 curve. On that basis, 100 basis point decline would decrease NII over the next twelve months by $2,200,000,000 and if rates went up 100 basis points, again more than the forward curve, NII would benefit by roughly $1,000,000,000 With regard to a forward view of NII, given the uncertainty of announced tariffs, we've seen expectations for more cuts in interest rates and more variability now in the market expectations for economic growth.

[Alastair Borthwick, CFO at Bank of America]

So let us provide a few thoughts for you using slide 12 to illustrate. In Q4, we provided our expectation that we could exit Q4 of twenty twenty five with NII on a fully taxable equivalent basis in a range of 15,500,000,000.0 to $15,700,000,000 And that included an acceleration of NII growth in the second half of the year. Our assumptions underlying that NII belief then included an interest rate curve, which anticipated one rate cut in the middle of the year and modest loan and deposit growth. And while the interest rate environment has changed a little, our current expectation for the exit rate of NII in Q4 remains unchanged. Using the first quarter twenty twenty five as the base, the waterfall gives you some idea of our assumptions to bridge to our Q4 twenty twenty five expected exit rate.

[Alastair Borthwick, CFO at Bank of America]

First, we pick up two additional days of interest, one in each of the next couple of quarters. Fixed rate asset repricing also benefits our NII and it takes into account the impact of the current interest rate curve. There are three primary buckets for that benefit securities, mortgage loans and cash flow hedges. Security pay downs are running about 8,000,000,000 to $9,000,000,000 a quarter, mortgage loans are another 4,000,000,000 to $5,000,000,000 a quarter and each gains a little more than 200 basis points as they're replaced. Cash flow swap repricing benefits are a little more staggered in their roll down and make up the rest of the benefit here.

[Alastair Borthwick, CFO at Bank of America]

We assume the early April interest rate curve, which reflects four cuts and a couple are later in the year. So that will have some negative impact near term on our expected NII growth, but it improves as the funding costs more fully reflect those cuts. Best proxy for that impact is our asset sensitivity, which again assumes instantaneous rate reductions even below the rates cuts currently in the curve. We provide our best estimate using the timing of those cuts. And at the same time with lower rates we would expect just a little more loan and deposit activity and we estimate the NII impact of that growth would offset some of the interest rate impact from lower rates.

[Alastair Borthwick, CFO at Bank of America]

We already saw modestly better deposit growth in the first quarter than we expected. In addition, we believe our liability sensitive global markets business will also likely benefit NII more as we move through the year and that obviously depends on the way clients choose to trade with us. Bottom line, our fourth quarter exit rate expectation for NII is unchanged at $15,500,000,000 to $15,700,000,000 from our previous expectation. And that means we're still expecting strong full year NII improvement this year of 6% to 7%. Okay.

[Alastair Borthwick, CFO at Bank of America]

Let's turn to expense and we'll use Slide 13 for the discussion. We reported a little less than $17,800,000,000 in expense this quarter and that included roughly $500,000,000 in seasonal elevation from payroll tax expense and some markets related revenue related costs. We also had higher litigation expense to $160,000,000 driven by a recent decision in a long running matter. And remember, as you think about the expense increase from Q4, that quarter included a $300,000,000 release of accruals for the FDIC special assessment. Expense compared to Q1 twenty twenty four is up a little less than 3 percent consistent with our full year 2025 growth expectations and the increase reflects costs of higher sales and trading and wealth management fees and in the investments made to add more sales associates and to support increased technology and marketing costs.

[Alastair Borthwick, CFO at Bank of America]

Let's move to credit and turn to Slide 14, where our asset quality remains sound. Net charge offs were $1,450,000,000 modestly down compared to Q4. This is the fifth consecutive quarter that net charge offs have hovered around $1,500,000,000 The total net charge off ratio this quarter was 54 basis points flat with Q4. Q1 provision expense was $1,500,000,000 and matched net charge offs. Consumer net charge offs were $1,100,000,000 consistent with the past few quarters.

[Alastair Borthwick, CFO at Bank of America]

Now 90% of our consumer net charge offs are driven by credit card, which highlights the importance of prudence in underwriting that portfolio as we note on slide 22. On the commercial side, we saw losses of $333,000,000 down modestly from Q4. Near term, we don't expect much change in net charge offs as you can see improvement in both early and late stage delinquencies from the fourth quarter. That tells us that net charge offs could even be a touch lower next quarter on the consumer side. On slide 15, in addition to the improvement in consumer delinquency statistics, note the modest changes in other stats for both our consumer and commercial portfolios.

[Alastair Borthwick, CFO at Bank of America]

Okay, let's move to the various lines of business and some brief comments on their results starting on Slide 16 with Consumer Banking. For clients, Consumer Banking continues to deliver strong organic growth driven by high touch and high-tech capabilities, convenience and security. For shareholders through NII in particular, this business is increasingly seeing benefits fall to the bottom line for its high quality deposit book with only 61 basis point rate paid on nearly $950,000,000,000 of deposits. In Q1, Consumer Banking generated $10,500,000,000 in revenue and $2,500,000,000 in net income. Revenue grew 3% from the first quarter of twenty twenty four as NII growth was complemented by fee improvement in card and service charges.

[Alastair Borthwick, CFO at Bank of America]

Expenses rose 6% as we continued our business investment and worked through elevated compliance costs. The organic growth that Brian noted on slide three included nearly 250,000 net new checking accounts this quarter, another strong period of card openings and strong investment account growth. Investment balances grew 9% to $498,000,000,000 with full year flows of $22,000,000,000 in market improvement. Consumer banking deposits continued to increase from their mid August low that was $928,000,000,000 and it's now at $972,000,000,000 on an ending basis. Looking at averages, deposits grew $5,200,000,000 from the fourth quarter to $948,000,000,000 and our rate paid declined to 61 basis points.

[Alastair Borthwick, CFO at Bank of America]

Finally, as you can see on the appendix slide 26, digital adoption and engagement continued to improve and customer experience scores rose to record levels illustrating the appreciation of enhanced capabilities from these investments. Moving to Wealth Management on slide 17, the business had another strong quarter With a continued increase in banking product usage from our investing clients, the diversification of the revenue in this business continues to grow. The number of clients that have banking products with us continues to grow also and is now approaching two thirds of the client base. Importantly, about 30% of our revenue remains in net interest income, which complements the fees earned in our advice driven model and those have also grown. Net income of $1,000,000,000 rose modestly from the first quarter of twenty twenty four a solid revenue growth was mostly offset by higher revenue related costs and continued investments.

[Alastair Borthwick, CFO at Bank of America]

In Q1, we reported revenue of $6,000,000,000 growing 8% over the prior year led by 15% growth in asset management fees. Expense growth of nine percent supported both the cost of the increase in fees as well as investment in technology and the cost of hiring to add experienced advisors to the platform in Merrill and the Private Bank. Average loans were up 6% year over year that was driven by growth in custom lending, securities based lending and a pickup in mortgage lending. Deposits were relatively stable compared to Q4 and our pricing discipline resulted in a 25 basis point decline in rates paid. Both Merrill and the Private Bank continued to see organic growth and produced strong assets under management flows of $79,000,000,000 over the past twelve months, which reflects a good mix of new client money as well as existing clients putting money to work.

[Alastair Borthwick, CFO at Bank of America]

We also want to draw your attention to the continued digital momentum that you'll find on slide 28. Our new accounts continue to be predominantly open digitally. On slide 18, you see the Global Banking results and the loan and deposit gathering success of the team. In the first quarter, Global Banking produced earnings of $1,900,000,000 modestly lower than the year ago quarter as lower credit costs from CRE office losses were more than offset by higher expense of investment in the business. Revenue of $6,000,000,000 was flat to the prior year as lower NII was offset by roughly $230,000,000 higher other income related to leverage finance positions as well as higher treasury services revenue.

[Alastair Borthwick, CFO at Bank of America]

Firm wide investment banking fees were $1,500,000,000 in Q1 similar to last year's first quarter. We maintained our number three investment banking fee position and looking forward we've got a healthy pipeline and our clients are simply waiting on more clarity on trade policy and the regulatory environment before committing to deals. Expense increased 6% year over year driven by continued investments in technology and operations to support clients. On the balance sheet, we saw good client activity. As I noted earlier, we saw good growth in commercial loans mitigated by decline in CRE loans.

[Alastair Borthwick, CFO at Bank of America]

And total average Global Banking deposits are up 9% year over year, where we saw strong growth across all categories from corporate and commercial clients on the larger end to Business Banking on the lower end. Switching to Global Markets on slide 19, I'll focus my comments on results excluding DVA as we normally do. As Brian said, we continued our streak of strong revenue and earnings performance, achieved operating leverage and continued to deliver a good return on capital. In Q1, we earned $1,900,000,000 and that grew 8% year over year. Revenue again ex DVA improved 10% from the first quarter of twenty twenty four on good sales and trading results and $230,000,000 of other income on leveraged finance positions similar to Global Banking.

[Alastair Borthwick, CFO at Bank of America]

Focused on sales and trading ex DVA, revenue improved 9% year over year to 5,600,000,000.0 Equities led the way this quarter growing 17% year over year, while FICC grew 5%. Equities and FICC both benefited from increased client activity among the market volatility. Year over year expenses were up 9% on revenue improvement and our continued investments in the business. On slide 20, we show all other with a loss of $4,000,000 in Q1 and the driver of the year over year improvement in expense and net income is the absence of the first quarter twenty twenty four FDIC special assessment. Our effective tax rate for the quarter was 9%, which reflects the discrete impact of share based compensation awards.

[Alastair Borthwick, CFO at Bank of America]

As a reminder, our tax rate remains well below our typical corporate tax rate driven by tax credits related to investments in renewable energy and affordable housing. Looking forward, as we said last quarter, we expect the tax rate for the full year 2025 to be in a range of 11% to 13% excluding unusual items. So let's shift gears to finish and we'll use slide 21. Over the last couple of weeks investors have signaled concerns for the bank industry over potential changes in the economy. And in light of that, we added the next few slides to illustrate how much stronger our risk profile and balance sheet are today for whatever economic outcome we might face.

[Alastair Borthwick, CFO at Bank of America]

And let me offer three important takeaways as you see the next three slides. First, we have a vastly improved risk profile from previous periods of economic dislocation. Second, at the same time we strengthened the balance sheet by adding billions of capital and liquidity. Third, following fifteen years of operating under responsible growth, our portfolio and our balance sheet are well prepared to support our clients in various economic outcomes. Now the left side of slide 21 highlights the shift in the loan portfolio to a more balanced mix of commercial and consumer as well as a more geographically diverse mix.

[Alastair Borthwick, CFO at Bank of America]

Our high quality commercial loan portfolio at this point is more than 90% investment grade or collateralized and it also includes a more diversified geographic mix as you see at the bottom of the page. At the top right, you see the improved mix toward a more secured collateralized balance of our consumer book. The bottom right illustrates the nine quarter loss rate and how our nine quarter, so this isn't annualized, this is nine quarter stress loss ratios fared in the Fed models and CCAR exams. And we compare quite favorably to peers in each of the past twelve years of exams. CCAR provides investors an annual independent view to analyze adverse impacts in the most severe circumstances.

[Alastair Borthwick, CFO at Bank of America]

So just to recap, if you went to the latest results from 2024, those scenarios include a drop of 6% to 8% in real GDP from peak to trough. It includes a rapid increase in unemployment up to 10% and significant changes in inflation. It also assumes housing prices falling 35%. It assumes short rates basically go to zero and the ten year goes to 1%. And it assumes bond spreads widen dramatically, commercial real estate prices declined 40% and equity prices would drop by 50% together with significant weakness in international economies.

[Alastair Borthwick, CFO at Bank of America]

It also assumes the portfolio size doesn't change from any management actions that we might take in that environment. And we obviously do quite well in that CCAR stressed environment. With that, I'm going to stop. I'll turn it back to Brian for a couple of thoughts to wrap up.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

Thanks, Alistair, and I'm on Slide 22. On that slide, we highlight some of the key balance sheet or asset quality statistics of the company has faced in important periods of economic disruption and we compare those to the current status. On the left side of the columns, you can see that the February illustrates what the company looked like after

[Brian Moynihan, Chairman, CEO & President at Bank of America]

a

[Brian Moynihan, Chairman, CEO & President at Bank of America]

couple of years in the financial crisis and after the acquisition of Merrill. Second column obviously is fourth quarter nineteen, which represents what we look like heading into the pandemic. And now we show you what the company looks like today. We have a multifarious loan book across types of clients, geographies and various asset classes. That holds us in good stead.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

In total, our consumers loans are down more than $200,000,000,000 as home equity loans are down more than $125,000,000,000 and credit card loans unsecured credit card loans are down by more than $60,000,000,000 This reflected a concentrated effort on us to focus on our relationship loans rather than loans as a product and deepen those relationships with the highest quality prime credit customers. Our wealth management business has doubled in size in those consumer categories and the relative exposure to those borrowers in those loans is very secures are highly collateralized and the strength of the borrowers underneath them. In the commercial area, in addition to the more geographic dispersion that Alistair discussed, you could also see that the construction lending and land development exposures have been greatly reduced. At the same time, our equity is $93,000,000,000 and higher. At Bank of America, we remain obdurate about our strength of our balance sheet.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

We are well reserved for our portfolio and risk profile. On a weighted basis including our model reserves, our imprecision reserves and our judgmental reserves, it positions us at approximately 6% unemployment rate. The current reserve allocation on card is 7.4% for example, against a charge off rate of around 4%. When you go to Slide 31, you can see some more statistics about our portfolios. Excuse me, 23, you can see some more statistics about our portfolios.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

Let's take a deeper look at those in just a couple of points. On Slide 23, can see that in regards to mortgage between the first and second lien products today, we have a total of about $260 On average, our borrowers have FICO scores above seven seventy and average debt to income ratios of 35% for the residential mortgage product and 39% for the home equity product. Loan to values also leave us in strong equity positions being below 50%. For comparative purposes, we entered the financial crisis in early two thousand and seven and you can see the exposures were more than $400,000,000,000 with average FICO scores were 50 to 60 points lower and higher LTVs. So $400,000,000,000 more in balances, lower credit scores and higher LTVs.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

So we've significantly repositioned those portfolios across the last several years. Moving through the other consumer loan types, you can see the high quality of the collateralized securities based asset lending and audit portfolios. And on consumer credit card, we have about $100,000,000,000 in outstandings with the current net charge off ratio as I said about 4%. FICO score of our average borrower is 777. And thinking about exposure borrowers less than a current FICO score of 660, we have about 12% exposure.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

Bard is really our only consumer unsecured exposure in the portfolio. As comparison heading into the financial crisis in fourth quarter of 'seven, we had $150,000,000,000 in credit card balances about 1.5% of 1.5 times our current balance of card loans. The average FICO score was 50 FICO points lower and the unused lines of those books were much, much higher. This strong position allows us to better serve our clients in the times of stress, which may come ahead according to our projections. Bank of America stands ready to support them as never before.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

Whether it's a commercial client, which needs help to borrow and navigate the changing economy around the world, whether it's a commercial client needs to reposition their debt structure or move money to help participate in the economy, we'll be there for them. If it's a wealthy client and needs advice and counsel in rocky periods or loan to get them through, we're there for them. If consumers need access to cash or borrowing, we're also there for them. Bottom line, operating the company in this way allows us to stand tall in times of stress. And these slides highlight the importance of having done that across the last many years and the relative strength of our company compared to others.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

Thank you. And now we'll go to questions and answers. Q and A.

[Operator]

We'll take our first question from Steven Chubak with Wolfe Research. Your line is open.

[Steven Chubak, Managing Director at Wolfe Research LLC]

Hi, good morning, Brian. Good morning, Alastair.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

Good morning.

[Steven Chubak, Managing Director at Wolfe Research LLC]

I appreciate you guys taking my questions. I wanted to start off with one on capital management. Certainly encouraging to see the acceleration in the buyback towards that $4,500,000,000 level. At the same time, you're still running with more than 100 basis points of cushion. I was hoping you could speak to, given the uncertainty in the environment, what level of CET1 you're currently comfortable running with in terms of the ratio and whether this $4,500,000,000 buyback level is something that we expect to be sustained over the near to medium term?

[Alastair Borthwick, CFO at Bank of America]

Yes. So Steve, if you look at what we did this quarter, just take a look at Slide eight in the earnings materials. Now here's a quarter where we ended up earning $7,000,000,000 and it allowed us to step up the share buyback from $3,500,000,000 up to $4,500,000,000 in an environment where we also invested more RWAs in global markets and into higher loan balances. So not only do we grow the loans, I'll call them organically, but we also purchased a loan portfolio this quarter. So we're sort of growing into our capital at this point by investing in the business and we still have some flexibility to increase the share buyback.

[Alastair Borthwick, CFO at Bank of America]

So I don't think we have an ultimate destination in mind right now on CET1 recognizing that we don't have full clarity yet on all the aspects of capital and we'd like to see that before we determine it. But obviously as you point out, we've got a lot of flexibility and we're more focused on just make sure that the CET1 is in a good place and then grow into the capital base that we have. And that's probably the best way to articulate it.

[Steven Chubak, Managing Director at Wolfe Research LLC]

That's great. And for my follow-up, just on the outlook for loan and deposit growth. You delivered better growth across both KPIs relative to peers. I was hoping you could speak to what drove the strength in 1Q beyond the portfolio purchase you alluded to earlier. And just bigger picture, the outlook for commercial loan growth as tariffs and policy uncertainty have certainly raised concerns regarding weakening loan demand, weaker CapEx, what have you?

[Brian Moynihan, Chairman, CEO & President at Bank of America]

Yes. So Steve, just Stephen, just on the I'll give you the broader thing and Alistair can talk about some of the specifics. You remember over the last several years we've been investing in basically building out more commercial bankers across the world, including build outs in Switzerland and The U. K. And things like that.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

We built more commercial loan officers in The United States and our Global Commercial Banking business under lending a team. We've grown more private bankers and more in the wealth management team under Merrill, what we call wealth management bankers to support those teams we've grown them. So those investments are sort of kicking in on that sort of 20 mile march way just more of a more of a more of and that just keeps driving it through. So that's why you're seeing us sort of do better than the competition just in linked quarter loan growth. When we look forward with all the things you described, the potential changes in economy, business views, people draw in anticipation of tougher economic times, we'll see all that play out.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

But the real way that the real reason that we're driving our capabilities is you have more capacity and then making that honestly also making that capacity more efficient using some artificial intelligence machine learning to direct that calling capacity and that's allowed us to take what we call new logos in the commercial business adding new companies for the first time and you're seeing that having started a couple of years ago is now maturing in the balances and outstandings which it takes a while to bring those clients in get them underwritten. They renew once every couple of years get in the flow etcetera. So those investments are paying off and we expect that to continue across the board.

[Steven Chubak, Managing Director at Wolfe Research LLC]

That's great color. Thanks so much for taking my questions.

[Operator]

We'll move next to John McDonald with Truist Securities. Your line is open.

[John McDonald, Senior Research Analyst at Truist Securities]

Thank you. Hi, good morning guys. Thanks for the longer term perspective on the credit. I just wanted to follow-up that. On terms of the loan loss reserve, what were the dynamics of the setting of the reserve this quarter in terms of is there any change in weighting of scenarios for the tariffs?

[John McDonald, Senior Research Analyst at Truist Securities]

And was it set with a threethirty one view or early April view?

[Alastair Borthwick, CFO at Bank of America]

So John, we said it all the way through the close, but normally we're focused on the data that we have on threethirty one. And then we have the ability to layer on top after we model our reserves. We have the ability to layer on imprecision and judgmental on top of that. So, we did this quarter the same way that we've done in other quarters. We went through and assessed using the blue chip economic indicators.

[Alastair Borthwick, CFO at Bank of America]

So, the consensus view of all of the various macro assumptions That's sometimes different than others who use their own proprietary. We feel like the right answer is to use the blue chip consensus. It's more independent. And then we've got that as our baseline and we've got four other scenarios around that. We've got upside and three downside.

[Alastair Borthwick, CFO at Bank of America]

And so, in this particular quarter already the blue chip economic indicators have moved down in terms of economic growth. So GDP lower in the baseline and a little higher on inflation. So that's reflected in the baseline before we even get to the weightings. And then weightings this quarter, are unchanged for us. And by the time we then take that modeled answer and then layer on top of it the judgmental piece all the way through the close, we're reserved closer to an unemployment rate that's right around 6% in 2025, '20 '20 '6 just to give you some idea.

[Alastair Borthwick, CFO at Bank of America]

So that should give you an idea. We feel like we're pretty well reserved at this point.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

Hey, John. One of the things we've been looking a lot of sort of what happened because obviously CECL came in, the pandemic hit sort of the buildup and things like that. But as Alistair said, one of the hard concepts is the baseline that we use continues has moved negative over the last couple of quarters obviously due to the outlook here last couple of months and will continue to reflect that. But we have a strong reserve position with that when you add it all up at the 6% implied level. So we feel good.

[John McDonald, Senior Research Analyst at Truist Securities]

Thanks. That's helpful. And then on expenses, you previously were looking for the full year expenses this year to be up 2% to 3% over last year. How are you feeling about that? Is that still kind of your current thinking?

[Alastair Borthwick, CFO at Bank of America]

Yes, that's still our current thinking, John. I mean, I think we said 2% to 3% for the full year. We feel like we're on course there. It might be towards the higher end, but we just got to see what happens with fees over the course of this year.

[John McDonald, Senior Research Analyst at Truist Securities]

Got it. Thanks.

[Operator]

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

[James Mitchell, Senior Equity Analyst at Seaport Global Securities]

Great. Good morning. Maybe Alistair, you were able to absorb four cuts this year in your assumptions and maintain the 4Q NII target, which is a good thing. But as we think about the full impact of the four cuts felt in 2026 and potentially a

[James Mitchell, Senior Equity Analyst at Seaport Global Securities]

few more, does that make it a little

[James Mitchell, Senior Equity Analyst at Seaport Global Securities]

more difficult to reach that intermediate term target NIM of 1.3% by the end of next year? Or the fact that you're getting them out of the way this year is helpful? Just trying to think through that intermediate term target. Thanks.

[Alastair Borthwick, CFO at Bank of America]

So Jim, first of all, that target is 2.3%, not 1.3%.

[James Mitchell, Senior Equity Analyst at Seaport Global Securities]

I'm sorry.

[Alastair Borthwick, CFO at Bank of America]

Yes, you're letting us off the hook here.

[Alastair Borthwick, CFO at Bank of America]

It's We're aiming at 2.3%, and we still feel like over the course of the next couple of years, that's the right answer. For this year's NII, those rate cuts, we got four of them in there, but a couple of them are later in the year. So it doesn't have a tremendous impact on 2025. It'll be a little bit of a headwind in 2026 if that in fact is the case.

[Alastair Borthwick, CFO at Bank of America]

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

[Brian Moynihan, Chairman, CEO & President at Bank of America]

And Jim one Okay. On the rate sensitivities remember those are instantaneous drops and it takes time for the fixed our debt portfolio our debt issuance portfolio some of it's floating some of it's fixed it reprices over time. So if they come more over time you can't quite acquitted to the instantaneous drop type of things if you got my point because you have other dynamics which help. So remember that long term most economists believe that with inflation coming back towards the target rate, you'd see the Fed funds rate ultimately get down to 3%, three point five % type of levels, which is more of a traditional normal, it's hard to say in the world we're in now level. So if that happens, we feel very comfortable if you look back historically the earnings power of this company and the NIM percentages you've talked about, with the Fed funds rate in that range pushing up 2.3 and beyond is strong.

[James Mitchell, Senior Equity Analyst at Seaport Global Securities]

Okay. Yes, makes sense. And just as a follow-up on just sort of the near term, April we saw a big jump in volatility. Just any what are you seeing across your business segments? Whether we've seen you've seen deposit flight to safety flows and the volatility in trading, has that been good volatility, bad volatility, just trying to get a little window into the near term?

[James Mitchell, Senior Equity Analyst at Seaport Global Securities]

Thanks.

[Alastair Borthwick, CFO at Bank of America]

Well, we've seen significant pickups in customer activity in global markets. So, the environment there remains constructive. We have seen, I'd say continued positive sort of similar to what we would expect. We haven't seen anything like if you were to go back a couple of years around regional banking crisis, but nothing like that. It's been pretty regular way I would say.

[Alastair Borthwick, CFO at Bank of America]

And we just keep driving the deposits day to day.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

And Jim you

[James Mitchell, Senior Equity Analyst at Seaport Global Securities]

Okay.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

I mentioned earlier, but just you did specifically ask about it. What's interesting is you watch that consumer money flow spending. If you take a four week average including up to the first twelve days of April, it's running at 5%. So it hasn't fallen off. You got to be careful just using two weeks because of where Easter fell this year versus last year and all that stuff.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

But basically, it's maintaining that pace. So the consumers are still solidly in the game. But they'll do next different question, but right now they're still solidly even to the April.

[James Mitchell, Senior Equity Analyst at Seaport Global Securities]

Okay, great. Thank you.

[Operator]

We'll move next to Glenn Schorr with Evercore. Your line is open.

[Glenn Schorr, Senior Managing Director & Senior Research Analyst at Evercore]

Hi, thanks very much. So another good trading quarter for you guys. But I'm curious, you benchmark yourself, say, to the top peers, there's probably about a $3,000,000,000 difference to biggest platforms. I'm just curious if you see those big gaps to peers, are those gaps that you're choosing to pursue? You mentioned you have the SLR room, you have a great equities franchise.

[Glenn Schorr, Senior Managing Director & Senior Research Analyst at Evercore]

I'm just curious on your approach towards is it a capital thing, is it a risk thing? I'm just curious on the high level thoughts. Thanks.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

I think starting a number of years ago this has been a relentless climb up the ladder and not overshooting and having to cut off. That three years a year over year growth consecutive quarters that other people don't do because there's more volatility. So Jim and the team have basically building up. So what have we done? More capital probably over five or six years three hundred billion dollars more balance sheet capacity even over lot of this quarter was 60 ish billion.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

So we keep adding capabilities capacity. But remember the and we've relentless March '4 third in this category, third, second in this category keep moving up and just keep pursuing it. In some areas like physical commodities that's not a business we're heavily into we made a decision about that a number of years ago versus core fixed income where we're stronger and we've been gaining share. So the idea is to keep gaining share, but at a pace for lack of better term in the business which has volatility in it, a pace that capitalizes volume of revenue into the business and then grows from there as opposed to grabs it and gives it back and grabs it and gives it back. It's just the way that Jim and the team have driven it and they've done frankly a very good job doing it.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

And so expect us to keep gaining share. We'll keep closing the gaps that you mentioned. It's getting closer to the third place gap. But in a given quarter other people may shoot up a little higher because of this element of that element. But our job is to just to be consistent across all the elements that we participate in and keep driving it and there's plenty of opportunity ahead.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

And it's not for lack of capital or lack of risk taking. They're taking more risk. And the other major thing is the investment in systems here is a competitive moat frankly that the amount of work you have to do to get this all to work right on a worldwide basis is very few of us can do it.

[Glenn Schorr, Senior Managing Director & Senior Research Analyst at Evercore]

I very much appreciate that. And similar to what John said, we definitely like to drill down on the extra detail around the credit book and history guide. I'm curious on the right now, when you talk about the reserving and you took now to give us the further drill down on the exposures, Is it a traditional regular way we're marching towards or closer towards a higher likelihood of recession? Or have you gone through and assessed the loan book from exposures to this shifting tariffs and tax environment and that's bringing the higher attention? I hope that the question is clear.

[Glenn Schorr, Senior Managing Director & Senior Research Analyst at Evercore]

I'm just I'm more talking about the why now and what's driving the increased attention.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

Well, the why now of why we put the extra disclosure is just to remind people, we actually if you look back Glenn, we did a lot of this around 'twenty because of the same discussion came up. And then in 'twenty two or three, there was the same discussion about we're heading into their sessions, consumer are going spend down their money, the consumers quit, turned out not to be true frankly in the 'twenty two, 'twenty '3 timeframe the consumer held in. So if you look, we always are testing every on a continuous basis in a trading book stress test, but on a quarterly basis across the things. If you think about all the different ways the economy can get knocked into recession or potential recession or lower growth, remember the whole world is predicting a lot lower growth this year than last year. That's not new.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

That's just all the Street are economists, etcetera. So the growth is slowing down from a 3% growth rate in the third quarter of last year to one ish type of numbers. They're a little bit less than one this year in the blue chip in the first quarter. So over two quarters pretty good drop. So that's all embedded in it.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

But why we're trying to give you reassurances or a look at the in-depth is because it's a source of strength for us. And we've been working at that hard to ensure that as we go through a crisis and we've had a couple bumps in the road, as we go through a more traditional economic downturn, we will be in great shape and we test that every quarter in lots of different ways. So but if you sit there and say what happens if tariffs happen, this happens, this happens, it's going to result in either GDP negative growth, higher inflation, which may then cause GDP negative growth, higher unemployment, etcetera. All those are the factors we actually test in granular detail. So it's not necessarily how you get there, the outcome of getting there.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

The GDP fall off, housing price fall off, unemployment levels, that's what we do. And we wanted to make sure we are positioned at the end of the day that we could serve our clients well and not have to be pulling back. And so that's where the underwriting discipline of the last decade holds you in good stead if in fact we do enter a recession in the future.

[Glenn Schorr, Senior Managing Director & Senior Research Analyst at Evercore]

Thanks for all that Brian.

[Operator]

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

[Mike Mayo, Managing Director at Wells Fargo]

Hey Brian, hearing this call and sounds like it could have been the fourth quarter earnings call. Loans are growing, deposits are growing, credit is fine, consumer spending is slowing but still growing, you're buying back more stock. And I'm just trying to reconcile the $7,000,000,000,000 of lost stock market wealth with comments from you. Sounds like you're not blinking. And by the way, I don't think you're alone.

[Mike Mayo, Managing Director at Wells Fargo]

It just seems more upbeat relative to what the stock market's done and I'm trying to reconcile those two things. So what am I missing? Or what are you seeing? Or at what point do you say, hey, wait a minute, this is really might be a bigger problem?

[Brian Moynihan, Chairman, CEO & President at Bank of America]

I think Mike you're laying out the difference between is and could and might and should in future right. So what we're trying to do is make sure people see what is going on today. And like you said for the and that's why you actually split the two pieces of the presentation for the first quarter. Everything you said is true loans, deposits, credit is good, charge offs went down, delinquencies are down at the end of the quarter versus fourth quarter. You're looking at all that and saying, okay, that's what we did.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

Then if we look forward, our economists, your economists I'm sure are all predicting a slowdown in growth. And the core question will be when all these different policies and stuff come together in responses to policies by other trading partners to the tariff policies by the policies on deregulation working for that the tax bill which comes out all that will mix together and come to an outcome And our job is to have positioned the company well and take advantage of the opportunities while that outcome hasn't happened yet and when it comes to be in a good position. And that's why this latter part of this was geared to showing you the strength of the credit portfolios and other things. At the end of day, you and I know that the real risk in balance sheet of a bank is going to be its credit posture heading into a general recession. Our colleagues have raised their probability recession, lowered their growth as have the blue chips.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

But even if you look at the people we did, it's a very slight recession and we should fare well on that. But we just don't nobody has a perfect crystal ball whatever the right word is to the future, but we're positioned to account for everything, but we don't want people to lose sight of the strong performance of this company and our team in the first quarter of twenty twenty five.

[Mike Mayo, Managing Director at Wells Fargo]

Let me take the other side of that. I thought the idea was to make it easier to do business with deregulation. And you can see the nominations people and then you get the policies. If that narrative plays out, how do you think it'll be easier to do business at Bank of America and with your customers as it relates to deregulation?

[Brian Moynihan, Chairman, CEO & President at Bank of America]

I think the new administration has made it clear that they're going to reduce the regulatory burden along two dimensions. Dimension one is, I think, less regulations new and getting other regulations off the book and refining them based on the view that the pendulum is going too far. I'm not talking about bank regulations, but it's actually more broad across. The second way is actually reduce the size of the federal administration that brings the regulatory inquiries and things like that. So we're seeing some relief.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

We look forward to seeing more relief as the nominees get in position and the policy outlines can be then drilled throughout the teams. But it's critically important that we get this rebalance. We want to run a company that is going to be well capitalized, great liquidity, fair to consumers, etcetera, Mike. But sometimes the regulation gets in the way of that and way overshot the issues and we look forward to having come back in the middle. And just take the whole debate about treasury trading.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

The SLR requires us to hold capital at a level against riskless assets and treasuries and cash that doesn't make a lot of sense. And we've been saying that for a long time and we expect now we've heard it said that there'll be relief in that. That will help us provide liquidity to our clients both in good times and times of stress. But remember our cash and our government guaranteed securities and government issued securities is $1,200,000,000,000 of our balance sheet right now Mike. So you think about that in terms of capitalize that under the SLR 5% or whatever it is and that's a big number.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

None of that has a risk attached as you well know. And so that's one thing. The second thing we saw it again this quarter on some of the expenses is the operational cost to deal with the regulatory push that happened that we tried to talk the last set of administrators into you're going way too far and you've gone past the substance into form is a cost that we're going see come out of the system and ought to be reinvested in helping our customers and clients grow.

[Mike Mayo, Managing Director at Wells Fargo]

And short follow-up, the $1,200,000,000,000 in cash in government, where would that be kind of in a more ideal world? And the operating costs, how much of that could potentially be saved even if you want to give some estimate to the industry, just order of magnitude?

[Brian Moynihan, Chairman, CEO & President at Bank of America]

Yes. I'm not sure it would be tremendously different by hundreds of billions of dollars, but I'd say a few hundred billion of its pure size that we all added to meet a bunch of metrics that I'm not sure as important as people may think they are and that's proved out. So think of that as our long term debt posture being up higher etcetera. So our job is to we got $2,000,000,000,000 of positive $1,000,000,000,000 of loans. We need to extract the value of that deposit.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

Our size ought to be more generated by that question and less about well we want you to just add stuff because we're not sure that the treasury that the market for repo of asset backed securities will be available in a time of stress And so therefore you have to hold more capital and more term funding against those are the things I think which change. So you'd probably see it most in our long term debt footprint coming down relative size and our sheer size coming down I don't know 100,000,000,000 1 hundred and 50 billion dollars maybe I think Alistair probably a good guess of we've grown really just fluffed up the balance sheet to make metrics that are not that important look good.

[Mike Mayo, Managing Director at Wells Fargo]

All right. Thank you.

[Operator]

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

[Erika Najarian, Managing Director & Equity Research Analyst at UBS Group]

Thank you. Good morning. Understanding that there's a lot of potential moving pieces in the regulatory agenda or deregulatory agenda, I did notice that at the end of the year, your G SIB score would indicate that if you didn't take down your exposure this year, you would have a higher GSIB surcharge by 01/01/2027, from what I understand, all else being equal. I'm just wondering, Brian, Alastair, if your plans are to reduce this exposure or the message is look our ROTCE is 13.9% and improving and so crossing is not going to be a big deal because of the PPNR and return power that we see going forward?

[Brian Moynihan, Chairman, CEO & President at Bank of America]

So I think that relates back to I think it was Glenn's question about the markets business if I remember who asked it. At end of the day most of what drives that change is the markets business. There are other factors obviously Erica, but the big factor is the markets business. And if they're out there getting market share and getting the return on that, we'll keep growing through that. That's in fact why we have gone up the chunk we've gone up.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

Now, go back to sort of Mike's point and frankly I think embedded in your question. Think about the facts that the GSIB calculations at the time they were set, I think it was off a 12 data or something like that 2012 data. The idea and it's right in the rules was that they should be indexed so that our relative position Bank of America relative position to the industry and the economy ought to we ought to be able to grow. We've had a nominal economy growth of 30% in the last since pandemic to now just sheer size growth of which there is no adjustment in the G SIB calculations for that. It was in the statute.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

It hasn't been implemented. You've heard in some of the even discussion by the Fed that they would index a lot of the one of the proposals was from sort of now forward which then skips all the growth. Our belief is it should be indexed more fairly as designed in the statute because our relative size hasn't grown even though our balance sheet has grown to the economy or to the industry. So why are we more GSIB size than we were before? So I think that's the two sides of trade.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

Yes, we'd let if the market business can get the returns and grow and do it in a way that sticks the ribs Jim and the team will grow and that will probably push our GSIB. But back up and think about the reality of it, you're now looking at Bank of America and our peers circa 2014, '20 '15 off of 2012 data if I remember the exact date and think about the sheer size of The U. S. Economy probably 50%, sixty % bigger and we have not indexed anything for this and therefore we're shrinking our banking size relative to the economy for the same without kind of a logic behind it and that's what we've been pushing about.

[Erika Najarian, Managing Director & Equity Research Analyst at UBS Group]

Got it. And I'll follow-up offline. I just wanted to squeeze my second question in. Follow-up on the net interest income outlook for the fourth quarter. You helped us with the exit points on both balance sheet and net interest margin in the last call.

[Erika Najarian, Managing Director & Equity Research Analyst at UBS Group]

If I recall, it was flat to fourth quarter levels in 2024 and I think a 2.05%, two point one zero % net interest margin. Are those points still valid in terms of what's underneath the surface of that 4Q twenty twenty five exit Obviously, the balance sheet is bigger because of markets in the first quarter.

[Alastair Borthwick, CFO at Bank of America]

Yes. I think you've captured it, Erica. You're exactly right. That's we're comfortable with that.

[Operator]

Great. Thank you. We'll take our next question from Matt O'Connor with Deutsche Bank. Your line is open.

[Matthew O'Connor, Managing Director at Deutsche Bank]

Good morning. I just want to follow-up on the concept of growing into the capital. Slide eight here has a really good walk on the capital and the puts and takes. And I guess I want to hone in on the RWA growth and just think about that going forward. Obviously, there's some increase in 1Q from seasonal stuff in markets, but maybe it won't be as much going forward and the loan growth might pick up a little bit.

[Matthew O'Connor, Managing Director at Deutsche Bank]

But what I'm getting at is, it's not that clear to me that you're going to use all the capital that you're generating and the excess from organic growth. And it does feel like the buybacks at some point will be at a pretty robust pace. So anyway, long story, one question just to summarize like talk about the capital consumption in a little more detail from the organic growth and the interplay of buyback? Thanks.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

Matt, I think you sort of answered your own question in the question because you could see that $16,000,000,000 RWA increase in a quarter where markets tends to be bigger just because of nature of it. So that's on $1,700,000,000,000 so less than a percent growth in RWA and the earnings growth through. So we will always, always, always deploy capital into the businesses at whatever they need to grow the businesses with the right returns. That's a given. In fact, the efficiency of our RWA deployment is something we work at all the time and that's why you can see the growth in size relative to RWA and we think we have room to go on this is always less than the overall growth in the loans and deposits.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

And so we'll continue to work that efficiencies. But you've got exactly right. The capital goes to deploy to support the business. It's going at a much the business's demands for that are much lower rates than the capital accumulation. And then we turn around and say what do we do with it?

[Brian Moynihan, Chairman, CEO & President at Bank of America]

Well, you have a common dividend obviously and then the rest goes to buybacks and you saw us step that up this quarter as Alastair said earlier to 4,500,000,000.0 just meaning the first quarter.

[Matthew O'Connor, Managing Director at Deutsche Bank]

Okay. And then that's helpful. And then just separately that all other fee line on a consolidated basis was pretty close to breakeven versus normally a loss because of some of your tax credits. Is that just some lumpy items like loan sale gains or marks given some of the things that we saw in the marketplace this quarter for 1Q?

[Alastair Borthwick, CFO at Bank of America]

Yes. No, you got that mostly right. The other income line this quarter, as in every quarter, it's generally most impacted by what's going on with our tax credit activity and often it depends on the timing of the completion of really long dated projects. It could be solar, could be wind farms, could be housing. So in any given quarter, there can be some timing there where we catch up in later quarters.

[Alastair Borthwick, CFO at Bank of America]

But in this particular quarter in addition to that, we've got the leverage finance positions that we referred to. We'd written those down in prior quarters. So when we sold them this period for a gain that accounts for a reasonable amount of the delta. And then the only other thing you just got to remember is, we had that legal settlement pretty long dated one, got that cleaned up, little bit of vis a vis cleaned up this quarter. So there's some one timers that offset that, but it's probably worth about $03 this quarter just to give you some idea.

[Matthew O'Connor, Managing Director at Deutsche Bank]

Okay. All right. Thank you.

[Operator]

We'll take our next question from Betsy Graseck with Morgan Stanley. Your line is open.

[Betsy Graseck, Managing Director at Morgan Stanley]

Hi. Good morning. How are you doing?

[Alastair Borthwick, CFO at Bank of America]

Great. Thanks Betsy. How are you?

[Betsy Graseck, Managing Director at Morgan Stanley]

Excellent. Great quarter. I did have two quick questions. One was on Brian, earlier in the call we talked about how some of the commercial loan growth was being generated by the investments you've been making in particular one of the areas international. So I just wanted to with this tariff overhang that we have going forward, how do you think about that investment spend in the international markets?

[Betsy Graseck, Managing Director at Morgan Stanley]

Do you step it up? Do you pull it back? Is it an opportunity? Is it a threat of risk? Just wanted to understand that angle from you.

[Betsy Graseck, Managing Director at Morgan Stanley]

Thank you.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

So I think a lot of that's to be played out. We would continue to invest where we see the opportunities and where we see opportunity outside The United States is with the teams that we have that have been in these countries, Japan for since the day after World War II ended, India for sixty five plus years, Australia for sixty plus years, European countries for many years. We are deeply embedded in those countries. And the idea was we basically are coming from pure multinational largest companies in those national champions and take them around the world and taking companies from outside that particular country into those countries. We will then we're now moving down a notch in size, strong family owned businesses in the production supply chains for business we understand.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

I don't think that will change dramatically. The product the goods and products start to be produced. And so we'll continue to work with it. We're watching our clients and helping try to figure out what this all means to them in terms of supply chain alignment and things like that. So I think it's it may ebb and flow.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

But remember when you then take the other side of where the investment is in United States that's where it's just a larger factor in terms of the overall commercial business, meaning small business with the largest small business lender in United States by quite a bit and those loans are growing. So I mean, the small business meaning FDIC loans under $1,000,000 which we both have in our consumer business and our business banking area and then middle market largest one of largest lenders in The United States and then large corporate. So we because of the diversity of our company, we'll see what might not be as possible in a place due to the dynamics you're describing, maybe more possible in a place like Georgia. So we'll keep playing this out. But the goal was to have relationship manager investments on a relentless pace to keep adding our team that's dedicated towards handling client relationships and then frankly making more efficient by the use of machine learning now AI to make them more and more efficient and also where to call, who to call on are the prospect lists we have and we're seeing that take hold and that's where you're seeing these logos just build up and new client acquisition.

[Betsy Graseck, Managing Director at Morgan Stanley]

Okay. Thank you. And that was my second question on the small business side. Can you help us understand what you're seeing today from small business? I know you are, as you mentioned, largest small business lender and you've had significant loan growth over the past several years in small business, way ahead of peers.

[Betsy Graseck, Managing Director at Morgan Stanley]

And so you're the closest to these folks in our world and I would love to understand how are they thinking about investing in this environment with tariff overhang? Thanks.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

Betsy, they're just trying to figure it out. And so they see the policies along multi potential deregulations, the tariff policy, immigration policies, etcetera. And they look at all of it and say and tax policy. And so they're trying to figure out how it affects their business. In the end of the day, today they're producing the goods and the goods are going out in the stream and being sold, but they're trying to figure out how that relates to it.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

And there's the concerns I think that were interesting is for a while it was inflation obviously coming through last year when that was a discussion. Then it's interesting flip to labor again, which was a little bit unique and that they're trying to make sure they get the qualified employees they need to operate. But if you look about it, they're basically sanguine on the current environment, but they're worried about how this will affect their businesses and where they should invest. And I think that's slowing down some of their decision paths right now because they're trying to figure out if my goods and services will be I'd be able to pass through the price. Do I need to change my business plans in terms of growth?

[Brian Moynihan, Chairman, CEO & President at Bank of America]

Should I buy that piece of equipment? That's why line usage has been relatively muted still and we continue to try to grow it. Now there's areas which in our small business growth which are sort of recession resistant which is like in healthcare. We have a big business lending to docs and veterinarians and other people involved in practice. Those things tend to have less impact by the issues at moment because of services business and things like that.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

So I think it depends on the business, depends on location, depends on whether in services or whether in goods. But right now if they look at the last quarter just like we're going to look at it looks pretty strong then they're going to sit there and say read the papers and see all the things coming at them and saying should I slow down my decisioning. That I think is the worry is because once they talk themselves on slowing down it'll be a while till they get restarted. Right now I think it's more thoughts and then worries and they've got to see this settle in. And when it settles in then they know how to run their business.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

But right now it's very unsettling for them.

[Betsy Graseck, Managing Director at Morgan Stanley]

Thank you.

[Operator]

We'll move next to Ken Usdin with Autonomous Research. Your line is open.

[Ken Usdin, Senior Research Analyst at Autonomous Research]

Good morning. Thank you again for the interest income outlook slide, the waterfall. I wanted to ask on the fixed rate asset repricing bucket, could you help us understand how much is rolling off each quarter in the HTM securities and mortgage loan books and what you're getting from that? And then also as we get closer to that second half benefit on the cash flow hedges, what type of pickups are you imagining in terms of like new fixed rate versus received rate versus what's rolling off? Thank you.

[Alastair Borthwick, CFO at Bank of America]

So, Ken, on hold to maturity, if you look back over the last fourteen quarters, it's sort of been around $89,000,000,000 a quarter. It depends a little on the seasonality as we go through the year. So $8,000,000,000 this quarter, but mean $9,000,000,000 next quarter. And normally when those are rolling off, we're picking up 200 basis two twenty five basis points just to give you some idea. So that's that bucket.

[Alastair Borthwick, CFO at Bank of America]

Around residential mortgages, let's say, we're originating $5,000,000,000 a quarter. Typically, we're picking up a couple of hundred basis points sometimes more on those just depends on prevailing market rates. So think about that being $5,000,000,000 at couple of hundred basis points or more. And then the cash flow swaps, we'll talk more about those as we go into the second half. But you can think about that as being something where we're probably picking up 150 basis points or so.

[Alastair Borthwick, CFO at Bank of America]

It just depends on any given quarter. So we'll give you a little more guidance as we get closer.

[Ken Usdin, Senior Research Analyst at Autonomous Research]

Okay, great. And then second question, you guys did another great job getting deposit costs down 20 basis points for the second straight quarter. As you contemplate this growth that you're seeing and continuing, how do you think about just how much you can continue to reduce rates paid relative to how you're seeing just the overall cost of funding? Thanks.

[Alastair Borthwick, CFO at Bank of America]

Yes. So I don't think we'll have any change in our philosophy there. We felt like when it comes to the commercial and the wealth clients in particular, where they have interest bearing balances, we just pass through the cuts. And then as it relates to the consumer book, we've got an awful lot of non interest bearing there obviously. So really you're focused there on the piece that's in the CDs and then the preferred deposits.

[Alastair Borthwick, CFO at Bank of America]

And there again, we tend to pass that through as it comes through. So it's trickier obviously in consumer where we're paying 61 basis points on $950,000,000,000 But even there just because we still have some CDs outstanding and we still have some preferred, we were able to take that down last quarter and look to do that again in the future.

[Ken Usdin, Senior Research Analyst at Autonomous Research]

Thanks, Alistair.

[Operator]

And we'll take our last question from Gerard Cassidy with RBC. Your line is open.

[Gerard Cassidy, Managing Director at RBC Capital Markets]

Hi, Brian. Hi, Alistair.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

Hi, there.

[Gerard Cassidy, Managing Director at RBC Capital Markets]

You guys did a very good job in giving us the details about what it looked like back in 02/2009 versus today on Slide 22. And if we move up to Slide 21, you can see the consumer loan portfolio has obviously been derisked as you pointed out. What I'd like to ask a question about is the commercial loan portfolio, particularly the growth. Can you guys share with us some of the confidence you have that we're not going to see some issues here, particularly you look at the dark blue non U. S.

[Gerard Cassidy, Managing Director at RBC Capital Markets]

Commercial has grown very, very strongly over this time period. And what can you share with us about the risk in this portfolio relative to maybe 02/2009?

[Alastair Borthwick, CFO at Bank of America]

Yes. So I'll start, Gerard. I'd say, we felt like over time as we've become a more global and international company than maybe we were in 02/2007. It was important for us to diversify the loan book outside of just The U. S.

[Alastair Borthwick, CFO at Bank of America]

And it was appropriate because we've got to support clients who are multinationals in The United States operating around the world and multinationals around the world who also operate and sell into The United States and other places. So that's natural I think. We've kind of supported that over time. And that's been a big part of our growth over a fifteen year period. Now in terms of commercial, if you look at the loan growth overall, I'd say, we're pretty diversified in the way we look at that.

[Alastair Borthwick, CFO at Bank of America]

So all lines of business grew last quarter. So, that's Small Business Banking, it's Business Banking, it's the Commercial Bank ex CRE, it's the Global Corporate Investment Bank, it's Global Markets and it's Wealth in terms of their commercial exposure. So, a little bit of it is diversification in all lines of business. And then if you looked at the book itself for the most part as we talked about it secured, it's investment grade. We always think about good client selection as a sort of people who can make it through any environment.

[Alastair Borthwick, CFO at Bank of America]

That's where we're investing and partnering. And we've had virtually no charge offs. So then when you turn to like the global markets business that again very diversified all assets, all client types across things like asset backs and mortgage warehouse and credit financing and subscription. So we feel like this book is in very good shape. We feel like they're the right clients.

[Alastair Borthwick, CFO at Bank of America]

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

[Gerard Cassidy, Managing Director at RBC Capital Markets]

Very good. Very insightful. Thank you. And then as a follow-up Alistair, you guys mentioned that the credit card charge off ratio was a seasonally higher number at just over 4%. And when we go back to the first quarter of twenty twenty four and 2023, obviously, the charge off levels were lower.

[Gerard Cassidy, Managing Director at RBC Capital Markets]

Can you and especially with the unemployment rate remaining as low as it has over the last couple of years, is the higher level due to some of that FICO score inflation we've read about during the pandemic? What do you guys account for the number being where it is today versus the last couple of first quarters of each of those prior years, considering that the unemployment rate for example has not gone up that much?

[Brian Moynihan, Chairman, CEO & President at Bank of America]

Yes. I think I'd flip it around the other way Gerard. That with all the stimulus and all the after the pandemic, the wage growth for inflation, the stimulus that came in, just sheer cash, you saw these things drop to levels that we do wouldn't hold, right? Meaning charge off rates in the card went way down. And all you see now is it sort of normalized around where it was in a very good credit period for our company in 2019 pre pandemic type of era.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

So that's just normalization. I wouldn't over read that. It's a comparative period. So if you look relative to 2019, '20 '18, you'd see that those charge off rates running 3.5 ish plus or minus percent or similar to we have now. So we feel good about it.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

The important thing is if you look at stressing that portfolio like we do, you could see that the losses are projected whether it's in the CCAR process or own internal stress test. If you take it across nine quarters, it doesn't come it's closer to honestly the charge off rate we actually underwrote to prior to the financial crisis. We underwrote to like a 5.5% charge off rate in normal times and then it would go up from there. And so it's a much more core book driven at a very strong performance through crisis. So think it's just normalized and more to where it was in a relatively good credit times in 2019 rather than any significant movement.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

In fact, we said that as we came through last year over and over again, people kept doubting it. What you've seen is delinquency actually have fallen and it's flattened out in terms of yet the $1,000,000,000 charge off level in cards.

[Gerard Cassidy, Managing Director at RBC Capital Markets]

Got it. Thank you, Brian.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

Okay. Well, thank you. I think that's all our questions. I just wanted to think about the three two or three things. One, thanks to the team for another good quarter.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

Thank you and thank you all for participating in our call. Number two, as I said earlier, the story of the first quarter is a strong operating performance, good organic client activity, growth in revenue and earnings, manage expenses well and at a period of time we continue to make investments to position the company for the future. On the other hand, we gave you the latter part of this presentation, to show you our multifarious loan book and how that diversity of types of clients and collateral types and geographies and all that will hold us in good stead as not only by our own internal models, but also by the comparison of stress tests. In addition, we talked about how we're well reserved heading into whatever may be in front of us. So our job is to serve our clients in all times and that's what we plan to do.

[Brian Moynihan, Chairman, CEO & President at Bank of America]

Thank you.

[Operator]

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

Participants

Executives

• Lee McEntire, SVP of Investor Relations
• Brian Moynihan, Chairman, CEO & President
• Alastair Borthwick, CFO

Analysts

• Steven Chubak, Managing Director at Wolfe Research LLC
• John McDonald, Senior Research Analyst at Truist Securities
• James Mitchell, Senior Equity Analyst at Seaport Global Securities
• Glenn Schorr, Senior Managing Director & Senior Research Analyst at Evercore
• Mike Mayo, Managing Director at Wells Fargo
• Erika Najarian, Managing Director & Equity Research Analyst at UBS Group
• Matthew O'Connor, Managing Director at Deutsche Bank
• Betsy Graseck, Managing Director at Morgan Stanley
• Ken Usdin, Senior Research Analyst at Autonomous Research
• Gerard Cassidy, Managing Director at RBC Capital Markets