Bank of America Q2 2025 Earnings Report

Bank of America EPS Results

• Actual EPS: $0.89
• Consensus EPS: $0.86
• Beat/Miss: Beat by +$0.03
• One Year Ago EPS: $0.83

Bank of America Revenue Results

• Actual Revenue: ($22.27) billion
• Expected Revenue: $26.79 billion
• Beat/Miss: Missed by -$49.06 billion
• YoY Revenue Growth: +4.30%

Bank of America Announcement Details

• Quarter: Q2 2025
• Date: 7/16/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, July 16, 2025
• Conference Call Time: 8:00AM ET

Bank of America (NYSE:BAC) is a leading multinational financial institution headquartered in Charlotte, North Carolina. Founded in 1904 as the Bank of Italy in San Francisco, the company adopted its current name following a series of mergers and reorganizations in the mid-20th century. Today, it is recognized for its comprehensive suite of banking and financial services, serving individual consumers, small- and middle-market businesses, and large corporations with a focus on delivering digital and in-branch solutions.

The company operates through several primary business segments, including Consumer Banking, Global Wealth & Investment Management, Global Banking, and Global Markets. Its Consumer Banking division offers deposit products, credit cards, home and auto loans, and online banking services. Through Merrill and Bank of America Private Bank, it provides investment advisory services, retirement planning, trust and estate administration, and brokerage solutions. Corporate clients benefit from treasury services, lending, risk management, and capital raising capabilities via the Global Banking and Global Markets units.

Bank of America maintains an extensive network of branches and ATMs across all 50 U.S. states, complemented by operations in more than 35 countries. Its international presence supports global corporate clients and institutions, enabling cross-border financing, trade services, foreign exchange, and advisory work. The firm’s commitment to technology and digital innovation is reflected in its mobile and online platforms, which serve millions of active users and facilitate seamless account management, payments, and investment activities.

Under the leadership of Chairman and Chief Executive Officer Brian Moynihan, who has guided the company since 2010, Bank of America has emphasized responsible growth and sustainable finance initiatives. The firm continues to invest in community development, environmental programs, and financial literacy to support economic opportunity and resilience. Its governance framework and risk management practices aim to uphold high standards of integrity and regulatory compliance in the dynamic global financial landscape.

Bank of America Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: We generated a record $14.8 billion in net interest income, up 7% year-over-year, and expect 4Q NII of $15.5 – 15.7 billion.
• Positive Sentiment: Revenue grew 4% and EPS rose 7% year-over-year, driven by broad organic growth in consumer, commercial, wealth and markets businesses.
• Negative Sentiment: Net charge-offs remained around $1.5 billion, with elevated commercial real estate office losses, though most were already reserved.
• Positive Sentiment: Noninterest expense fell by $600 million from Q1 to under $17.2 billion, and is expected to remain flat or decline in the second half, improving operating leverage.
• Positive Sentiment: Returned $7.3 billion of capital in Q2 via $5.3 billion in buybacks and $2 billion in dividends, with a CET1 ratio of 11.5% well above requirements.

Presentation

[Operator]

Good day, everyone, and welcome to today's Bank of America Second Quarter Earnings Call. At this time, all participants are in a listen only mode. Later, you will have the opportunity to ask questions during the question and answer session. Please note, today's call will be recorded and I will be standing by should you need any assistance.

[Operator]

It is now my pleasure to turn the conference over to Lee McEntire. Please go ahead.

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

Thank you, Chloe. Good morning, everyone. Thank you for joining us to review the second quarter results. Our earnings release documents are available on the Investor Relations section of the bankofamerica.com website. Those documents include the earnings presentation that we'll make reference to during the call.

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

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

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

the call over to you. Good morning and thank all of you for joining us for our second quarter twenty twenty five earnings results. First, a couple of words on the environment. We continue to see a solid consumer spending data, as you can see on our page 21 of the deck, improving credit quality that Alistair talked about from already strong statistics, plenty of household net worth growth in the market growth and also the account balances again staying strong above where they were pre pandemic. We see solid commercial loan growth and we see good credit quality with the exception of CRE in office, which we'll talk about.

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

We also see our clients continue to see clarity with the changes in trade And now with the tax bill passing, we can see them start to understand the future and expect them behave accordingly. We saw improving market conditions during the quarter and that leads our worldwide leading research team to continue to predict no recession, a modestly growing economy about 1.5% at the end of the year and continued no Fed rate cuts till next year. So with that backdrop, we talk about our second quarter. Key points on the second quarter are as follows.

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

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

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

This morning we reported revenue of $26,600,000,000 on an FTE basis, net income of $7,100,000,000 after tax and earnings per share of zero eight nine dollars for the second quarter. On a year over year basis, we grew revenue 4% and grew earnings per share 7%. We produced a return on assets of 83 basis points and return on tangible common equity of 13.4% in the second quarter. We produced $14,800,000,000 in NII, a record for the company, growing 7% from the second quarter in 2024. This represents the fourth quarter of NII growth in line with the guidance we've been giving you.

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

Supporting that average deposits have now grown for eight consecutive quarters and we have achieved this while maintaining very disciplined deposit pricing. That's great work by our teams. Markets related revenue gained momentum throughout the quarter. We recorded our thirteenth consecutive quarter of year over year sales and trading growth. Jim Dabar and the team continue to do a good job there.

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

Revenue was up 15% over the prior year quarter. We also produced more than $1,400,000,000 in firm wide investment banking fees and the better quarterly results improved as each month of the quarter progressed. We reported expense below $17,200,000,000 this quarter, 600,000,000 lower than the 2025 in line with the expectations we gave you. We reported our sixth consecutive quarter of net charge offs at around the $1,500,000,000 level. This is a little bit of a tale of two cities.

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

Consumer net charge offs were lower. Offsetting that we had elevated commercial real estate office charge offs. We resolved a number of credits in this quarter in the second quarter. When those credits close in the third quarter, you'll see the reduction in NPLs related there too. The good news is that most of those second quarter charge offs were previously reserved, so it had a modest impact on our profitability for the quarter.

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

We provided capital in support of our customers and clients to help them grow. For example, we delivered strong commercial loan growth as you can see. We also provided more balance sheet to our institutional clients for their financing needs. At the same time, we also increased the capital return to our shareholders. In the second quarter, repurchased $5,300,000,000 in shares and paid $2,000,000,000 in dividends.

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

In the first half of twenty twenty five, we have returned $13,700,000,000 in total capital, 40% higher than the first half of twenty twenty four. Tangible book value per share continued to grow this quarter. Let's move our discussion to organic growth. You can see that on slide three. We added new clients and deeper relationships with our existing clients.

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

That was across all our businesses, consumer, wealth, commercial and our markets business. Our teams are winning in the marketplace by putting the client first. For example, in consumer banking, we continue to grow primary checking accounts. We grew average consumer deposits for a third consecutive quarter. Balances are up year over year for the first time since 2022 putting the effects of the pandemic surges behind us.

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

This quarter we crossed the milestone of 5,000,000 net new checking accounts over the last six years. We saw increases in the average consumer checking account balance of our clients for two consecutive quarters and now the average balance per account is over $9,200 and 92% of the primary checking account in the household. On the investment side, our clients carry an average funded balance of more than $130,000 strong when compared to the industry. Our home and auto originations grew on a year over year basis this quarter. We continue to be a leading supplier of credit to small businesses helping the core segment economy grow.

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

Loans were once again up year over year and reflecting the commitment to add more bankers in the markets that we serve across The United States. In Wealth and Investment Management, client balances reached $4,400,000,000,000 We saw strong AUM flows and loan demand as well as market appreciation. Our advisors continue to deliver comprehensive banking solutions to help our clients achieve their goals. In our Global Banking business, client activity remains solid. Commercial clients are actively using their credit facilities albeit at still a lower level than they used them as a percentage prior to pandemic and our risk management approach remains very disciplined.

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

We added more than 1,000 net new clients most of them driven by our payments capabilities. Global Markets continued to perform well with a record second quarter level of sales and trading revenue. Institutional clients sought funding of their warehouse of loans and other needs at increased pace with high quality collateral. Organic growth means that we're also investing in our own capabilities, our people and our technology to serve our clients more effectively. Those investments have led to continued expansion in digitalization and engagement across all our lines of business.

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

Nearly 80% of our consumer households are now fully digitally engaged and they have benefited from our award winning platforms. Just to give you a sense of the volumes, in the second quarter alone 4,000,000,000 logins were made by our consumer. In the second quarter 65% of our consumer product sales were digital. You can see all these trends in our disclosures on slides 24, twenty six and twenty eight in the appendix. I commend you to review them to see how the technology application can be scaled and applied across the businesses.

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

We also continue to invest in our teammates and are moving more money into the AI side and machine learning side. And as we think about the quarters ahead and the operating leverage returning in the company due to the NII growth, it's key to note we have fully absorbed the cost over the last several years of inflation and wages of inflation and wages and other third party provided services. Fifteen years ago to make it an understanding how much an impact technologies had, fifteen years ago, the company had a headcount of 300,000. Today, have 212,000. We did that with a relentless application of scalable, secure, resilient technologies.

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

Customer behavior also changed and matched it. Digitization, simplification of products, machine learning and models and process improvements helped us get there. Now we have a chance to capture the value of that with the new enhanced capabilities of AI machine learning. Artificial intelligence allows us to change the work across many more areas of our company effective than prior tools allowed us. We have deep scaling experience in AI capabilities.

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

With Eric our AI assistant is the most recognized aspect of that. As you can see on slide four, we think about the way we apply artificial intelligence and augmented intelligence in four different pillars AI agents, search and summarization, content generation, importantly coding and automated processes. First off as an example is our virtual assistant Erica. This is a model we introduced back in 2018 and developed prior to that. It was a first true banking industry virtual agent.

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

It averages over 58,000,000 interactions per month today, helping to make it easier for clients to bank how they want and where they want. We also leveraged Erica capabilities for use of our commercial clients in CashPro as well as with our employees in Erica for employees. To give you a sense, 90% of our more than 210,000 teammates have now utilized Erica for employees to complete such tasks as password updates, equipment refreshes, etcetera. In wealth management and our other relationship manager banking businesses, AI is helping those relationship managers and advisors search and summarize information, preparing them to deliver personalized planning and personalized pitches to clients for their business and help with their advice. Copilots help them organize the prospecting process and all this is implemented in going through the system.

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

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

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

These investments are intended to help both improve the client experience and our own productivity. So if you think about the quarter before I turn it over to Alastair, just a few We saw good organic client activity. We enjoyed good growth in revenue and earnings per share. We continue to invest in that growth and are beginning to see the impacts of AI again aiding our efficiency. We managed risk well.

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

That drove healthy returns and we kept delivering more capital back to use our shareholders. With that, I'll turn it over to Alastair.

[Alastair Borthwick, CFO at Bank of America]

All right. Well, you, Brian. I'm going to skip slide five of the earnings presentation since Brian covered most of that already. And I just want to provide a little more context on the highlights of the quarter starting on slide six, where you can see revenue of $26,600,000,000 on an FTE basis grew more than 4% from second quarter last year. Now we saw the year over year revenue growth in several areas.

[Alastair Borthwick, CFO at Bank of America]

NII grew 7% and represented 55% of total revenue. Investment and brokerage fees rose 11% with both assets under management flows and market levels contributing nicely to the growth. This quarter's $5,400,000,000 of sales and trading revenue grew 15 from the year ago period. Service charges grew 7% with particular strength in Global Payment Solutions and card income improved 4%. And while investment banking was down 9% from the second quarter of twenty twenty four, momentum built across the quarter with a good pipeline.

[Alastair Borthwick, CFO at Bank of America]

Non interest expense was a little less than $17,200,000,000 and down nearly $600,000,000 from Q1 driven by the absence of Q1 seasonal elevation in payroll taxes. Provision expense for the quarter was $1,600,000,000 with asset quality remaining in great shape. And we reduced our outstanding shares by almost 4% from the second quarter of last year. So together these things resulted in earnings per share improving 7% year over year. Let's transfer to a discussion of the balance sheet using Slide seven.

[Alastair Borthwick, CFO at Bank of America]

And here total assets ended the quarter at $3,440,000,000,000 that is up $92,000,000,000 from Q1 driven by strong loan growth and a higher level of client activity in global markets. Deposits were up $22,000,000,000 on an end of period basis from Q1 and up a little more than $100,000,000,000 from the year ago period. Deposits reflect the seasonal headwind from income tax payments and saw inflows that more than offset the tax payment activity. Average global liquidity sources of $938,000,000,000 remain strong. Shareholders' equity at $300,000,000,000 was up $4,000,000,000 from last year as we issued $3,000,000,000 of preferred stock this quarter to replace redemptions from last quarter, and we saw modest improvement in AOCI.

[Alastair Borthwick, CFO at Bank of America]

Otherwise, net income was offset by distributions of capital to shareholders. We returned $7,300,000,000 of capital back to shareholders with $2,000,000,000 in common dividends paid and $5,300,000,000 of shares repurchased. With regard to dividends, as we noted in our July 1 press release following the CCAR results, we announced our plan to increase our common quarterly dividend by 8% starting in September pending board approval. We were pleased to see our stress capital buffer requirement move lower in the results And it was good to see some of the industry comments about the annual exam coming through the new proposals. Tangible book value per share of $27.71 rose 9% from a year ago.

[Alastair Borthwick, CFO at Bank of America]

And looking at regulatory capital, our CET1 level remains stable at $2.00 $1,000,000,000 and the ratio is 11.5%. That's down 26 basis points and remains well above our regulatory minimum today, which will move lower upon finalization of the new stress capital buffer from CCAR as well as the newly proposed rules. Now our calculated stress capital buffer and related CET1 ratio from CCAR is 10% and that takes effect on October 1. Through the newly proposed rules, which include two year averaging of CET1 depletion, our CET1 ratio would be 10.2% and would be effective on 01/01/1926. Either way, we have a lot of flexibility.

[Alastair Borthwick, CFO at Bank of America]

Our supplemental leverage ratio was 5.7% versus a minimum requirement of 5% and that leaves plenty of capacity for balance sheet growth. And we have $473,000,000,000 of total loss absorbing capital, which means our TLAC ratio remains comfortably above our requirements. On Slide eight, we show a nine quarter trend of average deposits to illustrate the growth across those periods. Deposits are now 9% higher than their bottom in May. And that momentum continued as we averaged $2,000,000,000,000 for the July.

[Alastair Borthwick, CFO at Bank of America]

Typically, see downward pressure on deposits as we move from Q1 to as clients pay their income taxes. And this year, we had enough growth to more than offset those tax payments. Average consumer deposits rose $4,000,000,000 from Q1, concentrated in non interest bearing. We also saw significant growth in global banking deposits, 28,000,000,000 or 5% from Q1. And this included some shorter term deposits from deal related activity and that allowed us to outpace the tax payment related declines in our wealth business, as well as corporate CD placements that matured with our institutional clients.

[Alastair Borthwick, CFO at Bank of America]

In addition, we remained disciplined on pricing to achieve that growth. Overall rate paid on total deposits declined three basis points, led by a three basis point decline in consumer and the rate paid on $952,000,000,000 of consumer deposits was 58 basis points in the second quarter. Let's turn to loans by looking at the average balances on Slide nine. Loans in the second quarter of $1,130,000,000,000 improved 7% year over year, driven by 10% commercial loan growth. Every business segment recorded higher average loans on both a year over year basis and a linked quarter basis.

[Alastair Borthwick, CFO at Bank of America]

Drilling down on commercial loans, we saw linked quarter growth in every segment of the commercial lending spectrum. Small business and business banking both grew and we recently combined the coverage model here to provide more calling capacity for our bankers. In middle market lending, we saw a nice increase in revolver utilization during the quarter as clients navigated the current environment. And in GCIB, we had a little more demand from our larger corporate clients. In global markets, we've been able to take advantage of strong financing demand in the marketplace from institutional borrowers, where we lend against diversified collateral pools.

[Alastair Borthwick, CFO at Bank of America]

Now, the largest growth areas year over year have been in asset based securitization and in credit. And in ABS, we're providing financing solutions for corporate and asset manager clients collateralized by loan, lease or other receivables portfolios. In credit, we provide term and warehouse financing collateralized by diversified pools of corporate loans for private credit and asset manager clients. We feel very good about the lending and we feel good about the growth opportunity in these areas and our expertise has enabled us to participate in a number of attractive deals. Let's turn our focus to NII performance on slide 10.

[Alastair Borthwick, CFO at Bank of America]

On a GAAP non FTE basis, NII in Q2 was $14,700,000,000 and on a fully taxable equivalent basis NII was $14,800,000,000 And as I said earlier, that's up 7% from the second quarter. NII grew $227,000,000 on a fully taxable equivalent basis over Q1, driven by higher loan and deposit balances, one additional day of interest and fixed rate asset repricing. Lower loan yields from lower foreign interest rates partially offset those positive contributors. The net interest yield or NII declined five basis points reflecting a roughly $80,000,000,000 increase in earning assets driven by global markets activity. Loans and trading assets generated in global markets contribute solid net interest income, but at a lower relative yield to the overall company net interest yield.

[Alastair Borthwick, CFO at Bank of America]

Additionally, of the deal related commercial deposit growth with relationship clients was net interest income accretive and modestly net interest yield dilutive. My point here is that net interest income growth continues to be the focus with net interest yield being an output. With regard to interest rate sensitivity on a dynamic deposit basis, we provide a twelve month change in net interest income for an instantaneous shift in the curve. And that means interest rates would have to move instantly another 100 basis points lower than the expected cuts contemplated in the current curve. And on that basis, a 100 basis point decline would decrease NII over the next twelve months by 2,300,000,000 And if rates went up by 100 basis points, net interest income would benefit roughly $1,000,000,000 Let me turn to a forward view of NII.

[Alastair Borthwick, CFO at Bank of America]

Let's turn to Slide 11. And there remains a good amount of uncertainty from the impacts related to announced tariffs and the potential for continued uncertainty. We've also seen volatility in expectations of future interest rate cuts. So let us give you a few thoughts about the rest of 2025. In January and again in April, we provided our expectations that we could exit the 2025 with net interest income on a fully taxable equivalent basis in a range of $15,500,000,000 to $15,700,000,000 We also noted our expectation that that growth would accelerate in the second half of twenty twenty five.

[Alastair Borthwick, CFO at Bank of America]

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

[Alastair Borthwick, CFO at Bank of America]

And lastly, global markets business is also expected to benefit NII a touch from lower rates as we move through the year. Bottom line is our range of NII expectation for the fourth quarter this year remains unchanged at 15,500,000,000.0 to $15,700,000,000 and that would result in record NII and a full year NII improvement of 6% to seven percent. Okay. Let's turn to expense and use Slide 12 for the discussion there. We reported a little less than $17,200,000,000 in expense this quarter.

[Alastair Borthwick, CFO at Bank of America]

And this reflects a nearly $600,000,000 decline from Q1, driven by the absence of seasonal elevation from payroll tax expense and modestly lower litigation costs. Expense compared to the second quarter of last year is up a little more than 5%. That increase reflects an aggregated 9% improvement in wealth management fees, higher sales and trading revenue and investment banking fees. It also reflects the impact of ongoing inflationary costs and continued investments in people and technology. Inflation is evident across our employee costs of healthcare and hardware and leased space among many other areas.

[Alastair Borthwick, CFO at Bank of America]

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

[Alastair Borthwick, CFO at Bank of America]

That coupled with the expectation of improved NII is anticipated to provide operating leverage in the second half of the year and an improved efficiency ratio. Let's move to credit. We'll turn to Slide 13 where you can see that asset quality remains sound. Net charge offs were 1,500,000,000.0 up modestly compared to Q1. And that's the sixth consecutive quarter that net charge offs have hovered around EUR 1,500,000,000.0.

[Alastair Borthwick, CFO at Bank of America]

The total net charge off ratio this quarter was 55 basis points, up a basis point from the first quarter. Q2 provision expense was $1,600,000,000 and mostly matched the net charge offs. Modest reserve builds in some areas, primarily for loan growth were mostly offset by releases associated with lower office exposures and mainly from sales. Consumer net charge offs were $1,100,000,000 down modestly linked quarter and consistent with the past few quarters. 90% of our consumer net charge offs are driven by credit card, and that highlights the importance of prudence in the underwriting growth of that portfolio.

[Alastair Borthwick, CFO at Bank of America]

It's worth noting the net loss rate on credit card declined year over year for the first time this quarter since early twenty sixteen outside of the pandemic period. On the commercial side, we saw losses of $466,000,000 that's up from Q1 driven primarily by office exposures and their associated sales as I noted earlier. The net charge off ratio for total commercial loans remained low at 29 basis points this quarter. Importantly, our C and I book commercial and industrial, so that excludes the small business and CRE loans, that commercial and industrial loan book is $564,000,000,000 and the loss on this book was nine basis points this quarter. It's averaged eight basis points from 2013 until now.

[Alastair Borthwick, CFO at Bank of America]

Focusing on total net charge offs again and looking forward, in the near term, we would not expect much change in the total net charge off ratio given the steadiness of consumer delinquencies, stability of C and I and the reductions in our CRE office exposures. On slide 14, in addition to the lower consumer delinquency statistics, note the modest changes in other stats for both our consumer and commercial portfolios. Okay, let's move to the various lines of business and some brief comments on their results, starting on slide 15 with Consumer Banking. Consumer delivered strong results with $10,800,000,000 in revenue that grew 6% year over year and $3,000,000,000 in net income that grew 15%. Results were driven by the increasing value of our low cost deposit franchise.

[Alastair Borthwick, CFO at Bank of America]

Innovation in deposit products like family banking and new higher value cash back credit cards, coupled with our industry leading preferred rewards program, deliver total value for clients, which we believe they don't get elsewhere. This value recognition and disciplined pricing also drove a 7% improvement in NII. While the revenue growth was led by the NII improvement, it also included solid fee performance in card income and service charges. And through good expense management, we drove 400 basis points of operating leverage in the business as expense growth year over year rose only 2% compared to the 6% revenue growth. The efficiency ratio improved more than 200 basis points in the last twelve months to 51% in the quarter.

[Alastair Borthwick, CFO at Bank of America]

Investment balances grew 13% to $540,000,000,000 with market improvement and full year flows of $19,000,000,000 And as I noted earlier, consumer net charge offs improved linked quarter following the move lower in delinquencies. The loss on credit card fell 23 basis points to 3.82% and delinquencies declined for the second consecutive quarter. And finally, as you can see in the appendix on slide 24, digital adoption and engagement continued to improve and customer experience scores rose to record levels illustrating clients appreciation of enhanced capabilities from our investments. Moving to Wealth Management on slide 16, the business delivered another solid quarter where we added new households, deepened existing relationships and saw strong client flows. The business generated net income of $1,000,000,000 on strong loan growth and solid AUM flows.

[Alastair Borthwick, CFO at Bank of America]

We saw modest decline in net income, a solid revenue growth was more than offset by higher revenue related costs and continued investments to build the business. NAROL and the Private Bank now manage nearly $4,400,000,000,000 in client balances and continue to see organic growth that produced strong AUM flows of $82,000,000,000 in the past year, contributing nearly 5% growth in AUM balances. And that all reflects a good mix of new client money, as well as existing clients putting money to work. During the quarter between Merrill and the Private Bank, we added 7,100 net new relationships and in both businesses, the size of the relationships added continued to expand. We also continue to add financial advisors to the sales force in Merrill and the private bank through our extensive training program and experienced hiring of advisors.

[Alastair Borthwick, CFO at Bank of America]

Approximately one third of net new households in Q2 were added by our newly trained advisors. We're not only growing relationships, but we're also deepening as the number of clients that have banking products with us grew to nearly 63%. And while this is primarily a fee based advice driven model, about 30% of our revenue is now net interest income derived from GWIM clients and the large loan and deposit balances on us. In Q2, we reported revenue of $5,900,000,000 growing nearly 7% over the prior year led by that 9% growth in asset management fees. Expense growth of 9% supported both the cost of the increase in revenue related incentives, as well as investment in technology and cost of hiring to add experienced advisors to the platform in Merrill and the Private Bank.

[Alastair Borthwick, CFO at Bank of America]

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

[Alastair Borthwick, CFO at Bank of America]

Slide 17 shows the Global Banking results where the prior year rate impacts lowered NII. And this segment has the toughest challenge to make that ground back through growth and pricing. In Q2, Global Banking generated net income of $1,700,000,000 Business activity was solid in Q2. We already discussed the strong deposit growth, solid loan growth and investment banking fees that gained momentum through the quarter. While business activity was solid, overall net income fell.

[Alastair Borthwick, CFO at Bank of America]

NII declined year over year from lower rates on the variable loans and higher funding costs for loan growth. Non interest income included both lower investment banking fees and lower solar and wind investment activity. Non interest expense to support the business activity grew as we increased investment for the future with more relationship managers across the commercial spectrum and we invested in technology and marketing. Term wide investment banking fees were EUR 1,400,000,000.0 in Q2, down 9% from a year ago, led by a decline in M and A and leverage finance fees. We still maintained our number three investment banking fee position year to date.

[Alastair Borthwick, CFO at Bank of America]

Switching to Global Markets on slide 18, I'll focus my comments on results excluding DVA as I normally do. And as Brian said, we continued our streak of strong revenue and earnings performance, achieved operating leverage, and once again delivered a good return on capital. In Q2, we generated net income of $1,600,000,000 which grew 11% year over year. Revenue, and again this is ex DVA, improved 10% from the second quarter of last year on good sales and trading results, while investment banking was lower. Focusing on sales and trading ex DVA, revenue improved 15% year over year to 5,400,000,000 Sales and trading built off the momentum of the first quarter.

[Alastair Borthwick, CFO at Bank of America]

FICC led the way this quarter growing 19% year over year with rates and foreign exchange trading benefiting from the macro volatility. Our equities group had a strong quarter with 10% revenue growth from both trading and financing. And both FIC and equities are benefiting from investments in the international franchise as we saw increased activity across Europe, Asia and Latin America. Year over year expense was up 9% on revenue improvement and continued investments in the business. And on slide 19, all other shows a loss of $77,000,000 in Q2 with very little to talk about here.

[Alastair Borthwick, CFO at Bank of America]

The tax rate ended at 7.4%. It was a little lower than last quarter driven by $180,000,000 of discrete items. And excluding those 180,000,000 of discrete items and the tax credits related to investments in renewable energy and affordable housing, the effective tax rate would have been much closer to a normal corporate tax rate at approximately 24%. So with that, I'll stop there. Thank you everyone.

[Alastair Borthwick, CFO at Bank of America]

And with that, we'll open up for Q and A please, Chloe.

[Operator]

Certainly. We'll take our first question from John McDonald with Truist

[John McDonald, Senior Research Analyst at Truist Securities]

It's been a lot of talk about different ways to measure retail deposit share and I know you may take issue with some of the methodologies out there. But Brian, taking a step back, how do you look at and measure the team's progress in growing retail deposit share and what's your report card and how you've done and what your ambitions are on that front?

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

Well, in the end of the day, if you look at the consumer business with $950,000,000,000 in deposits operated very efficiently at the cost of deposits, meaning all the cost over the deposits running under 146 basis points. The total rate paid 58 basis points, 58% of the balances are in checking accounts. It's a tremendous business and we'll only get more and more profitable as ANI kicks in because they're the biggest beneficiary of that. So if you think about it in terms of deposit growth, we look pre pandemic now, our team's gone from $700,000,000,000 odd numbers to $950,000,000,000 We've grown our deposits as a company faster than the industry grew from the pre pandemic to now, at 39% versus the industry like 37% and large banks 32%. And obviously, we contribute to the large bank growth rate.

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

So we feel very good about it. The key is they've grown checking accounts for five years now. They've grown retail deposits, which were influenced a lot because of our mass market customer base being such a big amount by the pandemic stimulus. That has all gone through the system and you're seeing the retail the consumer deposits growth three quarters in a row now. And the key is that the average checking account balance is at $9,200 that went into pandemic about $6,000 to $7,000 So you're seeing that grow.

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

So we feel good about that. Overall, our average deposit size per branch is $500,000,000 versus next best at 400,000,000 and the one behind that at 300,000,000 So I don't know all these methodologies. You guys can look at them. It's a lot of palaborate, a lot of debate. But at end of the day is we're growing deposits faster in the industry and 92% of core checking of the checking accounts consumer satisfaction is the highest it's ever been. So we feel very good about it.

[John McDonald, Senior Research Analyst at Truist Securities]

Okay. Thanks, Brian. Alastair, wanted to follow-up on your expense commentary. Can you elaborate on the outlook for the second half? I think your prior outlook implied some improvement in the second half.

[John McDonald, Senior Research Analyst at Truist Securities]

And I think you just said you may or may not see that depending on the strength of the markets business?

[Alastair Borthwick, CFO at Bank of America]

Well, I think what we're trying to say is it always starts with us with headcount discipline. So the headcount has been pretty flattish. We've managed that pretty well all the We don't see any change in that. So then the only variable that's left really is going to be around revenue related.

[Alastair Borthwick, CFO at Bank of America]

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

[John McDonald, Senior Research Analyst at Truist Securities]

Okay. Thanks.

[Operator]

We'll take our next question from Ken Usdin with Autonomous Research. Your line is open. Your line is open, Ken.

[Ken Usdin, Senior Research Analyst, Large-Cap Banks at Autonomous Research]

Hey, good morning. Hey, Alastair, thanks for the update on that trajectory for the second half of the year. I'm just wondering as we move a step forward, if you can kind of just make sure we're still tracking right on that the split between the loan securities and swap repricing and whether that step up in that bucket is linear in the third and fourth or kind of just builds up as we get towards the end of the year? Thank you.

[Alastair Borthwick, CFO at Bank of America]

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

[Ken Usdin, Senior Research Analyst, Large-Cap Banks at Autonomous Research]

Okay. And then just on the I think we know that the securities and mortgage loans, but can you kind of just dig us in a little bit on the cash flow hedges and what you're seeing in that? Are you still moving forward with the same strategy, the off and on and how much you're picking up on those?

[Alastair Borthwick, CFO at Bank of America]

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

[Ken Usdin, Senior Research Analyst, Large-Cap Banks at Autonomous Research]

So still in that plus 150 or so range that you said last quarter?

[Alastair Borthwick, CFO at Bank of America]

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

[Ken Usdin, Senior Research Analyst, Large-Cap Banks at Autonomous Research]

Okay, great. Thanks a lot, Alistair.

[Alastair Borthwick, CFO at Bank of America]

Yes.

[Operator]

We'll move next to Matt O'Connor with Deutsche Bank. Your line is open.

[Matthew O'Connor, Analyst at Deutsche Bank]

Good morning. Just want to follow-up on the expenses. I guess if you kind of flat line it or flat to just down a little bit, that would put you up, call it 3.5% or so on a full year basis. And I think the prior guide was up 2% to three or the high end of two to three percent. Can you just kind of circle back to the cost versus what you were thinking previously?

[Matthew O'Connor, Analyst at Deutsche Bank]

And maybe talk about some of regulatory costs that I think are keeping a little bit higher?

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

Matt. So I think if you look year over year just to give you a simple thing about of the expense growth from second quarter last year, second quarter this year, 400,000,000 of it was basically incentives in the wealth management business plus the what call BC and E that costed the markets based transaction activity largely markets based. So that's kind of revenue related growth, which we all cheer for growth there because that means the bottom line is growing. If you flip that around then the rest of the stuff grew at a really relatively modest growth rate. So on the if you think about it going forward out of the orders on AML that were public and stuff, we obviously put 1,000 to 2,000 people to work to clean up a lot of stuff.

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

That's now tipping over. So we feel good about that as we move into second half of the year. And then frankly the overall inflation rate and expenses are starting to flatten out, even though you hear a lot of talk about the inflation rate outside in general. But at the end of the day, we've got stability in terms of headcount in terms of third party rents and all that stuff is sort of flattening out. So we feel good about that.

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

And then the idea is then just to bring the headcount down. So if you think about it over the last fifteen years or so, we went from 300,000 people to 212,000 people. We just got to keep working that down. And we've been able to maintain flat headcount across the last four, five years as we've invested heavily in the front end of the business. And you expect us now with these some of these new techniques frankly make progress a little bit more faster.

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

So we feel good about the expense trajectory. But the key is you're not going to change some of the revenue related stuff and you wouldn't want to. On the other stuff you control the heck out of it.

[Matthew O'Connor, Analyst at Deutsche Bank]

Okay. So it does seem like the costs are coming a little bit higher, but I appreciate the kind of higher fees. I guess as we think about like more sustainable expense growth, like I know there's no official guidance for next year, but just kind of talk about do you get back into that kind of just a couple of percent growth or how should we think about it

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

over That's the longer an outsized sort of market growth or market related activity growth way above what a normal absorption rate would be. We have a model where we can run the place on a couple of 100 basis points net of expense growth, which is inflationary cost of 3%, 4% and then offsetting it by a lot of activity. As the NII kicks in each quarter we see it go growing and then growing at a little faster rate frankly as Alistair talked about that's the operating leverage kicking back in. So we had five years operating leverage disrupted by the pandemic got back in and then the rates fall off hurt us obviously from NII as that now hit a record level this quarter and is going to grow off of that record level. You'll see the operating leverage overall kick back in.

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

And the size of that revenue stream in all the businesses is huge and the company is obviously huge and that all pretty much falls to the bottom line.

[Matthew O'Connor, Analyst at Deutsche Bank]

Okay. Thank you.

[Operator]

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

[Gerard Cassidy, Managing Director at RBC Capital Markets]

Hi, Brian. Hi, Alistair.

[Alastair Borthwick, CFO at Bank of America]

Hi, Gerard.

[Gerard Cassidy, Managing Director at RBC Capital Markets]

You guys have had real success in having the digital adoption in your lines of businesses and you pointed that out in the appendix slides that you referenced. What do you think you could ever get the efficiency ratio back down to the pre pandemic levels of just under 60%? Or has the business changed so much since the pandemic that over time 59% let's call it maybe tough to achieve not near term but over time?

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

So Gerard, the one of the things that we talked about I think there's a couple of 100 basis points efficiency ratio difference due to the way the accounting treatment works for the tax incentive clean energy deals, not the housing because it won't change. But and so to the those are now changed on the statute in the runoff. But if you look at 2019 and now, 200 basis points of the efficiency ratio is just because we have an other income loss, which hurts revenue is made up of the tax line. So the bottom line effect is still positive for the company. So that's 200 basis points difference, because back then we ran about $300,000,000 a quarter of tax benefit negative other income due to the tax exempt deals.

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

Now we're running 900,000,000 And so you'll see that close out frankly as these deals sunset. Then on top of that, the NII kicking in just because of nature of it. And you'll see the consumer business get very, very efficient like it was back then just because it's NII piece basically all follows the bottom line. So we feel very good about that. So yes, we will move back down in low 60s and then potentially crack through it with obviously just the NII lift and the operating leverage lift.

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

But secondly, quite frankly, the tax credit deals will start to run off just due to the change of statute.

[Gerard Cassidy, Managing Director at RBC Capital Markets]

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

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

Yes. So focusing on stablecoins as a transactional device, if it's a new payment rail and we have trillions of dollars we move for our clients every day, We believe that if they want to use stablecoins to move part of that money, they'll move. So consider them having an account and they can send out money in U. S. Dollars.

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

They can also initiate transaction have it go into euros and it could have it go into stablecoins and then transact in that system. So we feel both the industry and ourselves will have responses. We've done a lot of work. We're still trying to figure out how big or small it is because of some of the places are not big amounts of money movement. So you'd expect us all to move.

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

You expect our company to move on that. In the end of the day, the debate will be how big an item this will be and how much more an effective payment stream it is. And there's places like small balance transfers across border that you can see the case. You can see it with sort of smart contracts and money movement. You can see it in digital native apps in app payments and stuff.

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

But we'll be there just like we were there when we moved from checks to Zelle. And you can see that when the industry puts its mind to it, if you were talking to me six or seven maybe ten years, you'd say this thing called Venmo is coming on and you guys can be left behind and here we are our Zelle payments exceed Venmo's total volumes today and the industries are multiples. It's just because we can move money efficiently and we have to be aware of the attack on the payment system and we'll be there to defend it.

[Gerard Cassidy, Managing Director at RBC Capital Markets]

And just quickly, Brian, do you think there'd be a consortium like Zelle on stablecoins where the industry defends itself and moves forward? Or will the banks go individually?

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

I think it'd be all of the above. I think in the commercial side, there might be applications more individually. But in the broad you need networks to make this all work. And we will partner with some of the stablecoin. We already have partnerships with some of them.

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

And so it will be a complex array and hopefully not complex to the customer, Frank.

[Gerard Cassidy, Managing Director at RBC Capital Markets]

Thank you for those insights. Appreciate it.

[Operator]

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

[Mike Mayo, MD & Head - US Large-Cap Bank Research at Wells Fargo]

Hey, how are you doing?

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

Good, Mike.

[Mike Mayo, MD & Head - US Large-Cap Bank Research at Wells Fargo]

I feel like you served up a good meal here. I mean, the main course, we don't lose sight of $2,000,000,000,000 of deposits where you pay 1.76% and that's certainly down quarter over quarter, year over year. The side dishes certainly look good with the NII going to escape velocity, I guess from 14.8%, said to 15.5 to 15.7% by the end of the year. But I'm still left hungry. Guess I need my dessert or something.

[Mike Mayo, MD & Head - US Large-Cap Bank Research at Wells Fargo]

I'm just wondering why even with all that improved performance, NII guide isn't even higher given the pace of loan growth. You certainly see the expectations, as Alastair said, every segment of commercial lending is doing well. You seem very optimistic about that. You're also asset sensitive and there's less rate cuts. So I guess I'm whining for some dessert, some extra. I'm left hungry. Why not more?

[Alastair Borthwick, CFO at Bank of America]

Well, Mike, you got a future as a chef. Look, think if you go to the NII Bridge on page 11 for a minute, we put this out at the beginning of the year. There's a lot can happen in a year. And I don't think any of us anticipated all the various things that happened in the course of the past six months. What's not on here, for example, is you think about international rates, they've been cut pretty significantly.

[Alastair Borthwick, CFO at Bank of America]

That's a headwind that we don't include here. So you're absolutely right. There's some things that we've been really happy with in terms of loan growth. There are some other places which have maybe grown a little less quickly. So I'd love I'd still love to see the consumer non interest bearing growing just a little faster.

[Alastair Borthwick, CFO at Bank of America]

We've got some good growth, but we'd love to see a little bit more there. But I think the balance of all of these various inputs, it all still hangs together six months later. We've removed a lot of risk from the equation, I think. And now we just have to see what happens with rates in the second half of this year. And then we just got to keep driving the same organic growth that we've been driving.

[Alastair Borthwick, CFO at Bank of America]

When we do that, NII growth for the year 6% to 7%. Hopefully, a record leaves you satisfied at the end of the year, but we'll be working on next year's course in the second half.

[Mike Mayo, MD & Head - US Large-Cap Bank Research at Wells Fargo]

All right. So when I go for my next meal next year or the year after, any kind of foreshadowing of what you're preliminarily thinking about for next year?

[Alastair Borthwick, CFO at Bank of America]

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

[Mike Mayo, MD & Head - US Large-Cap Bank Research at Wells Fargo]

All right. Thank you.

[Operator]

We'll move next to Steven Alexopoulos from TD Cowen. Your line is open.

[Steven Alexopoulos, US Large Cap Bank Analyst at TD Securities]

Hey, good morning everyone. Good morning. I wanted to start the conversation first. I love this AI Slide four. I might frame it actually.

[Steven Alexopoulos, US Large Cap Bank Analyst at TD Securities]

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

[Steven Alexopoulos, US Large Cap Bank Analyst at TD Securities]

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

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

Well, let me just walk up the coverage Stephen. But let's just step back and think about the application technology. Fifteen years ago we had 100,000 people in our consumer business. Today we have 53,000. The deposits I think at the time were say $400,000,000,000 Now they're 900 plus.

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

The numbers of checking accounts were up 50% transaction volume through the roof, etcetera, etcetera. And so all that is enabled by application technology on scale with control and resiliency. And so when you're now doing 2,000,000,000 digital interactions, have to be up all the time and we have invested probably $2,000,000,000 on what we call never down hot, hot, hot backup so that those systems can run all time. So you don't have to we don't have to debate the future. We don't you just look at what we've done.

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

We're down half the people in this business and it's bigger and more complex and more widespread etcetera. So that's one. As we look forward, you something like ERICA and it was developed when none of us knew what a large language or small language model was. It is built. It's operating.

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

And what I described earlier is it now does 20,000,000 consumers use it every quarter actively. They use it 60,000,000 times a month. This is not again and every one of those would have been a phone call and stuff. So as we bring it out to wider use case, wider things it can do and trade it on as we bring it across various parts of the company, commercial business with Cash Pro, Erica and full employees, etcetera. You're seeing these models that are the data is carefully crafted so it works.

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

They get the right decision. They can train them and we're using it in more places. So we just see that going and going and going. Now meanwhile in that consumer number, we have twice as many relationship bankers as we did at the start. So we reinvest a part of that savings to drive net checking growth on a consistent basis for five years.

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

And if you start to think about $5,000,000 net checking accounts with $9,000 of our balance sheet and start to do some math, you start to think that we've grown a good sized bank incrementally over the last four or five years. It enables you to do that while the cost structure went down $1,000,000,000 a quarter in consumer over the timeframe. So that's what happens. So you take something like this optimist model, which is a model that we've built with others third party models that we've fine tuned and the ability for fixed income traders, which is relatively bespoke still. We have one common equity.

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

We have 300 cusps for fixed income to give you example just as our company to allow them to reconcile trades all through using bots and agents between operations itself instead of emails and share drives and everything going on. It's pretty powerful. And we're just starting at seven fifty people. This is ninety days old for implementation and we'll see the benefits of that five people so far, 10 people, you'll start to see more people and we'll just stop adding stop replacing headcount attrition in these areas or reapply that headcount somewhere else. So we think there's a lot to go here.

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

And now I think I've we've got to be careful. It's got to be done right. The decisions we make are meaningful to people's lives. So it can't be made in a way that's not correct, meaning it comes up with the wrong decision. The customers are vogecious.

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

I mean, their confidence will come and go if you don't handle them right. So we have to be very careful. And that's why it's not a fast follower or a leader. It's can you apply it at scale? That's the question.

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

And if you can apply it at scale then you can get the benefits. If you can't apply it at scale meaning it isn't always up and operating then you have problems and that's what we're driving at. So you figure out in five years whether we were the leader or not the leader. We got the patents we showed you. We got the model.

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

The question is are you actually getting the benefits and the scale? We have and we will and we expect to continue and yet we're still in the early stages.

[Steven Alexopoulos, US Large Cap Bank Analyst at TD Securities]

Okay. That's great color. For my follow-up, just going back to your response Brian to Gerard's question on digital assets. As I studied BofA, I think you were the first bank out there with a mobile app. You're the first one out there with Erica, right, the digital agent.

[Steven Alexopoulos, US Large Cap Bank Analyst at TD Securities]

But it seems like the way you're thinking about stablecoins is your it's a little wait and see, right? JPM has a tokenized deposit. Citi has a tokenized deposit. I haven't seen any announcement from you guys. You don't have a large cross border business right now relative to others.

[Steven Alexopoulos, US Large Cap Bank Analyst at TD Securities]

So you could be the disruptor in this new ecosystem, same way you were with mobile, same way you were with digital agent. Are you just skeptical on what this could mean long term? Like why not lean in with this breakthrough technology the same way you have with these others?

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

You're forgetting that a lot of if you're going to go to customer facing activity in this area, we had to make sure we had legal clarity. And so that's still going on as we speak and to be able to apply it. Look, the business cases for it as incremental value are still to be proven frankly. And so that's so on Bitcoin or as you go on Blockchain, we have lots of patents. We've used it in the trade area and stuff where a lot of information's going to move with money and things like that.

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

But we still in the end of the day remember we'll move 3 or $4,000,000,000,000 today and all of it will be digital or 99% of it. So other than the cash out of the ATM and the checks written by consumers which are going down eight ten percent year over year and half the checks written that they were four or five years ago, everything else in our company moves digital. And so what's the improved process? And then there's real time and that's also connected. So we're trying to figure that out.

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

It's not cautious or not. It's just what is the client demand and when we start to see it, we have built the capabilities. We are understanding what we do and then we can roll it out. But the question is we aren't seeing clients are knocking on the door and saying please give me this right now.

[Steven Alexopoulos, US Large Cap Bank Analyst at TD Securities]

Got it. Okay. Thanks for the color.

[Operator]

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

[Erika Najarian, MD & Equity Research Analyst - Large-Cap Banks & Consumer Finance at UBS Group]

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

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

So we believe an appropriate buffer is 50 basis points plus or minus 50 basis points and that's what we are running pushing down before. We always want that to be utilized for lack of a better word by the core businesses because that's what we're here for. So we pay our dividends. We're basically using all the incremental capital to repurchase shares and then letting the businesses use up the excess capital to grow. And at the high point, I think we were 12.

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

Now we're down to 11.5%. So they're using it up. What we just did is increase the amount of which we have. So we expect them to use that and expect us to move down to 50 basis points. Now remember we got this debate between averaging and not averaging.

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

We'll see it happen. The SLR is really not relevant for us because frankly other ratios would catch us before the SLR. The G SIB calibration is critically important because people forgetting that has to happen because we're effectively using twenty ten, twenty eleven or twenty twelve data on the size of the economy in our company and other companies relative size to judge how systemically important are it was meant to be indexed. It hasn't been the proposal was indexed at the original a year ago or so from then on that wasn't really right because it skips all the run up in size at the pandemic. So we have to see more of this come together.

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

Expect us to work that capital down one way or the other way. But we're always trying to grow the company. And that's what that extra capital there is to grow the company loans, deposit loans, more interactions, more transactions. The balance sheet markets has grown and they've done a good job returning on it. So that's what we keep doing.

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

So back up 50 basis points is the target buffers. We just got a change in the last few weeks. The change is still being debated about the implementation timing. We got to get the GSIB thing figured out because if they don't index it, we'll have an increase coming at us in another year or so. And all this we're working on.

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

But at the end of the day is we've just returned all the capital we earned back to the shareholders and we'll continue to do that and more if the business can't use to grow.

[Erika Najarian, MD & Equity Research Analyst - Large-Cap Banks & Consumer Finance at UBS Group]

Got it. And just my follow-up question here, Ryan, is are there businesses that you're prioritizing in terms of redeploying that capital to that perhaps where the profitability looks better under this regime? And the $5,300,000,000 of stock that you bought back this quarter, would that be indicative of your appetite for the rest of the year?

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

I think the answer on the size of buyback is absolutely because we just did it. So obviously, didn't think of our appetite. The every business has an opportunity for growth. Some will have more RWA intensity, some will have less. If you notice the RWAs in the industry have grown and ours have grown pretty rapidly.

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

We need to all need to fine tune that. That's part due to the models and stuff that are being pushed around behind the scenes. Hopefully we get more rational discussion about. But every business has the opportunity to grow. We and so the most discrete decision we made was to put with Jim Demar and team is to give them more capital and capacity to grow and they've used that wisely.

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

But if you look across our businesses that's the lowest return on allocated capital. So we have to be careful to get the returns. We have to make sure that the wealth management business and the consumer business which have very high returns on capital are also growing. So everybody can grow if they need the capital, they'll take it down. And we've there's no the issue is always how much expense you can deploy to grow more than it is how much capital you can deploy.

[Erika Najarian, MD & Equity Research Analyst - Large-Cap Banks & Consumer Finance at UBS Group]

Got it. Thank you.

[Operator]

We'll move next to Betsy Graseck with Morgan Stanley. Your line is open.

[Betsy Graseck, Global Head - Banks & Diversified Finance Research at Morgan Stanley]

Hi, good morning.

[Betsy Graseck, Global Head - Banks & Diversified Finance Research at Morgan Stanley]

Two questions. One, a follow-up on what you were just talking about. I was wondering with relation to markets RWA. I thought in the past there had been no kind of ceiling on that that now is gone. And can you talk to how much RWA are you willing to allocate to the markets business?

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

As long as they can get the returns and that's the key because we got the dynamics of their return on allocated capital. We got the dynamics of their impact on net interest income. So Jim and the team have got to get the returns and return on assets has to be moved towards 100 basis points and beyond. So there's no theoretical ceiling. It's just the dynamics of how far they can go before they do it.

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

We went from a 600 or $700,000,000,000 balance sheet to base good trillion and that will ebb and flow based on clients activity. The GSIB buffer calculation, we're not worried about that. We've gone from basically $250,000,000 to 3,000,000 and it will move up. So we wouldn't worry about that because as they're deploying they're actually getting enough return and it's absorbing the impact to the rest of the company. That's the other thing you always have to be careful of is if markets can cause a GSIB trigger and everybody pays for it.

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

And so we make sure that they can actually get the return to justifies not only what goes into their business, but what the whole company experiences. And that's why it's the calibration is critical. We got to get these things all work together and the calibration of G SIB is critical. And the reality is that you've had a basic 20% growth in the capital requirements. There's no major change in risk for most of us across the last three or four years just by methodologies of G SIB creep and RWA calculations behind the scenes where they're pushing us on the models and stuff like that.

[Alastair Borthwick, CFO at Bank of America]

But Betsy, not aware of any RWA ceiling. And the Global Markets business as you've seen, it's just growing as the company grows and we've just continued to invest there.

[Betsy Graseck, Global Head - Banks & Diversified Finance Research at Morgan Stanley]

Okay, great. And then follow-up question is just on the question on how you are approaching your wind and solar investments with the tax plan that is going through?

[Alastair Borthwick, CFO at Bank of America]

Yes.

[Betsy Graseck, Global Head - Banks & Diversified Finance Research at Morgan Stanley]

How are you thinking about that business and how should we be anticipating how that will roll through your P and L?

[Alastair Borthwick, CFO at Bank of America]

Yes. So I read your report. I think it was pretty good in terms of laying out what the issues are. What we're anticipating is there's going to be a period here where our clients are still going to want to install wind and solar. So we're obviously going to support that.

[Alastair Borthwick, CFO at Bank of America]

Now they have to get them into production. And they have to get it all they have to get construction started by a couple of different dates. But you can think about it as between now and 2027, that's when you're going to see all of these things begin to slow and then stop. We happen to have, number one, an installed base of production tax credits. So that will stay with us.

[Alastair Borthwick, CFO at Bank of America]

But those will begin to burn down over the course of the next eight years. That's the way I would think about that. And then the low income housing tax credits aren't impacted. So we anticipate we'll continue to be involved with those. So I would say we're likely to be involved in deals for the next couple of years.

[Alastair Borthwick, CFO at Bank of America]

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

[Betsy Graseck, Global Head - Banks & Diversified Finance Research at Morgan Stanley]

And then the housing, does the housing investments increase to offset that wind and solar fade?

[Alastair Borthwick, CFO at Bank of America]

Well, that's largely a question of the size of that market. So if that market sort of grows with GDP, it may not increase in terms of the size that we do as a company because we're just supporting the clients that we're working with. But if it were to grow significantly, then it could take some of that gap. But I'm not sure that will happen.

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

Yes. I think the housing has been a relatively constant number where the clean energy, the wind and solar in particular is going to be in a temporal now because of the stuff that goes on and the effects downstream etcetera like that. The housing is pretty consistent. It's just a question of how as Alistair said, how big the demand can be and how competitive market other people go for it too. So I wouldn't expect that to come close to absorbing that.

[Betsy Graseck, Global Head - Banks & Diversified Finance Research at Morgan Stanley]

Okay. Excellent. Thank you.

[Operator]

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

[Christopher Mcgratty, MD & Head of U.S. Bank Research at Keefe, Bruyette & Woods (KBW)]

Great. Good morning.

[Alastair Borthwick, CFO at Bank of America]

Good morning, Chris.

[Christopher Mcgratty, MD & Head of U.S. Bank Research at Keefe, Bruyette & Woods (KBW)]

Brian, you've talked a lot about this responsible growth and the credit has been tremendous over the years. In terms of the journey on the growth portion, I'm interested in your assessment of where you are versus where you desire to be. And then maybe secondarily, a little bit more comments or color on the loan growth in the quarter, the conversations that you're having with borrowers, the degree of confidence. Thank you.

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

So I think we always are pushing our team to grow faster. You have loan growth faster and deposit growth, but faster and the economy grows and outgrow the economy and then turn that into strong profit. I think you've seen them do that. I think the commercial loan growth, leave aside the markets, which you can look at and that has elements to it, which are specific to the clients that we work with that are financing pools of assets and etcetera. If you look in the core middle market, Wendy and the team have done a good job growing the core middle market business even within nature of the frankly the commercial real estate flat to down.

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

So she's grown I think 6%, 8% year over year absent commercial real estate. The small business banking area the loan growth was okay over the years. We now have added a lot of capacity. That's up to fit demand our revenue companies. We effectively doubled the size of sales force by converting in some of the branch based sales force into that group.

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

They've started to grow the balances now. We'll see some growth there. It's a small portfolio of $13,000,000,000 Small business generally, is a much larger portfolio is growing mid single digits or higher year over year. They've done a good job. So we feel good about loan growth.

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

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

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

But you got to be careful of the volatility of consumer credit when we still have unemployment predicted to go up, in most of the surveys we look at. So we're being careful there too.

[Christopher Mcgratty, MD & Head of U.S. Bank Research at Keefe, Bruyette & Woods (KBW)]

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

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

Yes. Well, I think if you're talking about acquisitions in the deposit side, that's not available to us. But in technology space, we bought some companies over the last several years, but they're going to be relatively small uses. Bought one in the medical payments area then we can bring it to our scale and work it through. And so there's possibilities in that area.

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

But really it's organic growth is the reality because at the end of day our huge deposit share for thirty years plus we've not been allowed to buy another depository institution. So that game is done. How we got to do its organic expansion and that's what we did in all the markets and we're continuing to push the expansion markets we call them and we're seeing success there. We'll continue that push. But that's more of a deployment of resources.

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

So we take them out of places and push them. So we're down overall branches year over year. You can see that, but in these new markets have grown. So it's more of an expense redeployment question and a human being redeployment questions to get the efficiencies than it is a capital deployment question frankly.

[Christopher Mcgratty, MD & Head of U.S. Bank Research at Keefe, Bruyette & Woods (KBW)]

Right. Yes. Was definitely referring to non bank. So appreciate the color. Thanks Brian.

[Operator]

We'll move next to Jim Mitchell with Seaport Global. Your line is open.

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

Hey, good morning everyone. Alistair, I know you don't want to give a hard target for NII for next year. I appreciate that. But with the high jumping off point and then you have a little more puts and takes the most, I guess, you have potential headwinds from the BISB accretion rolling off, you got rate cuts embedded in the forward curve, but loan growth and deposit growth are picking up, cash flow hedges are rolling off, asset repricing. How does it all in your mind, does it all fit together next year?

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

Can you grow off that 4Q jumping off point in your mind? Or just any thoughts would be great. And the answer is yes.

[Alastair Borthwick, CFO at Bank of America]

Look, the answer to that is yes. Because the company is built, as Brian said, for organic growth. So as we continue to add clients, as we do more with the existing client base, that's when you see the loan growth and the deposit growth coming through. So there's always headwinds in any given year. But our mentality will be, when we come off of Q4, how do we grow NII sequentially each quarter from there?

[Alastair Borthwick, CFO at Bank of America]

And we're going to benefit again from that fixed rate asset repricing again next year. So that acts as a tailwind. The first quarter is just a little bit different because of day count. But in general, I think you should think about NII as at least our expectation is we're just going keep growing it quarter after quarter.

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

Okay. That's great. And just maybe just you had highlighted that balance sheet mix has changed a little bit and you're focused more on NII growth than NIM. I know you had historically or previously talked about a two twenty to two thirty longer term target. Is that different now?

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

Or how do you think about that longer term target?

[Alastair Borthwick, CFO at Bank of America]

No, it's not different. I just think any given quarter can be interesting. And this quarter was interesting because number one, we had really high volumes in active markets. So in a period like that, global markets clients are asking us for balance sheet. We're going to provide that, assuming it's well priced and we felt like it was.

[Alastair Borthwick, CFO at Bank of America]

So we saw the global markets business take on more in the way of earning assets that sometimes NY dilutive, But it can still be NII slightly positive. So you've got a little bit of that going on. And then in commercial this quarter, we just took on some I mentioned this in the speech, but we took on a couple of very large commercial deposits at the end of the quarter. And those are NII dilutive, but slightly NII positive. So I think in the grand scheme, this was just an interesting quarter where the NII came in slightly differently.

[Alastair Borthwick, CFO at Bank of America]

But the long term remains exactly the same. We're going to drive it back to that $220,000,000 to $230,000,000 with every available opportunity.

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

Okay, great. Thanks for taking my questions.

[Operator]

It does appear that there are no further questions at this time. I would now like to turn it back to Brian for any additional or closing remarks.

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

So thank you again for spending the time with us this morning. I'll leave you where we started. We saw organic client activity across the board. We're now seeing the second half benefits of the kick in and we'll expect to get the kick in in NII pushing operating leverage back in the business. That will continue to be solid revenue growth and earnings per share as we look forward.

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

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

[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

• John McDonald, Senior Research Analyst at Truist Securities
• Ken Usdin, Senior Research Analyst, Large-Cap Banks at Autonomous Research
• Matthew O'Connor, Analyst at Deutsche Bank
• Gerard Cassidy, Managing Director at RBC Capital Markets
• Mike Mayo, MD & Head - US Large-Cap Bank Research at Wells Fargo
• Steven Alexopoulos, US Large Cap Bank Analyst at TD Securities
• Erika Najarian, MD & Equity Research Analyst - Large-Cap Banks & Consumer Finance at UBS Group
• Betsy Graseck, Global Head - Banks & Diversified Finance Research at Morgan Stanley
• Christopher Mcgratty, MD & Head of U.S. Bank Research at Keefe, Bruyette & Woods (KBW)
• James Mitchell, Senior Equity Analyst at Seaport Global Securities