BofA (BAC) Q2 2025 Earnings Call Transcript

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DATE

Wednesday, July 16, 2025 at 8 a.m. ET

CALL PARTICIPANTS

Chair and Chief Executive Officer — Brian Moynihan

Chief Financial Officer — Alastair Borthwick

Senior Executive Vice President — Lee McIntyre

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TAKEAWAYS

Revenue: $26.6 billion (FTE basis) for Q2 2025, up 4% year over year compared to Q2 2024.

Net Income: $7.1 billion for Q2 2025, reflecting a 7% year-over-year increase in earnings per share to $0.89.

Net Interest Income (NII): $14.8 billion on a fully taxable equivalent basis, representing a 7% increase over the prior year and marking the fourth consecutive quarter of NII growth.

Sales and Trading Revenue: $5.4 billion, ex-DVA, up 15% year over year, with Fixed Income, Currencies, and Commodities (FICC) growing 19% year over year and equities revenue up 10% year over year.

Investment Banking Fees: $1.4 billion in the quarter, down 9% year over year compared to Q2 2024, but with improving momentum through the quarter and a sustained third-place market position year-to-date.

Non-Interest Expense: Just under $17.2 billion, down $600 million, primarily due to absence of payroll tax seasonality; year-over-year expense rose just over 5%.

Return on Assets (ROA): 0.83% andReturn on Tangible Common Equity (ROTCE): 13.4%, both delivered.

Capital Return: $5.3 billion in share repurchases and $2 billion in dividends; total first-half 2025 capital return of $13.7 billion, up 40% compared to the first half of 2024.

Loan Growth: Average loans of $1.13 trillion, up 7% year over year, with 10% growth in commercial loans.

Deposit Growth: End-of-period deposits up $22 billion sequentially and over $100 billion year over year, with average deposits now having risen for eight consecutive quarters.

Credit Quality: Net charge-offs were $1.5 billion, with consumer net charge-offs declining linked quarter and commercial real estate office charge-offs were elevated; total net charge-off ratio of 55 basis points.

Efficiency Ratio: Consumer Banking efficiency ratio improved by more than 200 basis points to 51%.

Tangible Book Value per Share: Rose 9% year over year to $27.71.

Digital Engagement: 65% of consumer product sales were digital, 80% of consumer households are digitally engaged, and the quarter saw 4 billion digital logins.

Guidance: Alastair Borthwick maintained guidance for fully taxable equivalent NII exit rate in Q4 2025 at $15.5 billion to $15.7 billion, implying a full-year NII improvement of 6%-7% for 2025.

SUMMARY

Bank of America Corporation (NYSE:BAC) demonstrated broad-based revenue growth and continued capital return, supported by disciplined expense management and robust credit quality. Management highlighted the increased pace of digital engagement, with substantial investment in AI and technology platforms helping drive operational efficiencies and product innovation. Executives repeatedly affirmed unchanged and constructive NII guidance for the year, underpinned by steady commercial loan growth, deposit inflows, and momentum in fixed-rate asset repricing, while prudently flagging the impact of international rate dynamics and regulatory factors on future financial outcomes.

Borthwick stated, "Provision expense for the quarter was $1.6 billion with asset quality remaining in great shape."

Moynihan indicated a planned move to a 50-basis-point capital buffer, reflecting intent to deploy excess capital into growth or further shareholder returns, as regulatory developments warrant.

Expense growth comprised higher incentives linked to wealth management and markets businesses, regulatory compliance efforts, and inflationary pressures, but management expects the cost trajectory to flatten or tick lower as revenue-related expenses normalize in the second half of 2025.

Executives detailed active capital reallocation to the Global Markets segment, citing increased returns and the absence of a fixed ceiling, provided that return-on-assets and allocated capital remain compelling.

AI investments are producing measurable operational benefits, such as Erica enabling over 58 million client interactions per month and achieving 90% employee utilization, and AI-driven code generation now saving 10%-15% of programming costs.

INDUSTRY GLOSSARY

Fully Taxable Equivalent (FTE): A method of adjusting income to reflect the pre-tax equivalent yield, facilitating comparability across taxable and tax-exempt revenue streams.

Sales and Trading, ex-DVA: Revenue from sales and trading activities excluding Debt Valuation Adjustments, giving a clearer view of core trading operations.

Global Wealth & Investment Management (GWIM): The segment managing investments, banking, and advisory solutions for high-net-worth clients, including Merrill and the private bank platforms.

Return on Tangible Common Equity (ROTCE): Net income available to common shareholders divided by average tangible common equity, measuring profitability relative to tangible shareholder capital.

Common Equity Tier 1 (CET1) Ratio: A regulatory capital ratio measuring a bank's core equity capital against its risk-weighted assets.

Supplemental Leverage Ratio (SLR): A regulatory measure of capital adequacy calculated as Tier 1 capital divided by total leverage exposure, including off-balance-sheet exposures.

Total Loss Absorbing Capacity (TLAC): The minimum amount of capital and long-term debt that a global systemically important bank must hold to absorb losses and recapitalize in resolution events.

Asset-Based Securitization (ABS): Financing provided to clients based on pools of assets such as loans or receivables, collateralized to mitigate risk.

Operating Leverage: The degree to which revenue growth exceeds expense growth, leading to improved profitability margins.

Erica: Bank of America’s artificial intelligence-driven virtual assistant for clients and employees, supporting digital banking and operational tasks.

Full Conference Call Transcript

Lee McIntyre: With that, Brian, I will turn the call over to you. Good morning, and thank all of you for joining us for our second quarter 2025 earnings results. First, a couple of words on the environment. We continue to see solid consumer spending data, as you can see on our page 21 of the deck. Improving credit quality that Alastair Borthwick 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 will talk about.

We also see our clients continue to seek clarity with the changes in trade and tariffs and now with the tax bill passing. We can see them start to understand the future and expect them to behave accordingly. 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 at 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 as follows. We produced another solid quarter of revenue growth, earnings, and returns.

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 also on the operational excellence side. We are continuing to see the benefits of our long-term investment in technology, capabilities, digitization, machine learning, now we are starting to see at the beginnings at the AI practices that we develop pay off. And we are looking forward to much more. On Slide two, we start the earnings discussion. This morning we reported revenue of $26.6 billion on an FTE basis net income of $7.1 billion after tax. And earnings per share of $0.89 for the second quarter.

On a year-over-year basis, we grew revenue 4% and grew earnings per share 7%. We produced a return on assets of 83 basis points and return on tangible common equity of 13.4% in the second quarter. We have produced $14.8 billion in NII, a record for the company. Growing 7% from the second quarter in 2024. This represents the fourth quarter of NII growth in line with the guidance we have been giving you. Supporting that average deposits have now grown for eight consecutive quarters and we have achieved this while maintaining very disciplined deposit pricing. That is 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 DeBarr and the team continue to do a good job there. Revenue was up 15% over the prior year quarter. We also produced more than $1.4 billion in firm-wide investment banking fees, and the better quarterly results improved as each month of the quarter progressed. We reported expense below $17.2 billion this quarter, $600 million lower than the first quarter of 2025 in line with the expectations we gave you. We reported our sixth consecutive quarter of net charge-offs at around the $1.5 billion level. This is a little bit of a tale of two cities.

Consumer net charge-offs were lower. 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 will see the reduction in NPLs related thereto. The good news is that most of those second quarter charge-offs were previously reserved it had a modest impact on our profitability for the quarter. 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, we repurchased $5.3 billion in shares and paid $2 billion in dividends. The first half of 2025, we have returned $13.7 billion in total capital 40% higher than the first half of 2024. 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. 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, 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, up putting the effects of the pandemic surges behind us. This quarter we crossed the milestone of 5 million net new checking accounts over the last six years. We saw increases in 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. Loans were once again up year over year and reflecting the commitment to add more bankers in markets that we serve across United States. In wealth and investment management client balances reached $4.4 trillion saw strong AUM flows and loan demand as well as market appreciation. Our advisors continue to deliver comprehensive banking solutions to help our clients achieve their goals. In our global banking business, client activity remains solid.

Commercial clients are actively using their credit facilities albeit at still a lower level than they used them as a percentage prior to pandemic and our risk management approach remains very disciplined. We added more than 1,000 net new clients most of them driven by our payments capabilities. Global markets continue to perform well with a record second quarter level of sales and trading revenue. Institutional clients sought funding of their warehouse of loans and other needs at increased pace with high-quality collateral. Organic growth means that we are also investing in our own capabilities, people and our technology to serve our clients more effectively.

Those investments have led to continued expansion in digitalization and engagement across all our lines of business. Nearly 80% of our consumer households are now fully digitally engaged. And they have benefited from our award-winning platforms. Just to give you a sense of the volumes, in the second quarter alone 4 billion logins were made by our consumer. In the second quarter, 65% of our consumer product sales were digital. You can see all these trends in our disclosures on Slides 24, 26, and 28 appendix. I commend you to review them to see how the technology application can be scaled and applied across the businesses.

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 you are turning in the company, due to the NII growth. It is key to note we have fully absorbed the cost of the last several years of inflation and wages over 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.

Customer behavior also changed and matched digitization simplification of products, machine learning and models and process improvements helped us get there. Now we have a chance to capture the value 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. 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. It averages over 58 million interactions per month. Today, helping to make it easier for clients to bank how they want and where they want. We also leveraged Erica capabilities for use 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 management 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. In our operations group, AI tools help improve our process around customer satisfaction. One chat-based AI product works between markets and operations allows us to have 750 people engaged 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 250 AI and learning models in the company. We are currently working through many dozens of our AI proof of concepts beyond what I just spoke about. These investments are intended to help growth improve the client experience and our own productivity. So if you think about the quarter before I turn it over to Alistair, just a few points. We saw 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 manage risk well that drove healthy returns and we kept delivering more capital back to use our shareholders. With that, I will turn it over to Alistair.

Brian Moynihan: All right. Well, thank you, Brian. I am going to skip slide five the earnings presentation since Brian covered most of that already. And I just want to provide a little more context on the highlights of the quarter starting on Slide six. Where you can see revenue of $26.6 billion on an F basis grew more than 4% from second quarter last year. Now we saw the year-over-year revenue growth in several areas. NII grew 7%, and represented 55% of total revenue. Investment and brokerage fees rose 11% with both assets under management flows and market levels contributing nicely to the growth. This quarter's $5.4 billion of sales and trading revenue grew 15% from the year-ago period.

Service charges grew 7% with particular strength in Global Payment Solutions. And card income improved 4%. And while investment banking was down 9% from the second quarter of 2024, momentum built across the quarter with a good pipeline. Non-interest expense was a little less than $17.2 billion and down nearly $600 million from Q1 driven by the absence of Q1 seasonal elevation in payroll taxes. Provision expense for the quarter was $1.6 billion with asset quality remaining in great shape. And we reduced our outstanding shares by almost 4% from the second quarter of last year, 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. And here total assets ended the quarter at $3.44 trillion that is up $92 billion from Q1 driven by strong loan growth and a higher level of client activity in global markets. Deposits were up $22 billion on an end of period basis from Q1 and up a little more than $100 billion from the year-ago period. Deposits reflect the seasonal headwind from income tax payments, And so inflows that more than offset the tax payment activity. Average global liquidity sources of $938 billion remain strong.

Shareholders' equity at €300 billion was up €4 billion from last year as we issued $3 billion of preferred stock this quarter, to replace redemptions from last quarter and we saw modest improvement in AOCI. Otherwise, net income was offset by distributions of capital to shareholders. We returned $7.3 billion of capital back to shareholders with $2 billion in common dividends paid and $5.3 billion 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 looking at regulatory capital, our CET1 level remains stable at $2.00 billion 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 roles, 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. Our supplemental leverage ratio was 5.7% versus a minimum requirement of 5% and that leaves plenty capacity for balance sheet growth and we have $473 billion 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 of 2023. And that momentum continued as we average $2 trillion for the July.

Typically, see downward pressure on deposits as we move from Q1 to Q2, as clients pay their income taxes. And this year we had enough growth to more than offset those tax payments. Average consumer deposits rose $4 billion from Q1, concentrated in non-interest bearing. We also saw significant growth in global banking deposits $28 billion or 5% from Q1 and this included some shorter-term deposits from deal-related activity. And that allowed us to outpace the tax payment related declines in our wealth business as well as corporate CD placements that matured with our institutional clients. In addition, we remained disciplined on pricing to achieve that growth. Overall rate paid on total deposits declined three basis points.

Led by a three basis point decline in consumer. And the rate paid on $952 billion of consumer deposits was 58 basis points in the second quarter. Let's turn to loans by looking at the average balances on slide nine. Loans in the second quarter of $1.13 trillion improved 7% year over year driven by 10% commercial loan growth. Every business segment recorded higher average loans on both a year-over-year basis and a linked quarter basis. Drilling down on commercial loans, we saw linked quarter growth in every segment of the commercial lending spectrum. Small business and business banking both grew and we recently combined the coverage model here to provide more calling capacity for our bankers.

In middle market lending, we saw a nice increase in revolver utilization during the quarter as clients navigated the current environment. And in GCIB, we had a little more demand from our larger corporate clients. Global markets, we have been able to take advantage of strong financing demand in the market marketplace from institutional borrowers, we lend against diversified collateral pools. Now, the largest growth areas year over year have been in asset-based securitization, and in credit. And in ABS, we are 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. On a GAAP non-FTE basis, NII in Q2 was $14.7 billion and on a fully taxable equivalent basis, NII was $14.8 billion and as I said earlier, that's up 7% from the second quarter.

NII grew $227 million on a fully taxable equivalent basis over Q1, driven by higher loan and deposit balances one additional day of interest, and fixed rate asset repricing. Lower loan yields from lower foreign interest rates partially offset those positive contributors. The net interest yield or NIY declined five basis points reflecting a roughly $80 billion increase in earning assets driven by global markets activity. Loans and trading assets generated in global markets contribute solid net interest income but at a lower relative yield to the overall company. Net interest yield. Additionally, some of the deal-related commercial deposit growth with relationship clients was net interest income accretive and modestly net interest yield dilutive.

My point here is that net interest income growth continues to be the focus with net interest yield being an output. With regard to interest rate sensitivity on a dynamic deposit basis, we provide a twelve-month change in net interest income. For an instantaneous shift in the curve. 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 $2.3 billion and if rates went up by 100 basis points, net interest income would benefit roughly $1 billion. Let me turn to a forward view of NII.

Let's turn to Slide 11. And there remains a good amount of uncertainty from the impacts related to announced tariffs and the potential for continued uncertainty. Also seen volatility in expectations of future interest rate cuts, So let us give you a few thoughts about the rest of 2025. In January, and again in April, we provided our expectations that we could exit the fourth quarter of 2025 with interest income on a fully taxable equivalent basis in a range of $15.5 billion to $15.7 billion also noted our expectation that growth would accelerate in the second half of 2025. 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 have 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. And lastly, global markets businesses 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 of year remains unchanged at $15.5 billion to $15.7 billion and that would result in record NII and a full year NII improvement of 6% to 7%. Okay, let's turn to expense and use slide 12 for the discussion there. We reported a little less than $17.2 billion in expense this quarter and this reflects a nearly $600 million decline from Q1 driven by the absence of seasonal elevation from payroll tax expense 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, hardware and leased space among many other areas. On the people side, we continue to be an employer of choice with a strong 92% retention rate among our employees. And this quarter, we welcome more than 1,700 interns and our headcount excluding those summer additions has fallen 1,500 from the beginning of the year proving that we continue to manage our headcount effectively and the associated expense. Next quarter we will bring on more than 2,000 campus graduates to begin their careers.

As we move through the back half of the year, we believe expenses will flatten out here and potentially move a touch lower if we see seasonally lower markets related costs. That coupled with the expectation of improved NII is anticipated to provide operating leverage in the second half of the year and an improved efficiency ratio. Let's move to credit. We will turn to slide 13, where you can see that asset quality remains sound. Net charge-offs were $1.5 billion up modestly compared to Q1, and that's the sixth consecutive quarter that net charge-offs have hovered around $1.5 billion. The total net charge-off ratio this quarter was 55 basis points up a basis point from the first quarter.

Q2 provision expense was $1.6 billion and mostly matched the net charge-offs Modest reserve builds in some areas primarily for loan growth were mostly offset by releases associated with lower office exposures and mainly from sales. Consumer net charge-offs were $1.1 billion down modestly linked quarter and consistent with the past few quarters. 90% of our consumer net charge-offs are driven by credit card, that highlights the importance of prudence in the underwriting growth of that portfolio. It's worth noting the net loss rate on credit card declined year over year for the first time this quarter since early 2016 outside of the pandemic period.

On the commercial side, we saw losses of $466 million that's up from Q1 driven primarily by office exposures and their associated sales as I noted earlier. 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 CRO CRE loans. That commercial and industrial loan book is $564 billion and the loss on this book was nine basis points this quarter. It's averaged eight basis points from 2013 until now.

Focusing on total net charge-offs again and looking forward in the near term, we would not expect much change in the total net charge-off ratio given the steadiness of consumer delinquencies stability of C 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 $10.8 billion in revenue that grew 6% year over year and $3 billion in net income that grew 15%.

Results were driven by the increasing value of our low-cost deposit franchise. Innovation and deposit products like family banking, and new higher value cash back credit cards coupled with our industry-leading preferred rewards program deliver total value for clients which we believe do not get elsewhere. This value recognition and disciplined pricing also drove a 7% improvement in NII. 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. Investment balances grew 13 percent $540 billion with market improvement and full year flows of $19 billion And as I noted earlier, consumer net charge-offs improved linked quarter following the move lower in delinquencies. The loss on credit card fell 23 basis points to 3.82% and delinquencies declined for the second consecutive quarter. And finally, you can see in the appendix on slide 24, digital adoption and engagement continue to improve and customer experience scores rose to record levels illustrating clients appreciation of enhanced capabilities from our investments.

Moving to wealth management on slide 16, the business delivered another solid quarter where we added new households, deepened existing relationships, and saw strong client flows. The business generated net income of a billion dollars on strong loan growth and solid AUM flows. 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. Merrill and the private bank now manage nearly $4.4 trillion in client balances and continue to see organic growth that produce strong AUM flows of $82 billion in the past year contributing nearly 5% growth in AUM balances.

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, added 7,100 net new relationships, and in both businesses, the size of the relationships added continued to expand. Also continue to add financial advisors to the sales force in Merrill, and the private bank through our extensive training program and experienced higher hiring of advisors. Approximately one-third of net new households in Q2 were added by our newly trained. We are not only growing relationships, but we are also deepening as the number of clients that have banking products with us to nearly 63%.

And while this is primarily a fee-based advice-driven model, about 30% of our revenue is now net interest income derived from GWIM clients and the large loan and deposit balances on us. In Q2, we reported revenue of $5.9 billion growing nearly 7% over the prior year led by that 9% growth in asset management fees. Expense growth of 9% supported both the cost of the increase in revenue related incentives as well as investment in technology and cost of hiring to add experienced advisors to the platform in Merrill and the private bank. Average loans were up 7% year over year driven by strong growth in custom lending, securities-based lending and a pickup in mortgage lending.

Saw solid deposit inflows and overall deposits declined as a result of the seasonal headwind of income tax payments. And some continued movements to other parts of our investment platform in search of higher yield. Our pricing discipline resulted in a three basis point decline in rate paid. We also draw your attention on slide 26 to the continued digital momentum in this business. New accounts continue to be opened predominantly digitally. Slide 17 shows the global banking results where the prior year rate impacts lowered NII. And this segment has the toughest challenge to make that ground back through growth and pricing.

In Q2, Global Banking generated net income of $1.7 billion Business activity was solid in Q2, We already discussed the strong deposit growth solid loan growth and investment banking fees that gained momentum through the quarter. While business activity was solid, overall net income fell. NII declined year over year from lower rates on the variable loans, and 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.

Firm-wide investment banking fees were $1.4 billion 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. Switching to global markets on slide 18, I will focus my comments on results excluding DVA as I normally do. And as Brian said, we continued our streak of strong revenue and earnings performance achieved operating leverage, and once again delivered a good return on capital. In Q2, we generated net income of $1.6 billion which grew 11% year over year.

Revenue, and again this is 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 $5.4 billion Sales and trading built off the momentum of the first quarter. 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 FICC 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 million in Q2 with very little to talk about here. The tax rate ended at 7.4%. It was a little lower than last quarter driven by $180 million of discrete items. And excluding those $180 million of discrete items, and the tax credits related to investments in renewable energy affordable housing, the effective tax rate would have been much closer to a normal corporate tax rate at approximately 24%. So with that, I will stop there Thank you everyone. And with that, we will open up for Q and A please, Chloe.

Operator: Certainly. We will take our first question from John McDonald with Truist Securities. Your line is open.

John McDonald: Wanted to ask about good morning, guys. I wanted to ask about retail deposit progress. Been a lot of talk about different ways to measure retail deposits 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 have done and what your ambitions are that front.

Brian Moynihan: Well, in the end of the day, if you look at the consumer business with $950 billion in deposits, operated very efficiently. The cost of deposits, meaning all the cost over the deposits running under 146 basis points The total rate paid 58 basis points, 58% of the balances are in checking accounts. You know, it's a tremendous business, and we will only get more and more profitable as ANI kick in because they are the biggest beneficiary of that. So if you think about it in terms of deposit growth, we look pre-pandemics now, our team's gone from $700 billion odd numbers to $950 billion.

We have grown our deposits as a company faster than industry grew the pre-pandemic to now. 39% versus the industry, like 37% and large banks 32 And obviously, we contribute to the large bank growth rate So we feel very good about it. The key is they have grown checking accounts for five years now. They have 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 are 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 and it went into pandemic about $66,000 or 7,000. So seeing that growth. So we feel good about that. Overall, our average deposit size per branch is $500 million versus next best at 400 and the one behind that at 300. So I do not know all these methodologies. You guys can look at them. It's a lot of palaver and a lot of debate. The end of the day is we are going to deposit fast industry, and they and 90% of core checking, the checking accounts consumer satisfaction is the highest it's ever been, so we feel very good about it. Okay. Thanks, Brian.

Alastair, I wanted to follow-up on your expense commentary. Can you elaborate on the outlook for the second half? I think your prior outlook implied some improvement in the second half, and I think you just said you may or may not see that depending on the of the markets business?

Alastair Borthwick: Well, I think what we are trying to say is it always starts with us with headcount discipline. So the headcount has been pretty flattish. We have managed that pretty well all the way through the year. We do not see any change in that So then the only variable that's that's left really is gonna be around revenue related Now we have seen pretty good growth obviously in sales and trading. Up 15% year over year. We have seen pretty good growth in AUM fees up 10%. So 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: Okay. Thanks.

Operator: We will take our next question from Ken Usdin with Autonomous Research. Your line is open. Your line is open,

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

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

Ken Usdin: Okay. And then just on the I think we know that the and mortgage loans, but can you kind of just dig us in a little bit on cash flow hedges and what you are seeing in that? Are you still moving forward with the same strategy, off and on and how much you are picking up on those Yeah. So there's no change there at all. That's exactly what we are doing. Just as the old ones roll off with lower coupons, we are replacing them with new ones with higher coupons. No new news there. So still in that plus 150 or so range that you said last quarter?

Alastair Borthwick: 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 will just share that with you at the time.

Ken Usdin: Okay, great. Thanks a lot, Alistair.

Alastair Borthwick: Yep.

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

Matt O'Connor: 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 put you up, you know, call it 3.5% or so on a full year basis. And I think the prior guide was up 2% to 3% or the high end of two to three. Can you just kind of circle back to the cost versus what you were thinking? Previously and maybe talk about some of regulatory costs that I think are keeping a little bit higher?

Brian Moynihan: Hey, Matt. So let's so I think 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 we call BEC and E that cost it of the markets based transaction. Activity, largely markets based. 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 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 a 1,000 to 2,000 people to work to clean up a lot of stuff that's now tipping over. So we feel good about that as we move into second half of the year. Then frankly, 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 have 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.

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. It would be able to maintain flat headcount across the last four or five years as we have 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. So we feel good about the expense trajectory, but the key is you are not going to change some of the revenue related stuff and you would not want to.

On the other stuff, you control the heck out of it.

Matt O'Connor: 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 percent growth or you know, how should we think about it in the longer?

Brian Moynihan: That's that's an outsized sort of market growth or market related activity growth. Way above what a normal absorption rate would be. If we have a model, we can run the place on a couple 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, you know, 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 in it's going to grow off of that record level. 'll see the operating leverage overall kick back in. In the size of that revenue stream in all the businesses is huge. And the company is obviously huge and that all pretty much falls the bottom line.

Matt O'Connor: Okay. Thank you.

Operator: We will move next to Gerard Cassidy with RBC. Your line is open.

Gerard Cassidy: Hi, Brian. Hi, Alistair. Hi, Gerard. Hi, 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, may be tough to achieve, not near term, but over time?

Brian Moynihan: So, Gerard, the one of the things that we talked about, I think there's a couple 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 will not change, but and so to the yep. Those are now changed on the statute in the runoff. But if you look at 'nineteen and now, 100 basis points of the efficiency ratio is just we have an other income loss which hurts revenue is made up in a tax line. So the bottom line effect is still positive for the company. So that's 200 basis points difference.

Because back then, we ran about $300 million a quarter of tax benefit negative other income due to the tax exempt deals. Now we are running 900. And so you will see that close out frankly as these deals sunset. Then on top of that, the NII kicking in just because of nature of it, you will see the consumer business get you know, very, very efficient. Like it was back then just because it's an piece basically all follows the bottom line. So we feel very good about that. So yes, we will move back down and low 60s and then potentially crack through it. With obviously just the NI lift and the operating leverage lift.

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

Gerard Cassidy: 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: Yep. So focusing on stable coins as a transactional device. You know, if it's 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 will move. So consider them having an account and they can send up money in U. S. Dollars, they can also initiate transaction, have it go into euros and it could have it go into stable coins and then transact to that system. We feel both the industry and ourselves will have you know, a happy response. We have done a lot of work.

We are 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 would expect us all to move, you expect our company to move on that. You know, in the end of day, you know, the debate will be how big a 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.

But we will 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, you were talking to me six or seven maybe ten years, you would 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. The industries or multiples. It's just because you know, we can move money efficiently and we have to be aware of the attack on the payment system and we will be there to defend it.

Gerard Cassidy: 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: I think it would be all of the above. I think they're in the commercial side, there might be applications more individually, but in a broad you need networks to make this all work. And we will partner with some of the stablecoin we already have partnerships with some of them. And so it will be a complex array and hopefully not complex to the customer,

Gerard Cassidy: Thank you for those insights. Appreciate it.

Operator: We will move next to Mike Mayo with Wells Fargo Securities. Your line is open.

Mike Mayo: Hey, how are you doing? I feel like you served up a good meal here. I mean, the main course we do not lose sight of $2 trillion of deposits where you pay 1.76%, and that's certainly down. Quarter over quarter, year over year. The side dishes certainly look good with the NII going to escape velocity, I guess, from $14.08, you said, to $15.05 to $15.07 by the end of the year. I am still left hungry. I guess I need my dessert or something. I am just wondering why even with all that you know, improved performance, the NII guide is not even higher. Given the pace of loan growth.

You certainly see the expectations, as Alistair said, every segment of commercial lending is doing well. You seem very optimistic about that. You are also asset sensitive, and there's less rate cuts. So I guess I am whining, for some dessert, some extra. I am left hungry. Why not more?

Alastair Borthwick: Well, Mike, you got a future as a chef. Look, I think if you go to the NII Bridge on page 11 for a minute. We put this out at the beginning of the year. There's a lot can happen in a year. And I think any of us anticipated all the various things that have happened in the course of the past six months. What's not on here, for example, is you think about international rates. They have been cut pretty significantly. That's a headwind that we do not include here. So you are absolutely right. There's some things that we have been really happy with in terms of loan growth.

There are some other places which have maybe grown a little less quickly. So, I would love I would still love to see the consumer non-interest bearing growing just a little faster. We have got some good growth but we would 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 have removed a lot of risk from the equation, I think. And now we just have to see what happens with rates in the 6% to 7%, hopefully a record leaves you satisfied at the end of the year, but we will be working on next year's course.

In the second half. Alright. So when I go for my next meal next year, or the year after, any kind of foreshadowing of what preliminarily thinking about for next year?

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

Mike Mayo: All right. Thank you.

Operator: We will move next to Steven Alexopoulos from TD Cowen. Your line is open.

Steven Alexopoulos: Hey, good morning, everyone. I wanted to start the conversation first. I love this AI Slide four. I might frame it actually. But to start the conversation there, as we have 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 if you guys saw at the JPM Investor Day where Mary Anne like put that slide up. Looking at headcount coming down about 10% or so in the consumer bank over the next five years.

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 would love to hear you unpack this for us.

Brian Moynihan: Well, let me just walk up to coverage, Stephen. But let's just step back and think about the application technology fifteen years ago, had 100,000 people in our consumer business. Today, we have 53,000. The deposits, I think at the time were say $400 billion now they are $900 plus. 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 are now doing 2 billion digital interactions, you have to be up all the time. And we have invested, you know, probably $2 billion on we call never down.

Down hot, hot, hot backup so that those systems can run all time. So you do not have to We have to debate the future. You know, we do not you just look at what we have done. We are down half the people in this business. It's bigger and more complex. And more widespread etcetera. So that's that's one. As we look forward, it takes something like take something like Erica and, you know, it was developed when none of us do what a large language or small language model was. It is built, it's operating. And what I described earlier is it now does 20 million consumers use it every quarter. Actively.

They use it 60 million times a month. This is not you know, again and every one of those would have been a phone call and stuffs. We as we bring it out to wider use case, wider things it can do, and train it on as we bring it across various parts of the company, commercial business with cash pro, Erica and full employees, etcetera. You are seeing these models that are the data's carefully crafted so it works. They get the right decision. They can train them, and we are using it more places. So we just see that going and going and going.

Now meanwhile, in that consumer number, we have twice as many relationship bankers as we did at the start. So we reinvest a part of that savings to drive net checking growth on a consistent basis for five years. If you start to think about $5 million net checking accounts with $9,000 of our balance, start to do some math, you start to think that we have grown good sized bank incrementally. Over the last four or five years. So it's enables you to do that while the cost structure went down $1 billion a quarter in consumer over the time frame. So that's what happens.

They take something like this optimist model, which is a model that we built with others third party models that we have fine tuning ability for fixed income traders, is relatively bespoke still. We have one common equity, 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 operation itself instead of emails and, and shared drives and everything going on. You know, it's pretty powerful. And we are just starting at 750 people.

This is you know, ninety days old for implementation, and we will see the benefits that five people so far, 10 people, you will start to see more people and we will 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. And now I think I have we have got to be careful. It's got to be done right. The decisions we make are meaningful to people's lives, so it cannot be made in a way that's not correct meaning it comes up with the wrong decision.

Customers of a gaze should say, I mean, they you know, their confidence will come and go if you do not handle them right. So we have to be very careful. And that's why not a fast follower or a leader, it's can you apply it at scale. That's the question. And if you could apply it at scale, then you can get the benefits. You cannot apply it at scale, meaning it is not always up and operating, then you have and that's what we are driving at. So you will well, you will 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.

And the question is, you actually getting the benefits and the scale? We have and we will and we expect to continue. And yet still in the early stage.

Steven Alexopoulos: 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 have studied BofA, I think you were the first bank out there with a mobile app. You are the first one out there with Erica, right, the digital agent. But it seems like the way you are thinking about stablecoins is your it's a little wait and see. Right? JPM has a tokenized deposit, Citi has a tokenized deposit, I have not seen any announcement from you guys have a large cross border business right now relative to others.

So you could be the disruptor in this new ecosystem, same way you were with mobile same way you were with digital agent, Are you just skeptical 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: Well, you are you are forgetting that a lot of if you are gonna 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 Look, the business cases for it as incremental value are our still to be proven, frankly. And so that's so on Bitcoin or as you go on blockchain, you know, have lots of patents. We have used it in the trade area and stuff for a lot of information going to move with money and things like that.

But we still in the end of day remember we will move 3 or $4 trillion today and all of it will be digital. You know, or 99% of it. So you know, other than the cash, LA, ATM, and the checks written by consumers, which are going down, you know, 8%, 10% year over year and a 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 trying to figure that out. It's not cautious or not.

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

Steven Alexopoulos: Got it. Okay.

Operator: We will take our next question from Erika Najarian with UBS. Your line is open. Wanted to just refocus the conversation and just ask Brian, with the deregulatory momentum that seems to be taking place, how do you feel about when is the appropriate time to address that 130 basis point buffer? So, you know, granted the stress the stress test has been quite volatile in the SCB result, But, you know, clearly there's reform to address that. I am wondering if 130 basis points would still be an appropriate buffer and what you need to see to rethink that buffer.

Brian Moynihan: So, we believe in appropriate buffer is 50 basis points plus or yep. Yep. 50 basis points, and that's what we are running down to you know, pushing down before. We always want that to be utilized for lack of better word by the core businesses because that's we are here for. So we pay our dividends We are basically using all the incremental capital to repurchase shares and then letting the business use up the excess capital to grow. And at the high point, think we are 12% Now we are down to eleven five. So they are using it up. What we just did is increase the amount of which we have.

So we expect them to use that and expect us to move down to 50 basis points. Now, remember we got this debate between averaging and not averaging, we will see it happen. The SLR is really not relevant for us because it 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 are effective using 2,010, 11 or 12 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 has not been the proposal was indexed to the rich the year ago or so from then on, that really right because it skips all the run up in size at the pandemic. So we have to see more of this come together Expect us to work that capital down one way or the other way. But we are always trying to grow the company. And that's what that extra capital there is to grow the grow the company loans deposit you know, loans more interactions, more transactions. The balance sheet markets is growing and they have done a good job returning on it. So that's what we keep doing. So back up 50 basis points is 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 GSIP thing figured out because if they do not index it we will have an increase coming at us in another year or so. And all this we are working on but the end of the day is we have just returned all the capital we earned back to the shareholders and we will continue to do that and more if the business cannot use to grow.

Operator: Got it. And just my follow-up question here, Ryan, is are there businesses that you are prioritizing in terms of redeploying that capital to that perhaps you know, where the profitability looks better under this regime. And the $5.3 billion of stock that you bought back this quarter, would that be indicative of your appetite for the rest of the year?

Brian Moynihan: I think the answer on the size of buyback is absolutely because we just did it. So obviously, think of our appetite. The every business has an opportunity for growth. Some will have more RWA intense some will have less. If you notice, the RWAs in the industry have grown and ours have grown pretty rapidly. We need to all need to fine tune that. That's part due to the models and stuff that are being pushed around behind the scenes. I hope we get more rational discussion about But every business has the opportunity to grow.

We and so the most discreet decision we made was to put with Jim Demar and team is to give them more capital and capacity to grow and they have used that wisely. 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 will take it down and we 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.

Operator: Thank you. We will move next to Betsy Graseck with Morgan Stanley. Your line is open. Hi, good morning. Two questions. One, a follow-up on what you were just talking about. Was wondering with relation to markets or WA, I thought in the past there had been no kind of ceiling on that now is gone. And can you talk to how much RWA you willing to allocate to the markets business?

Brian Moynihan: As long as they can get the returns, that's the key because we got the dynamics of their return on 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. We went from a 6 or $700 billion balance sheet to base good trillion and that will ebb and flow based on clients activity The G buffer calculation, you know, we are not worried about that.

We have gone from basically two fifty to three, and it will move up. So we would not worry about that because as they are deploying, they are actually getting enough return that it's 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 G SIB trigger and it everybody pays for it and so we make sure that they can actually get to return it justifies not only what goes into their business but what the whole company experiences. And that's why it's the calibration is critical. They yep.

We got to get these things all work together, and the calibration of GSIP is critical. And the reality is that you have had a basic 20% growth in the capital requirements, so no major change in risk. Most of us across the last three or four years just by methodologies of GSIB creep and RWA calculations behind the scenes where they are pushing us on the models and stuff like that.

Alastair Borthwick: But Betsy, we are not we are not aware of any RWA ceiling And the global markets business, as you have seen, it's just growing as the company grows and we have just continued to invest there.

Betsy Graseck: 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. Yes. How are you thinking about that business and how should we be how that will roll through your P and L?

Alastair Borthwick: Yes. So, I read your report, think it was pretty good in terms of laying out what the issues are. What we are 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 are obviously going to support that. 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 are going to see all of these things begin to slow and then stop.

We happen to have number one, an installed base of production tax credits, So that will stay with us. But those will begin to burn down over the course of the next eight years. That's the way I would think about that. And then the low-income housing tax credits are impacted. So we anticipate we will continue to be involved with those So I would say we are likely to be involved in deals for the next couple of years. And then you will start to see the portfolio come down in the course of 2028 the way through 02/1933? It will just burn down gradually over time, Betsy.

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

Alastair Borthwick: 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. We are just supporting the clients that we are working with. But if it were to grow significantly, then it could take some of that gap. But I am not sure that will happen.

Brian Moynihan: Yep. I think the housing has been a relatively constant number where the clean energy, the wind and solar in particular is going to be intertemporal now because of the stuff that goes on and the effects downstream, 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 would expect that to come close to absorbing.

Operator: Okay. Excellent. Thank you. We will move next to Chris McGratty with KBW. Your line is open.

Chris McGratty: Great. Good morning. Morning, Chris. Brian, you have 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 am interested in your assessment of where you are versus where you desire to be. And then maybe secondarily, you know, a little bit more comments or color on the loan growth in the quarter, the conversations that you are having with borrowers, a degree of confidence? Thank you.

Brian Moynihan: So I think, we always are pushing our team to grow faster 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 have seen them do that. The commercial loan growth, leave aside the markets, you can look at and that has elements to it, 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 done a good job growing the core middle market business even within nature of the frankly the commercial real estate flat to down.

So, she's grown I think 68% year over year absent commercial real estate. The 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 doubled the size of sales force by converting in some of the branch based sales force into that group. 've started to grow the balances now. We will see some growth there. It's a small portfolio of $13 billion Small business generally, which is a much larger portfolio, it's growing mid single digits or higher year over year. They have done a good job. So feel good about loan growth.

I think the key is that this customer demand and line usage is still down. So we have grown across the board, but we line usage moving to where it was more traditionally is yep, 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 it. So we feel good about the growth and we are seeing every consumer category I think grew a little bit this quarter and we can probably push a little harder some areas there and the team's works on that.

You know, 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 are being careful there too.

Chris McGratty: 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, there anything within the franchise that you would be looking to perhaps, allocate more capital externally? Thanks.

Brian Moynihan: Yes. I mean, well, I think if you are talking about acquisitions in the deposit side, that's not available to us. But in technology space, we bought some companies over the several years that they are going to be relatively small uses. To we bought one in the medical payments area, then we can bring it to our scale and through. And so yeah, there's possibilities in that area. But really it's organic growth is the is the reality because the end of day, our huge deposit share for thirty years plus we have 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 are continuing that push expansion markets we call them and we are seeing success there and we will continue that push. But that's more of deployment of resources. So we take them out of places and push them. So we are down overall branches year over year You can see that, but in these new markets are growing. More of an expense redeployment question and a human being redeployment questions, we get the efficiencies that it is a capital deployment question,

Chris McGratty: Right. Yeah. I was definitely referring to nonbank. So appreciate the color. Thanks, Brian.

Operator: We will move next to Jim Mitchell with Seaport Global. Your line is open.

Jim Mitchell: Hey, good morning, everyone. Alistair, I know you do not 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 than most, I guess. Do you have potential headwinds from the Bisbee accretion rolling off? You got rate cuts embedded in the forward curve? But loan growth and deposit growth are picking up, cash flow hedges are rolling off. Asset repricing. How does that all in your mind, how does it all fit together next year? Do you can you grow off that four q jumping off point? In your mind? Or Yes.

Just any thought thoughts would be great. And the answer is yes. No. Well, look, the answer to that is yes. It's because the company's built, as Brian said, for organic growth. So as we continue to add clients, as we do more with the existing client base, that's when you see the loan growth from the deposit growth coming through. So, there's always headwinds in any given year, but our mentality will be we come off of Q4, how do we grow NII sequentially each quarter from there. And we are going to benefit again from that fixed rate asset repricing again next year. So that acts as a tailwind.

First course 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 are just going to keep growing it quarter after quarter.

Jim Mitchell: Okay. That's great. And just maybe just you had highlighted that balance sheet mix has changed a little bit. And your focus 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? Or how do you think about that longer term target?

Alastair Borthwick: No. It's not different. I just think, you know, any given quarter can be interesting. And this quarter was interesting because number one, we had really high volumes in active markets. So in a period like that global markets clients are asking us for balance sheet, we are going to provide that. Assuming it's well priced and we felt like it was. So, we saw the global markets business take on more in the way of earning assets that sometimes NY dilutive Right. But it can still be NII slightly positive. So you got a little bit of that going on.

And then in commercial, this quarter, we just took on some, I mentioned this in speech, but we took on a couple of very large commercial deposits at the end of the quarter. And those are you know, 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. But the long term remains a exactly the same. We are going to drive it back to that $220,000,000 to $2.30 with every available opportunity.

Jim Mitchell: 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: So thank you again for spending the time with us this morning. Leave you where we started. We saw good organic client activity across the board We are now seeing the second half benefits of the kick in and we will expect to get the kick in NII pushing operating leverage back in the business. That will continue to be solid revenue growth earnings per share as we look forward And as we talked about and showed you some examples, we are 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.

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