Bank of America Aktie

Hello, and welcome, everyone, joining today's Bank of America earnings announcement. [Operator Instructions] Please note, this call is being recorded. [Operator Instructions] It is now my pleasure to turn the meeting over to Lee McEntire of Bank of America.

Thank you, Leah. Good morning, everyone, and thanks for joining us to talk through our third quarter results. I'm joined by Brian Moynihan, our Chair and CEO; and Alastair Borthwick, our CFO.

As always, the earnings release and presentation are posted on the Investor Relations section of bankofamerica.com, and will reference those materials during the call.

Before we begin, a quick reminder, during the call, we may make forward-looking statements and refer to non-GAAP financial measures. These reflect management's current views and are subject to risks and uncertainties. They are outlined along with the relevant GAAP reconciliations in our earnings materials and SEC filings on our website.

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

Good morning, and thank you for joining us today. Our third quarter results show the importance of a diversified company. The businesses closest to customers, wealth clients and commercial clients, the Main Street businesses showed continued strength, higher loans and deposits, strong wealth management flows, higher NII and better credit drove solid earnings, while the sales and trading revenue and investment banking revenue were lower.

We reported net income of $6.9 billion after tax and earnings per share of $0.91. On Slide 2, we've adjusted those results to take into account the nontax deductible regulatory settlement charge of $1.2 billion, which is a $0.17 per share impact.

Three points to understand about the settlement. We understand the seriousness of compliance to be responsible we're getting it right. We have invested -- second, we've invested billions of dollars in technology and dedicated thousands of employees to combat financial crime. The team is far along with and committed to completing the work required to be addressed by the regulators. Third, we have committed the resources and the ongoing cost of remediation is embedded in our company's expense base.

Excluding the regulatory settlement charge, our net income was $8.1 billion or approximately $1.08 per share, up from last year. Our leadership across our businesses and products and geographies allows us to meet more of each client's needs, deepen relationships and drive growth across our company. The connectivity between business units is strong and continues to be a competitive advantage.

Now when we think about our results, it starts with the health and activity of our clients, which brings us to Slide 3. We believe that Bank of America, our clearest economic signal comes from the daily activity of the 70 million clients and thousands of businesses that bank with us. And the message has been consistent. Consumers continue to spend with year-to-date money moving up 5% from 2025, and you can see that on Slide 3, and that's similar to what it was for the third quarter and similar to what has shown up so far in early October. Our business clients invested and hired selectively, supported solid growth in jobs and wages across various income levels in our customer base. Wealth clients remain engaged and continue to seek advice while commercial clients use more of our lending, treasury and payments capabilities.

Payment volumes, digital activity, loan demand and well flows all remained healthy. And you can see the digital activity in the slides in the appendix as we always put in our results.

The economic uncertainty that prevails in digeopolitical instability are always present, but what our clients are actually doing is continuing to point to a resilient and growing economy in the United States. That activity has produced organic growth across our company, coupled with great credit quality, and we show that on Slide 4.

Slide 4 shows the initiative organic growth for the quarter. In quarter 3, once again, we grew through both client acquisition and doing more with our current client customers. We added another 200,000 in the quarter of net new core consumer checking accounts. We now have 39 million checking account customers. It's been nearly 8 straight years of quarterly progress and growth. That's quite a flywheel.

We opened more than 1 million new card accounts, and importantly, we grew our card balances nearly 5%, consistent with our medium-term goals disclosed at Investor Day. The focus on investment in that card product is producing results. Our wealth clients generated approximately $41 billion of flows during the quarter. We continue to add affluent and high net worth relationships across global wealth and consumer investments. Across those businesses, clients entrust us with more than $5.7 trillion of their family's balances.

Virtual loans grew across every single segment from small business to business banking, the global commercial bank and the global corporate investment banking. That's from small businesses to largest companies of the world. Our treasury services, i.e., cash management relationship also expanded. This bodes well for our loan growth that we'll talk about later, but also shows you the strength in the economy as these commercial customers continue to be active.

Growth that you see on this page reflects the investments in our people, our technology, our capabilities in digital and our physical network. These deep relationships support earnings, balance sheet growth and long-term shareholder value.

With that overview, let me turn it over to Alistair for more detail on the quarter.

Thanks, Brian. I'll start with a few other income statement highlights on Slide 5. And as Brian said, momentum continued in our core banking businesses. Consumer Banking, Wealth Management and Global Banking's commercial businesses drove most of the revenue and earnings growth, while Markets and Investment Banking revenue declined from prior periods. Equities delivered a record third quarter and reduced client activity and changing market conditions, including a major shift in interest rates, significantly affected our leading FICC micro businesses, including credit mortgages and municipals, and those declines more than offset growth elsewhere in trading.

Revenue was approximately $30 billion, up around 3% year-over-year and an 8% increase in NII and 17% growth in asset management fees more than offset lower Investment Banking and Sales & Trading revenue.

NII reached $16.6 billion on an FTE basis, up 8% year-over-year and was up $450 million from the second quarter. Net interest yield of 2.16% improved 15 basis points year-over-year and 8 basis points from the prior quarter, moving us closer to the 2.3% medium-term target we outlined at Investor Day.

Credit quality improved, capital and liquidity remains strong and earnings remain solid. So let's turn to the balance sheet on Slide 6, where you can see we remain strong and became more efficient as evidenced by the improvement in our net interest yield.

Total assets were $3.4 trillion, that was down 2% from Q2. Ending deposits increased $14 billion from Q2 and remained above $2 trillion. Quarter end loans rose $34 billion to $1.25 trillion, and we funded that growth by reducing securities balances, while lower markets assets and higher deposits allowed us to reduce short-term wholesale funding, thereby continuing to improve the net interest yield.

Loans have now grown for 10 consecutive quarters, reflecting continued activity across both commercial and consumer clients. Global liquidity sources remained strong at $914 billion and capital stayed well above regulatory minimums.

CET1 was 10.9%, down roughly 35 basis points from Q2, primarily reflecting higher funded and unfunded loans, and a $3 billion reduction in CET1 capital. Capital distributions exceeded net income due to the regulatory settlement charge, and we also had a $1.8 billion portion of AOCI of AFS securities that impacted CET1 from higher rates.

Our hedging continued to limit the AOCI effect of higher long-term rates on much of the AFS securities portfolio and a little less than half of the total Q3 AOCI decline related to cash flow hedges and did not affect CET1. Despite the AOCI impact, tangible common equity ratio, or TCE ratio was stable with the second quarter.

We returned $8.3 billion to shareholders this quarter through dividends and share repurchases. And this combination of balance sheet strength and capital generation continues to support clients and shareholders.

Let's turn to deposits on Slide 7, where you can see the they're at $2 trillion now, up $31 billion from the third quarter of 2025 despite our intentional runoff of $11 billion of higher cost deposits recorded in all other. Global Banking deposits grew 6% and consumer deposits increased modestly with low interest and noninterest-bearing balances up nearly 3%.

GWIM deposits remained stable and well priced. Our deposit mix remained attractive with noninterest-bearing deposits accounting for more than 75% of year-over-year deposit growth. We also remain disciplined on pricing with the total deposit rate rising just 3 basis points to 1.49%.

Our focus on operating deposits and our low loan-to-deposit ratio allow us to compete on capabilities rather than price. Clients value the safety and convenience we provide and a significant share of balances remains in relationship-based operating accounts and other low-cost funding. Our deposit franchise remains an important competitive advantage for us and continues to fund healthy client activity.

Let's turn to the loan trends Brian mentioned on Slide 8, and here, we show average loans up approximately 6% year-over-year, led by broad-based gains in commercial. Wealth-related lending also remains strong and card balance growth continued to improve. Commercial loans increased 8% year-over-year with growth across every line of business with small business up 2%, Business Banking up 9%, Global Commercial up 6%, Global Corporate up 10% and GWIM custom lending was up 22%. Within that performance, Global Banking, international commercial loans grew 15%. And further, we saw broad-based middle market growth across the commercial banking segments in key sectors, including real estate, sports, technology, health care and biopharmaceuticals.

In Consumer, card balances grew nearly 5% and while higher consumer real estate balances and small business growth were more than offset by lower auto balances. Securities-based lending and wealth management grew 21%. Importantly, the growth remains consistent with our underwriting standards and credit discipline. It also supported another strong quarter for net interest income, which we show on Slide 9.

As I noted earlier, both net interest income of $16.6 billion, and the net interest yield were up strongly from both Q2 and a year ago. Fixed rate asset repricing and global markets activity both remain contributors. And commercial loans, card balances and deposits have increasingly been the ones driving the growth.

Looking forward, we expect NII to improve sequentially in Q4 and again through 2027 based on anticipated modest loan and deposit growth and continued fixed rate asset repricing. This outlook also assumes 3 25 basis point rate increases through June of 2027, so in December '26 and March and June of next year.

At Investor Day last year, we shared an expectation we would deliver 5% to 7% NII growth in the medium term. And during the course of 2026, we've raised that guidance first to 7% and then more recently to 8%, still expect to hit that full year revised NII growth guidance of approximately 8%. And for 2027, we currently expect full year growth of NII to be 8% or more higher than 2026 and again, higher than our original 5% to 7% range.

Banking book remains asset-sensitive. On a dynamic deposit basis, 100 basis point parallel shift above the forward curve would be expected to increase NII by $1.4 billion over the following 12 months, and that's a touch higher than the second quarter.

Let me turn to Slide 10, we see expense. We reported expense of $19.7 billion, and that included the $1.2 billion regulatory settlement charge. Excluding that charge, adjusted expense was a little more than $18.5 billion, down nearly $100 million from Q2 and up slightly less than 7% from a year ago.

The year-over-year increase reflected higher revenue-related costs in asset management and equities, including incentive compensation and wealth management and brokerage clearing and exchange costs and equities, respectively.

We also invested in technology modernization, AI, client acquisition, marketing and franchise growth. At the same time, productivity continues to improve as evidenced by our headcount. Even as we add headcount in our sales forces, our headcount was down nearly 3,500 from a year ago as we automate processes and simplify work across the company. This means we don't need to hire quite as many people to refill roles. We remain focused on investing where we see the best long-term returns, while we continue to improve the productivity of the organization. And we expect to return to operating leverage in Q4.

From expense, let's move to credit quality on Slides 11 and 12. And here, you can see the credit quality remains stable and, in fact, improved modestly once again this quarter. Provision expense was approximately $1.3 billion, lower than Q2, and the net charge-off ratio improved to 44 basis points. Consumer credit improved in line with expectations. The 3.22% card loss rate improved from Q2 and along with delinquencies declined for the sixth consecutive quarter on a year-over-year basis.

Commercial criticized assets declined to their lowest level on a rate basis since 4Q '19 and nonperforming loans also fell from Q2. Together, these trends continue to point to a healthy consumer and commercial client base and credit quality.

With that credit backdrop, let's now turn to each business, beginning with Consumer Banking on Slide 13. Consumer delivered another solid quarter, combining the organic client growth and disciplined execution with continued investment in the franchise. Revenue rose about 4% to $11.6 billion, net income increased about 2% to $3.5 billion. Year-to-date results remain robust with revenue up 5% and net income up 10%. Year-over-year expense comparisons are tougher because we increased marketing beginning in the fourth quarter of '25, Head of new sponsorships and the relaunch of BofA Rewards with spending steady for the past 4 quarters. We opened 14 financial centers this quarter and plan to open about another 20 or more by year-end.

Since its May relaunch, BofA Rewards has enrolled nearly 6 million clients, deepening engagement across banking, cards and investments. And as a result of these investments, we've seen continued account openings and noninterest-bearing deposit growth, higher new card originations and card balance growth and higher digital engagement and client satisfaction. Business produced a 50% efficiency ratio and a 31% return on allocated capital.

And in Consumer, it's our deposit franchise that remains a key strength with average deposits of about $949 billion, marking a sixth consecutive quarter of year-over-year growth. Noninterest-bearing deposits grew more than 4% while 59% of balances remained in checking accounts and 92% of those relationships were primary accounts.

Consumer investment assets reached $664 billion, up 14% supported by market gains and about $18 billion of net flows over the past year.

Digital adoption reached new highs with over 50 million active users. 80% of consumer households are digitally active and digital channels generated 71% of sales. Erica, Zelle and AI-enabled tools are helping clients and helping employees to complete more activity faster and more consistently. That mix of relationship growth, digital engagement and disciplined execution continues to strengthen consumer banking.

Turning to Wealth Management now on Slide 14. This business continued to improve profitability through strong client flows, positive operating leverage and higher margins. Revenue rose about 13% to $7.1 billion, and net income increased 22% to more than $1.5 billion. Pretax margin approached 29%, return on allocated capital reached about 28% and operating leverage was strongly positive as client activity and market levels lifted asset management fees and NII.

Client balances climbed above $5 trillion for the first time, up 9%, while AUM rose 12% to about $2.4 trillion. Quarterly net client flows were about $38 billion, including approximately $20 billion of AUM flows, bringing 4 quarter AUM flows to about $74 billion. Growth was broad-based. Merrill added about 4,200 net new households with at least $500,000 in assets, up 17%, and the Private Bank added 470 net new relationships with at least $3 million under management. These results reflect strong demand for advice and our ability to attract clients and experienced advisers to the platform.

Banking relationships also deepened is now 67% of Merrill clients have banking relationships with us. Ending loans rose about 12% to more than $280 billion, led by securities-based lending, custom lending and mortgages. Private Bank lending has now grown for 12 consecutive quarters as clients use more of our investment and banking capabilities.

Adviser productivity, disciplined pricing, digital engagement and AI tools continue to expand our capacity to deliver personalized advice at scale. And that sustained organic growth leads us to Global Banking on Slide 15.

Global Banking segment benefited from strong loan and deposit growth and treasury activity, which helped offset softer investment banking results. Year-to-date, the Commercial Bank added more than 30 new companies and logos. And in September, we launched a Gen AI tool designed to make prospecting and onboarding even more efficient.

Revenue of $6.2 billion was relatively flat year-over-year, and net income was just under $2 billion, down modestly year-over-year. However, strong pipelines and the broader year-to-date performance put this quarter's investment banking results in context.

Year-to-date, Global Banking revenue is up 5%. Net income is up 7% and the total company investment banking fees are up 16%.

Turn on allocated capital was 15%, and balance sheet growth reflected the continued client momentum. Average deposits rose 6% year-over-year to $669 billion. Average loans increased 8% to $419 billion and ending loans came in at $428 billion. Growth was broad-based across commercial and corporate clients.

Treasury Services revenue increased 10% as we helped clients manage liquidity, payments and working capital while creating more opportunities across lending, investment banking and global markets. Total company investment banking fees, excluding self-led transactions, were about $1.8 billion. Fees declined from a strong year ago period driven by lower advisory and debt underwriting fees. Looking forward, our pipelines remained healthy. We continue to invest in bankers, technology and AI tools in an effort to improve research, preparation and opportunity identification. That broad client activity also supports global markets, which we cover on Slide 16. And here, you can see solid results despite a tough comparison in our FICC credit businesses with slower trading activity this year.

Excluding DVA, revenue was $5.8 billion, and net income was $1.2 billion, both down from Q3 2025. Even so, the year-to-date performance remains a record for the firm, with revenue up 11% and net income up 14%.

Sales and trading revenue, excluding DVA, was $5.1 billion, down 5% year-over-year. It was a record third quarter for equities, and it was a record third quarter for international revenue. Equities revenue rose 10% to $2.5 billion, led by prime financing and strong client activity. The results reflect our investments in talent, technology and financing capabilities over time.

PICC revenue was $2.5 billion, down 17%. FX and commodities benefited from increased client activity, lifting our macro businesses 4%. And that strength was more than offset by lower activity in mortgages, municipals and credit following a strong year ago period.

The expense increase may seem counterintuitive given the revenue decline, but it reflects higher transaction costs tied to the equities growth particularly in prime financing and in Asia, reflecting our continued long-term investment and expansion. Average loans rose 5%, demonstrating stronger financing relationships and connectivity across markets Global Banking and Wealth Management.

With the business segment's results covered, let's finish with all other and some closing thoughts on Slide 17. All Other reported a loss of $1.4 billion, and that obviously includes the $1.2 billion regulatory settlement charge, which is not tax deductible. Excluding the regulatory settlement charge, All Other shows a loss of $153 million compared with a loss of $103 million a year ago. The overall effective tax rate was 23%. And excluding the regulatory settlement charge, the adjusted effective tax rate was closer to 20%.

Let me close then with some key takeaways from the quarter. Customers continue to spend, supporting a resilient U.S. economy, while wealth clients brought in assets to us and relied on us for advice.

Business clients kept spending, borrowing, investing and growing and institutional clients remain active globally, even though at a slower pace. Those trends were evident across the company and drove another solid quarter.

Our pipelines and our client conversations reflect the same confidence we have in the economy even as clients keep a close eye on geopolitical uncertainty. Our balance sheet and capital remains strong, and we continue to invest in technology and develop AI capabilities to support long-term growth. This quarter demonstrates the strength of our franchise and the value of our diversified business model. With that, I'll say thank you, and we'll stop now to take your questions.

[Operator Instructions] Our first question comes from Chris McGratty with KBW.

Brian or Alistair, on the capital outlook, you talked about modest balance sheet growth. I'm wondering if you could dig into your assumptions between growth of the balance sheet and returning of capital balancing the CET1 and the TCE ratio?

Sure. Well, first, I'd say if you look at the course of the year, we've obviously supported all of the client growth that we've seen with the capital that we generate. And if we look at where we stand today, we've obviously got a considerable amount of flexibility on capital. Just recognizing that we're at 10.9% CET1 and a reg minimum at 10%. We also generate substantial capital. So if you look at this quarter, for example, Chris, we supported $34 billion of loan growth. We obviously had a regulatory penalty. We saw rates go up 85 basis points. We paid an increased dividend, and we bought back $6 billion in shares. So we've got a lot of flexibility with the earnings that we generate to balance exactly what we've been doing through the course of this year and over the course of time.

Always our priority is going to be support the clients and the growth. We know we have to support the regulatory minimum and the dividend. And then whatever is left, we're going to return to shareholders. So no change.

Okay. Great. And then on the operating leverage comment, Q4 I heard you there. But could we revisit 2027? You gave us a pretty good NII update. I think the guide at Investor Day was 200 to 300. Any changes on how you're feeling about that going into next year?

No, no change there. We've obviously had a very good first half. Q3 was slower. And we're back on creating operating leverage in Q4. I think as we get into Q4, Chris, I will likely provide guidance for next year, but it's not going to change from the based on what we see, it could be higher, but we'll see as we get closer.

We'll move on now to David Chiaverini with Jefferies

Wanted to touch on the NII guide of 8% plus looking out to next year. I was curious on the drivers behind the improvement. Is it all rate driven or anything else driving that improvement?

No, it's not all rates. Rates are obviously a small component of that. But same drivers as this year really, David. We've seen a little more normal deposit growth this year and particularly where we've seen it is in noninterest-bearing. So if you look at the noninterest-bearing in Consumer or you look at the noninterest-bearing in Global Banking, that's returned to something a little more normal. We'd always thought deposit growth should be in kind of the 4% to 5% in a normal type economy. And that's kind of where the noninterest-bearing is now over the course of the last year over year. So that's number one. Number two, the pricing rotation is slowing. So we've seen, for example, consumers flattened out. It's now grown 6 quarters in a row, Wealth Management, same thing. The loan growth has kind of averaged $20 billion a quarter over the course of time. We don't see that slowing at this point in time.

And then we've talked about we benefit from fixed rate asset repricing, most notably in the auto loan and the residential mortgage portfolios, but also in our mortgage-backed securities and our cash flow swaps. And if any, in the last quarter, just increased both floating rig yields and fixed rate yields. So there -- do rates help us as we look into 2027? Yes. But it's the core underlying growth in deposits and loans that help us.

And then I think that we have to recognize, in '27, if rates go up, we would expect Global Markets, it's liability sensitive. It's entirely possible that Global Markets will go down. But remember, we continue to add loans in Global Markets, and we continue to invest in Global Markets. So that will offset that just a little bit. The gains in banking are going to more than offset that. That's the core part. The core banking book is going to be stronger in 2027 than '26.

Yes. To be precise, the 8% includes effectively a drag on markets because it hasn't been growth for the last couple of quarters, it's been relatively flat. So it's an all-in number overcoming that, just to be clear.

Great. And on the consent order, are there any constraints? Or does this impede business operations in any way as we look forward?

Just repeat your question 1 more time. I'm sorry. I was righting a note to myself. Go ahead.

Sure. Just on the consent order. Are there any constraints on the business? Does it impede your normal business operations at all?

No, there's no asset cap here. So no, there's nothing there. And then in terms of -- it won't crowd out anything either because we've invested the technology, and we've invested the people that we feel like we need to get the work done. So that's in the run rate. We've made the decisions we need to. We've added the resources we feel like we need. So it should not impact our clients in any way.

We'll move next to Manan Gosalia with Morgan Stanley.

On the consumer side, you noted that consumers continue to spend and consumers are healthy. But maybe you can give us some more color on what you're seeing there with short rates moving higher, higher for longer gas prices? Are you seeing any signs of pressure? And are there any changes that you're making at the margin in terms of where you're leaning in or leaning out?

So I think you're -- let's separate 2 things. One, on the credit quality, our underwriting standards are consistent to 5% growth. In credit cards is with the same underwriting standards, and you can see the stats very strong. The charge-offs there, 3% change. So yes, we feel very good about that. Any other consumer loan quality metrics are -- continue to be strong and improved. So in terms of seeing any stress on the consumer, absolutely not in terms of credit quality.

Then if you go to the balance in our accounts, they're growing. And when you look at the Paychex, the direct deposits coming from employers to our consumers, we see those growing across the 3 segments of income we have low, medium and high, and we see the low having picked up. So that all bodes well.

When you go to actually what their activity is, as we said on slide is 5% more spending this year than last year. And yes, gas spending is up 20-odd percent. That -- when you look at the credit and debit card spending only, that does crowd out as you look at some of the online data, you can see the gas spending and the inside store spending is still growing in the convenience stores, but not quite at the rate that it was. So it crowds out a little bit, but frankly, for the -- it's really different stories for different types of people in the overall positioning. The rest of the spending is very strong at the 5% and on entertainment and other categories that you see there.

Got it. And then if you could give us some more color on the positive operating leverage for next year. What are the key drivers? Clearly, you're dropping more of the NII growth to the bottom line. So that's certainly a positive. But if you could talk about some of the levers that you have on the expense side? And if you could clarify that the 200 to 300 basis points is on the adjusted expense number for 2026, excluding the settlement charge.

Well, I think that's the best way to look at it because we wouldn't view that as being repeated. We view that as a onetime. It's not a core operating expense. So I think you've got to adjust for that. But yes, we still feel like 200 to 300 basis points is generally speaking, the right kind of a zone. We put that out for Investor Day through the medium term. We'll get into what we want to guide for 2027 when we get into the fourth quarter. But you've identified first thing, which is NII growth, a lot of it drops straight to the bottom line, and that's really important. That's a very powerful driver for our company. And then, obviously, we've got some terrific opportunities to continue to grow the fee businesses as we have consistently invested there. So we've got a good opportunity across the board, we feel like whether it's Wealth, Global Banking and Global Markets to keep driving the fee side. So that we feel good about.

And then on the expense, we've got a pretty good track record of headcount management all the way through this year. So if you look at what we've done in terms of what's the main driver of expense for any business, 60% to 70% of it is headcount. We've done a nice job of managing headcount with discipline all year. We're going to maintain that management discipline into next year that allows us to create the operating leverage that we're talking about.

Final thing I'll just say is, we obviously benefit a great deal from the fact that we've got a Consumer Business, a Wealth Business, Small Business, medium-sized business, large businesses and investors. And the interconnectedness of those, the flows of business that go between them is another thing we've highlighted at Investor Day presentation and afterwards and another area of additional growth for us that we continue to explore.

We'll move on now to Ben Gerlinger with Citi.

Just wanted to double check. So you have the full year NII, and next year is also strong. And then you also say that noninterest-bearing deposit growth has been healthy. So are you kind of assuming that noninterest bearing cost growth continues to be healthy despite the 3 additional heights your forward expectations include? And if so, can you also unpack some of the deposit betas you might be assuming in next year's NII?

Yes. So first, with respect to noninterest bearing, yes, we're assuming low single digits for deposit growth broadly. And we're anticipating that we can continue to grow noninterest-bearing deposits as we have done over the course of the past year. Remember whether rates go up by 25 basis points or not, at some point, noninterest-bearing deposits are impacted more by inflation and GDP. So we are to see continued growth in noninterest-bearing deposits through the course of time. A lot of the rotation of rates took place when rates went from 25 basis points to 4.5. We've been in that environment now for 3 or 4 years. There's been a lot of time for consumers and wealthy clients to sort of settle into that environment. So yes, we anticipate continued growth in our deposits.

In terms of deposit betas, obviously, we came from 4.5% down to [ 350 ]. Over retracing steps, I would anticipate it will look the same going back up as it did coming down. The areas to watch continue to be, obviously, in Consumer, it's about CD pricing. In Wealth, we tend to pass along pricing with interest rate hikes and cuts. And the same thing is true in Global Banking. When the Fed raises rates, we're typically passing that through to our clients. So there'll be no change in our perspective on the way back up as there was originally nor in the way that we think about it on the way down. So no change there.

We'll move next to John McDonald with Truist Securities.

Brian, I was hoping you could give a little perspective in terms of the OCC and FinCEN orders. Like how it gets to this point? Is it kind of a misunderstanding of what regulators are asking for or disagreement on how to address the issues they're asking for in your processes? Just some perspective on how it comes about and your lessons learned or takeaways that we should have from this?

Look, at the end of the day, I think we have agreed to call this a settlement and move forward, and so we are doing it. So I think at the end of the day, we understand what they need us to do. We're deep in the process of remediating. Just for example, this quarter, a couple of hundred million dollars plus in remediation costs for that effort. So it's been substantial in thousands of employees. So we have a clear understanding of what we need to do. We're doing it. We'll complete it. And it is the focus of management to get it cleaned up.

Beyond that, there's not a lot to talk about in terms of our processes and our capabilities, but we're busy working away and have been for the last several months and quarters. This settlement resolves the penalty that was in the 2024 [indiscernible] order, and that was what took time is to kind of get the negotiations around all that, but the work started with pace back then. And it's something we build up and are going to do. And as we move forward, we'll get more efficient at it. And it will improve in the operating dynamics.

Okay. And then Alistair, that was helpful context on the levers you pulled for capital management this quarter. Just want to clarify, as you look ahead what metrics you're going to be managing to and kind of which is governing I think you're going to triangulate maybe? Is it CET1 of 11-ish and then also triangulating to TCE of 6-ish?

Well, first thing we're going to do is wait for the final rules because we're anticipating those coming out in Q4. That will be important in terms of just clarifying exactly how and what we're calculating. I think it will also be helpful in terms of clarifying what the transition period looks like, John. So we just have to consider that as we see that later this quarter. And then the reason that we look at both CET1 and tangible common equities because we have a series of different constituencies, and we have to manage all of them. So it's important for us just to keep an eye on all of these various metrics. And we're balancing at any given time, capital, liquidity, earnings as we make our decisions. But I'll go back to this point. We've got a lot of flexibility on capital right now. You saw what we could do in Q3. We generate a lot of capital. That gives us a lot of flexibility going forward. And our priorities remain the same.

We'll now move on to Jim Mitchell with Seaport Global Securities.

Alistair, just on just thoughts, I appreciate the 2027 commentary on NII. And just it sounds like and I just wanted to confirm that it sounds like markets-related NII could be down from '26 levels, which would imply that ex markets NII should be north of 8%. I just wanted to confirm that. And then when I think about your commentary around operating leverage in the past that if that flows to the bottom line, that, all else equal, does tend to push you towards the higher end of the operating leverage range. Not trying to put words in your mouth, but just trying to think through those puts and takes.

I agree with both broadly. I think both statements are probably true. The first one in terms of -- yes, we'd anticipate Global Markets in an environment where rates go up another 3 hikes. That's liability sensitive it is, but we just have to recognize we continue to add balance sheet there over time. So it just gets bigger, which tends to help NII. And then also, we're adding loans. So that matters also.

In terms of Global Banking and the banking book broadly, yes, that would imply then that would grow faster than 8%. So I think you're right. And then second, yes, we intend to drop as much of this to the bottom line as we possibly can, and that tends to be very good for operating leverage. But again, I don't want to get drawn into that right this second because we want to look at that as we go through the fourth quarter then I think we'll give guidance next year. But the point is, we're not coming off of our Investor Day expectations. And if you look at operating leverage over the course of the past couple of years, we've tended to do better year after year. We're positioned well for next year.

Okay. Yes. Great. And then maybe just on FICC trading, you noted kind of higher rates hurt the micro businesses. Now is that most negative marks [indiscernible] the slowdown of volume because just trying to see if this pressure could linger? Or could we see a snapback if rates stabilize?

Yes. So generally speaking, we tend to benefit a lot from the fact that we're really big in credit, mortgages and munis. Those are great leading franchises for us. It just happens when rates go up 85 basis points in a quarter, that tends not to be good for those businesses. Clients tend to slow their activity. It's not good for asset prices. So it's largely a client activity thing. We haven't seen the same kind of performance in -- meaning we haven't seen rates behave the same way in Q4. So we're moving on to the fourth quarter, having gone through the third and we retain leadership in those big businesses of ours.

We'll move on to Mike Mayo with Wells Fargo Securities.

In this period of AI and AI deployment, where can that take you guys? I see revenues per employee year-to-date are up 10%. And you would think with all the tools your disposal that you'd be able to take that much higher. So I know I've asked this question before, but AI is moving so quickly. And I think the banks have to keep up so much that I thought I'd ask it again.

So if you Like, I think -- so 1 just set the stage. If you look year-over-year, the total expense base was up $1.2 billion, and the head count was down 3,000 round numbers. In the $1.2 billion, $450-or-so million of that is wealth management incentives with revenue growth. About $300 million of it is in the markets business, the BCE, and that leaves say, $400 million left, of which a couple of hundred million plus in the third quarter were 2 things: remediation for the AML and remediation for the Mythos implementation. So there wasn't -- the overall expense growth absent that was a couple of hundred million dollars, maybe [ 3 ] on a base of, call it, [ 17 ] and change last year. So you think about that, how do we maintain that kind of 1%, 2% expense growth with all the investments we're making. We've opened 5 branches in Milwaukee this month and things like that, more headcount, client facing. And that's by engineering, both through engineering process through AI application, et cetera. So you see it already in the numbers, and we expect to continue going forward, and we expect that the Mythos remediation costs run down because we added 1,000 extra staff to work on that, not in the headcount and I think consultants expect the orders get implemented. But what continues to recur will be that leverage you get from -- on the core expense base.

So in AI has helped us. We're about different 130 projects implemented. All of them have a payback in the very detailed projects. None of them are huge contributors. Overall, the benefits are 2 to 3x over time of the expense you're giving out. We expect that number to go from the $250 million, $300 million this year to $700 million next year in terms of projects we put in the pipeline and key 1 of those is the in the development of technology, which is $4 billion and change a year, we're 10% more efficient. So next year, we get 10% more work for the same cost. And so we're going to continue to invest in driving the growth in the franchise and AI is a major part of that, say, $300 million going to $700 million, headcount down by 3,000 or 1.5% year-over-year, managers down by about 5% in that and production teammates that are doing the client-facing work are actually up year-over-year.

So we feel very good about the operating dynamics. And even the expense base we see grew in the third quarter, you can point to the things that are purely capital markets, revenue-related items and/or things that will disappear over time from the expense base and be replaced by expense that does more for us.

All right. And then just a separate question. Brian, this is, I think, the 17th year view being CEO. And I just was wondering about your thoughts on a successor. How much longer do you plan on remaining CEO? What qualities do you look for in a successor? And for a successor, would you look outside the firm? And why not, right?

It's the Board's decision ultimately. Our job is managed is to tee up the talent in this company, which there's a lot. We work on it all the time because I could get hit by a truck to more too, Mike. So -- but this company is success is due to the 209,000 people out there working every day, and they'll be a great leader for it next and the Board will make the decision when the time is there. But we feel very good about the team we have and the leadership we have in the company.

You will be the first to know, Mike, when I decide that.

We'll move on to Ken Usdin with Autonomous Research.

Or question on the balance sheet. How so last 1 you talked about working on balance sheet efficiency. And it seems like the last couple of quarters, you've done what you said in terms of really taking down the wholesale funding part of the balance sheet with an offset in NIM. I'm just wondering if there are any offsets to that in terms of either how much you can make in trading as a result of that? Does it change your intermediation potential? And any other thoughts you have about kind of like where the average earning assets goes from here in a totality perspective?

Yes. So those are obviously 2 different decisions. The markets business we're going to support with the balance sheet and the capital that they need to drive profitable growth. They've done an excellent job over the course of the past 3 or 4 years of growing and improving returns. Q2, I think, was a great example. It was a really extraordinary opportunity. We took advantage of that. We gave more capital because the returns were terrific in Q2.

In Q3, the returns aren't quite the same. We don't have the same client activity going on. So markets, we're going to keep investing in. We're going to keep giving balance sheet. We're going to keep supporting the clients because it's an important growth opportunity for us.

Second question is more just how do you manage short-term wholesale funding and the direction of travel for us is down. Generally speaking, deposit growth plus pay downs of securities as they come due is there to support loan growth. And every time that deposits plus pay downs is greater than loans, it allows us to just pay down a little bit of short-term wholesale funding. So look, most of the NIM improvement is coming from repricings and profitable deposit and loan growth over time and a little bit of it is a short-term wholesale funding, but the 2 things are separate. They're not linked in any way.

Okay. And if I could come back... Go ahead, Brian.

I was just going to add to that, think about a 15 basis points improvement from [ 2 to 2.15 ]. So that's 15 basis points on 2% improvement in the -- on the $3 trillion balance sheet. That's the efficiency of Alistair describing coming through. So you're replacing low-yielding securities with much higher yielding commercial loans and consumer loans. You also ending up with deposit growth with 5% noninterest-bearing and overall a couple of percent. So your mix is even improving there. And to your colleague's question a while back, because your rate deposits and low interest savings and checking are 0 in any environment for weight growth and the deposit balances keep growing irrespective of the higher rate environment. So that dynamic is really why we see this march to from [ 2.15 ] towards [ 2.30 ] really just taking place as we look out over the next several quarters here. That's a really important dynamic because if you go back to the 6% TCE ratio, that gives you a chance to really push the returns on a relative size that gets you the 16%, et cetera. So that's what we've been working at is that efficiency balance sheet because of the dynamics we are in as liquidity, we pushed the size up, and now we're bringing it back down.

The markets business has a balance sheet they need to run the business. They can have more if they put it to work or good returns out sites completely unrelated to that efficiency we can give for the rest of the balance sheet.

Okay. Understood. And then just coming back to the third quarter market results, as you mentioned, Alistair, just that there weren't as many opportunities. One of the peers yesterday talked about that fourth quarter could still be down meaningfully for them sequentially just based on what normal seasonality is. So I know this might not have been like the typical quarter, but can you just help provide any perspective on what you think versus the [ 5.1 ] in the third quarter? What your overall view of markets might be for the fourth quarter, just given what happened in the third and what normal seasonality might do in the fourth?

Yes. So we tend not to guide for any quarter in markets, recognizing that it's very, very challenging to forecast that business in particular. Third quarter, as I mentioned, we were obviously hurt by our mix. We have strength in credit and mortgage and munis. So you'd sort of think if that was an extreme bear market for a quarter, that moderates, which it has done through the first couple of weeks. We wouldn't see the same impact in the fourth quarter.

Fourth quarter obviously has seasonality, but those 2 may offset 1 another. And at the end of the day, the markets business has done a really nice job of 18 or 17 quarters in a row of year-over-year growth. So they're looking forward to the fourth quarter. We're looking forward to the fourth quarter. I think there'll probably be less seasonality this year than in prior years just based off of the way third quarter turned out. But we don't predict because we're not great at predicting Global Markets performance in any quarter.

We'll move on now to Matt O'Connor with Deutsche Bank.

It seems like the loan growth accelerated towards the end of the quarter, both based on the [indiscernible] data that we can all see and then also your spot loan growth was a lot stronger than average. Anything to read into that beyond just kind of quarter end noise?

No, I don't think there is. The H8 data bounces around, as you can see. And we have things like lending to warehouse, mortgage lenders that go up and come down. But if you look at it sort of get away from that kind of volatility, the really core aspects being middle market grew across the board in most of its segments and the business banking franchise, which the team's done a good job -- [indiscernible] our team have done a good job getting to grow again. It's balanced small business grows, the credit card group, those are -- they may come in ebbs and flows, but generally, they stick to your ribs type growth. And so that sets us something nice for next quarter.

The business come in and out of more of the high-end businesses because the loan -- a bridge loan gets taken out or the warehouse and stuff. So both of that volatility is around that and the core businesses it just keeps coming out is each month, which is terrific.

Okay. And then a bigger picture question. As we think about this rising rate environment and the deposit betas, I feel like a lot of banks are assuming it's similar to what we saw a few years ago when rates went up. But I also thought the loan and deposit environment is totally different because last environment, when rates are going up, loans are paying down, and everybody had excess deposits. And now loan growth is quite solid. And I think most people are expecting it to continue, and everyone wants to fund it with deposits.

So I guess the long-winded question is, isn't there a risk that deposit pricing picks up more than maybe you and others have assumed just because of more loan growth and their former deposit competition?

I think Alistair mentioned earlier, we have $2 trillion in deposits and $1.2 trillion in loans. So there is a lot of room to grow loans without thinking about needing to raise money to fund them. And within that, we have that really all sitting in cash. short-term securities and then held to maturity portfolio is running off. So each day, week, month, we have $9 billion a quarter to $36 million a year just out of the mortgage payoffs, which are holding constant. And so there's plenty of cash to fund up the mortgage balance. You look year-over- fund up the loan balance. You look year-over-year, you can see that in the balance sheet growth. So there's a lot of room in us. We are far different from most people because we're $2 trillion and $1.2 billion. That loan-to-deposit ratio is far less. And so, as Alistair said, we ran off high rate funding. We placed CDs from our clients' money in other people so that we take our clients' money who want higher rates, and we give it to banks who pay them higher rates because they need the funding. So it's just not something we need to reach for.

And I think leave aside rates down a little bit up a little bit, the nominal rate environment, if you think about it across the last few years, we're growing deposits from a low of [ 1.8 ], I think after post-pandemic, we have [ 18.5 ], something like that, up $2 trillion plus. The pricing discipline has remained. And if you look at the page on deposits slide, whatever Slide 7, you see it's 149 basis points in an environment which is 3.5%, 4% around you. So this is core money and movement in core transactional accounts for consumers, small businesses, wealthy clients that is growing and very stable. So we don't see the dynamic because we have a lot of room to grow loans without having any pressure to raise funds for them. We have a lot of runoff of fixed rate assets that can help fund that. And on top of that, the deposits grow and they're very advantaged. So 149 basis points against the current rate environment is a pretty good place to be.

And then on top of that, what's different from us than most, if not all, competitors is the efficiency on the consumer side relative to that deposit base. So that cost of deposits. That gives us a chance to make money on a consumer that is very strong.

We'll move on now to Erika Najarian with UBS.

I just want to apologize in advance. I have 3 questions. I'm going to ask short questions, but I think it's important given the stock opened down 8%. Number one, just a clarification question on NII ex markets. Alastair, given your comments on market NII being down, I would essentially assume that core NII would be up around 10% year-over-year in 2027, in line with what JPMorgan said yesterday. Is that about the right geography?

Well, look, we don't guide. I was asked to -- we don't guide the 2 differently and independently for a variety of different reasons. I was asked the question earlier, do you think global markets could be down next year with respect to 3 or 4 rate hikes, 1 that just happened 3 to come? The answer to that is yes because it's liability sensitive. But again, I'm just reminding people they continue to add loans and we're likely to just continue adding balance sheet. So markets piece, yes, may be done. So that 8% is including markets. So that would tell you that the number is likely higher for the core banking book. But we don't break it out because things move around and they go between and we manage it for the entire company.

So I think directionally, that's how you should think about it. And we may provide more guidance around what the exact number looks like as we get into Q4, we're probably not going to break it out between the 2.

And the second question is down 7% implies, I think, to the market that this is more than just the results that there's sort of a confidence issue perhaps deepened by the consent order. I guess, a compound question, and I apologize. One, are there any incremental expenses that we should expect coming out of the third-party review that needs to happen? I appreciate that this has been an issue since the season to sit in December 2024. And given that expenses have come in higher than expected, what would give you -- how would you instill confidence in investors that you could do the high end of 300 basis points of operating leverage next year, much less 200 to 300 basis points?

Okay. So look, on the expense, I think we tried to be as clear as we possibly can. We've ramped up significantly the people required to handle the consent order work. We've been working on that for some time now. We've also tried to be clear that we've ramped up the technology spend required. So we feel like that is in the run rate. And just remember, Erika, we started the year with 3,000 more heads than we have currently, just to give some idea. So we've been able to do that within all going on underneath the surface by repositioning people with the productivity gains we've seen.

So the expense side, I think, still holds together there. The operating leverage we've said we intend to deliver 200 to 300 basis points through the medium term. We haven't changed from that. And i think as we get into Q4, I'll give you a better sense for what that looks like in 2027.

And finally, on the capital. On January 1, 2027, you're set to step up in G-SIB surcharge, which would raise your minimum to [ 10.50. ] As we think about your shareholders have enjoyed about $6 billion in buybacks per quarter and it's been supportive of the stock. As we think about the intersection of strong capital generation sort of a TCE constraint at 6% and that G-SIB surcharge step-up with the potential for reform to be finalized, how should we think about how your -- is it business as usual in buybacks over the near term close to that $6 billion number? Or are we waiting for the finalization of G-SIB to see whether or not the -- they'll treat your G-SIB surcharge calculation only prospectively or retroactively to prevent that step-up?

All right. So there's a lot to unpack there. We don't guide on share buyback for lots of different reasons. It's definitely business as usual in terms of how we think about that equation with one exception. We need to wait for the final rules. So I know we're all desperate for the final rules. I'm desperate for the final rules, but we don't have them yet. We need to understand first, what are the rules? How is it going to work? And then we need to understand the transition period. I think in your question, there's an assumption that the current, which will soon be the old rules, prevail around where capital might go. That may be the case, that may not be the case. We have to wait, and we have to see. That having been said, if you look at this quarter, again, what did we manage to do? Well, we're looking at both tangible common equity and CET1. We've got plenty of flexibility on the CET1 number because we're 90 basis points above the regulatory minimum. And intangible common equity, just think about it, this quarter, rates went up 85 basis points. We dealt with a regulatory penalty at the end of the quarter. We added $34 billion of loans to support our clients, paid the dividend and bought back 6 billion shares. That gives you a sense for just how capital generative this company is every quarter.

So I don't -- none of that changes, Erika. We just have to see how the quarter develops. We have to wait for the final rules.

We'll move on now to Scott Siefers with TD Cowen Securities.

I know you've touched on the IB outlook, at least a bit. I was hoping -- maybe just a little more -- it's been such a strong year in the aggregate, but I think we're all fixated on this more recent pause in activity. Can you sort of speak to either what you all are discussing internally or with clients regarding anything that would kind of help distinguish between what's just hopefully a temporary pause and as we all adjust to higher rates and something that might prove potentially more lasting?

Well, the starting point is just to remind ourselves that after 9 months, our investment banking fees are up 16% year-to-date. So the activity level, generally speaking, is pretty good. Is the second quarter a little softer than -- sorry, is the third a little softer than the second? Yes, a little. There's a move in interest rates of the magnitude that we saw impact transactional activity from our clients. Yes, that does happen. And obviously, there's a period in volatility like that, where buyers and sellers just need to readjust valuations and expectations. So that always happens. But if you look at our businesses generally, we can see from the loan growth activity across the commercial side that the CapEx cycle continues. We know from the investment banking pipelines that they remain strong, and our team added more in the way of pipeline in the quarter.

So it feels to us like clients all around the world are active. We've got a good U.S. economy supported by the consumer and by the AI CapEx. And there's underneath that, a lot of capital requirement from these AI companies and the whole environment that surrounds them. We've been a very active participant in that. So we remain optimistic on investment banking. We've got a world-leading franchise in capital markets. I think we were third in announced M&A in the third quarter. So that tends to mean good things going forward. So we're pretty constructive and we'll see how the fourth quarter develops.

We'll move next to Steven Chubak with Wolfe Research.

Here. Maybe to start, Brian, I was hoping you could address some of the recent concerns on us or agentic AI as potentially driving more yield-seeking behavior, the potential risk of flight for more idle consumer deposits? And whether you can create barriers that actually explicitly precluded genetic access, which could potentially help dampen the pace of sorting activity while also providing some additional layers of security to your customers as well.

I think those are 2 different questions. One is we're working with various agent providers and others to likely worked with some of the aggregators to make sure that the customers in control of the decision, the human remains in the loop before money is moved out of their account and items like that. So that's safety and security. Look, we have a -- the banking system has been the source of transactional accounts for people forever and that safety and security people have knowing they can make a payment. It will go through the system. It will be credited to the person they're making the payment for. They can receive payments. They have access 24/7. They can send money out Zelle payments, et cetera, all of the time. They can do wires right from their phone. But it's all safe and secure in the environment. And I think that's the key.

And so what we and the industry and others are working on is with these providers are saying, "Hey, make sure that the human stays in control because what you don't want is a lot of [indiscernible] transactions for lack of better terms. So that's completely separate from the question. The question of people optimizing deposits comes down to what a customer puts money with a bank for. And today, a customer can get a money market fund rate of 4% plus. Today, the customer can get a rate from us of 4% in their money market funds, et cetera, either off-balance sheet or on-balance sheet based on what they want to do. And so what -- while their checking balances continue to grow, that's their transactional money that they're in motion, they're making all their payments with, they have to keep that account active, but -- and so optimizing that with the penalty being transactions not going through, being not paid and/or overdraft penalties and/or other types of issues is not the optimization. They've already optimized their cash that they [indiscernible] for investment purposes. And we got $280 billion of deposits for our Wealth Management customers, all of whom have a lot of money by definition. And if they want to seek higher rates, they can put it in their account structure and our advisers would do it for them into the market. into cash there, and there's a lot of cash in their investment accounts.

So I don't see where the agent is going to change that dynamic and the risk of it making adjustments at times when it doesn't know what the consumer is doing tomorrow or the consumers written a check or the consumer has done other things, I think it will settle out. So we're not worried about it. We have a great company. [indiscernible] and others are capable of helping consumers on a genic basis. We believe strongly the human in the loop because humans control their money and should control their money, and it'll work through. But the environment of higher rate available funds for deposits in our company, whether it's humans or general humans or wealthy humans or commercial clients, it has been there, has always been there. And frankly, since the money market started 40 years ago, there's always been an off-balance sheet alternative, for example, and you see what happens. So we're very confident in our deposit prospects. And we're very confident in the application of our technology is actually will be what the customer really wants because we are talking to them all the time about that.

If I could just squeeze 1 quick clarifying question. There's been lots of discussion around the market's performance. There's also been a lot of focus on having to manage to multiple constituencies on capital. There was a lot of speculation intra-quarter that efforts to match to a 6% TCE may have weighed on market performance in 3Q as evidenced by the balance sheet contraction in the segment. I was hoping you could speak to that linkage of how managing to a 6% TCE target informs your willingness to deploy more balance sheet in the markets business or frankly, at the other areas there are just more leverage versus RWA intensive?

It has no bearing at all. The simple proof of that is year-over-year, the market's balance sheet is up and the revenue is down. And so they're not -- so the return opportunity is there because of customer activity when you're a fixed income both in the capital markets area, which leads to trading plus and the support for our investing clients area, if your fixed income dominated and rates go up and the client step back, that's why the balance sheet wasn't needed. They're up significantly in the second quarter, and they gave you some of that back, but there's no constraint on their growth. If they can get the returns, and that's what Alistair said earlier. So the point is that we support that business. It's up several hundred billion dollars over the last few years, and we expect it to continue to grow, but they've got to get the returns as they're growing. And when customers stopped cold like did the last quarter, that happens. It's irrelevant to the overall capital company because you can see the tangible common equity ratio was flat quarter-to-quarter and the market's contribution to that flatness was -- and that's with an extra $1.2 billion hit in the markets change was relatively minimal in the scheme of $3.5 trillion of assets.

We'll move on now to Vivek Juneja with JPMorgan.

I want to follow up on 2 questions. Let me start with the first one. Brian and Alastair, I was the question that was just asked on the TCE ratio. How firm is that 6%? How much are you willing to let that go down and under what environments?

It may drift down with outsized growth in the quarter. But it's not like 6% perfect and 5.99% is not, it's much more flexible around that. But the real thing we talked about, Vivek, earlier in the call in multiple cases is there's lots of metrics around capital. We're waiting for the new capital rules. Alistair said that multiple times to ensure what happens there, and it's interface between the two that you've got to work through. But the reality is, on the TCE, there's lots of optimization with a lot of excess capacity to lend $800 billion worth and a lot of that not needed for liquidity and a runoff of the securities portfolio that can even within that $800 billion can be repositioned. We've got lost room to grow within the balance sheet and push the efficiency of balance sheet up. And so that metric will not constrain our ability to continue the consistent buyback principles of dividends, business growth and all the current earnings goes back. And then secondly, how we run the company and grow the various businesses have calls for capital.

Let me just turn to the second 1 that I want to follow up on. As Erika mentioned earlier, there was a confidence issue, which is reflecting your stock down over 7% this morning. Brian, what can -- it's obviously a surprise when you talked on the January '25 call, you talked about how the -- everything was already in the run rate for fixing this issue, the AML issue. We had clearly, you've had a huge charge this morning. It's more -- it's not that you can't absorb a bit to, but obviously, it's a reputational confidence. If you -- what should we think about? How should we get confidence that this is really in the run rate? Is there a time line that you can give us some -- that we should look to would give us some update on how far you've had a deliverable that was due and it is meeting requirements. What is that next time line? So we know that it's actually now truly behind us as opposed to the risk of more charges or more expenses.

We just resolved the timely aspect of that, which is in the order. And we have -- if you look at the cost across all the quarters, basically 18.5-ish is the last 3 quarters, 18.6, down 18.5 and we're telling this relatively flat. So it's in the run rate, it's thousands of people. We repositioning people from other units as we get the efficiencies to this and then that will let the head count drain down. And so it's in the run rate, you can see, and I just gave some statistics to one of your colleagues.

So we're very confident that we're on the course. The key was to get agreement to what the resolution was and that we have. We were we went back and forth on a little bit earlier in the year, now it's clarity as to exactly what the metrics, et cetera, they want to see. We file a lot of SARs, et cetera, and we just had to be clear about what the metrics they were looking for under a new regime that modified the programs and we're all set.

We'll move on now to Glenn Schorr with Evercore ISI.

Follow-up on the fixed income markets front. I do think you have a great corporate munis and mortgage business and the rate move was weird in the quarter. I get all that. So my question is, have you been pushing to build rates, currencies and commodities to be as big and broad as the other -- as the micro franchises, just so you don't have this imbalance from time to time that will always happen in markets?

Well, I should have said that earlier, Glenn, I mean I feel like that's been a core discussion that we've sort of laid out over the course of the past 2 or 3 years. If you date back a while ago, Jimmy first started talking about we want to fill the gaps in our franchise. And when we talk about investing in people and technology and balance sheet, what we're trying to do is take the strengths that we have, use those, continue to add. And then we want to invest in some other pieces. So we happen to have a bigger fixed income shop than we do equities. We can continue to invest in the equities business. As you point out, we feel like we can continue to do more with clients around the world in rates and foreign exchange and commodities. So this is one of the reasons that we stood up at Investor Day and said we see growth in all of our lines of business because this is an important contributor to us, and we've got pretty good growth opportunities in those areas. So yes, is the answer. We've known that for a while. We continue to invest there, and I think you should expect to see us continue to grow.

We'll move on now to Gerard Cassidy of RBC Capital Markets.

Can you guys share with us -- I know this in your credit area, asset quality, I think it's Slide 12. Can you show us the reservable criticized utilized exposure about $19.9 billion, down 25% year-over-year. Can you share with us the trends that drove that number lower? I know, Alistair, you talked about the consumer credits in great shape. We all see that. But what's driving these numbers this way? And do you think those trends continue into 2017?

Well, this is our commercial metrics. So it just takes into impact the lending we've done across the commercial loan categories. And we've got pretty broad-based improvement. I'd say one of the bigger areas of improvement over the course of the past year has been commercial real estate office. We're at the very tail end of that now. The [indiscernible], I think, down 50% or 60% in that 1 area. So that's been an important contributor. But when you're talking about a decline like this, i.e., an improvement like this in [indiscernible], it's obviously broad-based it's helped a great deal that the consumer is so strong and that the economy is strong. So that is just another piece of that evidence, Gerard, that the economy is in a good place at this point.

In terms of 2027, I'd say this [indiscernible] number is pretty low relative to even pre-COVID numbers. I think this is the lowest we've had since COVID. So can it improve? Yes. But if you look at the charge-offs today in commercial, they're really, really low at $220 million for the quarter. So can they go a lot lower? I mean, maybe a little lower, but I think we feel good about 2027. We don't necessarily see any change right now to the underlying credit quality, but it's a really low number at this point.

Very good. And then as a follow-up, I know this is not necessarily an easy question to answer. But clearly, the economy, and we're all benefiting from the boom in AI and capital expenditures. We all see about the hyperscalers, what they're spending. Have you guys been able to get your arms or frame out what kind of indirect exposure Bank of America might have to the food service companies that are going out to these sites that are being built or the lodging owners that are housing people that are building new sites. Is there any secondary derivative analysis that you guys can do so that when the AI boom slows down, those businesses probably will be impacted at some point. Any thoughts on that?

I think, Gerard, you're kind of -- the last part of your question kind of hit the point, which is, if a chunk of growth and the question of how big it is you can get different economists and different people would argue going on this year is due to AI activity, and that were to slow down, that would slow down sort of what is a parent AI, but also could have ripple effects through construction, staffing and all the things you labeled. So I think -- but that would be a general economic move. And I think right now, the nominal economy growing 5%-plus with inflation down to 2% plus by our team, there's a lot of nominal activity and that would slow down. The question then would be, would inflation slowdown and other things around it? And how much -- any day, how much unemployment it would cause which would be the ripple effects for the economy. If you think about new claims for unemployment, the last 4 weeks, I think averaged 190 something, which is lower nominally than prior to the pandemic, which was less people working in the United States. So people are employed, we can see that. They can see them getting more money. And so the question would be what would be the effect. And we always are looking about every individual customer in terms of where the revenues come from in the commercial underwriting. Do they have a concentration of customers that they're beholden to? And if those change, how does that affect them as part of the underwriting? What's in other words, the strength of the cash flows, the diversity of cash flows, et cetera? So let's take into account. And you know our credit quality is something in the commercial side and the consumer side, both, but especially commercial side that is very durable through COVID, through other ups and downs. Commercial real estate, remember, if you -- 2 years ago, you all thought we were going to a lot of commercial real estate didn't turn out to be true because the underlying underwriting we do is strong, and you should expect that, that's going on through all our portfolios in a given day.

Thank you. At this time, there are no further questions in queue. I will now turn the meeting over to Brian Moynihan.

So I want to thank all of you. Just as you think about themes for the quarter. The key is we've resolved the government discussion in the AML area that penalties paid in the third quarter, the expenses are in the run rate. Secondly, well, the markets activity because of our strong business mix towards fixed income hit us. We still made a lot of money trading this quarter. We made it very few days for low revenues. So we feel very good about it. As we look forward, as Alistair said, we expect that we may not see quite a seasonal drop we've seen in past practices. But the key for Bank of Americas is diversity in businesses. So on a normalized basis, we're an $8 billion plus, $3.5 billion in the consumer business, $2 billion in the commercial lending business, $1.5 billion in the Wealth Management business, all of which had strong growth in revenue, strong growth in organic activity, great credit quality and and you see that in the overall growth in deposits, loans and importantly, the net interest income and the confidence we have going forward of both the projected growth in the net interest yield. Thank you, and we continue to drive this company for the benefit of our clients and you.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Good afternoon, everyone. Thank you for being with us today. Jim DeMare will be with us today this afternoon. Thank you for coming to London. You're part of the -- you're Co-President of Bank of America, part of the member of the company executive management team. Well, thank you for the conference first. This is yours.

Great turn out. Thanks everybody for attending. Beautiful hotel.

Great hotel, lots of clients, amazing corporates today with us. So thank you for that.

Well, thank you, everyone. We'll go through a couple of questions, if that's okay. And if we have time at the end, we'll open for Q&A in the room. Let's start maybe with the macro backdrop. We have 70 million clients globally. We have a unique perspective on what customers do, businesses, investors. So what are you seeing from those clients today? And what is that telling you about the health of, of course, the U.S. economy, but also the global ones?

Sure. I think in addition to the maybe the level set because we have a lot of folks here that aren't in the U.S. and maybe don't have as much of a perspective on what our franchise. You mentioned a couple of the stats. We cover -- we have 46,000 banking clients broadly defined. We have 4.2 million clients that are -- which if we get the opportunity to talk about wealth, we'll talk about that a little bit more, but 4.2 million consumer investment customers, if you will, that are part of the bank, but also not only using our traditional banking, you think about it, but using us for their investing future as well. And when you combine that with -- we do about $500 trillion in payments a year. So thinking about that number and money circulating through the global economy, we do have the benefit of seeing a lot and not a plug for the institute, but if you don't get the information from the Bank of America Institute, I would suggest that you give it a look.

And to that point on strength, interestingly, a few of these things are more well known today, but I think it's worthwhile. Yes, there's a high-level numbers of earnings growth, nominal GDP in the U.S., which is pushing 7%, close to 7%. Below the surface, I think the numbers are even more supportive of what we've been seeing and give some comfort in the near term anyway for continued growth. There was a lot of talk last year or even coming into the spring about a K-shaped economy in the U.S. For those not familiar with it, just thinking more that the upper end was doing better than the lower end. We think about it in terciles. And if you look at that data that we have on those groups, there are a lot of supportive information that show the growth in the economy is more diversified throughout the economy than it was perhaps 1 year ago.

What do I mean by that? Take a look at the wage growth numbers that we show. If you look at wage growth on a 3-month rolling average, that lowest tercile is now at a rate that's above -- in terms of growth above the higher 2 sections. In addition to that, if you look at spending, which we just had some numbers out recently that we talked about, and that's through our debit card and our credit card information, data that we see discretionary spending across those wage groupings are also all growing, and they have been predominantly throughout the year. The last thing I would say on that front, if you look at deposit balances for all those clients, they are elevated to what we've seen historically. So I think from a consumer perspective, you can see very supportive of a good environment.

If you take a look at one of the other ones that's probably not as familiar because I wasn't until recently when I was looking at something else, people don't know that the largest employer in the U.S. is small businesses, of which there's like 3.9 million. We touched about 3.4 million of them. And their hiring, their desire to hire is at one of the highest levels that it's been in the near term and the optimism there is strong as well. So I think that gives you a little bit more depth beyond some of the government data that's available and some of the other information.

So you don't see any change in that macroeconomic backdrop?

We're not seeing it -- we're not seeing any deterioration. It's continued strength. It may not be at the highest level that it's been over the last 12 months, but we do see continued strength.

What about outside America?

Outside America, I mean, our information is obviously considerably more corporate and commercial. We're seeing varying growth throughout. I mean I think everybody here is a little bit more familiar with where we're seeing higher areas of growth, lower areas of growth. The other thing that I would say is that, obviously, with this rebuild of various supply chains as the world is taking a new form relative to where it was 5 years ago, great deal of interest in being able to move that money around, which obviously we think is very supportive of our global payments business and our global banking franchise.

Shall we move to the more the short term? Last week, our CEO, Brian made -- provided guidance at a conference. Wondered if you had any thoughts about the quarter.

Sure. I would say a couple of things. I think when Brian was the first to speak or he was the first to speak, I think expectations were high just based on the markets. When we talk about global markets, but the market environment that we had in the first half of the year, particularly the second quarter. I think the enthusiasm kind of waned throughout that conference as more people spoke and it was clear it's not going to be as robust as it was in the second quarter of 2026, which was.

Exceptional.

A lights-out quarter, I think, by any measure. But I think it's important to take a step back and think about not all those businesses are alike across the street, much like we all do the analysis of how we're doing relative to peers. And if you take a look at those -- the markets, this business is, in particular, there are a lot of factors that drive different performance in a quarter.

And we do see in most quarters, variation. What do I mean by that? Different products. Some firms are better in equities, some firms better in FICC and within FICC, you have macro products thinking rates and FX and commodities, you think micro, you have mortgages, you have munis and other products. And sometimes not every firm is even in those products. So then you get into the geographic dispersity or diversity. And it's a little bit more complicated. In terms of the quarter-to-quarter analysis, I think the way we've always looked at it is, obviously, we're striving to deliver the most for clients and for shareholders. But at the same time, quarter-to-quarter, you're going to have the noise. Take a look at where you are on a year-over-year basis.

And I led the markets business 1 year ago, but when I took it over in the summer of 2020, and we started our -- I would say, our growth plan, if you will, we were able to -- my motto at the time was to deliver growth regardless of what the market conditions were because we had room for market share growth, and we grew over 10% each year, and we watch every quarter, but we're also looking at trends that are a little -- that are longer than a quarter. Similarly, with investment banking, deal timing, things move around within a quarter based on economic conditions, regulatory conditions and other. And so we had a bit of movement there. And then you also have to consider, again, sectors. We've talked about our desire to improve our tech banking team and to make investments in investment banking overall.

I think the most recent stats to give you an idea, I think we've hired 34, 35 MDs so far this year. If you take a look at that dispersion within that, we've got 10 or 12 that are in industry groups in the U.S. It's 10 to 12 that we've hired internationally, predominantly here in London. And we focused on M&A as well. We have a handful of hires from there. And obviously, that doesn't add up to 34% or 35%, but those are the key highlights there. And we're focused on growing those businesses. So we remain as optimistic about the environment. We still find it to be a heavy investment environment, a heavy activity environment in the markets, and we remain constructive on that front.

We'll talk about our international franchise in a minute. Let's move away maybe from macro and discuss the strategic direction for the bank. Can you talk about where you see the biggest opportunities for growth?

Yes. Broadly, there's a few, and maybe I'll focus on. We brought it up in our investor conference last year, Investor Day last year. At times, it was worded specifically. At other times, it was more implied. But if you take a look at the opportunity set we have in broadening and deepening relationships is a big part of what we're focused on. Obviously, there's always new customers and new clients and you think about that as your potential inputs for growth for your business. But if you look at growth opportunities we have within businesses and growth opportunities across businesses, I think we've always been focused on it. I think it's a higher priority today.

And as far as things that Dean and I in our role and Brian asked us to overlook -- take oversight of the businesses on a day-to-day basis is to help drive those synergies across. And what do I mean by that? I think that some of the easier ones to think about are within businesses, taking -- if we stick with the consumer for a second, I think we have 70% of our traditional banking clients have credit cards. So obviously, there's room we can grow credit cards there.

If you take a look at -- I mean, it's pretty much across the board. You can look and for each of the businesses that we're in, there are opportunities to do more with those clients and things that were already or customers that we're already executing on. If I flip it over and go to market, we talked about it extensively on Investor Day. It was -- we have opportunities to do more with the clients that we have relationships with today, and it could be in specific products within markets. And just as like I highlighted one for consumer, you can go across commercial banking, you can go across each sector, and you'll find that we're really good, but we can be better. And those are the opportunities that we think are going to drive better client value and are going to drive -- help drive shareholder value as well.

The cross business is another one that it seems obvious or it may not for some of you, but we turn around and look at it and say, okay, of the -- I mentioned that number on consumer investments, which is a very unique business, not every firm has it, if we think about our peers across the board globally. And the penetration of those clients that we have traditional consumer bank relationships with that we also have this consumer investment with is sub-10 -- I think we have 9 million, I think, is the number that we have that are using us for investments as well. And as you talked about, we had 70 million relationships. So to give you an idea of the scale of what the opportunity set is, that's one.

And you can go literally across every business that we have and you can turn around and find similar things, business banking. Typically, a lot of what you think about in traditional banking services, that's another funnel for wealth, broadly defined in the wealth platform. And you can go on and on and on in each of these businesses that we have, where we have capabilities and strengths domestically and internationally that you will find to be very favorable for the users or our clients and customers and then also just continue to drive value. And we kind of talked about it as an ecosystem, a flywheel. You can use whatever term you want. But if we have a good relationship with you and we can demonstrate that there are other products and services that we can deliver that make you better, whether it's your personal life or whether it's your company operate better, that's what we're focused on.

And from your position, do you find those revenue synergies across more difficult to generate than the ones inside the business line?

Is that a trick question? I think like everything, it's all about execution. You need to set up your KPIs. You need to let people know that it's a priority. People -- I think people want to do the best that they can, and they usually have their set of objectives that they're focused on. So Dean and I are trying to help expand that a little bit and show that this is as important as many other things that you as a business owner may be focused on. And in fact, it's not an acquisition of a client in that way. There's already a good experience. There's already business being done. You don't have to go sell a whole new experience. It's just more about, hey, we have these other capabilities. These 2 or 3 seem they could align with some of your objectives. And let me tell you how we can do it.

Yes. And they know us.

Yes.

Since we're in London, let's focus on our international business or at least we're a small part of it. I guess, but...

Meaningful part.

A meaningful part. It was a key focus of the Investor Day last year in November. So what do you see as the biggest opportunities for growth? And what do you need to do to capitalize on them?

Sure. So -- reflecting back on Investor Day, we -- I think we had more than a few people speak to the opportunities in international specifically. I was one of them. I had my markets hat on for the last time and spoke to the Markets business. Wendy Stewart who runs our Commercial Banking business, in addition to Matthew, who runs Corporate and Investment Banking, and I think Bernie brought it all together for us as Head of International and tried to show and did show what the capabilities are and what this potentially means for growth. Just to reset for everybody, the numbers that were thrown out were a $4 billion increase in revenue, about $2 billion in pretax and the expectation were to deliver about 18% return on allocated capital, which is great.

When you go down into each of these businesses, what is that? I just mentioned it briefly. But for markets, it was we have institutional clients that we could deepen the relationship with by meaning doing more of the products that we're engaged in and they're engaged in, but we don't seem to have a good piece of market share with them. That was the most straightforward. When you flip it to the corporate clients, there was more opportunity. We've identified clients that we may not be doing business with today that we can be a value add and there's a relationship within corporate banking or investment banking that we just need to turn on the markets business.

Commercial banking, we talk about it a lot, but maybe not enough in this environment and being in this room, it maybe resonate a little bit more. But for domestic U.S. companies, and we are, depending on the day, the largest commercial lender in the country and thinking about $50 million in sales up to about $3 billion in sales, a lot of those companies have either clients or production or suppliers in other parts of the world. And so a big opportunity for us is we refer to as the foreign subsidiaries and doing business with them.

Like I said before, if we have a good relationship with the kind of home operation, when they go to expand internationally, we want to be part of that discussion. So whether it's not part of the discussion, part of the execution, it's payments, it's FX hedging, it's rates, all of those things and deliver that between the commercial bank and the corporate -- excuse me, in the Investment Bank. And that flows similarly for clients that we have that are internationally that are -- as the world supply chains are changing and some of those businesses are opening up or expanding their operations in the U.S., we want to be part of that, whether that's Europe, Asia, South America. So you can see that there are a lot of synergies that may not seem obvious until you dig in a bit, but it's really across the board between commercial banking, corporate and investment banking and markets. And it's a priority.

You've touched on most businesses. One more maybe, the Wealth Management business. As you look at the medium term, a 5-year view, what gives you confidence we can accelerate net asset growth? I mean we spoke about 4% to 5% growth. What are the drivers of that type of opportunity and to get there?

Sure. I guess a couple of things. First, just resetting again on what our wealth platform is or wealth capabilities that we offer. I mentioned we have the consumer investments business, which isn't a direct answer to your question, but I'm going to weave it in anyway. We have about $600 billion in assets there, consumer investments, which we have a target for $1 trillion, which isn't part of that -- the wealth and enabler that we're talking about. But it is an important part of how we think about this wealth continuum that we have and the capabilities of offering different degrees of high touch and low touch for investors depending on their needs.

Bringing it back to specifically Merrill, I think there are a handful of ways, and I think the team has done a pretty good job articulating them, but for the benefit of those that don't pay attention to it as much because we are a domestic wealth management business also, like the consumer business, the traditional place to start is with your financial advisers that provide that high-touch experience for their client.

So there are a couple of ways that you achieve that. One is through hiring, one is through training. Historically, I would say the last handful of years, maybe 3 to 5 years, the recruiting wasn't as high of a focus for us as it is today. I think the numbers through yesterday, we're going to be if we forecast out for the rest of the year, we'll hire more FAs than we did last year. That's a positive. And the assets that are coming along with them are almost double -- anticipated and almost double what -- and again, these are not hundreds of billions of numbers, they're tens of billions. But to put some context on it, we're pleased with the progress that we've made there. We're continuing to hire people, market executives in those local areas where we need to upgrade or improve, and we're expecting to see good benefits from that.

The other part of it, which may not be in the trainees, we have about 2,500 trainees that go -- come through each year. And you're going to obviously have not 100% retention, but we do see about 25% of the new business that we get tend to come out of the trainees. So existing plus new. And then the power of really what we have beyond that is all these other businesses that we talked about that provide a source and an opportunity to build out a wealth relationship, small business, business banking, commercial bank. It really touches everything. And I think that we could probably -- we will be focusing on more and probably continue to hear this be part of the regular conversation we have.

There's also a part of the business, which isn't as clear because candidly, 5 years ago, I'm embarrassed to say I didn't know as much about these aspects of the business as I do today, but we have 2 other powerful, I think, in this category. We have employee banking and investments, which is really us having a relationship with the individuals of a company. So when they go to a company and say, we can offer these benefits to your employees for banking. We just announced -- or Bank of America -- excuse me, Bank of New York announced and we announced that we did something with them a few months ago. I think it was second quarter. But again, this is another source of opportunity for wealth and for our traditional consumer banking.

Then we have the other, which is workplace benefits, which is more about relationships with corporations and managing their 401(k) businesses as well as their employee equity plans. And those are -- it's a little bit of -- you don't see much written about it. In general, in the industry, there's a handful of people or companies that can offer both of those capabilities, and it's another source of contact and introductions with people that we can then provide additional investment in wealth services.

So a little bit like elsewhere in the organization, growth within the business and across.

Yes.

Shall we -- well, we spoke about the macro and most of our businesses, maybe we should go towards more operational subjects. The company continues to deliver sustainable operating leverage, investment in growth, talent, tech. As you look across the business, how do you think about balancing expense discipline with investing in growth? And maybe a word in that context about our tech strategy.

Yes, sure. Well, the easy answer is growing revenues faster than expenses, right? That's the operating leverage, not to oversimplify. But within that, what's the construct in terms of how we think about investments and investments take a variety of forms. Tech is obviously a big part of that. And how do we think about tech in general, does it make -- does it help us execute better with customers and clients?

And then second, how does that fit into keeping our competitiveness, our competitive levels high. And so we say, well, that sounds pretty reasonable. I think you kind of would run your life that way, but then it turns into, okay, well, how do we prioritize within tech? We have a large and important tech budget like most firms. And then we have to start to think about, okay, within that tech investment, what's important to us? How do we prioritize within tech?

And there are things that there's no negotiation around, never down, we call it, which is you don't want to be in a situation where you go to use the bank and you can't access whatever it is that you're looking to access. And whether that means customers or on the institutional side of the business, you go to do a transaction and you can't execute. Not to mention, it introduces risk within the businesses when you're trying to manage risk. So that's obviously a top priority.

Cybersecurity, which has become even more pronounced as of late, given advancements in AI and a lot of the press that's been out there. So you're always thinking about those 2 as kind of nonnegotiables, but you have to also consider other things that are going to be important to you. We spent a bunch of money over the last probably 7 years just broadly on the tech stack, operating it better, data, cleaning up data, making data more usable by more people, mapping out processes, which at the time, I'm sure many people thought that why are we spending as much time internally doing that? Well, one, it creates a safer environment to operate from an operational perspective.

And lo and behold, when you start to look at AI and introducing it into your work processes, it's a pretty good position to be in that you have your processes mapped because you should be able to accelerate AI when you want to. I mean those are the top.

And then on the margin, you're always looking at how can we improve where can we do it organic growth, we need tech for that. And I think those are the main. We're always looking at it to be competitive and being aware of what is out there, but you have to do it within a cost-conscious framework. I always like to say, whatever your tech budget is, people will, without question, come back and say, well, that's not enough money for me to achieve what I want to achieve. And like everything else, it's kind of like you have a budget, you have to operate, you need to think about it that way.

So that -- I almost left this off, which is probably #3. Candidly, thinking about things on a platform basis. So thinking about horizontals that we're operating on. It's very easy to become very siloed in your businesses and have tactical responses to demands that are being driven by the marketplace or just general improvements that you want to make or capabilities. The real goal is to have these platforms, and I'm just using 80/20, but that has the 80% of the commonality in what you need to do in a platform and the customization that needs to be done for a different client group, customer group or something that risk may need or operations may need, but have that be the 20% that's differentiated.

And in theory, and I believe in actuality, where we've -- speaking from the markets business where we did a bunch of that, you get more for your dollar out of tech. So if I would take a step back for a second and race 2 minutes and go back in, I would put the platform component as up there in the top 3.

So I mean talking about the transversal aspect of our tech strategy and you discussed all the pillars of it. AI is probably one of them. We were as a firm, early adopters. What -- where do you see the strongest outcome? And how -- what are the use cases you're exploring next?

Sure. We talk a lot about and others have some dwell on an Erica for consumers and thinking more of small language model than large, the way we think about it today. But when you really looked at it, it was a way of self-serve for customers. So you have a question, you have a problem, you don't necessarily need to speak with someone. And so when we reflect further on that, there are broader applications. And I can share a couple of examples. But when we look at AI in general, I think one of the biggest risks to implementation of AI is people being fearful of it and thinking that it's going to replace them. And so you're going to -- us -- I shouldn't say that to us.

And that's not unique to AI. It's apparent every time we try to use new technology. Someone is always going to be resistant. But at the same time, when we had -- I think it's -- we have it up to like 200,000 people now, which is what the exact number is 90% or 95% of the people that we have working together, there's more familiarity with it, right? And so what's the benefit there? People get to use the technology, see it, understand it, hopefully be more comfortable to -- then it's about general productivity and how is it improving their life at work and how is it improving workflows and so on and so forth.

Second place where AI is in third parties, we're looking at a variety of providers out there to do different things for us where we think that there can be -- there's a place for AI, increased automation, so on and so forth, a lot of the standard things that you hear about out there. I wouldn't say from that perspective, it's anything truly unique. The last place is looking at things that are more complex and custom and unique to us and then working with internal and external to see if there are solutions that we can accelerate it.

We were just talking this morning. There are a lot of questions around this particular question I was asked more on how much longer it wasn't addressed to me. It was addressed to Michael Hartnett, but how much longer or how long can the CapEx cycle go on for some of the larger companies that are spending large sums of money. And the question was really getting at, are we going to see returns quickly enough?

I think that the most measurable place that most companies have articulated is around the tech organization itself, coding and the advancements that are happening there. And the numbers that are being thrown around are between 15% and 20%. Early on people throw out like 40% to 50% numbers. I think most industries have gelled around more of a 15% to 20%. We see those numbers in terms of our productivity from the 19,000 or 20,000 people we have coding. So that's clearly identifiable.

And then as we've applied Erica and Erica-like capabilities, some more self-serve internally, we are seeing improvement. So historically, this kind of self-help is only external. Now that it's internal, we're seeing considerable reduction in help desk calls for things that are pretty basic. I know that doesn't sound revolutionary, but that's where you're going to start to see or where we have already seen those benefits starting to come through the system. And then we have other places just in other products that we're offering out to people. We talked about payments. We have CashPro, which is more of a commercial and corporate offering for treasurers to use.

And there's an Erica that's part of that discussion now where people can kind of self-help and self-direct and operate more smoothly. So we think we're going to end up seeing the true results of this and the normal KPIs that we look at. I also think that probably in a few years' time, there's going to be a lot less talk about AI as separate and differentiated, and it's just going to be part of a broader discussion on technology and how are you thinking about tech. But we are seeing it already in the areas that I mentioned, and I think that, that's going to continue to accelerate.

I left off consuming a lot of information and data and being able to parse through it and summarize it, that's standard and doesn't really require a lot of discussion.

Fair enough. One last for me, and maybe we'll have time for one question in the room. We constantly generate excess capital and have historically returned a lot to shareholders. How do you think about deploying excess capital and obviously, weighting investing versus returning to shareholders?

It's constant and ongoing. I wouldn't say that there's an easy answer, but I think we have some principles that we operate by. First and foremost, we have to remain financially strong because if you're not financially strong, then you can't be there for people. So that's clearly a top priority for us, thinking about strengthen the balance sheet and liquidity and capital. So it goes without saying, but I'm saying it that, that is the top priority, supporting the broader economy. I mean, banks are a large financial services company, obviously, but banking is a large part of it. supporting the broader economy is important.

And then you get into a couple of the points I brought up earlier, which are what do we need to do for investment to improve the business that we're doing with people. I guess, fourth, thinking about growth, not in any particular order, but these are top 5. But I would say financial strength would remain #1. The others are all important and potentially equally important, thinking about what do we need to invest to grow.

And fifth, being the obvious, dividends and share repurchases. So thinking about that framework and then saying, well, how do we make the decision to go to return versus invest in the business. We want it to be marginally accretive on these targets that we have of 16% to 18%. So from that perspective, I don't think it's surprising or complicated, but that's kind of the framework of our logic. And I think we've demonstrated the ability to do both, increase dividends and continue share buybacks and growth.

Insightful as always. Thank you for your time. We have 4 minutes left. Maybe we can take a couple of questions from the room, if any. I think you've covered a lot. Thank you, Jim.

Thank you.

Thanks for your time.

I'm Jason Goldberg, and I cover the U.S. large-cap bank stocks here at Barclays. Thank you for attending our 24th Annual Global Financial Services Conference. The feedback so far has been it's a very productive morning, and we look forward to continuing on with another 2 days -- or an afternoon, another 2 days of insightful presentations.

A word of warning, in addition to prepping for this conference and watching football this weekend, I did help my youngest child study for this Saturday's ACT. Fortunately, today's keynote lunch speaker hardly requires an introduction, but an attempt to describe Brian Moynihan without suitably expansive vocabulary would seem almost impetuous.

Since becoming CEO in 2010, Brian's overseen the remarkable stabilization, transformation and derisking of Bank of America while adhering to the bank's now famous mantra of responsible growth. Under his stewardship, Bank of America has generated formidable earnings power, fortified its balance sheet and expanded capabilities.

Brian is known throughout the industry for his disciplined leadership, intellectual rigor and what many would describe as a perspicacious understanding of the economy and financial markets. He's also, as countless investors have discovered, fond of introducing arcane vocabulary into earnings calls, leaving even the most erudite observers wondering whether a particular locution was meticulously chosen or simply a product of especially sesquipedalian morning.

Fortunately, today's discussion should provide less anfractuous than some of the earnings transcripts. And I trust none of us will also develop the fantods while attempting to parse his remarks. Indeed, should an unfamiliar word emerge, we can take comfort in knowing it was almost certainly employed with the intention rather than obfuscation.

Please join in welcoming the Chairman and CEO of Bank of America, Brian Moynihan.

I hope your kid does well on the ACTs.

Me too. Those colleges are really expensive.

We were thinking -- not like you can't afford it. Actually, we were talking earlier, today or tomorrow is the sort of anniversary of a momentous weekend 17 years ago, and Jason and I were talking about, I closed the conference that year before the weekend that we never want to repeat. So it's good that you're still here doing what you're doing.

Very good. To pay for college.

Yes.

I guess, Brian, maybe the best place to start is you described the U.S. economy as proving more durable than many expected, supported by strong consumer spending and AI-driven investment. Now where are you seeing that durability most clearly in your customer data? And where are you watching most carefully for potential cracks?

So in the end, one of the things we obviously watch is what our consumers do along all dimensions: how they spend money, what their paychecks look like coming in, how they're using the lines of credit or how their credit posture is. And then that goes into small, medium-sized businesses second. Because in the end of the day, that's the lion's share of the U.S. economy is represented.

So if you look at the consumers in the month of August, they were up 4% of spending into the economy versus last August. And yes, gas drove part of that, gas prices drove part of that. But the reality is that there was more spending on cruise bookings, more spending on restaurants, both quick serve at lower growth rate, but a regular full-serve restaurants at a higher growth rate.

So the consumer spending on a broad-based out-of-home entertainment has been big. The movies have come back because they've had some good movies. So the consumer is spending money. And if you look at their paychecks, you can see the paycheck and you can see the wage growth is 3% plus to 4%. We can see that in their paychecks.

And then we look at their credit, the credit quality is as good as it's been in a long time. I mean -- so we're normalizing. They're normalized to levels that are equivalent to where pre-pandemic where everybody said was all -- things were growing the same way, it's only getting back to that. That was like a 40-year low. So we feel good about that.

On the small, medium size, the good news is they're using the lines of credit a little bit more. They think about all the issues that you read about in the paper every day, but the good news is credit quality is good in the commercial book, that the small and medium-sized loan growth is solid. They're using their lines, not all the way back to where they used them, but they're using their lines, which is good news. And they seem to have a stable employee base and that ends up in the broader economy as unemployment.

So we feel very good about the underlying U.S. economy. And our team, like your team has mid-2s growth for the year and Fed will raise rates, but it won't knock the economy off its movement.

I guess anything -- areas of concern you're watching for potential cracks in your radar?

Yes. We always watch to make sure that we watch the new claims for unemployment, unemployment levels. We watch any delinquency movement. We watch any sort of stress in the consumer payment cycle where they're -- they seem to be storing money. And the good news, the American consumer continues to spend. There is affordability in their mind. And so you can see that year-over-year in September so far, spending on gas is up 15%, 20% on the credit and debit card charges. That's about 5% or 6% of the total. So it doesn't change the overall picture. And credit and debit cards are 25% of the overall movement of money I'm describing.

So it's impactful, but -- and that caused them -- if you look, we just published a report today where you can see at the pump versus inside the store, at convenience stores, what's going on, it seems like people -- the consumer still spends money. On their mind is affordability. That will be the issue for -- to reconcile as wage growth -- will wage growth catch up and will there be real wage growth.

Got it. Maybe before we get into a more strategic discussion, perhaps you give us some thoughts on the quarter, particularly these ever-changing capital markets environment.

Yes. I think if you look out -- just starting with the capital markets, as you said, Jason, because that's the one that's interesting. Last year's second quarter was Liberation Day. This year's second quarter were increases that were very strong in both investment banking and in sales and trading revenue. If you look this quarter, what we're seeing is the market generally in investment banking is down 10% or so in the Dealogic fees type of things. We'll be down -- we're not as well positioned in some of the businesses that are -- have more activity. So we'll be down probably a bit more than that, I'd say, $1.6 billion to $1.8 billion in fees will be kind of the number.

On sales and trading, it'll be one of the better third quarters we ever had, but it'll be relatively flat to last year because last year was a big recovery from the second quarter. And that's being driven by a lot of the financing activity, frankly, slowing down from the second quarter because you had, especially international business in Asia, you had a lot of prime brokerage lift that's mitigated a bit as people pulled the risk back as a provider of credit. And so you're seeing that happen.

So investment banking, $1.6 billion to $1.8 billion, sales and trading flat. Investment management AUM fee is up 10% to 15%, which is good news. And then you back in the loans and deposits, everything's happened like we thought it would. Loans in the commercial side growing mid- to upper single digits, consumer side, low to mid. And that ends up with good loan growth. Deposits are growing. We aren't reaching for CDs and high-end cost deposits because we got $2 trillion in deposits, $1.2 trillion of loans, but the deposits are good.

NII is doing exactly as we said. Not only the dollar amount into growth rate, but also the NII yield is going up. So we feel very good about the rest of the company. And then expenses are bouncing around at the $18.6 billion level, which makes this quarter tough for operating leverage with a quick downdraft of revenue, but we'll get back and get back on the targets we've set for the 200 to 300 basis points. We feel good about that. So it's just a matter of getting through this quarter.

Over the streaks that we've had on operating leverage, there's always a quarter where the thing moves quickly and it only takes you a quarter or 2 to get back underneath it. So we feel the underlying economy's good and the business is good. So it's kind of this capital markets movement makes you not feel good, but when you actually look at it with the right perspective, it's actually a pretty good quarter.

A lot in there to unpack, which we'll do. Maybe we'll kind of just run maybe balance sheet first. Maybe start with on the loan side. You've had fairly strong broad-based loan growth. I think you have 6% in the second quarter, ninth consecutive quarter of growth. Can you maybe just talk, expand a bit upon both the commercial and consumer lending outlooks, particularly against the backdrop of rising rates as early as Wednesday?

Yes. So last quarter, we had 4% credit card growth, which we've been on the stair step of growing the book, and that's good, and we see that in good shape. The mortgage business is quite quiet as people might expect. The higher-end customers, not so much, but the general mortgage business in the consumer side. Autos are fine, but again, not growing real fast, just kind of moving along at the same pace.

When you get to commercial side, that's where the growth has been strong. The good news is over the last several quarters, it's broadened out from the capital markets area contribution to lending, which we have a lot of lending businesses in there to lend to warehouses for mortgage lending companies, asset accumulation companies, things like that. That's basically the growth rate slowed down.

In the rest of commercial business, the core middle market, large corporate and small business banking group has grown. So we feel very good about that because that's a broader-based amount. And last quarter, I think it was high single digits, and we expect something similar this quarter. So -- but that's good news because that means people are investing in the broad base of American businesses and putting the money to work.

And then I guess on the deposit front, you've often talked about deposits being a competitive advantage for Bank of America. I know last quarter's results somewhat obscured by seasonal tax-related outflows. Maybe just talk to kind of underlying trends in client activity across your various segments as well as maybe you could delineate across kind of the consumer income cohorts.

Sure. If you look at the consumer business, the deposit growth, what we're seeing last quarter and this quarter, it's continuing in the noninterest-bearing, both consumer and commercial, and especially in consumer business, you're seeing it stabilize. You're seeing the number of checking accounts grow. The average balance per checking account went up a few hundred dollars last quarter. Those are all good in this year because we produced about 160,000, 170,000 in net new checking. Over the last 5 years, we've done 5 million. The average balance continues to grow, which means people were getting a primary account, and that's the focus in the consumer business.

When you go to commercial side, the cash management revenue has been up high single digits, and that's sometimes expressed in deposit value and sometimes expressed in fee value, and that team's done a good job. And we continue to build our international platform out investing really hundreds of millions of dollars in that platform just to keep it pushing it along. So we feel good about that.

And if you look at the near-term quarter, everything is performing as we said. So I think you'll see solid deposit growth, but you won't see a lot. We just don't -- doing CDs and high end because we're sitting with excess money. So if we did a 4% CD, we'd take that cash and basically put it to Fed at 3.7%, whatever the hell it was. And we don't do things to lose money, we don't need it.

So we put the people in the market, and that's what we do. And the nice thing with Merrill Edge and Merrill and the Private Bank, we can put -- we have lots of access. So our customers can come at us and say, I want higher yield and we just put it in the market. With that being said, we have actually been growing deposits for the last several quarters, which is good.

I guess deposit pricing is something that's got received outside attention recently. Given Bank of America already offers a superior set of products and services, you ever considered like paying higher deposit rates as a way to accelerate market share gains?

And just looking further ahead, there's a growing discussion around stablecoins, automated sweep technologies, other innovations that can maybe reshape how people think about deposits and manage liquidity. And just how ultimately do you think this deposit landscape plays out?

I think I'd separate that dramatically into 2 different buckets because for the nontransactional deposit, they're flipping. Our core business is transactional deposits for commercial customers, for wealthy consumers and general consumers. That's the business. That's the payments business. That's the #1 -- the primary household account for a business or small business. And so that's what we drive.

And that all in is $2 trillion deposits, which in the consumer side, where, I don't know, 50 basis points all-in cost paid on $1 trillion of it, $950 billion. And then on the rest of it, it's higher and brings up to 1.5% or something like that.

If you think about it in the consumer side, you take that deposit rate paid plus the cost of operating the thing and you get in the 160, 180 basis points type of number. That's a very advantaged position, and there's no -- so that's -- now the idea of bidding for nontransactional deposits, you need to do something with the money, you need to fund the balance sheet and our balance sheet's very liquid. We're sitting with almost $1 trillion of liquidity every day. So that just doesn't make sense. That's how we take in the market.

In the commercial side, we have to pay what the market bears. So when you get in the larger corporate and cash manager, you're paying whatever the market bears. So there's not even for the transactional account and the credit rates you give them. When you look at it, stablecoin is completely different because it's not -- the question is it's a lot of talk about the interest on stablecoins, and that's the policy debate.

But the real question is, would it attack and take noninterest-bearing accounts and give people a vehicle to use them for payments and receive interest on them? And that's not the best idea for the banking system because it will shrink the banking system and lending capacity. That's the argument that broad-based 4,000 banks keep making. And whatever amount it shrinks it buys lending capacity comes out because the only thing a stablecoin can do is own treasuries or put the money at a bank or the Fed or indirectly with us. So if you think about it, it's not providing good core economy activity.

And so the point is if you shrink the banking system by $100 billion, $200 billion, $500 billion, $1 trillion, you're basically taking that lending capacity out of a core banking system, which is the lender to small and medium-sized businesses and consumers in certain areas, home equity and things like that, card. And mortgage -- there's more market-based choices. So that's the point.

So the idea of stablecoins, the industry has built multiple products. We've minted our own stablecoins. When the consumer demands -- when the customer demand's there, we'll do it. The industry, you've seen some consortiums announced and it gets linked into tokenized deposits and stablecoins because tokenized -- what you're really saying is, can I move money of size on the weekend? And right now, with the real-time payment system at the clearinghouse, you can do $10 million, 24/7.

With the Fed, you can do 5 by 20-odd hours, so you can move a lot of money with the Fed and other systems around the world. So the tokenized deposit may let us close down the need to move amounts of money on the weekend. And then for the consumer side, it's the payment. And what you don't want to do is lose that position. So we have consumer side applications we built in the industry. And really, there's 2 parts to that.

One, just general payments inside of all the different technologies out there. And the second is cross-border and the cross-border piece is something we're all working on to make sure we have ready to go. So Zelle has proven a tremendous payment system, taking that cross-border is not the hardest thing to think about. And so I think connecting with other mechanisms and the team in the industry has been working on that, too.

Got it. And maybe we'll stick with the balance sheet sort of before moving on to income statement. But just maybe on capital, broadly speaking. But we've seen this overall second quarter results, good year-over-year organic growth, positive operating leverage, efficiency ratio improvement, I think, across every business segment.

Just when you think about that, how much -- how would you characterize that as kind of cyclical improvement just versus structural change? Kind of what's your level of confidence you can kind of sustain that performance? And just how significant is this AI infrastructure build-out contributing to the overall landscape?

The overall landscape or the Bank of America?

The Bank of America.

The Bank of America, we announced the infrastructure effort to say we deploy more than AI just across all infrastructure in the 6 quarters from the start of this year to the July 4 of '27, we deployed $250 billion. The team's on course to do that. That's broader in AI, but it's a substantial part of AI. We're participating in those transactions where they make sense. Necessarily, the duration of the financing requirements ends up going to the market, a lot of it. So we're more of a facilitator and underwriter, so to speak.

And so it's not driving the outstanding balances as much as it's driving the activity. But it will be a major driver in our team's estimates, your team's estimates. Is that a point? Is it 1/3 of the marginal growth? Lots of different estimates, but it's a big investment cycle that will continue on, and it may go faster or slower depending on the announcements this weekend or not.

But the end of day, the capacity has -- is going to be built. So we feel good about that. We're participating in that. We built that infrastructure fund. We've also put together a team to work more on the ecosystem, make sure we're seeing all the parts and driving that.

But in terms of outstanding balance sheet loan growth, it's not that measurable because it's going to the market. So what's driving the balance sheet growth, the good news is for America, small, medium-sized businesses, are using their lines, and we're gaining client share by getting more clients, more logos as we call them across the 100 markets we serve in America and then outside America across the 30, 40, 50 markets we do business in.

And so that growth's coming the hard way of one more client getting their lines of credit and their facilities that they're using, and that's where that growth is coming from. So it's 2 different things. I'd say the AI is helpful in building it, but it's a good backdrop, but it's not going to hit the on balance sheet as much as the other activity will.

Got it. Last month, Bank of America announced a strategic investment in an online consumer lender in India. I think to some, that appears somewhat out of character for the company. Just maybe walk us through the rationale behind that investment. And should we expect similar opportunities or partnerships in other non-U.S. markets over time?

Well, so if you back up, our basic platform is inside United States, we do all 8 businesses. Outside United States, we do middle market lending, large corporate lending, treasury services, investment banking and capital markets sales and trading. That's what we do. And so we're not going to have a retail bank in India in any near term. We're not going to have a small business lender or medium-sized business lender.

So we partnered with Jio, which is a premium company with Reliance and Mukesh Ambani and the Reliance structure and Jio's the subsidiaries and various things. So they have one insurance. They have one in, obviously, core retail banking. They have one in -- they have their capabilities in the cell phone industry. So our job is to help them bring in the expertise in commercial banking and small and medium-sized lending, coupled with their reach, hundreds of millions of customers, coupled with their knowledge of India, and we could do it.

And so it's a sizable country growing at 6%. That's what makes it interesting and a partner we've done business with for many years and have great confidence in. I struggle to see how many other countries fit that profile because we've tended to stay in the upper middle market, and we've announced initiatives like in Switzerland and the U.K. and Germany. In Canada we have for years, in Mexico for years, we've gone deeper in the middle market where we could have the expertise to do the lending, but we didn't need the branch structure to extract the value.

And I think that understanding of how commercial banking works for small and medium-sized businesses, which were the largest in United States, stops us from going outside United States, especially except in an opportunity where you have a great partner, a great reach, a great brand and they need the expertise. And so $1.9 billion to help develop that platform, and it looks like it's going to be a great financial investment.

Got it. I guess I also saw that you announced capital deployment plans in further support of the U.S. critical infrastructure build-out with financing initiative of honoring America's 250th anniversary. What role do you see for other uses within BofA's capital strategy going forward? Any specific areas of focus?

Well, so if you think about we earned $9 billion last quarter, whatever it was. We paid a couple of billion dollars out in dividend, that gives us $7 billion. We always want to deploy that to help the businesses serve their clients. It's -- so we see loan growth, we see -- we put $100 billion more in the capital markets balance sheet to the end of last year and the first part of this year into the second quarter, supporting their growth. We instantaneously will push the capital where it gets the returns.

And so -- and if there's nothing to do with it, we'll buy back the stock, and we're holding a tangible common equity ratio just over 6%. And the CET1 at 11% change, which could work down a little bit based on all the rules and theories, but the reality is we're focused on the tangible common equity ratio also. So plenty of capital, we'll deploy it.

This thing in a joint venture you mentioned is there. When you then get to what we talked about a little bit earlier, the $250 billion, that's really supporting our clients' development of assets related to the infrastructure build-out this country needs along power, both generation, transmission, new sources, import/export, et cetera, around AI data centers and things like that have all the different aspects of that and around railroads and other things that need to have another level of investment in if you're going to redomesticate a lot of production activity -- manufacturing and other types of activity, you need to move those materials.

So we -- and if airports, it's whatever we can do. So some will be on balance sheet, some will be in the capital markets, but that's the capital deployment we announced. In the end of day, it won't be a lot of capital needed for that because a lot of it will be going to capital markets ultimately.

Got it. And maybe just as we have this evolving kind of Basel III endgame finalization in sight, you've seen your kind of upward G-SIB surcharge pressure. Just how do you kind of think about capital in the new regime?

Well, I think -- so I think the upward pressure is kind of mitigated, which is good. And if they index, that's important. When they index from in the final rule will be important because that -- are we going to go back to '12 that was in the original statute? Are you going to pick '19? Are you going to pick '20? Whatever period of time they do and that they'll announce a rule and that will start up. But the concept of indexing is critically important.

And then the methodology changes for some of the stuff. But we've been below the add-on for the stress test for a long time, most years. So that's not really relevant. So we'll drop down a little bit. But the end of day, what I -- what we watch and what the rating agencies and other people who actually own the debt and think about companies, you watch the tangible common equity ratio. And at 6%, you're getting to the point where you got to be careful. Can you go a little lower than that now with the amount of no risk assets we have on the balance sheet? Yes. But remember, if you go back and think about 2008, tangible common equity ratios of 3% didn't fare well in the first bump in the night.

And so we've looked heavily over time at what happens to banks that have gotten in trouble. And we've -- as part of a risk thought process, we think hard with our Board and others about what's the right tangible common equity because the end of day, that's what the rating agencies end up. They have their own risk-based methods and stuff. But in the end of day, they also look at that.

So you're trying to manage the dichotomy at 6%. We're kind of -- bump is we're 6.07% or 6.05%, whatever it was last quarter. You're kind of around the range where you got to make sure you maintain it. But you look at all that, but we don't really feel any capital pressure to build at all right now. It's -- we can return it all if we don't have good use for it.

Got it. Maybe pivoting back to the income statement. You kind of gave an overview of guidance at the onset. You talked about good loan and deposit growth. Net interest income has kind of been running at the upper end of that 6% to 8%, at least you talked to for the year. Is that still kind of the way to think about it?

Yes. So if you back up the net interest income growth we gave you estimates for the year back on Investor Day, and that was multi years and Alastair showed the charts and stuff. Everything's worked out. And if rates go up a little bit, that will help a little bit even on that. So we feel very good about that, not only in the percentage growth, but importantly, to get the 1% plus return on assets on the 6% tangible common equity basis for the 16% plus ROTCE, you had to make sure that you were also getting the balance sheet tightened back down as it came through.

So the net interest yield part of that, I think off the top of my head, I think it was up 14 basis points second quarter last year, second quarter this year, which doesn't sound a lot, but that's 7% on the basis of 2%. So it was a big move, and we expect that to keep moving.

So you're going to have margin dollar volume growing at upper single digit. We said 7%, 8% type of numbers and then NII yield growing 2%. And that doesn't stop -- that just keeps rolling in here because of the repricing dynamics of balance sheet, the loan and deposit growth, which we're not assuming levels that we haven't grown at for many years now are growing at now, and then it just keeps compounding and it's a wonderful thing.

So even the loans from last year's second quarter, this year second quarter, $20-odd billion, $30 billion of loans, whatever it grew, you capitalize that out of it, a couple hundred basis points of spread. That's a lot of NII in the future. So we're just running this virtuous circle more, but the NII yield is picking up, which then makes it -- showing the balance sheet is getting more efficient as the repricing goes through. And it's a multiyear context here.

I guess at Investor Day, you talked about a 2.3% medium-term net interest margin. With the Fed hiking Wednesday, 10-year on total now over 5% today. Does that make you feel more comfortable with that projection?

It does because the repricing comes in at a higher rate. The trick is you always have to remember when the rates are high or low or what's going on around you to make sure there's loan demand and other things. So -- but we feel -- it makes us feel better, yes.

And the NII story has just been sort of relentless. You don't see day, week, month. We see day, week, month building into the quarters, and it just keeps going up, and we feel very good about it because it's coming off that core $2 trillion advantaged deposit base now growing. It was $1.9 trillion, probably ended at $1.8 trillion. It went up to $2.1 trillion, $2.2 trillion, came down and now it's back over $2 trillion and growing.

But within that, we actually have more core deposits than we were back then, and we were pretty tight back then. So that NII yield then kicks off of that. So you start getting $2 trillion deposit funding advantage and drive that. And then loan growth in the end of day, it's come in the commercial business in the areas where the yields are pretty good.

And then maybe kind of shifting to fee income. You mentioned investment banking pool down 10% year-over-year, down more than 10% for the third quarter. Maybe just talk to kind of where in the underperformance you see and then kind of looking out what pipelines look at? Is this kind of more of just a seasonal slowdown and we expect another good 12 to 18 months looking out?

So just picking up more philosophically, we've got as many investment bankers as anybody else. They're doing a great job. We focus a lot on the middle market connectivity of those investment bankers and how we go to market in the field. We started really around COVID, we had 60 or 70 people concentrated on the middle market. What happened was we realized we had excess investment banking. If you remember those days, it was pretty quiet.

So we basically pushed a lot of them to help us cover in the middle market. We're up to 250 people, and we're growing that. That's about 1/3 of the business between in the -- and it's all kinds of things. It's not only debt capital markets, it's some equity capital markets and M&A. But it's also beyond that, it's also rates and currencies, people buying hedges, floors and ceilings and foreign currency and all that stuff. So it's a great business for us.

But as we look at the current pipeline, the current pipeline is very strong. And so -- and last year, we did about $2 billion. This year, it was $1.6 billion to $18 billion is what I said earlier. That's a good quarter for us in some ways, but the pipeline is strong and part of it is just getting the deals through the system.

Now the only question is if rates go up a lot, will that slow down some of the financing demand? And right now, we're seeing it solid and the pipelines are staying full and the deal has got to get financed and get done. It just may start to restructure on some of the pricing and stuff like that. But the activity is extremely high.

People are trying to get stuff done strategically across the world and also trying to get stuff done just in the U.S., especially, there's a fair amount of movement from generational aspects of people selling their businesses as the world gets a little bit early in the population is, frankly, aging in the U.S. So there's more people selling businesses just to get out. And that's that middle market thing, which is great. We're recapping family business to take some money off the table.

And even though you guys said trading is flat year-over-year, it probably still makes 2026 a record year and a very big number. Just how do you think about that business looking out in terms of -- it was kind of flat to down for many years. We've now had 4, 5, 6 years of kind of growth.

Yes. These guys do what they're supposed to do. We'll get -- this will be the 17th straight quarter of growth. So we're in a dog fight for it. But that's a lot of years. And what we started on about a decade ago was getting the infrastructure set and dropping the breakeven cost that's under Tom Montag and Jimmy then, and now Soof and Denis.

And the idea was you had to bring that cost structure down to be more precise and then build out from there, and they dropped it by almost $1 billion a quarter. We started making good money, got the returns up. The returns now is a debate, are we going to get 14% or 13% or 16% in a quarter, not 8%, 9%? There was a time when people would say will we ever get over double digit? And so that's all good.

And so I feel very good about the business. We're built out in all the trading venues. We continue to add capacity in places where we see opportunity to support the clients in the room here and elsewise in terms of their investment strategies. We continue to work on the funding structures and things, more structured notes to fund itself and so it can grow.

But we've got about a $600 billion balance sheet, about $1 trillion in that in the last 6, 7 years in that business, and we will continue to grow it where we see share opportunities that we gained is really in the fixed income area in -- up until the recent past. Now the equities have had strong performance. So we feel good about that.

There's 57 regulators touch that business to be in a global business, that 57 different regulators. And they're not always consistent in their points of view. And the capital calculations are different. We were in a management team meeting this morning, we're talking about the calculations in Europe are slightly different. And so it's not an easy business to do, and there's only a few of us can do it to scale.

Now when you have it, the interesting thing is your middle market U.S. base from both research around the world plus execution around the world, if you -- a middle market company has their supply chain and needs to trade finance and currency conversions, et cetera, they need to know about what's really going on in Vietnam, Thailand. You can bring India if we can bring people to them.

And so it's a big competitive advantage, but it takes a little work. It's a lot of -- about $1 billion of systems development work a year between that and the capital markets area to keep it current good products, good services and everybody thinks you can create a new co and do it tomorrow morning with some AI and stuff. It's a lot of data. I want to say 3 billion trades a day we post, you have to submit to the regulators. So it's a lot of data, a lot of execution. The team does a good job, and it's a scale business. We make good money, and we expect it to continue to grow.

And then you mentioned, I think wealth management fees up 10% to 15% in the quarter. Just how do you think about that in terms of what the market gives you versus Bank of America's advantages and just the outlook there, particularly in light of evolving AI and the like?

Yes. So I think if you step back most broadly from it, what we have uniquely at Bank of America is a continuum from first-time investors in Merrill Edge all the way through the highest, richest families of the world with the Private Bank and Merrill. And what we did is build it so it could go womb to tomb, so to speak. We could start with people and work there through the entire life, and that was the principle.

So Merrill Edge is $600-odd billion and it's growing about 10% accounts a year. The average account is $100-some thousand versus $2,000. These are good core investors. We work integrated in the model in terms of its presentation in the digital space and how we sell to clients and stuff. And we have 2,000-plus people in the financial service centers that can sell it. And so it's a good product.

And then you build in the Merrill and the private bank, which are more traditional financial advisory-led businesses. The combination gives us the largest trust business in the world in trust and estate execution. We do a ton of art lending and airplane lending and stuff that's unique. We do -- we administer a lot of trust, which means we help administer assets around the world and all kinds of things, oil and gas and stuff like that, which is pretty wild. And it's a great business.

And so the idea was to get Merrill to grow its net new assets better because the Private Bank was fine and Merrill Edge was fine. And the reason why Merrill is just so big, when I say they're up 10% to 15%, that -- their revenue line from their brokerage and AUM fees is $5 billion a quarter. So it's 2, 3x the investment banking fee rate and near the trading. So you've got to get to grow, and they're doing a good job, Lindsay and Eric.

But we're recruiting again, and we stay in our recruiting. The deals got crazy and everything, but we're recruiting exactly what we want in the 600 offices we have in the 97 markets we have because our view is we have a competitive advantage because our Merrill teammates working in a market with our consumer teammates, our business banking, which is $0 million to $50 million segment and our middle market teammates, $50 million to $2 billion is a unique aspect. And that's worked and it continues to work and it continues to give us a way to acquire.

And then our -- the work we do even with some of these companies going public to gather assets through their entire employee base, not just the C-suite, so to speak. The team has done a good job. But it really comes down to a little more recruiting, so the adviser population grows. The productivity we have is second to none.

And what you saw in the second quarter is you saw, I think, 300 or 400 basis points GWIM's profit margin was up maybe more. And you're seeing that come back up to the traditional 30 as the value of the loan and deposits kick in. It is a bank of size, $280 billion of deposits, to give you a sense. So it's as big as most of the banks that we'll be presenting here. And so it has the same dynamics. So as NII picks up in the franchise, they get a good chunk of it. And the lending side is a very strong lender. So -- but the key is just more advisers and deploying more advisers.

Now AI. We talk more generally about it. AI is important to this business on the ability to assist an adviser to do even more and more for the clients and potentially handle more client interactions and less sort of day-to-day work for both the financial adviser or the PCA, the private client adviser, and the people that work for them in the portfolio management process. It's -- this will have a big impact. It just got to be done carefully crafted, but we still believe a human is the most important adviser we got.

And so we -- remember, Merrill Edge is all automated. If you remember the days of robo advising and all that stuff. We have, I don't know, $35 billion, $30 billion in that. Other people have got out of business already because -- it's self-guided investing, you put in your parameters. It balances all the time. It uses very low-cost structures. But that's $30 billion. The whole business is trillions and trillions.

So it's not -- people want somebody to help them and because it's hard stuff, and that's -- but you can make that advisory structure more important. So it's a great business, and you'll see it continue to grow and we'll continue to invest in it. And the team running it between Katy and Lindsay and Eric do a good job.

And then Merrill Edge is sort of a hidden gem because it just keeps producing and growing and keeps delivering. I was on Cramer's show -- Jim's show the other day, and I was on the floor of the exchange, and somebody asked me when the last time I rang the bell was. It was when we announced $0 trades in 2005 or '06. This is not a new concept. We took equity trades to 0 at old Bank of America back then because we just didn't have that much revenue lose. We figured it would do it. So the idea is you're not going to make money charging 0. So the question is how do you make money on the advisory side, even that business?

Makes sense. I guess on the expense side, you tried to move us away from looking at expense growth in terms of dollars or percentage and more focused on operating leverage. You started out the year at 200 basis point target. July, you raised it to 300 to 400 basis points. Is that still the right way to think about it?

I think I'd hold us to 200 to 300 only because this quarter was such a quick adjustment on the fee side. But the end of day, if you get the NII growth we're supposed to get in at 60% of the revenue and keep the expenses that will go up like on the investment -- wealth investment management business. If you look at year-over-year second quarter last year this year, the $1.2 billion, $2 billion or $3 billion we had in expense growth, $400 million of it was just the incentives in that business. Yes. So that's good news.

And then another $400 million was BC&E and related stuff in the markets business, which was good business. And so the rest of it was about 2% or 3% growth rate. But we have to be able to grow the expense basis for inflation. We keep managing headcount down, pay people more and invest more in technology in the physical plant, updating it, making it better, data center environments, and all those things.

That for a while, we could keep taking it down, then we hit the bottom in '19 and said, we're going to have to go to operating leverage in 200 to 300 basis points is what we should hold ourselves. If the capital markets kick back in, we push back in. But I think right now, I'd look at us to get in that same range. And we should -- this quarter will be difficult just because of instantaneous change in the rate of growth of fees year-over-year.

But the fourth quarter, we should be back in the saddle. And this happens like over the last many years, we had 5 years straight operating leverage, and we had 13 quarters, and then we had -- this was our fifth or sixth, so we would have been back on the streak, but it usually happens when you have this quick turn in the market. It's just hard to get underneath it for a quarter.

Understood. Maybe just talk about how AI can maybe impact the expenses and the bank overall. You guys all report earnings the same day, I think, and not everyone goes through your materials, but I know Slide 20 of your earnings deck really stood out to us, over 300 approved AI and machine learning use cases, 114 live generative AI applications across the country -- across the company.

Just maybe talk to kind of the opportunities and the risks. And you talked to this kind of 55% to 59% efficiency ratio target over time. Is even something better than that conceivable?

Yes. So I think -- so this weekend was a lot about the risk in AI, and that largely is around agents just left to operate, and we just don't do that. And that was a decision we made early on was, wait, we are responsible for everything goes on with our customers. And so our teammates that use in the investment banking function that do pitch books with a spreadsheet that's been helped by AI own -- and when they give demonstrations, they all [ talk about it ], they own every cell.

And they have to -- and that's why the practice of AI has gotten so much better to annotate every cell coming into the spreadsheets, so you can find it and double check it. So you have to be accountable for it. So the risk for us was really the risk of letting -- start getting answers without humans, checking to make sure the answer is right, both just common sense, but also literally making sure it's right to -- that was one risk.

And then obviously, the cybersecurity penetration risk. And both those, the team is working, and that's the cost pressure, frankly, in the current term is just building the amount of patching we all had to do across the industry. And then -- so the debate this weekend is more about agents and what can they do if you let them go and operate and how they operate and some of the stories about the Hugging Face. But for our sense, we're trying to control the risk.

Now when you flip it around, what's the reward of this? We're now probably the 130, 140 have implemented things at a cost of $400 million, generating a benefit of $800 million, and we're in a process of capture, spending that money and getting those costs, but they're all agreed to and being going in the system. And we think that's doable.

We're down -- we've been able to manage the headcount very carefully. So we're about 210,000, 209,000 people a day. We're 212,000, 213,000 at the beginning of the year. That's just all managing attrition, 8%, 8.5% right now. Times 200,000-plus people. That means you got to hire 1,000 plus month. All you do is hire 1,000 versus 1,300. You got to own 300 people. So we're always managing the headcount because in the end of day, our teammates have got to use AI to make our company better and make our clients a better experience. And there -- we went out and asked for thousands of ideas from them to help do it, to help make their jobs easier.

When you look at our employee scores over the time, we're topping out where on the general scores are great. The only thing to improve upon really is make my job easier. And this gives us another tool, but the teammates will know how to do that. So we're doing that. So you're seeing the applications being done. We deployed across all the teammates have access to AI. We haven't had an issue because of the way we negotiated the license and stuff in terms of tokenomics and all that stuff. Could be an issue downstream.

The coders, the 18,000 coders we have on our payroll, use it and have saved 10%, 15%, and that we're just deploying into more work. We're deployed across all the different businesses in general. We're seeing the audit team and the legal team and others using it. And how we -- each idea is costed out to the nth degree to say, I spend X, I get back Y and here's the payback and et cetera.

But importantly, the way you think of it from a macro basis is, are you seeing the revenue of the company grow and the headcount in the company march down? And that's the productivity, and that's what you're seeing go on. And now we're not laying off anybody. We don't have to do that. All we do is just manage the hiring carefully, and we can manage into this. And so it's been a pretty effective thing.

But we're about 130, 150 use cases implemented, not theoretically about 50 a quarter coming on. We expect to double the expense budget for it next year. It's deployed to all 209,000 people have access to it. The range of things they have access to keeps increasing, with the specialized models are needed, we've got access to those models. All the general providers you hear out there, they're providing AI embedded in their core offerings to us. Platform offerings, we're taking advantage of that. But it's good. We have -- we own the answer.

And so you have to do it carefully from both the teammate to make sure the teammate gets -- is able to make their work easier else you've just not gotten anything out of it and from the client to make sure the client doesn't start getting wacky answers. That Erica that you see, which we started developing 10 years ago, it was just an AI thing deployed 7 years ago now. 20 million people, 200 million times last quarter, only does 700 intents. And 700 intents, now you hear about intent management, that's prompts in the different words.

Nobody knew what the hell we were talking about. We said we're talking about intents and Erica. It started at 200, got to 700, but it's only 700 because it has to be absolutely right. Because the tolerance to get a wrong answer is no. If you do the math on how many inquiries go through that each quarter and what it would cost you if you had a human answer that inquiry either a chat, an e-mail or a phone call or branch visit, you would come up to about 10,000 to 12,000 people. But it has to be exactly right or you're going to need 12,000 people tomorrow.

And that's the care that you have to take because we don't need new regulation in our industry because we're already really good. We make a loan, it discriminates, we're liable for that. I don't care what machine you made it do. If you give a wrong answer to a client, the client's going to walk out on you. If you come to one of these clients and show a presentation that has mistakes in it, they're going to let you have it and they should. And so that will gate its application in some ways.

But the reality is it's already having a pretty good impact, and we expect it to have more. But we've done it with the idea generation and idea cost. And the way we did the dot-com era, the e-comm buildout, the way we did some of the digital stuff, the way we did New BAC, it's a very disciplined process to make sure that you're getting the value out of it, but also that you're getting the teammates to drive it, not a top-down idea.

We have 3 questions left in about 3 minutes, so we'll go quick. Credit quality. You have to be quick. Careful. Higher rates, AI build-out, private credit, anything keeping you up at night?

No. We don't see -- consumer, were prime business, delinquency rates and stuff basically -- came down, went up a little bit, came down and flattened out and good. Commercial, 3 or 4 years ago, was all real estate blah, blah, blah, that's all the way through the system. Office building is never going to be used again, guess what? And so that's all -- anything -- that's pretty much the system.

So we feel very good about the commercial credit, the ratings, the upgrades, downgrades, et cetera, in the consumer credit. And so we feel very good about it. And -- but we, in our industry and we in our company manage leverage carefully. We don't over lend, and that's been -- that's holding us in good stead right now.

I'll combine the last 2 questions and it's kind of maybe tying everything together. We had this big Investor Day last November. You laid out a goal of 16% ROTCE within 2 years, 17% to 18% within 3 years and the potential to do better over time if the environment helps.

Just how do you feel about that journey today? What do you think needs -- what do you think Bank of America needs to do to operate at kind of a high-teen level of returns? And kind of the KPIs you laid out, any ones you're kind of behind on that you need to do better at?

Well, from the ROTCE, we hit it last quarter. So then the question was people were saying, well, can you get to the from the 16% to 18% faster. And as I said then and I'll say now, we're letting it all flow through. We're not like saying, oh, because we're at 16.2%, we can invest more. So the way we're operating the business is the same dynamics whether -- and so we've hit the 16%. We should continue to make progress.

Frankly, as the net interest income keeps growing and becomes a bigger part, it's gone from a low of about $10 billion to $16 billion plus, that's $6 billion a quarter. That's a lot of efficiency because the amount of work doesn't change a lot. So as that grows, that compounds up. So we feel very good about that path.

And so if you think about it, the 1% over 6%, 1% ROA, which we're operating at over 6% to 16%, and we're there. And then the idea is just you tighten that balance sheet to come back to NII yield, that will push up. So we feel very good about that. We hit the high end of the efficiency ratio. This quarter will get bumped around, but it will be around the same -- around the top end of those ratios. So we feel good about getting that. That's just literally just maturing the NII again through a lot of that comes from that just operating the company well.

The net new asset was the one that the team put the biggest leap on the table in the credit card growth. The credit card growth, they actually got 4%, they said 5% last quarter. So they're making good progress. The net new asset -- the key is to be focused on the fees, the net new fees are generating and that they're already hitting everything you said.

The gross assets, nonpaying assets is a trick because we're losing -- we always have a lot of conversion off the brokerage. So Lindsay and Eric and the team are working on that. But we feel good about all those targets. And because we wouldn't tell you unless we had a path to get there in our current plan, and we're hitting it.

Perfect. On that note, please join me in thanking Brian for his time today.

Thank you.

Well done.

Hello, and welcome, everyone, joining today's Bank of America earnings announcement. [Operator Instructions] Please note this call is being recorded. [Operator Instructions]

It is now my pleasure to turn the meeting over to Lee McEntire, Bank of America. Please go ahead.

Thank you. Good morning, everyone, and thank you for joining us to talk through our second quarter results and what is a busy bank earnings day. As always, the earnings release and presentation are posted on the Investor Relations section of bankofamerica.com, and we'll reference those materials during the call.

Before we begin, a quick reminder that during the call, we may make forward-looking statements and refer to non-GAAP financial measures. These measures reflect management's current views and are subject to risks and uncertainties, which are outlined along with the relevant GAAP reconciliations in our earnings materials and our SEC filings on our website.

With that, I'll turn the call over to Brian Moynihan, our CEO.

Good morning, and thank you for joining us. Once again, our team delivered strong second quarter results, extending our momentum of the past several quarters. Our revenue grew 15% year-over-year to $31.6 billion. Our net income was $9.1 billion, up 27% from last year. Our EPS increased 34% to $1.21 a share. Our results show organic growth, operating leverage and efficiency ratio improvement in every business segment. Along the bottom of Slide 2, you can see the progress against several of our key financial metrics for the firm.

For the quarter, we delivered 6.6% operating leverage and our efficiency ratio improved to 59%. We generated return on tangible common equity of 17%. In short, organic growth was broad-based and coupled with operating leverage, which translated into stronger returns on both equity and assets.

Slide 3 shows the contributions and growth of each business segment. Every business segment contributed to our year-over-year growth. Average deposits and loan balances continue to grow, supported by healthy client engagement. Revenue and net income increased in every business segment. Each segment generated operating leverage. Each segment improved its efficiency ratio and each segment demonstrated the benefits of its scale. Together, those results drive stronger returns across the company.

Let me touch on a few earnings highlights from Slide 4, starting with revenue. Revenue growth was broad-based, led by NII, investment banking, wealth management fees and sales and trading revenue. First, net interest income. It continued to perform well. On an FTE basis, NII was approximately $16.2 billion, up 9% over last year's second quarter. This is driven by the strength of our core lending and deposit gathering franchises. It also includes our lending in our Global Markets business and the impact thereof. We also have added the benefit of ongoing repricing of lower-yielding assets and a repayment of higher cost funding.

Second, our fee-based businesses delivered exceptional results, translating into 22% noninterest income growth. Wealth management, investment banking and markets all benefit from healthy client activity and favorable capital markets conditions. Maryland, a private bank advisers drove the 18% growth in investment in brokerage fees. Investment banking fees increased 50% year-over-year to more than $2.1 billion, while Sales & Trading generated $7.2 billion in revenue, up 33%.

Third, we manage cost while we continue to invest in the franchise, our brand, our people, our technology and our AI-enabled productivity. Asset quality also remained stable and consistent with the strong underwriting discipline has characterized our company for many years. Finally, capital generation and capital returns to investors remain strong. We've returned $8 billion to you through dividends and share repurchases this quarter. We ended the quarter with common equity Tier 1 capital of nearly $202 billion and a common equity Tier 1 ratio of 11.2%.

The economic backdrop remains very constructive as Slide 5 illustrates. Last week, our research team raised its 2026 U.S. GDP growth forecast to 2.2%. They also have global growth expected to remain steady at 3.2% in '26 and grow to 3.5% in '27. As noted on the slide, consumer spending has recently expanded and continued to outperform our expectations. While the slide reflects 5% growth in year-over-year spending for the first half, the spending picked up during the second quarter, and now -- during the second quarter and now is running at 6% plus year-over-year comparison.

So overall, the U.S. economy has proved more durable than expected, supported by the strong consumer ongoing AI-driven investments across the board and easing energy costs, no inflation and tighter monetary policy remain key risk.

Before I turn it over to Alastair, I want to bring your attention to a couple slides. First, we have our digital slides in the appendix. In addition, we added a slide on AI at Slide 20, which shows how our over 200,000 teammates are actively using AI-enabled capabilities across our company. These range from productivity tools to more advanced Agente workflows and coding support. Our associates are generating more than 400,000 prompts a day. And as of last week, we had over 300 AI use cases approved, all of which have good economics of which 114 are live generative AI use cases. 34 of those cases are fully implemented, and we see new capabilities coming on every week.

These tools are designed to help -- our customer relationship management prepare more thoroughly for the client meetings. Our bankers automate the research and presentation materials. Our developers code more efficiently and all our teammates improve productivity, consistency and client service while creating significant opportunities ahead of us.

I'm going to turn it over to Alastair. Alastair?

Thanks, Brian. I'm going to pick up on Slide 6 and start with the balance sheet, where you can see it remained a source of strength and we continue to support client activity across the franchise. Our ending assets were steady at $3.5 trillion, steady compared to the first quarter and primarily reflecting lower securities balances replaced by loan growth and Global Markets activity. We maintained strong liquidity and funding while we optimized our balance sheet and we supported all that with diversified funding and healthy client-driven growth.

When you look at regulatory capital, we remain in a strong position with our CET1 ratio stable at 11.2%, and that remains well ahead of our 10% minimum ratio. Tier 1 common equity grew to nearly $202 billion, while our RWA increased to $1.8 trillion, driven by loan growth and capital markets activity. Supplementary leverage remains strong and well above our minimums.

When we turn to Slide 7, you can see deposits remain a key competitive advantage and a source of strength for our company. Average deposits were $2.02 trillion, up $49 billion or 2.5% from a year ago, and importantly, included noninterest-bearing growth of $19 billion, up 4%. This marks our 12th consecutive quarter of average deposit growth, and growth was primarily driven by Global Banking, where deposits increased 8% year-over-year, reflecting continued client engagement and operating account growth.

The second quarter saw muted sequential growth in average deposits because it was impacted by typical seasonal tax-related outflows. Otherwise, underlying client activity remains healthy and on track with our expectations. Importantly, our deposit base remains highly diversified across consumer, wealth commercial and corporate clients, providing a stable and attractive funding advantage.

Our strong liquidity and funding position means we don't need to change -- chase rate sensitive balances. And with the other relationship values like rewards, digital and security features, it allows us to offer customers attractive rates and grow balances. And we consent you to see growth in both interest-bearing and noninterest-bearing balances. As shown in the upper right, rate paid was modestly lower this quarter, led by consumer deposits of 48 basis points on $957 billion in balances, so favorable balance moves.

Turning to Slide 8. Loan growth remained strong and broad-based. Average loans and leases increased to $1.2 trillion up $88 billion or 8% from a year ago. Ending loans were also $1.22 trillion, up $71 billion or 6%, marking the ninth consecutive quarter of both average and ending loan growth. Commercial lending continues to lead growth with average commercial loans increasing to $733 billion, up $75 billion or 11% from a year ago. And we've seen growth both domestically as well as internationally, illustrated by the chart at the bottom right of Slide 8. Additionally, commercial growth has broadened away from the global markets activity that we saw last year.

Consumer loans increased 3% year-over-year, led by growth in securities-based lending and credit card balances. Credit card grew 4% year-over-year as we increase marketing and enhance product offerings. The combination of first and second lien mortgage balances remains relatively stable, reflecting elevated rates and included the ninth consecutive quarter of average home equity growth. These trends reflect healthy client activity across both commercial and consumer businesses and they demonstrate the benefits of our diversified lending franchise.

Turning to Slide 9. Net interest income continues to perform well despite a modestly lower short rate environment, which impacted variable rate asset yields. NII on an FTE basis was approximately $16.2 billion and increased $253 million from the first quarter and $1.3 billion or 9% from a year ago. On a year-over-year basis, growth was driven by higher loan and deposit balances, fixed rate asset repricing and Global Markets related activity. And this was partially offset by the impact of lower average short-term rates.

We've seen steady improvement now since the second quarter of '24 when NII has grown from $13.9 billion to now $16.2 billion. Net interest yield was 2.08%. That's up 1 basis point from Q1 and 14 basis points from a year ago, reflecting favorable asset and liability mix and loan and deposit growth, partly offset by Global Markets balance sheet growth.

Bank of America's banking book remains asset sensitive and on a dynamic deposit basis, a 100 basis point parallel shift above the forward curve is expected to increase NII by $1 billion over the next 12-month period. Looking ahead on NII expectations, in January, we told you to expect 5% to 7% full year NII growth. And then in April, we raised that full year range to be 6% to 8%.

We now expect full year 2026 NII growth to be at the upper end of that 6% to 8% range, supported by anticipated loan and deposit growth, fixed rate asset repricing and balance sheet optimization. And this assumes modest loan and deposit growth in the second half of the year, and it's based on the current forward curve, which has 125 basis point rate hike in September. Overall, NII remains a significant contributor to earnings growth and reflects the core franchise advantages of our scale and diversified balance sheet.

Noninterest expense on Slide 10 was approximately $18.6 billion, up roughly $100 million from the first quarter and $1.4 billion from the second quarter of $25 million reflecting continued investment in technology, sales teams, financial centers and brand marketing. And it also includes higher activity-related costs that come from trading in our Global Markets business, particularly in our overseas markets. With those investments, we generated 660 basis points of operating leverage and improved our efficiency ratio to 59%, highlighting the performance of the franchise and the return on our investments.

AI-enabled tools are now more embedded in workflows across operations, risk, finance, technology and our client-facing teams. And that's helped reduce manual work, improve speed and enhance consistency for clients and teammates. On our first quarter earnings call in April, we told you we expected full year operating leverage of more than 200 basis points. And operating leverage for the first half of 2026 has now exceeded 450 basis points. So with that first half performance and our continued expectations for a strong second half, we now expect full year operating leverage to be in the range of 300 to 400 basis points.

Turning to Slides 11 and 12. You can see credit quality remains stable and consistent with the strong underwriting discipline that's characterized our portfolio for many years. Provision expense was approximately $1.4 billion. Net charge-offs were also $1.4 billion and both were largely unchanged from Q1. Consumer card charge-offs and delinquencies improved both year-over-year and quarter-over-quarter.

Commercial credit also remained solid, with CRE improvement offset by some isolated corporate and commercial lending losses. Reservable criticized commercial exposures declined by approximately $2.3 billion from Q1 and to roughly $22 billion, driven primarily by CRE improvement. Nonperforming loans remained stable at approximately $5.8 billion, and we recorded a modest reserve release. Overall, our portfolio remains well positioned, supported by strong client fundamentals and disciplined risk management.

Turning to Slide 13, and now we get into the business segments. Consumer Banking delivered another strong quarter, combining solid financial performance with continued investment in growth, innovation and client engagement. Over the past few months, we refreshed our rewards program. And that's generating more than 2 million enrollments since the late May relaunch. We also launched one of our largest consumer marketing campaigns around the FIFA World Cup. We expanded our financial center network in new and growth markets, introduced new card products and deployed new AI-enabled tools designed to enhance both the client and teammate experience.

All of these investments helped to strengthen the franchise and drive organic growth. Net income increased 10% year-over-year to approximately $3.3 billion, while revenue rose 5% to $11.3 billion. Through strong expense discipline, we generated our fifth consecutive quarter of positive operating leverage, maintained a strong 51% efficiency ratio and delivered a 29% return on allocated capital.

With regard to client activity, our deposit franchise remains a key competitive advantage. Average deposits rose to $957 billion, our fifth consecutive quarter of year-over-year growth. Client engagement was also strong with record checking account balances, 162,000 net new checking accounts and card spending up 9% year-over-year to $266 billion. We continue to deepen relationships across the enterprise and consumer investment assets reached a record $640 billion, up 18% year-over-year, supported by strong market levels and net client flows.

Digital engagement remains a clear differentiator with roughly 50 million active digital users, more than 24 million active Erica users and digital sales representing 70% of total sales. new AI capabilities have improved service, increased efficiency and allowed teammates to focus on higher-value client interactions.

Finally, consumers remain resilient as average deposit investment balances and spending all showed linked quarter increases. Additionally, consumer credit quality remains strong and in line with expectations, reflecting the strength of our customer base, and our disciplined approach to risk management. Overall, Consumer banking continues to demonstrate the power of our scale, digital leadership and relationship-based model positioning the business for sustainable and attractive long-term growth.

Turning to Slide 14. GWIM delivered another outstanding quarter, highlighted by record revenue and pretax income, expanded profit margins and continued client growth. Clients continue to consolidate more of their financial lives with Bank of America. During the quarter, we added another 6,000 net new affluent households to serve and the continued strong growth in banking relationships and lending balances demonstrates the power of our integrated wealth and banking model. At the same time, both Merrill and the Private Bank continued to attract talented advisers who are drawn to the breadth of our platform and our ability to deliver comprehensive solutions for clients.

Franchise continued to benefit from strong adviser productivity, growing digital engagement and new AI-enabled tools that help advisers prepare for client conversations, identify opportunities and deliver more personalized advice at scale. Net income for the segment increased 42% year-over-year to $1.4 billion, while revenue grew 16% to a record $6.9 billion, driven by higher asset management fees, strong flows higher market valuations and higher NII. With good expense discipline, we generated another quarter of positive operating leverage and saw pretax margins expand to more than 27% and demonstrating the scalability of this business.

Client balances reached a record $4.9 trillion, up 12% from a year ago. Assets under management grew 17% year-over-year to $2.3 trillion supported by approximately $14 billion of AUM flows this quarter and $78 billion of AUM flows over the past 4 quarters. Also, loans grew $13 billion or 5% linked quarter to $277 billion, driven by custom and securities-based lending demand. Overall, GWIM continued to demonstrate the strength of our advice-led relationship-based model and remains well positioned for sustainable growth.

Moving to our commercial and corporate client-facing businesses in Global Banking on Slide 15, where Global Banking delivered strong results in the second quarter reflecting healthy client activity, near record investment banking performance, strong treasury service revenue and continued balance sheet growth. Client engagement remained broad-based with activity across capital markets, strategic transactions, liquidity management, and we continued our program of growth investments, including technology modernization, digital infrastructure and AI-related initiatives. We're also using AI-enabled tools to help bankers accelerate their research, prepare materials and identify relevant client opportunities more efficiently.

Revenue increased 10% year-over-year to $6.2 billion, while net income grew 20% to more than $2 billion. Investment banking was a particular highlight. Total corporate investment banking fees, excluding self-led transactions, increased 50% year-over-year to more than $2.1 billion, reflecting strength across debt underwriting, advisory and equity underwriting. Average loans increased 7% to $413 billion, while average deposits increased 8% to $652 million, demonstrating continued franchise growth and client confidence. Credit quality remains solid and returns remained healthy with a 15% return on allocated capital.

Turning to Slide 16. Global Markets delivered an exceptional quarter. Excluding DVA, net income was $2.7 billion, up 70% from a year ago. Sales & Trading revenue, excluding DVA, increased 33% to $7.2 billion. Equities delivered a record $3.6 billion of revenue, up 70% driven by client financing activity and strong trading performance in derivatives and cash. FICC generated $3.5 billion its strongest quarter in more than a decade. Growth was broad-based across the franchise.

Domestically, our revenue in the U.S. increased 31%, while our international business delivered a 38% improvement with Asia Pacific as the standout. And this is generally consistent with our Investor Day messaging of continuing our improved performance internationally. But perhaps what stands out most is the consistency of our performance because we've now delivered 17 consecutive quarters of year-over-year sales & trading revenue growth and 14 consecutive quarters of year-over-year net income growth. And combined with 16% operating leverage and a 20% return on allocated capital, these results reflect the strength of our client franchise diversified platform and disciplined execution.

Client activity remains strong and the connectivity between markets, global banking, and Wealth and Investment Management continues to create value for clients. Investments in technology and AI are helping teams deliver insights faster, operate more efficiently and further strengthen our competitive position. So this was a record quarter built on scale, client engagement and consistent execution across the franchise.

Moving to all other on Slide 17. We recorded a $292 million net loss in the quarter, which is larger than a year ago with no significant drivers to note, and we reported an overall tax rate of 21.5% and consistent with our full year guidance. In closing, the second quarter reflects the strength of our diversified operating model. We produced double-digit revenue growth and more than $9 billion of net income, with EPS growth of 34% and return on tangible common equity of 17%. We also delivered strong operating leverage while continuing to invest in the franchise and supporting our clients.

Across the company, clients continued to invest, transact and grow. Activity remains healthy across lending, payments, investment banking, markets and wealth management, including technology, digital infrastructure and AI-related opportunities. We also see meaningful opportunities to continue using AI and automation ourselves to improve productivity, strengthen client engagement and support disciplined growth across the company. So taken together, these trends simply reinforce our confidence in the long-term earnings power of the franchise and our ability to deliver responsible growth and attractive returns for shareholders.

And with that, Leo, let's open it up, and we'll see what questions we can answer.

[Operator Instructions] Our first question comes from Chris McGratty with KBW.

Noticed the deposit discipline in the quarter. Alastair, I'm interested in your thoughts about pricing in a higher for longer environment. I know you didn't change the full year NII guide. But your deposit pricing outperformed some of your peers this quarter. Any comments on the near-term outlook would be great.

Yes. So I'd say we kind of just kept nudging NII a little bit higher as we've gone through the year. First, from that 5% to 7% up to the 6% to 8% and then we're recently saying we're probably going to be at the top end of that range. So we've tried to express our confidence in the momentum of NII. And some of that comes from the deposit gathering. I think you know we've got a lot of liquidity. We're not loaned up at this point. We've got $800 billion of excess between our cash and securities over our loans. And that really allows us to concentrate on our strategy.

Our strategy is very clear. We're trying to grow clients and operating accounts. That's the highest quality growth. It's the highest quality clients because when you get that operating account, it's key to the financial lives. So when consumer puts up 162,000 of net new checking accounts, or when we grow noninterest-bearing for 7 consecutive quarters, that's what helps us to drive the noninterest-bearing up 4%. So the lower rate paid is really about mix, Chris, we're competing out there for deposits like everyone else.

We compete tooth and nail to get deposits where we can. But at the end of the day, our strategy is about relationship value all the things around digital and security and rewards that we talk about. And it's that favorable mix of growing the noninterest-bearing that makes a difference.

Okay. That's helpful. I appreciate that. And then on the operating leverage conversation, the new slide. And what you said the 200 to 300 basis points plus of operating leverage that you talked about in November, you're clearly off to a great start. I'm interested in kind of the sustainability. Obviously, the comps will be a factor, but the influence that AI might have on that over time.

Well, there are 2 elements to that, I think First, obviously, we said at Investor Day, the sustainable kind of thing that we're in for is something like 200 to 300. Right now, we're outperforming that. We've had a terrific first half of 450 basis points. So that's what's giving us the confidence for the full year to say is going to be above the range.

AI plays a role, I think, in 2 ways. The first one is on the revenue side. There's obviously a big AI theme going on in the world. We're leading in investment banking and global markets around capital raising financing, that massive capital investment and infrastructure build around the world. So that's helping us there. And then you're asking a question that's really about sustainability going forward.

Can it help us with our own operations? The answer is yes. That's why we put that slide in. So if you go to the slide, it's Slide #20. And you just take a look, remember, we've been at this for a little while now, but you can begin to see now in these general purpose productivity tools or the tools that are aimed at specific functions like the bankers or the wealth professionals or the software developers. You can see what we're doing there. And then there's another layer of AI on top of that, that accesses a lot of the company.

So on the right-hand side, here's what's going to come out of that. We believe growth, efficiency risk management and resiliency. So that's what we're trying to make sure. We're updating you on the AI as we're going through. And at this point, we've got -- we put it at the top of the page just so you could see it. But you can see the number of approved model cases at this point it's 300. You can see the number we've got in here that we're using, 114. So this is going to be something for the future, and we're just working our way through it.

We'll now move on to Glenn Schorr with Evercore. Mr. Schorr, please check your mute switch. Your line is open.

We'll move on to Ken Usdin with Autonomous Research.

Alastair, just on the positive operating leverage point. I think you've made it very clear about the comps getting a little harder in the second half because of the ramp you had last year, starting with the NII and also markets. Can you just help us put it into some kind of context obviously with 300 and 660 basis points of leverage and now talking to a full year of $300 million to $400 million. Just how do we kind of box the operating leverage potential for the second half as we get into this kind of tougher comps, albeit with the good top line revenue growth continuing.

Yes. So we're offering the $300 million to $400 million, recognizing that we've already booked $450 million for the first half, so that's good. And then we're just trying to give you a range, Ken, that allows you to kind of work backwards because as you point out, in the second half of last year, the NII went up more than the first half. We think that will happen this year as well, but it might not. Just the numbers are bigger this year, so the percentages just change a little bit.

And then remember, second quarter last year was a slower quarter for investment banking for the entire industry. So you think about it, if we put up $2.1 billion of investment banking this year, up 50%, if you kind of sustain that relative to what we did in third quarter of last year, which was $2 billion or so, you just don't get the same kind of uplift in the second half. So that's what we've got our minds on. Otherwise, as you can imagine, the business conditions are very good, and we're trying to maximize operating leverage where we can.

Okay. Got it. And you mentioned balance sheet optimization from here. Can you talk about where you have that room to continue to optimize notably -- well, across the balance sheet, I guess, on both the asset side and the liability side as you focus more on that?

Well, there are really 2 places, I think, that you'll see it. The first one is we've talked about the fact that we believe we can improve net interest yield over time. We've done that. You can see we're at $2.08 now. were up from $1.94 a year ago. So that's been a contributor to some of the NII gains. But we've talked about on prior calls, we still feel like we carry some repo, some institutional CDs, but over time, we're just continuing to pay down.

If those are invested at the Fed, we're not capturing a lot of spread. It doesn't do anything for NII. It actually hurts NIY, but it also ties up a little bit of capital. So as we continue to pay that down, and I think you'll see more of that happening in the second half of this year, that will free up more capital. It will help us on the return on tangible common equity as well. So we're sticking to that program. We'll have a pretty good opportunity in the second half. We're looking forward to that.

Just note, there's no constraint on the growth of loans or the core deposits, et cetera. So that's all can grow because it's all going to good returns and things like that. It's really a question of sort of the centralized security portfolios, the term debt, the repo, as Alastair said, a lot of the buildup that came because of the rules getting flipped around is now we're through that and on the other side.

We'll move on to Manan Gosalia with Morgan Stanley.

Alastair, I know you outlined the higher rates as a positive if you can talk a little bit about if the rate environment changes here because we're getting a lot of changes overall. Would that impact the NII guide? And as we think about just markets NII overall as well, given that prime brokerage and some of the other businesses are doing better if there's any offset to getting to the high end of the 6% to 8% NII guide.

Well, first, welcome to coverage. Nice to have you on the call. Second, yes, I mean, if rates -- if we've got one rate hike in the curve, it's in September. So its impact this year is pretty modest because you're really only capturing anything in October, November and December. We will obviously adjust pricing in each of our segments for any rate hike but net-net-net, we expect that to be a positive. So that's in our guide right now where we're saying it was 5% to 7%, then it was 6% to 8%. Now we're saying it's going to be at the top end of that range, and that's with that hike.

Now, I think, generally speaking, because the banking book is liability insensitive, that's the predominant benefit. But the markets business is slightly liability sensitive. So that's a slight offset. But net-net-net, it's a positive for us, and that's what we're trying to communicate.

Got it. All right. And apologies if I missed it, but as you think about loan growth in the back half of the year and you think about, I guess, just middle market C&I growth, how is that trending? And what do you expect overall as we get into the back half of the year?

Yes. So if we look at the middle market, we're sort of growing kind of like commercial loans overall. They're growing around 8% or so. Middle markets kind of in there, larger cap corporates are in there. So the growth looks pretty good, we would say, on the commercial side. And if you go back now, I think it's over 9 or 10 quarters, we've been growing loans at $20 billion or so per quarter, 7% last year, full year, 8% this year. So the commercial growth there, we don't necessarily see that changing. It feels to us like we're in a good environment for loan growth.

And then just keep half an eye also on card where how we laid out a plan to say we want to get back towards 5% type card growth. We were at 1%, then 2%, then 3%. You can see this quarter, we are at 4%. So some good news on the consumer side. And then things like securities-based lending have been pretty positive as well, just with the way the markets have performed and what our wealth management clients want to do. So we remain pretty constructive on loan growth in the second half, no changes there.

We'll move next to Ben Gerlinger with Citi.

I was curious, I get the updated guide or closer to the higher end of NII, includes the forward hike potential. I was curious, does that also incorporate a little bit more productivity on the average earning asset mix? I know you guys have alluded to a little bit more productivity down the road. And I guess that, that takes time. Just kind of curious, is the guidance based on a static balance sheet or the continuation of a little bit more loans in the averaging assets?

Yes. So Ben, also welcome to coverage. Thanks for joining. Yes, the updated guide essentially assumes the following: first, modest deposit growth similar to what we've been seeing. Second, good continued loan growth in the second half of the year, similar to what we've been seeing. So we haven't really changed our perspectives on either of those. We'll get the benefit from some fixed rate asset repricing. We got a little bit more of that in the second half than the first half. But otherwise, it's mostly balance sheet gains. And then what I described in terms of balance sheet efficiency, I would think about that as being more about net interest yield and less about NII, okay?

Got you. That's helpful. If I can do a follow-up in terms of operating leverage, I guess that you've increased the guide for the full year this year. When you think about just a higher revenue production that you kind of alluded to, do you run the risk of potentially underinvesting? I guess that you're probably ahead of peers across every major category of AI and technology and is being a bit more digital. But if you have more revenue, do you think you could potentially speed up the spending, so it pulls forward into this year, reducing that leverage?

Well, I think we are spending at a good clip overall on technology and also dedicating a lot of time in the company towards careful examination implementation catalyst, people working to understand the projects in AI, we give you the outline on Slide 20. So I think there's productivity increases. There's a lot of spending. We're going to be spending more of it, whether that increases expenditures of technology development dramatically or not really has to do with a couple of things. One is they're shifting of spending towards it.

And then secondly, even the coding process has become more and more efficient using these tools. So the same amount of money in '27 will get us more code for lack of a better term, in '28. So we're driving everything as hard as we can. And so our focus on operating leverage, and we just told you we raised us above the normalized range. And then we're continuing to invest in the places to grow the business, especially around the consumer business, I think financial centers and new markets done in a rational full market build-out basis, not on a one-off, one at a time base of building out cities we're not in and we continue to drive the marketing capabilities of the firm and our consumer scores have now reached all-time highs.

And then we invested heavily in our rewards program, which goes to some of your other colleagues ability to cement relationships with great deposit mix and their result cost of funds. So we're spending -- I don't think you'll see a major change in our methodology of how we think about spending A lot of the incremental expense growth from second quarter this year, last year was due to incentives and BC clearing expenses. If that keeps going, we'll be happy -- has not -- very happy because that means the revenue has got to grow. If the revenue slows down, it expense growth were able to slow down and it will have a different type of operating leverage that Alastair described earlier.

We'll now move on to Erika Najarian with UBS.

So the investor feedback so far is that they feel that the net interest income guide is conservative. I mean I just re unpacked the number of questions that you've gotten already on this Alastair. So the first half of the year, NII growth is up 9%. Clearly, the second half of the year is tougher comps, right, which you're saying would get you within the range. But we just wanted to understand you mentioned that included in your guide is modest deposit growth, good loan growth, improving card growth, which obviously is coming at a better yield. So are we getting the -- are we getting earning asset growth for the second half of the year, but not much NIM expansion. I guess we're just trying to think about the jumping off point to sort of that will slow your NII growth from the 9% that you've printed for the first half of the year?

Yes. Okay. Well, the first thing I should say is it's not slowing it much. Second, I think it's actually helpful, I think, to just lay out. If you look at the 4 quarters of 2025 just sequentially and then lay out essentially 2026, what you see is most all of the NII build last year was in the second half of the year. So we're just up against tougher comps. That's all. It's not more complicated than that. So we just got to stick doing what we're doing. We got to keep growing the loans. We've got to keep growing the deposits with particular focus on operating accounts and noninterest-bearing. And then we'll get some benefit from fixed rate asset repricing as we do.

We've invested in global markets with their balance sheet that's a net positive, but I don't expect that to be anything particularly big in the second half of the year because markets, generally speaking, is sort of at a good run rate right now. So we're talking about 8% or 9%. I don't know. They're both very good. But we kind of feel like right now, it looks to us like more like 8% for the full year just based on the comps.

Got it. And my second question is, Brian, you printed a return of 17% on tangible common equity this quarter. granted the equities number and the IB numbers are huge. So I guess a 2-part question. Number one, just sort of reaffirming that is your positive operating leverage being better in the full year but slower in the first half is only due to the seasonal revenue factors that you're taking into account. So in theory, if the pipeline continues to be robust in banking and markets, it could be better, right?

And second, as you think about sort of a very strong year in terms of returns, are you willing to invest in perhaps slightly lower return than the 16% to 18% target businesses like equity financing, for example, to continue to set yourself up for earnings growth going forward.

So I think, Erika, there's a lot in assumptions and things. Let me just be clear. The return on tangible common equity was 17%. We thought it would take us longer to get there. That has in part due to the strong operating of -- the general businesses that are operating very well, getting good operating leverage, consumer banking, commercial banking and benefiting by the NII lift as well as the strong performance in markets.

Right now, we see very strong performance this quarter, and we expect it to continue based on the market conditions. But the Iran wars and [ fractures ], and we can't predict what will happen next in it, and that can affect the market's perception, IPOs, et cetera. But right now, the pipelines are full, we feel very good about that. the loan growth, deposit growth Alastair described. So we feel very good about the returns and maintaining those returns. But in this current quarter, there was a pretty healthy lift off of last year and the strong markets return, as you mentioned.

So we are a balanced company, the other parts are kicking in. The key for everyone to understand is it's all going to come to the bottom line. And that's -- our goal is to make sure all the NII lift as we march from 190s in NIM up to the 230s, which we said we could do that all that fell the bottom line along the way, and that's what we're driving at. So if you look at the expense growth, it's really related to the fee-based businesses and the rest of it is having a very rational amount of expense growth because of the efficiency measures and that's dropping the bottom line, and that's why the earnings growth was 30-plus percent EPS. So expect that to continue.

We're not hiding it from you. We're growing -- we're having operating leverage of 660 basis points, so we're letting it come to the bottom line, but meanwhile, we're investing heavily in the growth of this company to make sure that we're positioned in the future. Whether we accept lower returning business or not, that's -- we always look at all the businesses and say, what can you swap out from low return to higher returning based on the return on tangible common equity metric, which at 6%, plus or minus, we think, is the right standard to look at. We think it's what the rating agent look at. We think the people operating below that have to be careful. That's lesson learned from financial crisis.

So we expect to be around that level. And when people have optimization opportunities they have to grow the bottom line. But if they can grow with more return, we're pushing to do that as well as let them grow to meet the market demand.

We'll now move on to Mike Mayo with Wells Fargo.

Could you elaborate more on the change in your operating leverage guide? That's quite a big lift there. And you did address the NII that all falls to the bottom line. I get that part and get the equities trading going up more. But aside from that, it still seems to be guided quite a bit higher. So your marginal margin or the scalability of your model I think you've been kind of waiting for this moment when you can layer on more revenues at lower marginal cost. Can you highlight the areas that's impacting that the most?

Yes. So Mike, when we got together at Investor Day, we essentially outlined for our shareholders that we felt like the model -- the financial model works if we can create 200 basis points of operating leverage from the organic growth and the expense discipline that we expect to put up every cycle. But what we also said is we benefit from fixed rate asset repricing for a period of time here. So we kind of felt like what we were prepared to commit for the next 3 to 5 years was 200 to 300 basis points of operating leverage. Obviously, we have performed positively and outperformed that in the first 6 months of the year.

The 2 reasons for that are, first, NII just keeps grinding higher. And as Brian pointed out, all of that is dropping to the bottom line. So that's really powerful. And then second, we had really terrific fee-based performance over the course of the first 6 months. You can see it in assets under management. You can see it in sales & trading, you can see in investment banking. So that's really boosted. And at some point, you're halfway through the year with 450 basis points of operating leverage, and it's pretty clear, we're going to be above 300.

So we know we've got tougher comps in the second half, but it's still a strong second half. And when we put that up, we should be in a good place to report full year results. So that's what we're aiming at.

And did you provide any expense guidance for the year or the second half?

No, we've largely gone away from that, Mike, for the very simple reason that when you have revenues increased this quickly, and some of them come with brokerage clearing and exchange costs, some come with FA incentive cost. It's really hard for us to just keep updating the expense through the case of the quarter. So our shareholders have just said, look, it's sometimes easier to stick with operating leverage, we found that. But I think if you look at the core, the best core measure is probably headcount.

Our head count discipline over the last 6 quarters has been excellent. It's flat to slightly down. So we expect good core expense discipline and the expense at this point is really going to be based on what happens with revenue. If the revenue isn't there, then the expense will come down. If it sustains where it is currently, then you see what it costs to operate the company right now on the fees that we just put up.

And then as a follow-up, going back to Investor Day, I think you're looking for cards to grow 5%. And as you said, it's gone from 1%, 2%, 3%, now 4%. So that's there. but you also are hoping for net new asset growth at 5%. And I don't think this quarter, the net client flows weren't as good. So just if you could comment on that.

And then lastly, on commercial loan growth, traditional commercial C&I growth, away from the hyperscalers and all that. I'm trying to figure out if that's actually coming back or not, you're being across the U.S., a good guide for that.

First, I think you were referring to the Merrill 5% guide where we said we were aiming for 5% over the course of the next 3 to 5 years. it's been 7 months, and I think we're off to a good start there. We added net new households again this quarter. This was the best quarter in the last few. So that was good. Probably the most important flow is the assets under management flows where they were up 4%. So we're happy with that. The loans were up 13%, I think it was year-over-year.

So I think what Lindsay and Eric are trying to drive there, what Katy is trying to drive there is just keep growing the sales force. Well, adviser attrition is now at near historic lows. So we're pretty happy with that. We've got more to do. We know that over the course of the next 3 to 5 years, but I think we feel like we're off to a good start, so we're happy with that.

On the commercial loan growth, yes, it's broader than just an AI theme. The AI theme has helped because there's so much in the way of capital investment going on globally now. But when we look at our global banking segments, each of the lines of business, whether it's business banking, the commercial bank or the corporate bank, they're all contributing. It's very broad-based loan growth at this point. It's consistent loan growth in commercial. So that's another reason why we're pretty comfortable with our NII guide for the second half of the year.

We'll now move on to Gerard Cassidy with RBC.

Can you take a step back and just give us a sense, what are you seeing in the underwriting area for credit? Is there a risk on -- going on? I mean, numbers are great for you and your peers. The economy's healthy. What are you guys seeing for the trends there?

[indiscernible] start overall. We see -- from what we're underwriting, we stick to our credit knitting, so to speak. It's been consistent. It's been long term. You can see it in the stress test results again that just got issued. So in what we do, we may maintain that consistency. And the nice thing is we can maintain that consistency and actually grow a stronger, stronger industry in core middle market areas that you're thinking about small business, et cetera. So we feel very good about that.

We see some excesses on outside, we always do. A lot of that went to a different market, not in the banking system. Some of that's come back and now needs to -- they have to do it more on bank lendable terms, so to speak. So we're seeing that competitive pressure ease a hair, but we'll see if it stays that way. And we're seeing price pressure in some of the more liquid products like auto loans and stuff, and that's why we laid off a little bit as the pricing got very tight, and that happens once in a while.

But overall, we feel good that the credit quality is high, the underwriting we see as high the -- some of the impact of more leverage than the loans outside the banking system is mitigated as that practice straightens itself out over time here. And so we feel very good about the credit quality. It's all going to come down to the economy. And right now, our team is very constructive on the economy and unemployment at 4.2% or whatever it is, new claims, front employment is staying low. It's a pretty good place. And so that's why you're seeing a complete sort of steadiness in our credit cost. And importantly, the issues of the moment, whether it's real estate 4 or 5 years ago or whether it was private capital lending and all the stuff, just aren't surfacing the way people thought they would.

Very good. And then as a follow-up, I don't know if you guys could frame this out, but the AI is such a powerful economic force in this country. Have you guys been able to frame out not exposure to data center build-out, but the second derivative because you wonder 2, 3, 4 years from now if I ever kind of slows down or rolls over, what's the second derivative credit aspect from that? Have you guys given much thought?

When we look at the work we do with clients and others, we factor in across all our companies as part of the underwriting work that the team does, they have to factor in the question of what's the impact of AI in the industry and the company and what will happen. I think it will take time, as you said, and we continue to watch that. As we look at underlying deals, we're always looking at the credit. The capability and the earnings power of the underlying tenants, so to speak, that are driving the revenue to the build out business so that we could keep care on. And when we look at the energy build-out, we see the demand there.

So we look at all the factors you're talking about. I think that -- and what we learned from also is not only what happens outside, we see the impact on our company and the ability for us to use it effectively relatively quickly. And so it's a very powerful tool. It has great utility. It has to be carefully managed. You have to have your data perfect. You have to have your rules based. So it doesn't make mistakes in how you use it. It has to -- you have to look at processes and not engineer them, so we feel very strong about it. And we talk to the companies that are in our portfolios of lending to make sure they're active using this so they don't get left behind. But on the other hand, they're using in a responsible way that they can protect their data and their security and things like that. So we feel good about it, and we feel it will be a powerful force in place where the American economy will be very successful.

We'll now move on to Matt O'Connor with Deutsche Bank.

Just a quick follow-up on interest income. The guidance for this year is essentially be up 8%. What is that ex-markets?

I need to take a look, give me 1 second. I need to work it back. I mean I can help with that off-line once we finish it up, but it's not going to be a big factor because I think what's going to end up happening is the market's NII is probably pretty stable here. It could even go down with the rate cut in fourth quarter, but it will be flat to slightly down, is my guess. So most all of the growth is going to come from the global banking books.

Okay. Yes, that number would be helpful. I mean I think on a year-over-year basis, I would think it's up just given it was going up throughout last year...

Well, year-over-year, it will be up because we've put more balance sheet into the business. So we can sort of see that. I'm just saying, if you were to look at first quarter, second quarter, kind of expect a similar kind of number in third and fourth. But we don't normally provide the guidance ex Global Markets because this -- there's lots of moving pieces that go backwards and forwards, and there's a lot of loans in markets.

So it gets a little confusing when we strip that out. Sometimes you have to think about the presentation there. But bottom line is market's NII, I think will be flattish, could be slightly down with a rate hike, but that's not the driver of second half performance of NII.

Okay. That's helpful. And then longer term, you talked about NIM grinding higher. And I know this was a while ago, but you talked about a 2, 3 or 2, 4 NIM. But obviously, like the balance sheet is a lot bigger. There's been some mix shift. Just any updated thoughts on the NIM over time.

Well, we still feel good about that 230 number that we're aiming for. I think when we started, we said it would be 2 to 3 years. We're inside -- probably inside a couple of years now to get there just based on the progress that we've made. One of the things that's just interesting over there is because we've grown the markets business, which is quite low net interest yield, that has suppressed the overall, if you like.

The banking net interest yields have been quite encouraging over the course of the past couple of years. So it's been a conscious choice to invest in markets. That's obviously been a good decision, particularly this quarter with the markets business is up as much as they are. But it's less about net interest yield and more about net interest income. At the margin, we're going to get the net interest yield. We know that. We're still confident we're still on track. We'll get to that 230 and we are a year closer now.

There are no further questions in queue. I'd be happy to return the call to Brian Moynihan.

I thank all of you for joining us. The consistency is the key as you look across all our metrics in every area, whether it's NII fees, et cetera. The second thing is to keep in mind that the revenue growth is strong, but also very diversified across lots of different businesses, lots of different outcomes.

And the third to keep in mind is that the credit cost in the company have flattened out at a very strong historical levels. And we continue to feel good about the delinquencies and everything we show you as getting better. If you think about that, all that, we gave you guidance that we're at the top end of the range in operating leverage. And so all that backs into a strong second half ahead of us.

When you think about the atmosphere we operate in, it's a constructive environment, full pipelines in the markets business strong investor demand for debt and equity, commercial lending strengthening and continue broadening out, and we continue to see strong consumer spending activity, which at the end of the day, shores up the U.S. economy. Our company is well positioned to be a part of all that growth, and we look forward to talking to you next time. Thank you.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Okay. Up next, we have Bank of America, and I am delighted to have with us today Jim DeMare, Co-President of Bank of America. Jim, thanks so much for joining us.

Thank you for having me.

So Jim, you and Dean Athanasia have been Co-Presidents for about 9 months now.

Yes.

So maybe to start, can you spend some time talking about your new responsibilities to drive growth across the lines of business and what you're most focused on, where you see the biggest opportunity?

Yes. So Brian asked us in the fall to take the Co-President role. And as he stated, it was to help the businesses run, I think, was the quote. And so over the last -- particularly the last 6 months as we were kind of getting through Q4 of last year was to really take a look across our businesses and we've really started to look at them in the light of 2 continuums. One is we're saying the wealth continuum, so thinking consumer investments, Merrill to the Private Bank and then also on the business and banking side, just thinking about that continuum.

So from business banking to commercial banking to corporate banking and really trying to think about those as horizontals, not only in terms of how we face outwardly to clients, client acquisition or as they migrate along that path, but also tech and ops, so we can drive synergies there and then have those dollars available to reinvest. And it's really -- it's a similar approach to what I pushed through in the markets business when we were looking at complex technology and operations platform and really turning around and saying, where are the synergies, where can we drive that cleaner, simpler, better and then drive value out of that.

All right. So there's a lot to dig into. Maybe let's start on the broader environment and get your thoughts on the capital markets and trading environment. What are you hearing from corporate and institutional clients? And how is lending activity trending after starting the year so strong?

Yes. So I would say, generally speaking, not dislike what you're reading out there. There's more, I would say, concern and cautiousness than is what's reflected in the general level of activity. I was joking around with someone recently and saying it's kind of what you see broadly, whether it's on the consumer side or on the business side, where the surveys, various surveys are reflecting considerably more caution than what we actually see in the numbers, whether that's consumer spending still mid-single digits increase off a little bit from where it was, and that's off the most recent data that we had out.

And on the investing side and on the banking side, it's similar, similar in the sense of there's caution. But at the same time, the environment is pretty right. Corporate credit spreads are tight, even though yields are higher depending on where you are on the -- focusing on the U.S. for a moment, but U.S. interest rates up anywhere, 20 to 50 basis points where you are on the curve.

Corporate spreads are tight. That's obviously attractive for both M&A and general CapEx that people are spending on. And then from the investor side, the equity business has been where there's been increased activity. And I don't want to say euphoria yet, but there's a lot of excitement about technology, CapEx and what the future looks like, whether you're utopian or dystopian, that is a big focus.

So it sounds like there is some caution in the survey, but you're not seeing it in the numbers and the numbers are fairly resilient?

Yes. I would say from a corporate perspective, again, still a lot of dialogue on M&A. Exact timing, I think everybody is wishing and hoping for a quick resolution in the Middle East. That being said, nothing really of any note being canceled. It's just more like what's the opportune time to do that. So we still feel good about that pipeline. And my understanding is John was pretty effervescent about the IPO market. So I'm not going to repeat myself on that or repeat him on that, but it's a pretty exciting time for the capital markets.

The other question we get is the IB pipeline and how it's refilling with record equity markets on one hand and then concerns around the geopolitical environment on the other. What do you think about the pipelines at this stage?

Pipeline still remains plentiful, I would say. Again, a lot focused on technology, broader technology. Obviously, there's large IPO pricing this week. There were a couple of S-1 filings over the last few days from some of the larger names that are out there in these market capitalizations between, say conservatively $900 billion to upper $1.5 trillion plus. These are numbers that we've never seen before. And even if you think about the typical 5% to 10% that is placed off of that -- those market caps, these are larger than total company sizes that we were talking about not too long ago.

So I would say, again, there, people are disciplined. I mean, yes, there's enthusiasm around the tech names, but I think away from the tech names, companies with positive free cash flow and good outlooks are what people are focused on.

Got it. So we'll dig down into Global Markets and the Investment Bank in just a second. But maybe just while we're talking about the Co-President role and just given your role, which, I guess, capitalizes off of your previous position running Global Markets, I assume you still have primary responsibility for the commercial and institutional side of the business. It would be great to get your thoughts on the connections of those 2 businesses and how that makes BofA more competitive?

Sure. I think it's one of those things where if you're not -- if you don't have both those capabilities, it's difficult to imagine how powerful they can be. I mean we talked about it during Investor Day, and we've talked about it time and time again. But it's a pretty powerful position to be in to have the banking -- traditional banking relationship also with the capabilities of a markets business. Why? It's pretty straightforward. But for those that aren't as familiar with it, I mean, obviously, many companies are international, foreign exchange, whether it's hedging or payments. We can be there for them.

Interest rate hedges, also a big part of that business. I think people often overlook those 2, much more familiar with debt capital markets, equity capital markets and that kind of IB and advisory work that you have there. But when you look at rates, foreign exchange hedging plus payments, it's pretty powerful. And I think there are only a few of us that really have global scale and capabilities to execute on that. And I think it's really underappreciated.

Got it. Okay. So let's dig down into the Global Markets business. The trading business, you've seen consistent growth across the past 4 years. And you spoke about diversification, it's highly scalable. What are the most important drivers of this consistent growth?

I think the diversification -- well, I would say a couple of things. There's things unique to us, which I think the diversification, again, unless you have it, it's difficult to imagine how powerful it can be. I always used to say to the dismay of some of the people in the markets business, whether markets go up or down, spreads tighten, widen, whatever it may be, we're less concerned about that. Obviously, a rising market is more favorable.

But when you have the capabilities and the diversification across client types, a hedge fund is going to respond differently than an insurance company or a traditional asset manager. Similarly, you may have clients in -- or could be foreign non-U.S. clients or U.S. clients that want to access Asia markets, for example, or European markets or South American markets. And so as long as we have top-tier capability across the business, we're going to earn the business and we're going to see it.

So as opposed to someone who may be highly U.S.-centric or only a macro product or a micro product or boutique, it's much more volatile. The highs may be higher in terms of what they earn during those periods. But the diversification without question, gives us the ability to serve clients and to continually drive returns.

So one of the investor questions has just been around you're getting more volatility out there in the market, and that's driving the sales and trading businesses higher. But I guess what you're saying is that the diversification helps the underlying business as well?

Yes. I would say for us as a company, yes, that is a big driver. I think the size and the structural changes in the market are also strong contributors. And I think, again, depending on how long you've been in the business, from 2010 up until -- well, let's say, 2010 through 2015 when new rules and regs were being put in place and we were all trying to digest the cost of being in these businesses, we were also doing -- meaning there were higher capital charges, there were higher liquidity charges, so on and so forth, not surprising. But when you were in an environment that was heavily influenced by central bank policy and we had quantitative easing, you had suppressed rates, you had suppressed volatility and you had suppressed growth.

So those all keep a damper on what the opportunity could be. Where are we today? I mean, we barely got over 3% rates for a 10-year period, and we've been above 3%. The size of the markets themselves have also grown materially. If you look at outstanding debt for -- whether it's corporate bonds, sovereign debt, you can kind of mortgage -- U.S. mortgage agency debt, all those are larger markets growing and not to mention the equity market, has grown considerably in the -- not only in the price in aggregate or market value of the indices, but take a look at the volumes, I think we were doing like 7 billion shares a day in trading volume in equities pre-COVID. I think we got up to 11 billion or 12 billion. We're between 15 billion and 17 billion a day today. More volume, larger markets, more volume, higher prices and getting a piece of that is valuable.

And then you mentioned structural changes in the market as well. What are you thinking about that?

So structural changes there, meaning because capital requirements increased for complex products and also with movement of products towards exchanges or swap facility -- swap exchange facilities, for example, for interest rates. More of the activity of the banks today is in -- and brokerage houses are in Level 1 and Level 2 assets. So those that are liquid, observable and higher trade volumes.

I don't even hear anybody talk about Level 3 assets anymore as a part of their balance sheet, which from 2010 to 2019, you spent more time than not talking about what your Level 3 assets were. So when you think about it, it's -- and again, part of Dodd-Frank and other, there's just been that shift towards facilitation of activity, more products being traded on exchanges, growth in market, and it's a pretty strong flywheel.

It's less capital drag as well.

Yes.

Okay. And then just to round out that discussion, when we think about fixed income financing and NII revenues within the markets business, are you leaning into the FICC financing business? And what -- how does that drive the NII?

So yes. So an interesting point on that. We had been in that business for as long as I can remember in varying kind of forms. I joined the firm back in 2008. And I think once we got out of the financial crisis and the economies were starting to kind of rebuild and reenergize, we had done various forms of that activity. So we've been in it for a long time, consumer receivables, mortgage, warehouses, those types of things, some credit extension.

But I think the part that is misunderstood or maybe underappreciated is if you take a look at the economy, the U.S. economy between pre-COVID to where we ended last year, I think we've had aggregate nominal GDP growth of 37% or 38%. That's a considerable number. And if at the same time, bank capital was going higher, it wasn't coming down. By default, to achieve economic growth, which the U.S. economy credit, it's part of our philosophy as an economy that credit extension is part of economic growth. The growth had to come from somewhere, right?

So when we looked at the business, we just looked at it and said, hey, these are assets we have expertise in decades long, clients we've been dealing with for a long time. We're going to focus on client selection, and we're going to focus on the collateral and having robust structures, and we feel comfortable with it. I wouldn't say that we were going after something more aggressively or less aggressively during that period, but those -- I think those stats I provided give you a good sense of the economy was growing that there was always this discussion around what's occurring outside the banks versus what's inside the banks.

Nonregulated nonbank financial institutions grew, and we were part of that ecosystem. So it was a little bit less about -- we always stick to our guns, so to speak, on what we view as what's the return that we want to achieve along with the other criteria that I mentioned. So opportunistically, things get more attractive for us, and we'll look at that more closely. But I wouldn't -- we didn't lean out. We didn't lean in. It's a core part of the business, and we just follow it accordingly.

Got it. So while we're on the topic of the markets business, let's bring it a little bit more near term into 2Q. Brian provided an update a couple of weeks ago. I think you mentioned markets was trending up for the 17th straight quarter at up 15% or so year-on-year. Where are you seeing the most strength there across FICC and equities?

Yes. First, I'd say I think we're going to be a little better than that. It's been a couple of weeks since he spoke. As I mentioned, with interest rates on an upward trend, while credit spreads and the like have remained firm, a lot more of the activity and revenue has been coming from the equities business, and that's what we've been seeing, I think, in general for the industry, probably for the last 12 months. Within that, there's a lot of desire to access Asia, the Asia markets. That's been a high area of growth. It delivers strong returns when you look at it. And so I would say equities broadly, APAC has been a considerable part of that. When you get into the fixed income businesses, it's mixed. Some of the macro businesses are doing better than others. The same goes for micro. So growth has definitely been equity driven.

And then any specific color on the investment banking side? I think Brian mentioned it was in pretty good shape this quarter?

Yes. I would echo it's in pretty good shape.

All right. Anything across M&A, ECM, DCM?

It's going to be a good quarter. We're continuing to see the activity. There's deals that have been announced, not to get into any of them specifically, but activity remains robust.

All right. Perfect. And then while we're on 2Q, it seems like a pretty good environment for banks. And I know Brian touched on some near-term guidance points recently as well. But maybe you could cover those near-term points for investors that might not have caught those comments a couple of weeks ago?

Yes. So overall, I would say it was constructive, showing the growth where we indicated we were going to have the growth. Starting off with operating margin, we had guided 2% to 3% is kind of a target for operating margin. We got close to 3% for Q1. I think we're talking north of 4% for Q2. So I think that's a good indicator of kind of where we're seeing things trending. We've talked a lot about NII and NII and repricing of assets and part of that pulling straight through to the bottom line and not incurring additional expenses on that is what's helped driving that.

And so from a numbers perspective, I think Lee, we were saying $1.8 billion, right? Yes, $1.8 billion on investment banking and in NII guidance, we're sticking to the same.

Got it. Okay. So on the operating leverage side, over 400 basis points in the second quarter.

Yes.

All right. Perfect.

And I think it's important on that to note, there's a lot of discussion or comments being made. Is that at the expense of investment? It's not. We view everything as there's -- we're always looking to grow where we should be growing and in a way that we should be growing.

And at the same time, expense management and managing expenses accordingly so that you can make the right investments is the real philosophy for us. I mean, tech investments are significant. We've talked about them, our annual tech spend and how much we've been putting into specifics, whether it's AI and other, we want to keep driving that efficiency cleaner, simpler, better, reduce systems, bring synergies and then use those dollars to plow back into tech investment.

Right. So given the strong momentum you have on the revenue side and the operating efficiencies you're generating on the expense side, there's enough room for both investment spend and positive operating leverage. And then I think you spoke about 200 to 300 basis points of operating leverage for -- that was a number for [indiscernible]?

Right. And within that, we obviously talk about it regularly. But in I bring it up, it's topical since I was talking about Asia equities, variable expense there, the BC&E is just part of being in the business. And so we do have vacillation in expenses that's a function of variable expense, and we're very focused on maintaining the right balance, keeping fixed costs low so we can generate this operating leverage when the environment -- whatever environment that may be in, whatever business it is, but it gives us that opportunity to continue to drive value.

All right. Perfect. And let's pivot over then to the Global Corporate and Investment Bank. At Investor Day, you laid out a lot of growth opportunities. I think you pointed out that you have a medium-term target of 50 to 100 basis points of investment banking market share gains. So let's start on the investment banking side. Where is the biggest opportunity for share gains? And what is the business doing to drive that growth?

Yes. Great question. I think one of the things you're going to start to hear more regularly while we've done it, but the theme will be, I think, more consistent across the firm. Nice to say in the markets business, doing more with the clients that we have today, apply that to customers. And if you think about across our businesses, whether it's consumer or various banking businesses plus investment banking markets, you start to see some of that play out.

So when you look at our investment banking business, we've got M&A, top 5 player, I think it's like 5.3%, 5.5%, something like that for market share. If you get into investment banking, overall for corporate, you get to a number where we are fourth. I think that gets us mid-6% market share, low 6% market share. But the really powerful thing is if you start to look at where we have relationships, corporate banking relationships, that IB business grows materially. So we're -- I think it's like 300 basis points higher approximately where our market share with those clients. So that puts us up to like #2.

So if you look at clients that were doing corporate banking and investment banking, we rank much higher. It's further exaggerated in the commercial banking business. We have 12% to 13% market share, and we're #1 with our clients there. And so it's nuanced, but once we have those relationships and the trust is built and then we have the capabilities, that flywheel just keeps running. And so that's a key component or a key part of the strategy. And then we had talked about other synergies that we had during Investor Day around international growth opportunities, banking markets, payments, investment banking markets and payments, and that's a pretty powerful combination for us as well. We're -- for those businesses, we have about 40% of it.

When you look at -- it comes from international on a top line basis. Again, doing more with those clients that we're already doing business with. I think we had it on the market side. It was something like 95% or 96% of the clients we're already doing business with. We wanted to do more. You look at that, it's about 40%, I think, for corporate clients. So there was the opportunity to increase that there. And when you bring those capabilities together, markets, banking, investment banking and corporate banking, it's a pretty powerful combination of capabilities. And again, building trust with clients and the ability to execute opportunistically when they need us to and at the same time, day-to-day in the regular course of business is important.

So 40% of the combined Global Markets and Investment Bank -- Global Corporate and Investment Bank business is international?

Yes. I think that's the number that we...

Got it. Yes. And when -- I guess within that business, you outlined some of the opportunities that you're seeing in the near term. But as you look out over the longer term, where do you see the best opportunities there?

Well, we -- they're pretty -- for international. I mean it's a pretty staggering number. I think we cover like 80% of the Fortune 500 companies. It's an incredibly high number. The U.S. number is even higher. It's like 95% or 96% of the Fortune 1000. But we've talked a lot about -- for the most part, it doesn't mean that there's modest expansion in a country. But for the most part, it's in the regions we're already operating in. So obviously -- and where there's more opportunity.

So clearly, with higher interest rates in Japan and with the change in regulatory environment, there's a newfound enthusiasm for companies and non-Japanese investors to invest there. So I mean that just comes to mind is one that's -- that we have a lot of conversations about. I mean, obviously, we're cover Asia well and Europe and Latin America as well. And obviously, in the Middle East, there's likely to be once things are resolved, that there's going to be a great need for lending and capital markets activity to rebuild a lot of the infrastructure and other that's been destroyed.

And as you get more of that market share, both in the U.S. and internationally, is there anything more you need to do on the hiring side?

We're always -- we're -- I think we're pretty religious about reviews and performance and how we're doing. Periodically, we do make those hires. I can't say that right now, we're focused on one specific area, but we build in the flexibility in our planning such that, yes, we're going to staff up accordingly where we need to be. Candidly, I think the economic growth that we're seeing in the deal activity has caught many firms by surprise, and that's why it's been such an active environment for recruiting.

Got it. Maybe touching on private credit. We saw the $25 billion direct lending balance sheet allocation announcement. And as you think about some of the opportunities for banks to take back some of the lost share, whether it's from private credit, given the leveraged lending guidance has been withdrawn, where do you see the opportunities there?

So again, there is a significant need for capital for all this investment that's taking place, predominantly broadly defined infrastructure, digital infrastructure, power and broadly energy. And I think that those are the areas that you're going to continue to see it.

The candid response on this risk appetite, some of it was limited by what the rules and regs were and some of it's just simply limited by what risk appetite is and where we want to deploy our balance sheet. You live with loans once you make them. So we're very thoughtful about what it can look like through a cycle. That being said, the demand -- the size and scale of the financing that's being done is well beyond anything that can be handled in the loan market for banks. And that's why you're seeing the expansion or kind of regular access into the bond markets, which is why the bond markets were created in the first place was just that there was limited capital and balance sheet available in the regulated banking system.

So the $25 billion that we communicated, that was our way of saying that we're continuing to remain involved. We're going to be there for clients and some of this may not meet what our kind of traditional profile of lending is, and we do have some capacity to deploy that when we think we need to. The reality of it is now most of the activity or a great deal of the activity you're seeing is more for investment-grade type credit demand. So I don't -- and obviously, the private credit sector is going through a kind of repositioning and a recalibration, but a lot more of the demand we're seeing today for lending is much more on the investment grade.

Got it. On the -- I guess, the wealth side, you mentioned the wealth continuum in your opening comments.

Super excited.

Yes. So maybe you can talk about that. Where is the opportunities across consumer investments, Merrill, the private.

Yes. Dean and I spent a ton of time on this. It's really -- I think it's a highly differentiated platform. We talk about consumer investments when we talk about the consumer business. But when you really think about that across the continuum, consumer investments plus what we say, Merrill and the Private Bank, it's just incredible. We're offering investments and investment advice to traditional consumer bank clients. Obviously, they need a certain profile.

But we have that channel, and that's an acquisition channel, and that's going deeper with clients that we already have a traditional banking relationship with. Then you move over into Merrill, we've got, obviously, financial advisers. It's very powerful in terms of acquisition, but it's also powerful for those clients that want a more high-touch advisory role. But we also have digital capabilities that's a product. It was predominantly used as the investment interface and product for consumer, but growth does occur in the digital space for the industry, and that's an area that we're focused on not only for consumer, but for Merrill and for the Private Bank.

And then you get into the Private Bank, again, another jewel. And when you really look at all these businesses, they're durable as they are today. However, there's areas where they can all grow, right? For Merrill, where it's -- I don't know if we disclosed the numbers, but it's the majority of it coming from the earnings, top line and bottom line come from investments.

Lending and banking, we do talk to those clients about that, but that's where there is a bigger opportunity for us, not only on the investment side, which people think about, but lending and banking. And when you see those relationships, again, like we were talking about on the corporate and institutional side of the business, it really drives a powerful flywheel.

The Private Bank is almost the reverse, predominantly lending and trust services with less on investment, and we think that there's opportunity for growth there on the investment side. And we just think that there's growth opportunity really across the board. And we've being unified in that approach for tech dollars, for operations capabilities. Again, that's another part of the flywheel where we need to drive that efficiency, make it easier. And then this way we can have both external and internal efficiencies that we can just drive.

So maybe a tangential topic that's come up more recently is around funding costs, cash sorting, consumers and wealth management clients maybe using a little bit more AI to move their deposits around. What are your thoughts on the risk to the banking industry in general?

Like any new -- any innovation that's talked about, we spend serious time having discussions and analyzing it. I mean, yes, this is a more advanced version of when you could first pull up. I forget what the company was, but you could look at different borrowing rates for mortgages when someone just decided to aggregate them on the Internet and turn around and say, here's your menu of what you can get for a mortgage rate.

So we're focused on it. We're not -- you can't dismiss anything. I do think we're -- for a certain profile of customer or client, that's beneficial. We're not seeing requests for broad adoption for that yet, but it's obviously on the menu of things that we think about and are focused on.

All right. Perfect. Maybe let's end on the capital side. The trading businesses saw a sizable increase in balance sheet in the first quarter. Can you talk about maybe the trade-offs as you think about the deployment of excess capital? And how should we think about which businesses get more or less capital you have?

Yes. So I think there are a few ways to look at it. I don't think that there is a simple answer. We're always trying to optimize capital and financial resources. So capital is the one that's the most easily observable and reported. You obviously have liquidity, you have balance sheet and you have some others that are of less consequence but are all part of the evaluation process. So what we really try to do across the company is to turn around and forecasting, as you know, can be difficult.

But have the flexibility to move capital around when we can. And to go back to the markets business and our discussion on what those balance sheets look like, it's highly liquid securities where most of the balance sheet is deployed once you exclude the loans and that pure lending part in the markets business. So you have balance sheet, capital and liquidity that's scalable that we can adjust up and down, and we have to be very cognizant of what the rest of the company balance sheet looks like.

So we try to match what clients need, where those opportunities are with looking at what the returns are by business. Obviously, some businesses have much higher capital returns because they use a lot less capital. So yes, the markets business always is a larger user, we have lower returns there. So there's optimization not only within the markets business to continue to drive that higher, which we grew a couple of hundred basis points higher over the years that I was running it, continuous focus on driving -- continuing to drive that higher. Does that answer the question?

That does. And just to follow up on that, with the new rules that we have, does that change anything in terms of how you're thinking about capital allocation?

The process isn't changing.

Got it. All right. Fair enough. With that, we're out of time. Jim, thanks so much for joining.

Great. Thank you.

Okay. Hello again, everybody. Ken Usdin from Autonomous Research, the large-cap banks analyst, back with our second bank of the day. Brian Moynihan from Bank of America, Chairman and CEO. Brian, as you all probably know, has led the company since 2010, overseeing its transformation through the post global financial crisis period into one of the world's largest and most diversified financial institutions. And under his leadership, BofA has grown into its responsible growth strategy. It's invested heavily in technology, including digital platforms and expanded leading positions in many of its businesses, which we'll talk through as we get through the session. So Brian, thanks very much for joining us today.

Ken, it's great to be here. And so I learned that Ken was -- worked for me a long time ago, but I didn't realize that until this morning. So he's gone on to bigger and better.

Fun times, fond memories. Before we start, I just want to make sure everyone knows you can submit questions through the Pigeonhole app. And as we get into it, we're going to start with big picture. So Brian, there's a lot of news and noise this year, 5 months in. Just what's your just broad assessment of the economy as we sit here today? You see a lot of different metrics across the consumer and commercial businesses. What's your base case here? And how do you see things evolving?

So I think overall, our team, our research team and obviously, Bernstein and their research team everybody -- last year, this time after Liberation Day, knocked down the growth for this year a lot, a point took off the top. They were mid-2s and they knocked it down. And as we came through the year, they pushed it back up and we were 2.8 at the high point. They've knocked it back down to 2.2. This is U.S. And that just reflects the drag on the economy from oil and other things. So that's where we are. As we look at it, though, what's interesting is if you look even in the month of May so far, the consumer movement of money out of their accounts. So each year, consumers will move about $4.5 trillion to $5 trillion from their Bank of America checking accounts out into the economy.

And that's moving at 5% for this month so far, the first 20 days over last year. And April moved likewise. In the first quarter moved likewise, which is consistent with a strong underlying economy. And so people say, well, what's happening in gas spending, gas spending is up. But that's -- the other spending is up. What's happening with travel. So airline spending is up, but the numbers of charges are up, which means there's more tickets bought even though the price is driving it higher. So -- and restaurants are up. And so people are spending money, and that's because, frankly, they're employed. And when they're employed and earning money, they're in pretty good financial position. Consumer credit quality is great. Consumer availability of credit is great. And for us, a prime lender, the house -- the loan-to-value in our portfolio is 50% on the mortgage loans and home equity loans and combined loan to value in a similar number.

So the consumer is in pretty good shape because they're employed and all these wonderful companies that employ a lot of people. Earnings are growing. And yet there's a lot of worry about what happens next. Gas prices are on people's minds, the affordability question is there, but it hasn't impacted their day-to-day activity yet. And so the question really is a tension of if this goes on, does it ultimately call them to change. On the commercial side, large corporates in the markets and that activity everybody sees. But if you think about it from small- and medium-sized businesses, they sort of had as they came through last year, a pretty good setup for this year as they thought about their financial plans or investment rates because the 4 or 5 big policies were seeming to come together, trade tariffs, tax, immigration, deregulation were all come together, deregulation was coming to be more beneficial in '26 because a lot of the administration was taking their time. So that was sort of the thing.

And then all of a sudden, the Middle East war starts, and that sends it all into question in Supreme Court. So they're still trying to make sure they're grounded. What is my input price going to be? Can I get it? What's the impact of oil price inflation on the goods that come to me from Asia, for example. And so they're a little bit -- but still, they're borrowing a little more in the lines. The employment levels, you can see the small business employment levels pays, roles are going up a little bit. So it's all pretty good. And 2.2% GDP growth rate predicted for this year is actually -- if you go back and look across the last 15, 20 years, reasonably strong. Now inflation is higher, rates will stay higher, and you guys talk all about that. I'm sure your colleagues are talking about it. But overall, we're seeing a net growth. It's fairly decent. And everything we see in the customer bases that are harder to see than the capital markets and share price is very strong.

Yes. And does this uncertainty or hesitation just become part of the new normal, right? So we've been dealing with this for a while, going back 1.5 years or so. So do you sense any -- there's the spending differences you mentioned and wanting to be like grounded. But is this kind of just the new normal that the customer base just has to deal with and go through?

The customers have got to -- the consumer lives their life and does their things. And they're not -- the real impact on -- if you look across the 30 years of this data is when unemployment starts moving. And so if you watch new claims or something like that and they start moving against, they're very low 200s some thousand, they haven't moved much. continuing claims, 1.7 or something haven't moved much. And again, if you go back and compare them, say, that's pre-COVID, but pre-COVID, the workforce was actually smaller in population. So there's been growth since then. So that's what's going to cause them to change. The only thing after looking at it for years is retail trading volumes were more correlated to consumer confidence than anything else. That's kind of broken out because the market keeps going up, so they're effective in there. But -- so I think what has to change is employment levels, and that's going to take business -- businesses are being careful, both large, medium and small on hiring and making sure they're hiring carefully.

The quick rates are down. The turnover rates. We had the great resignation 2 years ago, it's no longer there. Businesses have adjusted their hiring to make sure that they're going to be able to deploy the people with the new world of AI and everything they're thinking about how that's all going to work. But even with these layoffs, you're seeing that being absorbed into the economy. So employment levels are not -- unemployment levels are not moving. And as long as that's true, I think the consumer hangs in there and as long as the consumer hangs in with the power of that engine, America stays in pretty good shape. Now there's affordability questions are much different by cohorts. We do -- our institute publishes low, medium, high income and how it affects. This is not -- this is an aggregate statement, not that there's affordability issues for $100,000 under households that are difficult and gas prices affect them more. So I'm trying to stay away from -- this is more of an aggregate question than a specific question.

Yes. Okay. Got it. So talking about Bank of America at the big picture. I mentioned that you've been building and growing all segments across the company. But there's a lot of competition out there, and that competition is building and expanding, whether it's peers, regionals, fintechs, et cetera. So when you think about the company for the next decade, how do you think about supporting and continuing to defend both your strengths and expand the advantages that you have across the businesses?

So it depends on -- the businesses are different. The 8 lines of business do slightly different things and where they attack, but -- and the competitors are different. We monitor all the competitors. We monitor the disruptors, so to speak. And you have today's parlance, disruptors, fintech and other parlance, e-companies and stuff like -- we monitor for years, wonder what they do, see where they're seeing, any traction, consumers, seeing if that's something we need to adjust to, whether it's in the core consumer space, in the retail investment space, the broad-based retail investment space and the high-end investment space.

And then the commercial business is the same things. We look hard at payment systems changes, obviously, stablecoins and the legislation going through and our positioning both as a company and the industry because that's a big driver of profit. But if you sort out the thing we have to maintain, our competitiveness and drive is really around the core transaction account, core activity count, whether that's a business, a person, affluent or not so affluent, whatever it is, at the end of the day, we want to be in the middle of household and then add to the product set.

And so that's what we're really focused on. We really, really watch the payment system. You see us constantly gaining share. So 5 years ago, it was like Venmo is going to eat your launch and now our Zelle payments exceed Venmo's payments. So it's just a matter of applying technology to drive it. So as you look forward, the idea of applying it is really drive the brand, drive the capabilities in the core businesses and just keep investing in them through new initiatives and technology and technology capability, et cetera, we can talk more detail about that. And then making sure that the talent and teammates we have are the best that we can get and the best in the business and then letting that work and then frankly, knitting them together.

So in the markets we operate around the United States, using techniques to get our corporate clients to drive us into their employee bases. We have something called employee base investing, using techniques to ride the continuum from birth to death, from small business to large business. And then secondly, find the potential customers where they are because without population growth at the rates, we have to go find them and take them. And so we work a lot on what we call the themes and how we work between each other and make it happen.

Yes. And we got a lot of that detail last year when you did the first Investor Day that the company has done in a while. So as we also think about the long term, we saw a lot of the new depth and breadth of the management team. Recently, Dean and Jimmy have been promoted to Co-Presidents. Can you talk about just how the new structure is elevating both the team of leadership for the future and how that's going to improve performance of the bank?

So our challenge is to keep developing the talent for the future. And so people focused -- Dean and Jimmy are talent executives and they took it. But the key is the 8 lines of business head and keep investing in the teammates running those businesses and keep adding to the talent and then even on the credit side or on the risk side or on the legal side or on the HR side. So we keep adding that. But it's going very well in the sense that we were able to elevate those 2 co-presidents, and they can help drive some of the initiatives across the franchise. While we preserve that the 8 lines of business heads run those businesses and drive them together, but they're to knit them together to push and help us execute and make sure we're driving and lifting the brand.

We're investing a lot to drive our consumer brand to places really nowhere else is on the theory that we're ubiquitous. Everybody knows this, but everybody has to have a strong opinion of this in order for us to continue to gain market share on the consumer side and in wealth management side and small business side and business banking, large corporates is a little different attack in terms of the brand and how you do that. So they're doing that. They've been great. But don't discount that the people who drive this company are the 200,000 people and 3 of us at the top sort of make sure it all works, but they do all the hard work.

Yes. So thinking about Bank of America's performance and relative performance versus peers, BofA is uniquely positioned certainly on the revenue side for the next couple of years to deliver both NII growth and NIM expansion. You got the tailwinds that we all know about, about fixed rate repricing and you've got the balance sheet mix changing. So can you just walk us through just the main drivers that give you confidence in that growth and that outlook trajectory and how long your line of sight is on that continuing?

Sure. So if you think about from the net interest income side, we raised our estimates from 5% to 7% to 6% to 8%, and that's driven by our view of the core growth in deposits. And frankly, we're at this time in the industry where people -- you have to be careful about nominal deposit growth versus core deposit growth and people are using for funding. And that's all fine. It's just that we don't need the funding. So that core deposit growth, along with good loan growth and good credit quality produces that NII lift that just -- and the repricing adds a kick to it. So that -- if the economy goes in the tank, that's different. But as long as the economy gets roll along, that happens because we grow faster than the economy on loans and deposits. That's -- it's more than half our revenue, and that locks it in and the repricing adds a little fuel of fire and you march from 200 basis points of NIM percentage up to 230 over time.

So that is pretty predictable and the team has done a great job. And then on the fee side, we had a couple of dynamics over the last several years, which was to keep becoming the most favorable bank for consumers to drive attrition down. We took the fee structure and really managed it carefully, no overdraft fee accounts, et cetera, et cetera. That's all through the system and flattened out. Now you're starting to see even the consumer service fees grow a little bit. Card incomes with rewards and stuff, a little different dynamic. But the core service, that's good. And then if you look at the commercial side that the GPS fees grow nicely in the mid- to upper single digits. And so that's good. And then the question then there is the 3 fee sets that really are going to depend on the market environment, the wealth management fees, the investment banking revenue and sales and trading. And right now, those are all very strong.

So while you wouldn't -- I guess, maybe we could if we're in a different dimension, but the idea of the market going up 20% per year in perpetuity would be a nice thing to talk about. But the reality is they're all positioned and they're setting new standards of profitability that even if they flatten there, it would be a great business sort of walking up the ladder. So we feel good about that. But as you look forward, it's really a common purpose, been at a long time. The growth rates are there. And now with the balance sheet turnover and becoming more core, the efficiency of the returns go up to 1% on assets, 6% common equity, 16% return to core. That's what we did in the first quarter. We said 16% to 18%. We hit it a year early. So you expect us to keep making progress there, too. So that's the general set -- we can get into specifics. That's a general setup is that loans grow, deposits grow drives that. Credit quality is strong, doesn't take it away.

And on the fee side, we experienced good growth. We expect to do that. But the reality is that will settle into a more normalized growth rate. But after 16, 17 quarters of core sales and trading growth rate year-over-year. It's been a different environment in that scene, and that's where Jim and now Dennis and [indiscernible] have done a great job. They've build that up. And likewise, investment banking, we're holding our market share growing a little bit here and there, but it will ebb and flow with the markets, but generally, it's the new baseline.

Got it. And so coming back to reasonable growth at Bank of America, your loan growth has been ahead of the industry for the last several quarters, right, led by the commercial side, U.S., international. What do you see as the main drivers of that growth? And do you see that as sustainable?

So yes. And yes, because the dynamic -- if you look back 2 or 3 years ago, the markets business was growing strong. It's flattened out, and now we're still getting good strong upper single-digit better growth. There's still a usage question in the core businesses. And so whether it's middle market or business banking, the line of credit usage is still not recovered, and we're seeing that eat back up and each point of that is a lot of outstanding. So if that goes from the -- say, mid-30s to the 40% type of numbers, round numbers, that gives us a nice anchor to win where we do no more work, we take no more risk and yet we get more revenue, which is a nice -- and loan growth, which is a nice thing. So that's what we feel good about. So what I felt good about in the last quarter is if you look the quarterly progression in markets lending, of which markets lending has very different pieces in there, it has slowed, but the rest of the businesses in the commercial side have caught up.

In the consumer side, basically, the credit card, they set a path to get to 5% nominal growth in balances. That aside, if you really look at the mortgage stuff, it's really not growing, and it's -- we don't have to go over the dynamics of that. But if you look at the home equity side, we're starting to see a little pickup. Ultimately, that -- those balances were $30 billion, down to $20 billion after the pandemic and should go back to $30 billion and beyond, given everything that's going on, yet the American consumer has not decided to tap that. And ultimately, they stay in the house longer to do repairs and things like that. So we think that grows, but mortgage loans are just going to run to stay in place until there's a more favorable environment. So the consumer side oddly is kind of bumping along card a little bit better. It's the commercial side driving it, and that has leveled out to more of the business is driving as opposed to just markets.

Yes. And at the Investor Day, we talked -- you talked about the card strategy. And can you talk to us -- talk about the competitive dynamics there and how you expect the card business to just evolve over time from where it's been historically?

So we've been in the card business a long time. We made a conscious decision along 3 dimensions: one, to be really focused on prime card lending; second, to focus on the Bank of America card base; and third, focus on the affinities where we thought we could have a good relationship and help drive success. At the time, we had 3,000 affinity relationships and 2,950 of them didn't have a lot of value, honestly. And the credit losses and some of them were pretty substantial. So we've narrowed the business. But this morning, we announced a redo of our rewards program. And we always believe that the rewards program ought to be holistic around all Bank of America customer capabilities. It was geared a little bit to the -- what we call preferred affluent -- mass affluent America.

We've now broaden out that all checking customers have access to reward programs. The card has a reward program, but it's one rewards program. So with the affinity we have, which are great, but the rest of the card is about building our brand, our Bank of America brand card in the eyes of our people, our customers and then drive that forward and the rewards is a key thing because the rewards drive the deposit base growth and deposit base stickiness. So that's the integrated approach. That's different than other people have taken because we're not a card-only company. We've been there and almost took the company down, frankly. And because we haven't had a serious consumer credit issue since 2007. And so it's very volatile.

And so we're playing it to make sure that doesn't create issues for us while at the same time, penetrate the customer base and drive it, use the rewards and do it. So that's the card business. That being said, the team has to grow at a faster rate and they got, I think, 3% maybe year-over-year this quarter, something in that range. They're moving towards 5%. But if you just say grow balances, you can forget that you got to get profitability and with 1/3 of the balances paying off every month, they're not paying any interest and you're paying money to carry them. So you have to be careful about that balance, and that's the management task that Holly and the team have.

Yes. So the deposit side of the business for the industry is getting a lot of attention. You have one of the largest and lowest cost deposit franchises around. And how do you think about the advent of all these new digital products, some of which have existed but in different forms, whether it's stablecoins, tokenized money market, mutual funds, AI agents, how do you see the company adopting over time and evolving to both continue to grow but also protect that core funding base?

So I think -- the principles of which money could move to higher rate products are not new. The device price are changing and they always change and they change over time. But -- and so we always have to be mindful of that dynamic. But when you back up from that, we have $2 trillion in deposits and $1.1 trillion of loans, just to make it simple. The $2 trillion deposits are very core. That's where our advantage comes, our 150 basis to 40 basis points cost of deposits is not because we're cheap on deposits because the dominant part of them are zero-interest or low interest checking in the consumer space and then even the commercial space, noninterest-bearing and in wealth too, that creates that value.

And so that's because we have a core transaction. That goes back to my earlier statement. So if you think it's pretty straightforward. If you think about the customer has transactional cash and cash they want to earn a return on, the company has balance sheet funding requirements and then excess funding. And if you're a position of excess funding, you don't need to chase 5% CDs because, frankly, we don't have anything to do with the money other than put it in overnight treasuries, and that's a loss. So we don't do that. Now on the other hand, can you move money at Bank of America to the market? Sure. We have massive money fund penetration for customers that move it over. Do we have higher rate products across the spectrum? Yes, we have 5 tiers of money market fund pricing and all the stuff.

So people move within it. So they can find rate as they want if it's excess cash. But you have to say why did people have the money? If they have the money to carry out their daily life, they cannot have a payment get missed or something happen. And so I think the constraints and where we've aimed our attack is to really drive and own that account for the household. And then we'll take the other cash or we'll put you in a market alternative because we don't need to fund the balance sheet. There's no advantage in holding it, but we want to control that cash decision. So we have very fast terms. If other ways to come up to do it, we will facilitate those ways, too. But it would be -- bring down the growth rate in deposits because I don't think they shrink because we don't have much of that CDs and stuff like that. We have very little. It would bring down the growth rate, but we'd still control the cash and make money on it somehow.

And we have fee side and everything else. So it's a complex thing. I think people are forgetting that all the ways to move money have existed and all the higher-paying devices have existed. And the reason why accounts stay where they are is because people are thinking about that money differently. The theoretical construct of an agent coming and moving every 10 minutes until they bust at once and all hell breaks loose, that will be an interesting question. And because once one payment doesn't go through right, all of them don't go through right and at $35 a clip or in our case, $10 or $15 a clip gets very expensive very fast. And so what did I save? What did I get? What did I -- the fine-tuning. And so that's going to be an interesting tension in all this, but we'll see it play out. We'll be competitive. We'll have all the techniques everybody else has. We have them today, we'll have them tomorrow.

Yes. So let's touch on some of those fee-generating businesses you mentioned earlier. So wealth management has been a longtime big strategy driver for BofA. You talked about this at the Investor Day. What are the key drivers that are going to drive growth in the wealth business ex markets, we'll keep that aside as a nice tailwind today, but in terms of organic and gaining market share, et cetera.

So if you look at the drivers in that business, it's more clients, more of the clients. And to get more clients, you have to have either more clients per adviser or more advisers in both. And then you have to decide whether internally generate advisers or external hires. And so over the years, the external hires have gotten so sort of expensive that we sort of laid off that. We're now going back in to fill up offices and to bring some talented teammates in and recruiting, and we had to restart that engine. The good news is the experienced adviser attrition is hitting -- bumping along all-time lows. And so -- and that number just keeps coming down. And by the way, it was all-time lows 2 years ago, and it just keeps bouncing down. And so that's good news.

So to get net flows, you have to have current customers add balances or new customers add balance. Lindsay and Eric, Katy have committed to drive those to another round of increase really the Merrill piece, the private bank is doing pretty well on that. To do that, you've got to then add advisers net and add clients net. And they're adding the clients through the continuum we have from Merrill Edge all the way through the private bank, we got, I don't know, $90 billion of net flows last year, something like that. So it's just pushing that a little bit higher. The big change for the Merrill teammates is the hiring and they started recruiting in advisers to come join this wonderful platform. That helps on the asset management side.

The real other thing that's going on, and we're getting -- every year, we make another step of progress is $280 billion of deposits in that business. And so it's one of the largest banks in the country in the wealth management business. If just we start to noodle on that question. And they have go to the rate they pay, rate they do it, but they have a big core checking business. And so that's been picking up. And then frankly, the best success they've had over the last few years has been on the loan side, and there's 2 parts to that. One is sort of the very high end, very structured loan to wealthy people for art and for other planes and other types of things. And then secondly, the securities-based lending has picked up as the market has been strong. So the loan growth has been very strong in that business.

And so you put that all together, it's -- the improvement they laid out was to go to higher net asset flows. That's from basically driving the adviser count up, and we can make advisers more efficient, too. But it's really from driving adviser. That comes from being a little more aggressive on the recruiting side. We manufacture advisers and training programs and stuff. But we said, let's go out and do that. The economics are -- you got to be careful of. But on the other hand, we believe we can bring somebody in even the economics now, we're much more confident in the ability to get them around out the base and make money for the company on loans and deposits and things which they couldn't do at other firms.

Yes. And another business where you've expanded and taken share has been in the markets business or the trading-related business. And some of that's been through allocating more balance sheet to it. But I guess the question is how much more share do you think you can see taking there? How much more are you willing to allocate in terms of the balance sheet towards growing that further and creating that -- continuing that stable base that you've talked about for a long time?

Yes. So I think if you look at the markets business, let's say, it was a $600 billion to $700 billion balance sheet at peak 3 or 4 years ago, now it's a $1 trillion balance sheet at peak. So the balance sheet has increased to support the business. The capital allocated to it is circa $50 billion now. It's getting a good return on that but the challenge for us always, if you think about the tightness of our franchise, the ROA and the TCE equivalent, then it's the one that earns less. So Dennis and [indiscernible] have to solve that equation all the time. So they've grown nicely, taken market share, done a great job, and we've given a lot more resources, but the constraint is you got to be able to put it to work. And a lot of what they do, prime brokerage overnight risk, it's not exactly something you're going to get paid a lot for from an ROA basis, but from an equity risk basis, there's huge return.

And so this is where you get in the arbitrage between regulatory accounting and RWA and actual tangible common equity and stuff. So they've done a great job. They continue to grow. What I'd say about that business is, I think it has 72 different regulators touch it. It operates in all the trading venues around the world. It supports the great clients in here with knowledge research about all the different things. This is not an easy business with the technology demands $700 million, $800 million, $900 million a year in technology spending. If you start to think about this business, it's really a business you have to really be willing to put a lot of scale work in a very highly talented nuanced business to the client, the scale behind it has to be there as it becomes extremely difficult. And the bespokeness has to be managed down.

And the team has done a good job at the cleaner, simpler, better, as Jimmy called it, and taking the breakeven point down $1 billion a quarter over the last decade probably.

And so that then puts up to $2 billion in the first quarter. And that's -- they've done a great job. It's just that in the scheme of things, we've added more capital, added more balance sheet, but we're always managing that against these other businesses, which have a much bigger impact on the return on tangible common equity. And as we're moving up in the range, we'll keep that balance going. And that's what we're doing, but we got to be careful that if it becomes too big relative to the franchise, it starts to drag the returns at the ROTCE level down a little bit. I don't know if that makes sense to you, but that's one of the challenges. They have lots more resources doing it. But it's -- and they do a great job running it in 16 straight quarters of year-over-year, nobody has come close to that. And I think they probably will do 17.

And the last one, just in terms of higher ROE business has been investment banking, which has been also gaining market share over the last couple of years. You talked about building up the middle market as part of it. Can you talk about both just that organic where you're taking share and where you can? And then as a second part of that, just coming back to the environmental question, are people just kind of plowing through this environment as the new normal? Or do you sense any change in terms of willingness to transact?

Well, let's go to the last part first. People are just plowing through. To your point, a little bit, they've adjusted to the to the situation and said, you know what, we can't wait too long. There's catalytic change going on with the impacts of technology and new technology and new change. We got to figure it out. Scale will help do that. So you're seeing our clients the ability to do deals in the market, the IPO, these apocryphal IPOs are one thing, but just the general IPO market is a little more constructive, et cetera. So the pipelines are full on the activity side. It can -- think last year, it can start and stop on a moment. And that's where you got to be careful about making sure that business has a throughput underneath it that gets you a minimum amount that's fine, and then it's tied to the corporate customer where you make money on loans and deposits and stuff.

So it's a fairly constructive place. The pipelines are strong and et cetera. You go to the sort of more philosophical long term, we think of that business, it's a global business, global companies. But the piece that we've been able to do a pretty good job in between Matthew and Wendy -- Matthew Koder and Wendy Stewart who runs our middle market is really drive the middle market business. And so -- and that's 2 pieces. That's smaller companies and still covered in the industry world, but also general middle market companies in which we have dominant market share around the country. And so right after COVID, when we end up with excess capacity because the world kind of stopped. They were saying, well, we've got too many investment bankers, what are they going to do? And I said, well, let's build that faster. So we went from 60 up to 200 people doing it, and we'll continue to do that.

As all this technology maybe makes it efficient, we have this outlet where we can keep that because there's capacity to add a lot more people doing that in all the markets. So they're out in the market out in 17, 20, Citi is doing -- working with Wendy's team going to call middle market clients. And we're seeing the market share of our middle market clients where lenders is strong, but there's a lot where we're not a lender and there's a lot of other clients and those 2 elements we're really after. So I think that's good. The rest of the business, which is a classic industry-driven global business with regional overlays, Matthew and team have done very well. We're doing -- Asia has been pretty strong and Europe on the M&A, we picked up some there. America is always strong. So I think that's just that's more standard fair. But this middle market thing is unique because we are coupling banker capabilities, investment bank capabilities with 30-year, 50-year relationships, and we can just do that over and over.

And it doesn't mean every client does a transaction every day because that's not the nature of it, but you have to be in the flow to catch the clients over time. And that's been -- it's probably about 30% of the revenue now in that business. So it's contributing, and it can keep growing because there's -- the market share sounds big, but it's not big when you think that there's 90% of the market out there we aren't touching.

Okay. So one of the things we talked about also at Investor Day and in the last earnings sessions has been just the benefit of having that built-in NII growth plus the fee growth you just described has been a better operating leverage output, which has been consistent, but it's getting wider again. And at a high level, what does good operating discipline look like to you in terms of like balancing reinvestment versus driving efficiency and bottom line performance?

So historically, we had -- remove a lot of costs because we got rid of businesses. We had a lot of buildup after the financial crisis, et cetera, et cetera. So that came down. We got down to a pretty low level. Then we had inflation and costs and things. But all the time, you're making investments. So as we think about it, our investments are really headcount growth, which is in the relationship business. So going from 500 to 600 private bank -- lead private bankers going from 700 to 800 middle market commercial bankers going from 1,000 to 2,000 business bankers, which is $50 million on revenue. It's just how do we keep adding that. And that we have to do it. And how do we fund that in the grand scheme of things is by becoming more efficient in operational excellence and stuff like that.

So that technique. So if you looked at Investor Day, we showed you this massive downdraft in expense and headcount, but what we showed you is from, say, '19 forward, what happened is we've added heads and still taken out heads and the net has been up a little bit. We're running about 210,000 people today. 210,000 to 211,000. That's down, but that's a constant reinvestment in retraining, reskilling people even within operations groups going from X to Y as we automate and do work. And so it's just -- it's a matter of doing.

The major change we wanted people to see is we gave a nominal reduction in expenses because we couldn't get people's attention that we're actually coming down, and then we could never get off that point. So now we're focused on operating leverage. Last quarter, we said at Investor Day said 200 to 300. Last quarter, we had 300. This quarter, you should expect us to do pretty well. That's the goal because we have to have the expense growth to fund that growth and initiatives and talent in usage of the new technologies, et cetera, but we got to keep it relative to revenue growth in sync and then that produces the profit margin.

And so we think in a steady-state economy growing a couple of percent, you have revenue growth in the mid-single digits, expense growth in the low single digits. None of this is true because of the markets and everything going crazy now, but in a more standardized environment, that produces 8% to 10% operating profit growth. And then with the share reductions and stuff, 10%, 12% EPS growth. And that model is the model that's going on underneath every day. It's just that right now, you have huge market activity comes in and covers up some of that activity and then comes back out and that comes through. But we watch that underneath every day. And that's just a constant reengineering of the platform using all kinds of technology, including AI.

Yes. And how -- and talk about how AI will now influence this, too. You've talked for years, you guys talked about how the customer side has been facing it with Erica, Zelle, your broader franchise. But what are the tangible benefits that you're seeing right now as you put AI through the whole platform and add it on to just normal digitalization? And how do you think these tools are going to change the firm's performance over time?

I think applying technology to task is not new in our industry. Managing the human part of that is also not new. So our job is to manage implementation of this and also manage our hiring and our attrition rates to make this all work and then retrain people inside the company. And so last year, we moved 14,000 people from job A to job B in the company. That's a huge retraining effort. We also hired about 1,000-plus people a month, yet we ended up relatively neutral headcount. And that's by thinking this through. So the job of management is to make this work. Now how is it going to affect us? It's really all over the place. So there's very concrete. Erica is a very concrete example, 20 million consumers use it a lot of times. They can use it in a way that doesn't increase cost for them to have intimacy and interaction at pace that you can do it.

In the consumer business, 99% of the stuff is all digital already. So there's not like a lot of -- it's just the piece -- it's huge. The piece of the 1% left is a lot of transactions. And as you move that, you can do it. But the question on my mind is that you got to be careful because even though Erica is used all those times, would people have done that if they didn't have Erica. And so what you do is you atomize the activity, more and more activity takes place and you got to be able to scale that without cost. And that's what the magic of AI can do. It can scale customer interface without adding cost other than operating in a system, which is much more leverageable. So -- then you get on that side. We've automated the underwritten for years on the consumer side. There's nothing new here, and this is 30 years of doing automated underwriting. It's not a new concept.

So there's very little income benefit on consumer decision of Brian Moynihan gets the loan or doesn't. There's a huge lift on the preparation credit offer memorandum for commercial clients because that's a write-up that goes on. That's a huge amount of work that we can then reduce by having them pulled together, prepared, then looked at human in the loop, making sure they're okay, people experience, making sure it's not giving you an answer doesn't make sense, but it speeds up the process of preparation. That's a big benefit because if you look on the consumer underwriting side, you're going to get relatively small in the decisioning of credit. On the process of doing mortgage lending and the paperwork, yes, it's big, scanning and reading and taking the text and making it work and loading and stuff, a lot of it was input of just because of the way the systems are configured outside our company, not only inside our company.

So it has applicability across every platform. We're a big sales force user, agent force is out. We're up to 1,000 -- 4,000 or 5,000 people using it. That's growing thousands each month as we deploy in the other businesses. That provides them the benefit to prepare for meetings faster. You go back to, say, the wealth management capacity question, that means an adviser can -- whether a private bank or wealth management can be more prepared, they can take on more client activity, less getting ready for that client activity. And those are where we see it have a growth aspect that's pretty strong.

And then a legal department uses it now, and they can in-source more legal work with the same number of people and generate a benefit on that. So it's just going to go through the whole organization. I think the job is it has to be right. It has to be perfect. The data -- we spent $3 billion or $4 billion getting all our data aligned for a wholly different purpose, honestly. It turns out to be fortuitous because we know that the lineage of our data, we have been establishing for years and years and years to get all this reporting and make Erica work right and all this stuff. That provides a good stead. You have to have your data perfect. You have to have the decision path and whether it's fully agent deterministic, that's going to be an interesting question when you let it run versus you always -- it's preparing an information to let a human being make a decision faster, better.

That's going to be tricky because if it goes haywire, they can go haywire. And we've seen that happen in the early days at Erica. We had to constrain Erica because of that. And then -- so that the platform -- and then the question is the cost because you're going to start to have the thing they call tokenomics. The amount of money we spend on this can't be infinite because it's got to have value. And so we test every project. We have 22 colleagues led by Jeff Busconi working on this. We went up to 3,000-plus people, give us your ideas. We're trying to make this everybody's work in our company. So we'll see it play out, but it's going to have a big impact. Our job is to make that impact work for our teammates. And their job is -- honestly, their job is to help make it work for the company and themselves, and we'll take more share and go on.

Understood. Talking about credit, we touched on it when we started just talking about the consumer being very stable. And outside of gas prices and the impact on spending and maybe substitution, just what are other important signals you're looking for, for any changes to potential changes in the consumer outlook and consumer losses?

Yes. In the near term, you obviously look at near-term delinquencies, all the stuff, which are in good shape and improving, et cetera. So that's not the problem -- really, you have to look at employment after our teammates have been in this business a long time after watching these companies after having prime, subprime, card prime, card subprime, mortgage prime, mortgage subprime, home equity lenders, all this stuff, the day if a person is employed, they're going to pay their debt. And so the question is employment and then the other life things, death, divorce, sickness, other things can impact it. And right now, the employment level is strong.

We watch that like a hawk, not only current new claims and things like that, but predicted outcomes and thinking through and getting the best advice from everybody we can, including our research team. Look at all the blue chip. We base our reserving based on the blue chip. We don't let our view color it and that shows and we're -- I think we're reserved at implied levels that are much higher unemployment and things like that. But if you -- that's the simple answer. People are employed, they're going to pay on the consumer side because they don't want to lose their access to credit. And yes, they'll get overextended and some things will happen. But when you look within the things happening, it's generally a cathartic thing has happened to the individual. And our job is to try to keep that incidence rate low and then keep it more secured credit versus unsecured credit because the loss factors are obviously much different.

And on the commercial side, there's still a lot of attention on the private credit ecosystem, although a lot of banks, including you guys talked about your comfort with your portfolio. As you think about just the interplay between banks and private credit, how do you think that this will evolve and become an opportunity for Bank of America?

Leave aside that we've laid out all the disclosure, which shows -- but let's go to the competitive question. The question was really what was the offer that was happening that we got concerned about in the middle market client. That's why we announced the $25 billion pool when people said, really, this stuff is being talked about. We announced [indiscernible] because we know how to do good credit. But the reality was that someone was doing a, say, $1 billion buyout with a sponsor or entrepreneur business recapping or something and somebody can then all supply everything. And we go in and say, well, the private equity come in, we'll do a loan syndication for $500 million or whatever, and we'll get 5 banks and you have to work through that and the person in and said, I'll do all $500 million. By the way, you'll pay more for it and people are taking the deal.

So we had a competitive risk here, not for the credit we didn't want to do, but for the credit we did want to do, and that's why we put the pull together. And that's the question now is can we win consistently for middle market companies going through that kind of change -- the average middle lines of credit and stuff are very different than this. It's when they're going through sort of a cathartic capital change that if the competition comes in, can we hold our position there, that's going to require us to combat it differently. That's the biggest exposure we had in the middle market business. In the larger end, everything ends up going through the markets and everything. But -- and so that's why we built the fund. But in terms of credit risk, we're very comfortable with our positions and build them in a way that it's not something we worry about.

So on capital, the recent rules were proposed for the Basel III end game and the G-SIB surcharge, you guys cited a net overall positive benefit. Do you anticipate any meaningful changes to come out of the final rules? And how do you feel about them as they stand?

I still think we've got some points to make on where the G-SIB recalculation starts, for lack of a better term, was meant to start in 2012. The data was meant to be updated. That's still something we feel strongly about it. And so there's a lot of ins and outs, but I'm not sure they'll change a lot. And -- but I think the key is to get a set of rules and make sure they stick to the risks going forward because under the old set of rules, suddenly, we had 20% more capital with no more risk, and it was just all this manipulation. So [indiscernible] and the team have done a good job of thinking this through about how they make sure it doesn't creep back other ways and codify it.

So at some point, we've got to get something done a call a day. But yes, we'd like to make sure that G-SIB is actually calculated from the time it's meant to calculate. A lot of our growth has been just general economic growth, come on now. We're not more important or less. Those are the factors we're concerned about. But we're making our points, and we'll see what comes out.

Yes. And along the way, Bank of America still has a meaningful excess capital position. You've been -- the dividend is strong, big buyback in the first quarter. How do you balance dividends, buybacks, organic growth as you look forward to that 16% to 18% ROTCE target you put out for the medium term?

So we think about us running plus or minus 6% tangible common equity. And so as we get down to that level, if you have $1 of earnings, pay the dividend, what business growth you have, the rest goes back into the shareholder base. The interesting question is because we have the excess that middle thing, we could just leverage the current capital base. And we're kind of getting to the point where with the new rules, we'll get a little more window and then we got to figure out how that all works. But you should expect us from the earnings we make in the first quarter, $8 billion plus, all of it goes back into the shareholders because we have excess capital to support the business growth we need. And then going back to the earlier point about Mark, you always got to be fine-tuning the returns, dynamics between the businesses.

Okay. But before we close, any updates that you want to provide in terms of the near-term outlook that we should all be considering?

Yes. I think if you look at us for this quarter, just to give you a sort of an update, I'd say the NII, we told you we -- what will happen in the extra day and stuff, we feel good about that. We moved the range of 5% to 7% for the year, up to 6% to 8%. We feel good about that. You should expect this quarter will be good and solid on that. On investment banking and trading, we're doing, I think trading, I think like a 15% increase year-over-year. We got to be careful. Year-over-year, you got to remember last year was liberation quarter, so some of these numbers will look big. Investment banking is in pretty good shape and wealth management in the low teens year-over-year.

So we feel good about that. The one thing I cautious is because the growth is coming from wealth management and things like that, the expense leverage, but we'll have good operating leverage. We'll do as well as last quarter, and that's good news. And so that's the only -- as I look at the things, people are forgetting that the revenue growth is exceeding what people's expectations are coming business, which have a BC&E, which is transaction costs on the market side plus compensation and things. But we feel good about the quarter.

And so I think the NII at the top end of our growth range for the year. I don't see any issue in that. I think 17th quarter of sales and trading up 15% plus or minus is investment banking up strong and then the wealth management up in the low teens. And then just make sure people are -- you're paying attention to the expense side of that is the only thing.

Excellent. Great. Well, please join me in thanking Brian Moynihan for joining us this morning.

Hello, and welcome, everyone, joining today's Bank of America earnings announcement. [Operator Instructions] Please note, this call is being recorded. [Operator Instructions]

It is now my pleasure to turn the meeting over to Lee McEntire with Bank of America.

Good morning. Thank you. Thanks for joining us to talk through our first quarter results. As always, the earnings release and presentation are posted on the Investor Relations section of bankofamerica.com and we'll reference those materials during the call. Brian will start us off with a few opening thoughts, and then Alastair will walk through the quarter and provide more detail on the results.

Before we begin, a quick reminder that during the call, we may make forward-looking statements and refer to non-GAAP financial measures. Those reflect management's current views and are subject to risks and uncertainties, which are outlined along with the relevant GAAP reconciliations in our earnings material and the SEC filings on our website.

With that, Brian, over to you.

Good morning, and thank you for joining us all of us. It's the our earnings report for the first quarter of 2026. I'm going to begin on Slide 2. Bank of America delivered strong first quarter 2026 results. Revenue grew 7% year-over-year to $30.3 billion. Earnings per share were up 25% year-over-year to $1.11 per share. This performance was driven by balanced results across our businesses, continued operating leverage, solid client activity and stable to modestly improved asset quality.

We also saw solid year-over-year growth in both loans and deposits. Our capital and liquidity positions remain strong and well above current regulatory requirements. Along the bottom of Slide 2, you can see the progress against some of our most important operating metrics. We delivered operating leverage of 290 basis points this quarter. The efficiency ratio for our company improved 170 basis points year-over-year to 61%. And importantly, we generated return on tangible common equity, ROTCE of 16%.

The biggest highlight I can provide you is you flip to Slide 3, there you can see that every segment of the company contributed to our year-over-year growth. Every segment grew revenue. Every segment grew earnings. Every segment grew average deposits and every segment grew loans and every segment drove strong returns.

Now moving to Slide 4. Let me talk about some of the primary drivers of results before Alastair takes you through additional details. First, net interest income performed better than expected. On an FTE basis, net interest income was $15.9 billion, up 9% year-over-year. Second, our fee-based market-facing businesses performed well, markets, wealth and investment banking, all show good momentum. Client activity remained healthy and revenues in each of these areas grew at double-digit rates compared to the first quarter of 2025.

Third, our team continued to manage expenses well. Reported noninterest expense of $18.5 million in the first quarter, which was in line with roughly 4% year-over-year increase we discussed in our last quarterly earnings call.

Let me just spend a few moments on expense and how we think about them in the context of delivering growth and returns for our shareholders. Having said consistently, our focus is on delivering durable earnings and returns. Expense discipline is embedded in how we run our company. And it's also one of the reasons we're able to convert scale, productivity and macro tailwinds and operating leverage over time. In the quarter -- the first quarter, our expenses reflect the deliberate choices we made. First, we continue to invest in our revenue-producing capabilities, whether it's relationship managers in all the businesses, new branches, technology of all types delivered throughout the platform and product enhancements of all types, all those support the client activity, market share gains and long-term earnings power of this company. These investments are return on investment driven. They're tied to businesses where you see clear demand and attractive returns.

The second thing we do is we continue to offset those investments through productivity and simplification. The continued digitization of activities by our clients and inside our company, the application of artificial intelligence that detailed process reengineering all help reduce manual work, lowered unit costs, limited increase in our base cost structure. That's why even as we've invested, we continue to deliver positive operating leverage. It's simply put that our revenue growth rate is faster than our expense growth rate.

Third, we remain highly disciplined in nonstrategic spend. We are conscious not to add complexity, layers or fixed costs that don't support the clients and what they need from us. That discipline is part of our responsible growth culture has been going on for many years.

If you think about that in terms of headcount, we are down about 1,070 people from year-end 2025 through attrition, and we'll continue to drive that. We continue to heavily extend the franchise, deepen the client relations and deliver attractive terms. And we're doing -- while reducing the FTEs and absorbing cost and inflationary cost out in the market.

Turning briefly to asset quality. We saw improvement from last year. Net charge-offs, card delinquencies, reservable criticized assets and nonperforming loans all declined versus the first quarter '25. Provision expense was $1.3 billion, compared to $1.5 billion last year, reflecting continued benign credit results. Finally, capital generation remains strong. We continue to deploy excess capital to support RWA growth across all the businesses, while returning capital to shareholders through dividends and share repurchases. We ended the quarter with a strong capital position, including $200 billion plus CET1 capital.

We also continue to benefit from the many quarters of organic growth across our businesses. We include our standard organic growth view, beginning on Slide 19 and following in the appendix. I commend you to look at those across all the different business lines, all the activity and all the digital activity are there. All that activity remains a key differentiator for us, driving continued growth in deposits, investment assets, lending balances and trade counter party. This combines with that strong engagement across our digital platforms, and we believe driving ongoing share gains in targeted markets and products. Overall results again demonstrate the value of our diversified earnings stream. The growth in [indiscernible] of all our businesses across different environments. In the end this is a strong performance by our team here at Bank of America, and I thank him for another great quarter.

Before I turn to Alastair to go through a few observations -- go through the quarter. I'm going to give you a few observations we see about the economy beginning on Slide 5. So we have 2 things that Bank of America to help us view the economy. First is our very strong research team and they provide great data to us based on their view of the world. And you can see that on the left-hand side of Slide 5, but we also couple that with our internal data, what our customers really do both on the consumer side, corporate side, small business side, et cetera, and you can see that on the consumer expressed on the right-hand side of the slide.

[indiscernible] team continues to see the economy that is resilient, that the core activities economy continue to push along even with all the uncertainty that you've all written about out there. We see the forward look of GDP growth rates in the U.S. in the 2% range, and we see a faster growth rate around the world.

When you look at the inflation, you can see on the lower left, you can see that the projections for it to be -- remain elevated in '26 and into '27 and we -- both at the U.S. basis and the global basis. But when you look on the right, you can see where the resilience comes from in the U.S. The U.S. consumer continues to spend through all these different platforms here, Bank of America. To put that in context of total spending by consumers across all the ways they move money into the U.S. economy Bank of America is $4.5 trillion a year.

For 2025, you can see that was up 5% from 2024. And at 5% growth has been consistent in the first quarter of '26 compared to the first quarter '25. And during that quarter, customers moved $1 trillion plus in the economy. As you look on the lower right, you can see the debit and credit card spending was up 6% year-over-year. This total is about 25% of the way consumers spend money at Bank of America.

If you look within the categories, you can see it's up in entertainment and services and travel and retail. And yes, it's up in gas prices, and we note that in March, it was up 16% year-over-year. At the same time, we look at this data and see what it tells us. We're also mindful of all the risks out there, the ongoing conflicts in the Middle East, including implications for the energy market inflation and growth. We look at global trade flows and broader financial conditions. To date, these impacts have been measured and absorbed by the economies here and around the world, and we continue to watch them carefully.

Looking ahead, our research team expects moderate U.S. and global growth over the next several years, and our data supports that view. In this environment, I'm asked at the capital markets activity has really inflected or is this just the volatility producing the results that our markets team produced or our investment banking team. What we're seeing is improved breadth in our global businesses, not just episodic activity. Trading has been in for volatility. In fact, this is the 15th quarter we have year-over-year revenue growth. But more importantly, investment banking pipelines are building and engagement is up across all products.

One of our corporate clients is strong. Like wonder about all the things I spoke about, they continue to conduct strong activity. That activity is healthier than a year ago and supports a continued constructive fee environment. In our view, while those risks are out there, the macro backdrop remains constructive and a diversified business model position us well to continue to deliver for you across a range of economic scenarios.

With that context, I'll turn it over to Alastair for more details.

Thanks, Brian. I'm going to begin with the balance sheet, starting on Slide 6. You can see total assets ended the quarter at approximately $3.5 trillion, up 2% linked quarter, reflecting loan growth, deposit growth and balance sheet to support our clients' increased activity in global markets. Deposits increased to more than $2 trillion, driven by continued strength in both commercial and consumer client engagement.

Common shareholders' equity was approximately $276 billion and relatively stable quarter-over-quarter as earnings generation was more than offset by the capital we returned to shareholders through dividends and share repurchases. This quarter, we paid $2 billion in common dividends and we bought back $7.2 billion of common shares. From a regulatory perspective, the CET1 capital ratio declined 14 basis points to 11.2%, and that decline primarily reflects the capital return to shareholders above earnings generation as well as balance sheet growth and mix change in support of our clients, and our ratio remains well above regulatory requirements.

Looking ahead, we don't have any meaningful updates to report on the recently proposed Basel III Endgame or G-SIB capital changes. As proposed, Basel III would result in modestly higher capital requirements. However, the proposed changes to the G-SIB surcharge are expected to more than offset the Basel III end game impact for U.S. G-SIBs.

Taken together, if Basel III Endgame and G-SIB frameworks are adopted as proposed, we believe Bank of America is likely to see some reduction in overall capital requirements relative to the current regime in future periods, and the public comment period concludes in mid-June, and we look forward to the finalization of the rules.

Liquidity remains strong with global liquidity sources of more than $960 billion, well above regulatory requirements. And now as we go a little deeper on the balance sheet, we'll focus on loans and deposits. So I start with deposits on Slide 7, where our franchise continues to demonstrate strength, stability and discipline. Average deposits remained solid during the quarter, increasing approximately $59 billion year-over-year or 3%, reflecting the depth of our client relationships and the value customers place safety, liquidity and convenience, particularly in an environment where rates and market conditions remain dynamic.

It's notable that both interest-bearing and noninterest-bearing deposits grew 3%. Growth was led by commercial clients, while Consumer Banking grew more modestly, marking its fourth consecutive quarter now of year-over-year growth. Composition of our deposits remains a key differentiator. We benefit from a high-quality mix with a meaningful portion in low-cost operational balances and strong engagement across consumer, wealth and commercial clients. That mix has continued to benefit our funding costs even as pricing competition persists across the industry. The total rate paid on our deposits declined 16 basis points to 1.47%, and this allows us to maintain one of the lowest cost funding profiles among the large U.S. banks.

Turning to loans on Slide 8. Average balances grew nearly 9% year-over-year driven primarily by client demand in our commercial portfolios. That growth was broad-based, and it reflects good core operating client activity. And as always, we remain disciplined in how we deploy our capital, prioritizing returns, credit quality and relationship depth over volume. Consumer loan balances were up about 4% year-over-year, including 3% credit card growth. Wealth Management contributed nicely to consumer loan growth through strong securities-based lending. And across both consumer and commercial folios, the credit performance remained consistent with our expectations, and we've not changed our risk posture. We remain highly liquid. We're focused on protecting our margin and preserving flexibility while continuing to support our clients.

Let's turn to net interest income on Slide 9. In the first quarter, net interest income on a fully taxable equivalent basis was $15.9 billion. On a year-over-year, NII increased by $1.3 billion or 9% driven by growth in average loans and deposits, the ongoing benefit of fixed rate asset repricing and higher global markets client-related activity, and those tailwinds were partially offset by the impact of lower average rates in the quarter.

Compared to Q4, NII was materially flat and reflected similar underlying benefits that were nearly enough to offset the negative impact of 2 fewer days of interest accrual in Q1. Net interest yield for the quarter was 2.07%, up 8 basis points year-over-year, reflecting disciplined balance sheet management, funding optimization and the continued benefit of repricing dynamics even as rates declined across the curve.

Regarding interest rate sensitivity, we continue to provide a 12-month dynamic deposit-based sensitivity relative to the forward curve. And on that basis, an additional 100 basis point decline in rates beyond the forward curve, would reduce NII over the next 12 months by $2 billion, while a 100 basis point increase would benefit NII by a little less than $500 million.

Looking ahead, while the rate environment remains dynamic, continue to see multiple levers supporting NII, including balanced growth, funding optimization and ongoing roll-off of lower-yielding assets. Given our outperformance against expectations of NII in Q1 and based on the most recent interest rate curve, which has now shifted from 2 rate cuts expected to having none currently, we're raising our full year NII growth guidance range for 2026 versus 2025 to be up 6% to 8%, and that outlook continues to assume moderate deposit and loan growth.

Turning to expenses on Slide 10. In the first quarter, noninterest expense was $18.5 billion. That was up 4% and consistent with the guidance we provided on our Q4 earnings call. We generated 290 basis points of operating leverage, and that translated into measurable improvement in both our efficiency ratio from 63% to 61% and an increase in the ROTCE to 16%. We continue to manage our cost base with discipline while investing selectively to support client activity and long-term growth. The year-over-year increase in expense largely reflects double-digit revenue growth in Investment Banking, asset management fees and sales and trading and the associated higher revenue-related incentives and transaction expenses.

Stepping back, our approach here remains unchanged. And we're [ testing ] where returns are clear. We tightly manage the discretionary spend, and we maintain our sharp focus on operating leverage, including expanding our use of technology and AI to improve operational efficiency and sales effectiveness.

Looking ahead, we continue to expect more than 200 basis points of positive operating leverage for the year, consistent with our prior guidance. And we also have levers that preserve our flexibility to help navigate changing market conditions as required.

Let's turn to Slide 11 for a discussion of asset quality. Credit performance remained stable and consistent with our expectations. Net charge-offs were approximately $1.4 billion with a net loss rate of 48 basis points. Both of those were down from Q1 '25 and modestly up from Q4, primarily reflecting the normal seasonality in our card portfolio with continued stability across the commercial portfolio and improved results in CRE office loans. Provision expense was approximately $1.3 billion, including a modest net reserve release driven by improvements in card and commercial real estate and partially offset by growth-related and targeted build supporting corporate and commercial lending portfolios. Overall, as you can see, our credit results remain benign, and we continue to feel good about the quality of our portfolio.

Turning to Slide 12 for some other credit metrics and a couple of comments here. Commercial reservable criticized exposure declined to roughly $24 billion, while nonperforming loans were flat quarter-over-quarter. It's also worth noting that this was the first quarter in more than 3 years with no new inflows of nonperforming assets into office exposures, which is another sign improvement in that portfolio. For perspective, we've now been in a benign credit environment for some time, and our performance reflects the benefit of decades long underwriting practices and responsible growth culture. We expect that approach to serve us well across a range of potential economic cycles. And we've updated the more detailed credit disclosures in the appendix beginning on Slide 19.

In addition, on Slides 24 and 25, we've chosen to include updated disclosure around our Global Markets loan portfolio. Let me start by saying we've not experienced any material losses in Global Markets loans, and we feel good about the underwriting and the secured positions that we have here. We acknowledge the potential for underwriting dispersion in the portion that's considered the private credit market, particularly in the faster growth vintages and we know that, that risk sits first with sponsor equity and fund investors. Bank of America's exposure has structural insulation from those first loss positions. For losses to reach us, we believe operating company equity and a substantial portion of fund investor capital would need to be impaired before we would experience losses. We don't rely on sponsor marks. We reunderwrite collateral continuously for borrowing base purposes. And our exposure is governed by independently determined borrowing basis with ongoing performance tests. So that means where credits deteriorate, the borrowing base contracts before the losses migrate.

We see the market activity is largely a repricing of liquidity. And growth expectations for alternative asset managers, not evidence of systemic credit impairment. We continue to monitor the market closely. We're comfortable with our positioning. And we're also glad to see the return of more traditional C&I loan growth in the first quarter.

Turning to Slide 13. Let's shift our focus to the lines of business, and we'll start with consumer, where you can see Consumer Banking delivered a strong first quarter as customers continue to place their trust in Bank of America for their personal finances.

Net income was $3.1 billion, up 21% year-over-year, driven by higher net interest income that led to 5% revenue growth, and we managed expense well. That resulted in over 500 basis points of operating leverage and a 53% efficiency ratio. We saw our fourth consecutive quarter of year-over-year deposit growth, with average deposits of $951 billion, while maintaining a high-quality mix with over half of balances in low and no interest checking. Client engagement remained a clear strength. We ended the quarter with a record 38.5 million consumer checking accounts, adding over 100,000 net new checking accounts this quarter. More than 90% of these relationships remain primary.

Digital adoption remains strong with 79% of households digitally active and 71% of sales coming through the digital channels compared to 65% a year ago. Finally, credit performance in consumer remains solid and in line with expectations.

On Slide 14, we turn to Global Wealth and Investment Management who also delivered a strong first quarter, benefiting from solid flows over the past 4 quarters, favorable market conditions and disciplined expense management, which together drove margin improvement and valuable operating leverage. Net income was $1.3 billion, up 32% year-over-year on record first quarter revenue of $6.7 billion, driven by higher asset management fees and solid client flows.

Pretax margin was 26%, reflecting the operating leverage achieved through disciplined expense management. Client balances increased to $4.6 trillion, up 10% year-over-year supported by favorable market conditions and net client flows during the quarter. Asset Management flows remained solid at $20 billion and lending momentum continued with average loans up 13% year-over-year led by custom letting and securities-based lending. We remain focused on pricing discipline, adviser productivity and long-term client relationships. We're driving productivity higher on both newer and existing members of our financial advisers team, and we continue to attract talent across both new and experienced advisers.

Now we move to commercial and corporate client-facing businesses and Global Banking on Slide 15, where Global Banking delivered solid results in the first quarter, reflecting strong client activity and continued balance sheet growth. Revenues were $6.3 billion, up 5% year-over-year, driven by higher net interest income and improved noninterest income. When combined with well-controlled expense, which rose only 1%, the business generated more than 350 basis points of operating leverage.

Net income was $2.1 billion, up 8% from last year as the higher revenue was partially offset by continued investment in the business and a higher provision for credit losses through builds of reserves that were primarily for loan growth. Investment banking fees of $1.8 billion were up 21% year-over-year, and we're a clear positive in the quarter. Investment Banking fees, strong momentum was led by M&A with equity capital markets also up very nicely in the quarter.

The year-over-year investment banking performance is particularly notable given our prior year first quarter included gains related to leveraged finance positions that didn't repeat this year. Balance sheet growth remained a strength. And you can see average loans increased 5% year-over-year with all lines of business contributing. Deposits increased 13% year-over-year, reflecting continued client engagement across the franchise, and rates paid was down linked quarter and year-over-year. Returns remained strong with a return on capital of 16%, which was higher year-over-year.

Turning to Global Markets on Slide 16. I'll focus my remarks as usual ex DVA. And Global Markets strong first quarter was driven by robust client activity and disciplined risk management in a volatile trading environment heightened by geopolitical uncertainty. Revenues ex DVA were $7 billion, up 7% year-over-year, where Sales & Trading had its strongest performance in a decade increasing 12% to $6.3 billion, led primarily by equities performance. And despite the noted volatility, we had no trading loss days during the quarter. Equities had their best quarter ever with revenues up 30% year-over-year, reflecting increased client activity and capital extended to the business for growth. The increase was driven by client financing activity, particularly in Asia, as well as strong trading performance in derivatives. FICC results remained strong and were modestly higher with strength in commodities, partially offset by lower revenue in FX and interest rate products.

Net income was $2 billion, which was up modestly from strong results in Q1 '25 that also included roughly $230 million in gains related to leveraged finance positions. Higher revenues were offset by increased expenses on higher activity levels, increased people costs and our continued investment in this business.

Average assets grew 14% year-over-year to $1.1 trillion, reflecting higher inventory levels and strong client balances. Returns remain solid with a 15% return on capital. Overall, Global Markets continues to deliver for our clients producing consistent profitability, continued revenue momentum and it reinforces the durability of the franchise across different and challenging market environments.

On Slide 17, all other shows a modest profit of roughly $100 million in Q1 with very little to cover here. So as I wrap up, I'll just note the Q1 effective tax rate was 17.5%, that was seasonally lower, reflecting the annual vesting of employee share-based awards. And as a reminder, for the full year 2026, we expect an effective tax rate of just a little more than 20%.

So in closing, first quarter of '26 reflected continued revenue momentum, disciplined execution and improved efficiency and returns. Our diversified business model, strong balance sheet and prudent risk management position us well for the remainder of the year.

And with that, we'll open up the line for questions, please, Leo.

[Operator Instructions] Our first question comes from Manan Gosalia with Morgan Stanley.

First up, just on the expense side, the stronger NII guide was great to see, and you're keeping expense guide, but you're also keeping the operating leverage guide. I know there's some level of rounding in here, but how do you think about dropping the benefit of the better NII to the bottom line?

Manan, thanks for the question. We did this quarter, and we expect that the NII will drop to bottom line. And that -- and so if it goes up, you'd expect us to see a higher end of the operating leverage range like we did this quarter.

Got it. Perfect. And then maybe on the ROTCE side. So I guess you've already delivered on a 16% within the 16% to 18% target. How do you think about staying within that range in the near term as you deliver on the operating leverage? And are there any one-timers or anything else we should be considering for this quarter?

So Manan, I don't think there's any one-timers to consider here. We provided that guidance of a medium-term range for ROTCE over the course of the medium term. And look, every quarter is going to be different. We're obviously gratified with 16% based on the strong operating leverage performance. But the key for us as a management team is just keep moving up the ladder. A couple of years ago, it was 13%, then 14%, every quarter will be different. We just got to keep making progress towards our goal, and that remains our focus as a management team. .

We'll now move on to Glenn Schorr with Evercore.

Maybe an easy high of one on the consumer. I think your spending is so good. Employment and wages have been strong. So the easy question is why do you think loan and deposit growth in the consumer side is slow, sluggish. It's not like you're not opening new checking accounts, new credit card accounts. Just curious on the high level there.

Well, Glenn, I think if we look back over time, on the deposit side, what's been interesting, we talked about 3 or 4 years ago, at some point after the deposits were seeking higher yield, consumer would begin to find its floor. When you look at what's happening right now, you can see now 4 quarters in a row of year-over-year deposit growth. So it looks like we're finding that floor and beginning to grow out of it. You can also see, if you look at our numbers, growth in noninterest-bearing, and a little bit more this quarter than we've seen in the prior quarter. So there -- the elements that are sort of saying it's beginning to pick up.

Now obviously, there's an interest rate environment. There's a spend environment that go against deposits. But it feels to us like the consumer part, which is so powerful, is beginning to turn and grow at the beginnings of accelerating that's kind of where we are in the longer arc. On the lending side, we're in a period right now where unemployment is good. Home prices are good. Asset prices are good, savings remain elevated. So the lending is pretty broad-based within consumer, but you're getting 3% or 4% growth there. Can we see more over time? Yes. But at this point, I think relative to how the consumer is performing, we're in a good place.

One final thing I'll just say is, we've talked about the fact that we've got to focus on our own balance sheet efficiency. We've talked about the fact that we've got the ability over time, just to allow some of the retail and the institutional CDs to pay off. And we've sort of done that. So we don't have to chase CDs at this point, that in turn has meant that we've been very disciplined on rate paid. So we could put up more deposit growth if we wanted to, but we're really choosing at this point to just maximize the core operating client account activity. That's what we're focused on.

Well, I think it's working. That's cool. I appreciate that. I was interested, you guys mentioned that headcount is down over 1,000 this year. If I look over the last 5 years, it's kind of flattish, but there's a lot underneath the covers, right? You're adding in growth areas, you're subtracting some other areas. And I think your attrition rate is more like 7%. So maybe can you talk about some of the puts and takes where you're adding, where you're shrinking and obviously, the question of how AI might -- where are you in the AI journey in terms of how that might bring a little bit larger headcount reduction or not replacing all the attrition going forward?

Well, in the long arc, if you look in 2007 before we bought Merrill and Countrywide to give you a sense, we had more employees at Bank of America than we have today. And so the application of technology, the process and the customer utilization of our technology has led us basically run the company 19 years later on less people. And so this is not a new trend. What you're seeing now is the continuation of those trends, and you're right. So if you -- as we showed you at Investor Day, we showed a shorter term, we showed headcount down to 8,000. We showed at 50,000 out the consumer set of businesses at 25,000 out of ops.

What we're seeing now -- and during that time, we made massive investments in technologists and cybersecurity from a few hundred people or 3,000 people, et cetera, et cetera, new branches. So we continue to shift investment that went on again this quarter, where you saw headcount drift down out of operational process and managers and things like that. And that investment goes into developing more headcount in the relationship manager businesses across the board, and so we'll continue to do that to support the growth of the business.

So we're doing it through attrition. Each month, we have to hire 1,300 people round numbers to stay neutral in the company. And so you can adjust the headcount by just being careful on hiring and let attrition be your friend as we call it, and that's how we got down 1,000 people, but it comes from eliminating work and applying technology and consumer and commercial customers using those technologies and AI gives us pieces to go, we haven't gone. And we've got 90 installations working, all 200,000 teammates have access to AI or can use it every day. Erica is more understood out there, but it's been brought across lots of platforms that the models. And so -- we're still in the early stages of what all this will do, but we're seeing real benefits out of it today.

We'll now move on to John McDonald with Truist Securities.

In terms of capital, with the peak at the new proposals, how are you thinking about a capital target as you strive towards your ROTCE goals? Just kind of wondering now that you have some -- do you have some more incremental comfort in narrowing that management buffer that you have today, which is over 100 basis points to the reg minimums?

Thanks, John. Well, I think as we're getting more and more clarity, you've seen us take advantage of that by just allowing the capital ratios to drift down. So we'll wait ultimately to see what the final rules all look like, but it's pretty clear to us at the point that, yes, Basel III Endgame RWAs will be a little higher. Yes, it appears G-SIB inflation indexing is going to give us some relief, particularly as you move forward into future periods. So that's allowed us to do a little bit more buyback, it's allowed us to put out a little bit more balance sheet. So we're gaining a little more confidence. But at the end of the day, we're in a good place right now. We have plenty of capital, plenty of flexibility. We're earning well. Now we just got to wait for the fine rules.

John, I think your point about operating closer to the minimum [indiscernible] side, everything else have talked about and the shifts across time, the new rules, the old rules and the transition. The reality is as the -- as we have studied this, the volatility in our earnings stream under all the stress scenarios that we run every quarter is how we start to think about the cushion we have to maintain, and that's -- that cushion could be tighter to the reg minimum without having the same threats because of stability in the earnings streams and the capabilities of the company.

So -- so we brought it from a broader range to a narrow range, expect us to keep it in the 50 basis points that we said. And so if the underlying requirement goes down, the whole number goes down , et cetera, so let it play out a little bit. But there's no philosophical change in maintaining a decent cushion but not an overly big cushion, but our fine-tuning of that across the last 3 or 4 years really is based on the earnings -- capabilities of this company to earn through. different things like the COVID and the regional bank crisis, et cetera, you can see that the volatility is just not there.

Right. So what you're saying, Brian, is the 50 basis point kind of management buffer is over time, what you'd expect to gravitate to?

Yes. And we were moving there. But we're taking all earned capital out, right, to dividends and buybacks. That then leaves the nominal amount the same, and we're growing the company into it. And then we got all these rules and how they'll be implemented. Remember, there's step-ups and steps down and that kind of sort of see play out here. But you've got it right. I just think of the long term, 50 basis points over the minimum is more of what we're shooting for.

Okay. And then, Alastair, could you give a little more color on the drivers of the change, the tweak in the NII outlook? And more specifically, what you're assuming within the modest loan and deposit growth inside of that guide?

Yes. So we're not really changing anything in terms of the loan and deposit growth. We've been pretty encouraged with the way that started out the year. So it's more a continuation of what we've seen. But we've seen pretty good organic growth, so that's been good. The rotation is slowing from noninterest-bearing into interest-bearing. And in fact, noninterest-bearing picked up a little bit this quarter, so we're happy to see that.

So for as long as the loan growth stays there, deposit growth looks good, last a couple of rate cuts. Those might have hurt us at the back end of the year. They're not going to hurt us in the same way. So all those things, you add them up, it's a little bit of all of them, but a little bit more balance sheet into global markets. So added up that all feels good.

And final thing, John, is if you take a look at the loan growth disclosure that we put out, I think it's on Page 8 of our release, you'll see pretty broad-based now from each of the lines of business. Pretty broad-based by each of the products. So we're not reliant on any one thing, and that gives us a little more confidence around durability.

We'll now move on to Jim Mitchell with Seaport Global.

Alastair, can you expand on the funding optimization point a little bit? It seems like you had a significant drop in rates paid on non-U.S. deposits. So overall, how much can you do on that fund opposition point? And how do we think about balance sheet growth in that context?

Yes. So this is something we've talked about in prior earnings calls, Jim. So no change to what we've been thinking about over the course of the past couple of years. We had I'll call it, balance sheet puffiness around some of the longer-dated CDs and some of the repo activity. And as we go through the course of time, what we believe we can continue to do is just allow those to drift lower, which in turn is good for NIY, probably doesn't impact NII, particularly but it just -- we can fund the core growth of the clients while allowing some of that balance sheet tough to go out. So that's what we're doing. We're just sticking to that. You can see the CDs coming down quietly slowly over time, taken some of the repo down quietly slowly over time, while still giving more balance sheet to the business for clients.

And can you quantify how much you think is left of that?

I think last time we got together, we said probably somewhere around $100 billion or so a little more, it could be a little less, but it's in that kind of a number.

And Jim, be careful about nominal. In other words, within your -- we grow core loans within the balance sheet and let other stuff go off. But the total footings at one point, but it's the -- what you're holding within those footings that's the key point and what your -- what liabilities you have within those footings. So I think it was pointing out one of your colleagues earlier, if you think about deposits in our company and you look at Slide 7 and look at the rate drop across the board, we are clearly at the core of core deposits in all the businesses. They have different aspects. Obviously, wealth management business. So core deposit is different than the mass market consumer business or even the small business versus a large corporation -- so a large corporation. So look at that page, just think about we're sitting with $2 trillion of positive [ trillion 2-ish ] of loans. And we're only going to take the deposits we need -- we take the deposits from the customers in line with their core operating capabilities in the core business. That's what we're focused on.

Yes. No, absolutely. And on the C&I side, Alastair, you mentioned that more traditional C&I growth has picked up. Is that an early read on taking some share from private credit, given disruptions there? Is it simply just broadly improving demand and an improvement in credit line utilization?

It's mostly credit line utilization this quarter. So at the end of Q4, we saw a little bit of revolver pay down, which probably took our loan balances down, we still grew loans in Q4, but the growth wasn't quite as high because the revolver utilization came down. It just came back in a little bit more in Q1. So we probably picked up $5 billion to $10 billion of loan growth just for revolver draws. So it's sort of core middle market activity, building working capital across corporate America and internationally. That's where we saw the growth.

We'll now move on to Mike Mayo with Wells Fargo Securities.

What a difference a quarter makes. I think what I hear you saying is that you feel better about the short term and you can correct that. But you got the 16% ROTCE. You're guiding NII higher. You have 29 basis points of year-over-year operating leverage. So I think you're saying the short-term better, but since the last earnings report, there have been concerns about the long term, right, that AI agents will come and take your deposits. The AI bad actors will commit cybercrime against you, the AI spend will not bear fruit. So I know you guys have Erica and CashPro and GenAI and over 4,000 patents. And as you brought up less employees since 2007 and also some other advantages there. But as you think about that debate, the long-term debate AI, you being a victim or are you being a beneficiary, why is Bank of America and AI beneficiary? And if you could just frame it, somewhere I know that the question was asked already, but revenues per employee, how much would you expect that to increase or something around that?

Like Mike, I think in your question, you gave the answer, which is we are a beneficiary of the impacts of all technology, including AI. We've applied it and we'll continue to apply our team's job, and we've got catalyst efforts going on, on a corporate wide basis to bring all the ideas to bear. Our team's job is to benefit from the technology. It creates issues about cybersecurity and things like that that you're reading about in the paper and we take those extremely seriously and invest heavily to do it, and we work with our industry colleagues and colleagues and other industries to ensure the safety and security of our architecture.

But there's -- there will always be positive pressure on the earnings due to the application technology and AI gives us a lot of efforts there. There's nothing new and different about the ability to move deposits that we can move them in our company instantaneously to other off balance sheet, on balance sheet, right? So the question is, what are deposits for. And I think like it's lost in all the discussions a little bit the reflection of the earlier discussion on deposit rate paid is we have the deposits because people buy their transaction accounts with us here moving money. The CD and at the market deposit practice in our company is a small part of what we do to drive the economic value. And our job and our -- is to stay with our customers to be the core depository institution and transactional banks with them as well as our lending bank. And we feel very strongly that we will not only take advantage of AI will help us drive greater market share and capabilities in the future.

I guess as a follow-up to, I guess, you remind me like the primary checking account, I think, is what you're saying is very sticky. How to use AI to improve the trust of customers, whether it's with a cyber risk. I'm not sure if you were of the CEOs went down to DC or just trust with data and identity and the relationships?

Sure. I think the trust in our -- the customers go to our institution at all-time highs and the trust they see and in the way we use data and the way we use information, frankly, the -- some of the gates on our adoption of some of these technologies are, we're protecting customer data where other people are not. And that's been a constant struggle from cloud computing into the -- so we keep our data out of the models, we keep -- so that our customer data, et cetera, and take advantage of the models coming into us, but not feeding them. And that's what we owe our customers. We feel we're in a great trusted position. We spent a lot of time, effort and money over years, making sure we get to what we call never down and continue to deploy hot-hot hot backups and systems that will step in for each other. We work with the industry to ensure that, that goes throughout the other platforms, the FMUs and things like that. So we -- if you ask our customers, our digital capabilities, our technology capabilities and the trust in us is as high as it's ever been, matters higher than it's ever been, and it's growing literally month after month after month. So we feel good about that.

And then last follow-up, just in 5 years from now, when we look back, say, okay, AI, tech, where should we see the benefits? Is it just the stickiness of the relationship? Or is it efficiency or where should that show up?

So if you think about the just on the consumer side, Mike, because 2 things. One, you said the core deposit account. There's a core deposit account is a core investment account. It's a core corporate transactional account. It's a core borrowing home. So each of these core is what you're seeking, not just growth overall. So I just want to make sure it's broader. But if you say 5 years from now and think about it, I think you'll see the same elements, we should continue to see more and more digital or AI generated interface to the client. But I think AI really helps us internally just to make it straightforward.

99% round numbers of all the interactions we have with our consumers are digital already. So there's no person involved. So as you start to think about that, you go the inverse, the cost of that 1% is a pretty high number, and we're working on that with all this technology, and we're working on the efficiency even of the 99% in house delivered. The example of that is Erica versus Alerts. Alerts are basically instead of doing prompts and asking questions, we're using the same technology delivered to a constant flow of information. That saves the interface on the prompts and things and also allows it to be more interactive with the customers.

So in the AI intelligence technology intelligence is not different. So it will be more of it. I think at the end of the day, if you think about from [ '07 ] until now the same number of people, we'll be plowing into the front end, where relationship managers matter, the high-touch piece, which is critically important delivery. You'll see us keep adding there, and you'll see us keep taking out of the activities that are not directly facing the customer. But even on the customer facing with 90,000 sales force moving to agent force and AI and we'll get more efficient on that, too.

So I'm not going to give you exactly because you know that's [indiscernible] because it never quite works out that way, but the trends will be more technology, more intimacy with the customers more agentic versus prompt more built into the process rather than have it be delivered by teammates doing something, it's part of the process, more customers doing more with us and expense will be -- and the operating leverage will be there.

We'll now move on to Erika Najarian with UBS.

Just 2 quick follow-up questions from me. First, on the net interest income outlook. As we think about the possibility of no rate cuts. How should we think about how BofA is going to handle deposit costs in that scenario? Could deposit costs be contained particularly given sort of the loan growth in the market's balance sheet if the Fed doesn't cut?

I think -- Erika, I think so. I mean if the rates aren't moving, I don't see a great deal of impetus for us to be changing what we're paying in the interest-bearing side. And then it will just be a question of which of the 2 categories grows faster, interest-bearing and noninterest-bearing pointed out right now, we've got a little bit of growth in both. So that's helpful. We'll have to watch that over the course of the year. But even with 2 rate cuts, no longer in the period in the second half, doesn't make a great deal of difference because you're really talking about 1 cut for 6 months, 1 for 3 months in the old version. So we'll be a slight beneficiary of that, but the main thing going on is just organic growth of the company.

Got it. And just a very technical question on some of the capital reform proposals. And this sort of came to everyone's attention when one of your peers reported yesterday, I fully appreciate that the regulators are trying to address retrospective inflation with the coefficient changes. But companies like Bank of America in theory, based on your 2025 G-SIB score are set to go up by January 1, 2028. Now clearly, a lot of that growth was related to the economy and your risk density continues to go down. As you think about the comment period, is that something you would address because obviously, there's 90 days, and there's a lot of dialogue, I'm sure, going on between the industry. But I thought that was particularly notable in terms of that 2025 score potentially bringing your G-SIB up by January 2028, despite the positive revision on the surcharge.

Yes. So there are 2 worlds right now, Erika, there's the current rule and there's proposed rules. We don't have the proposed rules finalized yet. I'd just say the main thing you're talking about, which is G-SIB numbers going higher over time, the new proposal addresses that because there's inflation indexing. So what might look like a raise in the future may not be a rise in the G-SIB. So that's why we believe in the course of this. That's one of the most important things done here. We expect to be a beneficiary of that because we're an organic growth company as well all the large G-SIBs, one would think.

Erika, one thing to think about is in the words of the old song, you can't always get what you want, but can get what you need. The end of the day, we needed a concept of indexing because it was just -- it was in the original rule that after '12 data -- 2012 data that it was supposed to be indexed. So we needed that in there. What we would have wanted was a longer-term perspective than we are getting on it, but at least in the concept and we baked in a rule and we can go to work on how that impact because it was just -- we and the industry are not going to get everything who we want these proposals because at the end of the day, there's -- it's hard there's some negotiation going on.

But on the other hand, we're getting what we need. We just a concept of indexing because it's meant to be an original rule, it wasn't put in and then with gross growth in the economy from '19 and now, we all had an increase in capital, 15%, 20% with no major risk. So we got the concept in, let them finalize the rules. We're never going to get everything in the industry should get or desires to get actually we believe we should get. But at the end of the day, we got to get moving along here so we can get this implemented and then fine-tune the models around.

Got it. And Brian, a fantastic job on addressing the efficiency questions very clearly earlier in the call.

We'll now move on to Ken Usdin with Autonomous Research.

Just one follow-up with a great start on the 9% growth in NII, and you took up the range to 6% to 8% in I'm just wondering, Alastair, just as you look through the year, like why couldn't the first year growth rate stay there? And are there any either comp things or shifts in kind of the expectations around markets-related NII from NII to fees given the higher for longer? Or any other points that we should just be mindful of? Or is it just -- we'll see because it's early in the year, there's a lot that could still play out.

Well, it's a little bit of that. It's early in the year, we'll see how it plays out, but it's also a little bit of recognition that last year, we had a bigger second half just because of the shape of the fixed rate asset rebasing that took place. And we just got a little bit less of fixed rate asset repricing taking place in the second half of this year. So it's really a year-over-year comp thing that we're looking at.

Now, by the way, the organic growth continues to pick up. Can we do better? Of course, but that's why we give give you as much guidance as we can in each quarter based on what we actually see.

That's fair. And then on Brian's point about the great start to operating leverage, 290, same kind of question, like you did great in holding the line on cost, and I know you're trying to not focus is on a cost side per se, but is the demonstration of that flexibility going to be the ultimate driver of the incremental to get you from one side of the 200 to potentially the higher side. I mean I just kind of wonder just can you keep this range reasonably tight on the expense growth trajectory?

Yes. So we provided a guidance on operating leverage looking forward over a 3- to 5-year period and said we're aiming for 200 to 300 basis points. If we can do more, we will. Every quarter is going to look different because you're comparable versus last year will look different. The growth will look different. And so we just -- we recognize we have to have a range because it's not going to be the same every single quarter. That's one point.

Second. The main thing that we have to do on the expense side is just to be really disciplined on headcount because that remains 60% to 70% of the cost base when you really think about it. So you're going to look at the headcount, that's going to give you a pretty good idea as to whether or not we're really focused on the core operating expense being disciplined there.

And then you've got revenue-related expense, many of those are good expenses. We don't want to have to apologize for that. That's why we focus people on the operating leverage because when assets under management fees are going up 15%, with investment banking is going up 20%, when the sales and trading is going up 12%, those are good things and with them come good costs. So -- that's what we're managing on the operating leverage. We had a good quarter this quarter. We run to the next. We're figuring out how we can do 200 and higher this next quarter.

We'll now move on to Chris McGratty with KBW. .

I'm interested on the wealth strategy relative to the M&A targets laid out in November. Any recruiting or retention commentary would be great.

So I think we -- so 2 things. We'll update those targets not every quarter just because they're longer-term targets, medium-term, long-term targets on net new growth. The -- on recruiting, I think the team is doing a very good job and we're getting in, I think, doubled the amount of advisers this year first quarter as we did last year, something like that. But importantly, the attrition of the advisers is down to a low level, and it's a net benefit of that. So we feel that Lindsay and Eric and Katy and the [indiscernible] are well on the way to driving those metrics to where they should go. And the business had nice operating profit, which it will do when markets year-over-year up. It's a nice pickup and the margin continues to improve year-over-year, up a couple of hundred basis points. So they've done a good job. Importantly, you can look on the -- you get growth pages, you'll see some pieces in there about account, checking accounts and rounding out the relationship and the loan growth in Wealth Management was very strong for the last year or so. So we feel very good about it. We'll update you on those when we do more of a general update for the company, and we feel good.

Great. And then the popular question this quarter has been durability of trading revenues. I'm interested in how you see the potential of the firm to grow trading revenues and the mix within trading over the next near to medium term?

Well, we still feel good about it. I mean, this is another quarter where we allocated a little bit more in the way of resources to the team. They delivered with another 15% return on allocated capital. And at the end of the day, we've got a big global diversified set of businesses in global markets. Equities did very well this quarter. Commodities did well this quarter. Our international businesses came through this quarter. So this is what you have when you've got a nice portfolio of businesses, activity can move from one to another, still end up with 12%, sales and trading increases year-over-year. So we've obviously invested a lot we'll continue to invest in this business.

The client activity remains robust. There's a lot going on in the world and people have to think about them, their financing and their risk management and repositioning. So we've clearly been beneficiary of our client activity as well, but we feel good about the business, and we'll keep investing.

We'll move next to Gerard Cassidy with RBC Capital Markets.

Alastair, you talked about the loan growth and how the utilization rates have come up a bit, also mentioned about the consumer growth in the quarter or maybe Brian, at about 4%. The question I have is, we're starting to hear from a few banks that the underwriting standards might be getting stretched. And I know you guys emphasized you're sticking to your discipline on underwriting standards. But are you guys seeing that in any areas, particularly in the global markets lending area. Are people pushing it and you guys are just walking away from stuff maybe more often today than maybe 12 months ago?

Well, we've not seen any of that here, and we haven't detected that elsewhere at this stage.

Very good. And then as a follow-up, Brian, you talked about the growth of the consumer. You talked about the debit card growth and credit growth. I think it was Slide 5. We often hear about this cash recovery the lower end, struggling with inflation, the higher end, better off because of the affluence. Are there any -- what are the risks that may prop up or crop up for the higher end 6 or 12 months from now? Everybody is always focused on that lower end concern. Are there any -- should there be some concerns at the higher end? Or what could they be?

I think at the end of the day, whether you're talking about credit quality or the ability to spend money, it's always going to come back to -- for the broad base of American population that's critical the economy, they're working. And so unemployment level staying in the 4.5 range and et cetera? And then is wage growth there. And I think wage growth has been solid among all the different parts of the earnings spectrum.

And the question will be, will wage growth continue. And both of those things have up to the quarter, you're saying spending grow among all those parts economy just at a faster rate in the -- if we look at 1/3, 1/3, 1/3, 1/3 in the lower-income strata, middle income high. And you look at it, it's growing everywhere at a faster rate in the middle and high but the wage growth has been solid across all those populations. And so the spending ought to be there. So I would just keep watching the unemployment, new claims are up around 200,000 change, continuing claims 1.8, they're levels that they were on a bigger workforce than they were in prepandemic.

And so until those move, I don't see anything that interrupts the actual spending capability of all the consumers. And I know often people say you're optimistic. I'm giving what we see today in the spending even in early April here. And that's the critical thing what they do, not what they say they're going to do, and that's going to be dictated more am I employed, I have a job, my way just growing, and I feel that my money is being well spent. And that's where inflation can make them shift money around but not necessarily stop it.

Very good. And I assume you guys are watching the tax refunds, which are coming in better than expected, which obviously will bolster consumer spending as well. Appreciate Brian and Alastair. .

We'll now move on to David Chiaverini with Jefferies.

Follow-up on loan pipelines and borrower sentient on the commercial side. Are you observing any change in borrower behavior given the Middle East tensions were the line utilization drawdowns defensive or normal course of business type of drawdowns.

These were not panic draws. This has generally been BAU working capital type of activity at this stage.

David, I think when you talk to commercial customers and you think about where they were last year with Liberation Day in the middle of that, you come a year forward and a lot of things have been figured out with trade tariff policy immigration policy. Tax reform was in and deregulation was coming, the major principles of the new -- of the Trump administration were flowing through some -- obviously, the Middle East and the trade tariff and all that stuff, it's got them thinking but they're still seeing solid demand. So I'll trying to figure out what happens next.

And so the borrowings right now are because they see opportunities, and we'll see what happens with the resolution of the Middle East conflict and other things and what the terms are, what the duration of the inflation is, and that could impact them, but you're not seeing it now.

Great to hear. And then shift over to extense repricing. That's been a nice tailwind for you guys. At what point does the repricing tailwind begin to moderate? And if you happen to have at your fingertips, the dollar volume of fixed assets that are expected to reprice in coming quarters?

So when we got together at Investor Day, we laid out, number one, the magnitude. Number two, the time period. You can think about it, David, is 5 years. So it's not going to be 1 quarter. It's going to be every quarter for the course of the next 5 years, assuming rates stay where they are. So we laid out pretty good disclosure there. I would encourage you just to take a look at that. One see is we put it in 3 different buckets. One was the residential mortgage, the auto loans that come our balance sheet with clients every quarter and new ones that come on. We laid it out in terms of treasuries and mortgage-backed securities in our securities portfolio that will mature and we reprice every quarter, and then we laid it out in terms of the cash flow swaps and the hedging activities we do.

So there's pretty good disclosure there. It's a 5-year thing. It's a little bit longer than that, but the majority is -- the vast majority is in the next 5 years. We laid out the numbers, it might be helpful. Okay.

We'll move on now to Saul Martinez with HSBC.

I want to ask about reserving. I was a little bit surprised that you saw the slight reserve release this quarter given the macro uncertainties. And -- so I guess how are you factoring in macro volatility, downside case scenarios into reserving? Because it does seem like you take a different approach to reserving some of your peers. I fully agree that your track record on credit is comparatively strong. Loss content has been lower than your peers. You see that in the stress test that you guys have highlighted a number of times. But if I look at your reserve ratios by segment, but also things like reserve coverage of charge-offs, reserve coverage of delinquent loans, it tends to be lower than your peers.

So I guess, why not be a little bit more conservative in your reserving? And I'm curious if you agree or disagree with my assessment that maybe you're -- I don't want to call it more aggressive in reserving, but maybe more realistic in your reserving than some of your peers. But I'm curious just philosophically, your approach here on reserving? And why not be a little bit more conservative in terms of your reserving?

Okay. So first, I don't think we have any difference in the way we think about reserving relative to anyone else. We all will be under the same CECL methodology. We all operate in the same way. Second, I'd say, in terms of whether we have lower reserves or allowance tends for most banks to be reflective of the quality of their lending portfolio, the risk they take and their client selection.

So when we show you on slides 20, 21 and 22, how we have transformed the company over the course of the past 15 years, we have a very different risk profile of our lending than many of our peers. So when you look at, for example, on Page 20 of the earnings, you'll see we've got a lot less of consumer unsecured. So a lot less of credit card, a lot less of home equity lines. We have a lot more of wealth loans.

And when you look at the Federal Reserve stress test loss rate, we've been the lowest 13 of the last 14 years, which would tell you we probably should have a lower reserve because we have a more conservative approach to our client selection and the type of risk that we take. So we don't think we're any different than other people. We just think we've got a higher quality client base and a higher quality loan portfolio.

And the final thing to say is in the course of any given quarter, you might take, like, for example, this quarter, we took 5% out of the upside case. We've put it in the baseline. So we're pretty heavily skewed at this point towards a downside case plus baseline. And the only thing that happened to offset that was we had some release from the continued improvement in CRE office where we had built reserve pretty significantly. And as that portfolio has gotten smaller, as we've got less and less in the way of NPLs and [indiscernible] there, we've been able to take some of the reserve back out. So that's all that's going on in this particular quarter.

Okay. No, that's helpful. Maybe just a follow-up then on NII, obviously, encouraging to see the guidance increase. NII ex markets up about 5% year-on-year, which is a good number, obviously, lower than 9%, but a good number. How should we think about what the 6% to 8% means for growth in NII ex markets? And should we be thinking that global markets NII kind of stabilizes at current levels given that it's benefited from lower rates and if we see the Fed on hold here, maybe it kind of sticks around these levels?

And also just remind us what proportion of Global Markets NII is revenue earnings neutral? Because my understanding is that some part of it is not, but it does flow to the bottom line. But is it predominantly offset by higher Global Markets NII offset by lower global markets noninterest revenue. So just any color you can give there, that would be helpful.

Yes. So the Global Markets business NII has benefited over the course of the past couple of years from, number one, rates coming lower. And number two, continued balance sheet growth.

If rates don't go lower, that engine for global markets NII growth wouldn't be there. So you can almost think that go forward, more and more of the NII growth is going to come from global banking, consumer and global wealth and less of it is probably coming from global markets. And then in terms of the NII, there will be quarters where a little bit of the NII is offset in MSA. Last quarter happened to be one where I noted we got about $100 million or so of NII benefit that was offset in MSA. But I don't anticipate that being a big story for us going forward. We've talked about the fact that the NII that we're generating is going to drop to the bottom line, that continues to be our position.

Okay. And that's true in markets as well.

Yes. Generally speaking, it just depends on the client activity in markets because sometimes they can change from on balance sheet to off balance sheet at sometimes is the NII composition. But if it ever came up where it was a large impact, I would share that.

Okay. Got it. That's really helpful. .

There are no further questions at this time. I'm happy to return the call to Brian Moynihan for closing comments. .

So thank you for joining us. It was a good quarter at Bank of America, the first quarter 2026, strong NII growth, strong overall revenue growth, great operating leverage and good returns. We look forward to delivering for that in the future. Thank you.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

After lunch, Bank of America Corporation, which, of course, everyone knows is a bank that has $3.4 trillion in assets, a market cap of over $345 billion. And on top of that, they have over 3,600 branches throughout the country. With us is the Co-President, Dean Athanasia, and we're really quite pleased to have him. As you know, Bank of America has created these 2 co-Presidents, and Dean is one who overlooks the consumer wealth management, global banking, global markets. They serve 69 million customers. It's truly one of our nationwide banks in the United States. So Dean, thank you so much for joining us.

That's great being here. Thank you.

Maybe speaking of the new role, maybe you could talk to us about you and Jim DeMare, who is the other Co-President, of course, about the new responsibilities and the growth that you're looking to drive through the line of businesses at Bank of America. And where do you see like the biggest opportunities?

Yes. Let me come back to that last one. But just to give you a little bit of an overview, Jim and I oversee the 8 lines of business at Bank of America now. And we work with them, and you saw them all in Investor Day, it's an impressive array of leaders up there, but we work with them on their strategies, executing, hitting their metrics, finding the business opportunities in and around the businesses, having them work together. So -- but practically speaking, you mentioned Jim, I really -- I still keep an eye on all the regional businesses I used to have and although really focused on those. Jim is going to do the same on the global market side where we spend the most time together, and I think there are some -- the opportunities, and I'll come back to would be on our wealth continuum, looking at all the assets we have in that we think we have -- we have a $5.5 trillion wealth businesses embedded within Bank of America, looking at all the opportunities there.

Same thing, second biggest area we focus on together is our business continuum. So anything from small business, business bank, commercial bank, global corporate bank, all those assets, they all work together, technology and operations. So we make sure they effectively work smoothly together, and we capture all the business on all our 46,000 business clients in and around everything they do. And then the last one is, which Jim calls the Venn diagram, a little bit of the intersection of Investment Banking, Global Markets and our high net worth business on the wealth management side, finding those are all sort of the same clients. They share products. So there's a wealth of opportunity in that little intersection as well.

So we're looking at everything from high-level strategy, bringing in more clients, looking at deploying capital in the right areas, technology in the right areas, making sure the investments we get the return on them throughout the business. And coming back to the biggest opportunities, if I look at the way we do investor presentations every quarter, I'd break it down into consumer, right, continuing to lead on the deposit end, using all of our assets, digital, physical stores, having them work together continue to drive deposits and growth. Our credit card is another biggest opportunity, and we'll talk a little bit about that, but expecting to get more growth out of that and ramp it up to a 5% growth rate over the medium term. So we're working. We know we have to do better there, and we've got some focus on that.

On the Wealth Management side, we've got -- on the Merrill Lynch Private Bank side, we've got over 2 million clients in that business, but we have line of sight of another 8 or 9 clients that are embedded within Bank of America that we need to continue to build, bring in and build up and bring in all their investment assets. So that would be another big opportunity. And then on the corporate side, I mentioned, I think it's -- and again, we hit this on Investor Day, our international platform, investing in it, growing in it. That's our global markets business, our Global Corporate Investment Bank, our payments business, we expect in the medium term, another $4 billion of revenue out of that group. So we're keenly focused on that, but helping all the businesses grow, achieve, work together and hit all of our performance metrics we laid out on the table.

So if I heard you correctly, so on the Bank of America side, you've got in the consumer potentially a pool of 8 million to 9 million increment -- I mean, customers that could then be brought into the wealth management.

They are greater than $1 million in investable assets out there, and they haven't brought over all that full service opportunity. So we have a line of sight on all those clients, and we're going to use that to help wealth management grow in a better connection between the 2 businesses.

Got it. Very good. Obviously, one of the strengths that you have, and you've mentioned it about your consumer franchise. What are you seeing from the internal data on consumer activity today? Are there any shifts in behaviors going on right now in the consumer side of the house?

Yes. And just -- we did -- we've invested a lot in all of our analytics, but we have close to 70 million consumers on the consumer side, including stretching across wealth management. They push about $4.5 trillion through the economy. So there's a lot of activity that we track and keep tabs of almost daily. And then also on the business side, you didn't mention that the 46,000 business clients, they're generating payments of $450 trillion on that side as well. So there's all this activity we look at every day to see what's happening. So on the consumer clients, they're still spending at a 5% year-over-year rate. It's about equivalent to last year. If I just broke it down to debit and credit at about 5% to 6%, which is just a little bit higher, and you're seeing more spend on entertainment and travel than you did last year, just to tick up.

You do see evidence of a K-shaped economy. I know that's prevalent out there and sort of the discussion, but wages are growing faster and spend is higher on the upper end than it is on the lower end. The good thing about that is the credit quality, so there's a little bit of a growing gap there, but the credit quality is not growing. There's still -- clients on the lower end are still in good shape. So the lower FICO and the upper FICOs, that credit quality is not widening. So they're still in a great shape. They still have a lot of deposits. They have greater than 13% deposits more than they had in pre-COVID. So they are still in good shape, still spending. And so as far as we can see, the asset quality is still good. And on the corporate side, yes, we can -- we're getting good activity from our corporate clients led by our commercial bank clients, good lending coming out of the gate here and strong growth in that end as well.

Yes. It might be a little too early, but you mentioned the K-shaped recovery. Are the guys on the -- have your folks on the front line seen any evidence that with these tax refunds that are supposed to be greater this year than last year. Has that shown up yet in spending or deposits? Or is it too early?

Yes. It's too early to tell. Usually, we do the analysis post -- we'll see inflows now and we expect outflows coming all the way through April up to the 15th. So -- but as of right now, it's on track with what we expected. So there's no surprises there, no differences there, and you'll see that in our deposit numbers.

Got it. Okay. Obviously, you held an Investor Day in early November in Boston. And one of the themes was delivering one company to your customers. Can you talk about the advantages you have with the integrated platform that will enable you to do this? And also how it is a competitive differentiator in your local markets that you have this? And what are some of the other differentiators that BofA brings to the market?

I'll break my whole presentation down to the second answer here. So if I look at on Investor Day, if you didn't go, we compete at a very local level in the United States. I'm going to leave out international for a second. But early on, we targeted 100 top markets in the country. We wanted all of our businesses to be in those markets. We wanted them all working together because we know we're competing against an array of banks. And then we selected or elected a leader, a senior leader from one of the businesses to be the market president, if you will, and they marshal all the resources. So the resources in that market are dependent on the clients that are there -- business clients, consumer clients, two-legged clients and then our desire to drive market share in each and every one of those markets. So the market president's job is to make sure that each and every line of business is taking clients and growing their client share and being #1, striving to be #1 in that market, and we measure it and then also working with each other, sharing clients, referring clients to help each other grow.

And that's where we always come up with the number of 10 million referrals that I referenced back in Investor Day done every year. And somebody like Wendy Stewart, she gets on stage in the global commercial banks and she can declare that I'm going to get 30% of my clients from wealth management, 30% of our new clients. So what she's saying is, look, I've got a great partnership with wealth management. I'm going to rely on them. They're going to help me grow. And in fact, in my financial plan, I have that level of growth in my plan. So it's a great cultural thing. People love to come in and work, and they know they're going to work in a team environment. So I think that in itself is a competitive advantage because in a market, yes, we compete against the national banks. We compete against the very strong regional banks and very strong local banks, and you need that local level of leadership on top of everything else we do.

So we have to be good in decision-making. And then over the top, I mean I think we have strengths in a lot of different platforms. I mean technology and scale, first and foremost, we spent $13 billion a year on technology, $4 billion on new initiatives, and that's growing over $4 billion. We've been able to build great platforms. Our mobile banking, integrated banking and investment platforms. We've got over 1 billion log-ins every month, and we've got all sorts of transactions going through that. We advertise our businesses. We make sure it attracts clients and make sure they stay in longer and do business. Something like Erica, we added on, it's doing done over 3 billion transactions since the day we rolled it out.

Same thing on the corporate side. It's anchored by CashPro, right? That's 35,000 of our business clients are using CashPro. They're making those $450 trillion in payments, over 9 billion transactions going through that. Those are incredible just scale things that we have advantages over everyone else. And the last 2 is our wealth management platform. The combination of Merrill Edge, Merrill Lynch, our Private Bank, workplace benefits, all those platforms working together extremely hard to beat in terms of the level of investment somebody would need to replicate that. And then last, I'd say our international platform, and we've invested heavily in that, and that includes our Global Payments business. But we operate in 45 countries and jurisdictions, over 140 currencies. We have all the platforms, products and services to take all of our clients internationally around the world, which is a huge competitive advantage.

Speaking of the wealth management...

That was okay, right? In that short period of time, my presentation...

In the wealth management area, the targeted acceleration in the net new asset growth of about 4% to 5% over the medium term is really brought it to investors' attention. And so can you walk us a little deeper through the key drivers that -- to reach that goal, including the integration that you just mentioned, the different areas? And also highlight this workplace benefit solutions. I'm not so certain most people know...

We haven't. Yes, yes, it's a great secret. And we're about to go in a big way with that. But overall, just remember, wealth management at Bank, we have just under $5.5 trillion in assets. So it's a big entity, right? We have a lot of different pieces. And one of the ways, and I love them putting a stake in the ground on 4% to 5% net new asset growth. So -- and that's our medium-term target. So we're getting after it. But they've -- the reason we have confidence in doing that, we have the building blocks in place or being put in place to get there. So first step is accelerated client acquisition and retention. We've got 15,000 financial advisers. We backed them up with 1,000 product specialists.

We are creating capacity and allowing them to be more productive, reach more clients by leveraging AI, and we'll talk about that a little bit later, but getting and retaining those individuals at a higher rate given the platform we have and everything we offer, that would be one, more aggressive recruiting to bring people on our platform who fit in our model and want to work in that team-based environment. We have no problem recruiting, so we'll continue to do so. And then we develop -- we're ramping up the development of our own advisers Remember, we've got this great base of consumer financial service advisers, and they will move up. They'll do well in the consumer area, Merrill Edge and they'll sort of move up through the continuum and be great private bankers and full-service financial advisers over time.

So that part acquiring clients. The other one is a little bit what I talked about, again, in terms of building blocks, more and more referrals from the franchise. So small business, business banking, Global Commercial Banking, global -- our Investment Bank, our Global Markets group, all those groups bringing clients to wealth management, but doing it at an increasingly greater rate. So this year, we have a target. Next year, we have a higher target. And the year after that, we have an even higher target. So they'll be bringing more referrals in, and that will help grow the base. And then that's sort of new clients and then deepening with clients, I think 2 things. One, I think we said 64% of our investment clients use banking products and services from us. That's good, but not good enough.

We've got some room to go there, not just credit card or deposits or things like that, but custom credit, trust, estate planning, all those things that help grow assets and make them more sticky in the company. And then last, growing our alternative investment platform. We're putting new products, new services, widening the array of offerings we have for our high net worth and family office clients. So it's got over $100 billion of assets on that, and we see substantial growth there as well. And then I'll take the last one. Just explain workplace benefits, embedded within Merrill Lynch is an organization that has $600 billion in assets. They do 401(k) plans, they do equity plans, they do HSAs.

We offer it to our corporate clients. Great. We have a lot of corporate clients. We've got 24,000 corporate clients using workplace benefits. And so we have 46,000 corporate clients in the bank. So we have plenty of room to grow as we add new clients on, we're able to capture those assets on the platform that helps grow our platform. But it also happens when those employees separate from the company, we have first access into them. We probably have some of their external assets already, and then we go and building over there. So it's a way -- it's another way to acquire clients that not a lot of people have. So huge, huge benefit for us.

Absolutely. It's a one way of getting access to these people. You're on the front line.

You're on the front line, you're ready, you're the first call. They know you, they know what you have to offer. So you are the first step into it.

Absolutely. Can we shift a bit to the credit card? You touched on that a moment ago. And at Investor Day, you guys highlighted some plans to improve the growth there. Can you talk more specifically on just how are you going to drive that growth? And where is it -- how far underway are you with that?

Yes. Well, since I had that a long time ago, credit card has always been a great relationship product for us. We've got 71% penetration of our credit eligible clients at Bank of America for our core cards, which is they've done a phenomenal job there. It's a great job. We could go deeper than that. So there's room to grow there. when I say credit quality, our book FICO is 780 plus. So it is a high-quality book. If we have anything in 660, probably 10% to 12%, that's probably about half or 1/3 as much as other competitors and other peers. So it's a very high-quality book, and we've stuck to that, and we will stick to that. There are things that we can do to continue the growth, though, doing more -- I'll name a few, doing more with our co-brand partners. So Alaska Air is one of our good -- just as an example, we just launched the Atmos Card with them in August, and that's got great growth across and great deepening and people will grow assets with it.

So that's a big one for us and others like it. We're doing more. We changed our whole rewards program. We just relaunched it, and it captures a wider array of our core operating account clients, but it's partnered with credit cards. So you get more benefits if you do both of those products with us, and we open the door. So that will help both grow new clients, attract new clients, but deepen and grow those assets with clients at a faster rate. We've got new marketing programs. I don't know if you guys know we're the sponsor of the Masters, FIFA and other sporting events. So we're leveraging every dollar we're spending there. We're doing a FIFA credit card. And so that's been a big home run as well.

We've upgraded a platform on the digital side, remove some friction. We can acquire and onboard clients faster. We've changed the payment mechanisms to make it easier for clients to do more things with their credit card, which promotes deepening overall. And so that -- we've got an investment last year and investment this year in our digital platform. And then last, the platform itself. We've upgraded -- we're in the process of upgrading all the cards, enhancing them. We're adding new products. We're using AI and other analytics to do better and go deeper on underwriting and processing and things like that just to speed up things for our clients and help us make the right decisions. So if Holly talks about it, she's hitting on -- Holly O'Neil who runs that, is hitting on all those different elements. Each one of them is a building block. And so we're tracking it all the way through, and we feel pretty confident we're going to get there.

Got it. Now I talk to you or Lee on the World Cup tickets.

Well, since Lee is hoarding them, he's got stuff in his pockets, you can probably shake it up a bit.

First quarter '26 performance. Any updates on net interest income, loan growth? And then also any updates in the capital markets, markets or investment banking that you'd like to share with us?

Yes, you can -- and then there's a lot there, so you can hit me. But first quarter NII up at least 7%...

Year-over-year.

Yes, at least 7% year-over-year. Things are going pretty good there. We feel good about that. Deposits in the low single digits. Things are going as planned, as I said there. Consumers going through the usual tax inflows and outflows in corporate. You're seeing just the normal seasonality and outflows for dividend, bonus payments and everything else that happens in the first quarter, and we expect deposits to grow after we go through these periods in line with what we're talking about Wealth Management, fees are up double digits. So that's good for the first quarter, and that continues to go.

So there will be some volatility, but again, that goes. When I hit lending has actually come out of the gate pretty strong, led by our commercial bank, and I would expect in line or above the H8 data. So they're doing a great job, and we see good activity on our corporate clients. Capital markets is a little bit different. You're going to see probably a lot of volatility that are going to happen in the last 2 weeks here. So let me just couch it by saying, let me just focus on where we are today, if that's okay. Investment banking, we would see as we stand today as compared to last year at this exact time, up 10%, double digits right there. And I think on Global Markets, it's up low double digits as well. So really good activity. Again, we've got, whatever it is, 15, 16 more days left of trading that we'll see where the results go, but a lot of activity. And I think if I -- Jim would get mad of me if I didn't say he's pretty confident he's going to hit his 16th consecutive quarter of year-over-year growth in capital markets in Global Markets. So they're doing a great job, and he's continuing to drive it.

That's great. And we have always heard that volatility really helps the markets businesses and clearly, you're seeing that. One of the areas that everybody focuses in on Bank of America is expenses and operating leverage. And you provided at Investor Day some operating leverage targets for the medium term. And for this year, it's at the low end of the range is what you talked about. And so what are the expense levers that you have confidence in that can get you guys to that target and the amount of operating leverage that could improve from this year's target?

Yes. I think we gave at earnings 200 basis points, at least 200 basis points was the guidance. And so as I said, you've got good NII growth, and that's going to help us and the continued deposit growth in the second half of the year is going to help us. We've got the volatility you said in the capital markets area and the investment banking area and wealth management. Those are all good revenues. I wouldn't -- we want to see that continue. They do come with expense. Obviously, I sort of count that as good expense. On the rest of it, we have very tight expense controls.

We watch where we're spending, whether it's the investment, we're still going to hit our operating leverage and continuing our positive streak there. But we're going to we make sure that all the other expenses in the company and we're watching that. AI is going to help us, not yet baked into the numbers. So as we roll out, we'll talk about that as we roll those things out that might give us some leverage as well. So there's a lot of things we can do. I will say in all the other expenses that are non sort of activity based, we've got tight controls on. We feel pretty good about those, and we continue to work on them and drive efficiency from them.

Got it. And you obviously have invested. You mentioned the tech spend that you're going to have this year. And maybe investors are focusing on the investing and the positive operating leverage that you're going to generate. Maybe you can walk us through how you approach the investment decisions, both for tech and non-tech every year. And then also how important at the top of the house, you, Brian, Jim, on consistently delivering positive operating leverage.

Yes, we're very close. I actually think I've heard some of the -- we can do both, right? Our model allows us to do both, invest at a heavy level and the growth -- in the level we need to drive growth, but also get the operating leverage and efficiency. And you have to remember the way we manage it, we're sort of like -- we manage a portfolio, right? So we've made investments, whether it's technology, marketing, other sorts of investments 3 years ago, 2 years ago, 1 year, all the results -- and we track every single thing we do, we make sure we get results. So we get results that increase revenue, drive productivity, reduce expenses, then we're putting the new investment on top of that, right? Because there is capacity, there's a space. And so that way, we can drive high -- we can drive and continue a positive operating leverage and make all the right investments.

So for technology mentioned, I'll hit that one. I said over $4 billion in new investments. That's -- if you really -- that's gone up as does marketing, about $1.5 billion over the last 10 years. So we're able to sort of add more to the pool and get great benefits out of it and feed our business. So we get growth and we also get operating leverage along the way. And we like to manage. And I think it's because our culture is, yes, if we're going to invest something, let's make sure -- let's not forget about it, let's make sure it delivers year 1, year 2, year 3. And so if we get those results, we won't, we can actually do more and invest more and get more growth. It's kind of like a flywheel that just keeps going.

Yes. Obviously, technology is important for the banking system. It seems like AI could be the real -- one of the industries that are real big beneficiaries is going to be banking and specifically Bank of America. On your Investor Day, you guys talked about utilizing AI, of course, across the businesses. Can you spend a few minutes with sharing with us some of the live examples of where AI is succeeding? And then also going forward, where are some of the best opportunities that may come from AI?

Yes. I actually think we have a unique approach that we haven't sort of really put out there and advertised. But if I may just tell you how we run it is, we created this AI catalyst group in the company, very important to us. Since it's so important, we took our Head of Strategy, Jeff Busconi; and our Head of Technology, Hari Gopalkrishnan, and they're working together, and they run the AI Catalyst group for us. We selected senior -- 18 senior business leaders to be on that Catalyst. So they represent all the different areas of the bank, and they work together to make sure -- and individually to make sure that we're driving AI into every single area. It's only -- it's such a large bank. It's a way to get it done and to share and leverage and get every bank for every investment dollar that we go out there.

So before I get into the new ones, I mean, just point out -- I'd like to point out maybe because you know it was back in the day when I was there when we started. But Erica, we rolled it out as AI investment a long time ago. Now we're on our third generation of it. So it always advances forward. But like I said, it does 3 billion transaction. That is doing the work of 11,000 people for us today. I mean if I didn't have that, I'd have to have that many more people given the amount of touches and it will keep going. Then we've taken that -- it's a great example because we've taken that technology and we brought it over to the corporate side. It now answers 40% of questions that our corporate clients are asking us, takes you saving more heads. And then internally, we use it. 90% of our employees are using it for help desk, call desk, whatever they need internally, takes out 50% of the calls we used to have. And it's going to keep going, right?

So we'll be on a fourth generation, fifth generation, whatever. Some of the new things coming out, all of our developers, 18,000 developers using GitHub. So they're developing things faster. So think of 20% to 25% more productivity, faster, cleaner, better and getting it out there. It allows us to get out with our clients much faster on some of the things I talked about that we develop with. That's a big one for us. We use Erica again. We do Erica Assist. So Erica Assist is now if you're a call center individual with a call that comes through or anywhere, it listens to the call and it compiles all the data that, that individual will need to answer the client. It does it in 3 seconds. So there's no more hunting and packing all the analytics come up, all the data come up and it gets the best available answer for the conversation with the client. I think that's huge for us.

We use Salesforce agent force. We've rolled it out to 1,000 advisers when I was saying, make those financial advisers, help them become more productive. We rolled that out. We've got 80,000 people on Salesforce. So we're going to roll it out to 20,000 individuals by the end of the quarter, right? If I was going to see you, we'd pull up all the information on you and break it down and allow me all that prep time goes away. Pre and post call. So -- and there's other capabilities in it. But that's just a huge, huge time advantage, and we don't need a lot of admin sitting around creating that or the adviser to sort of spend time there. So huge productivity lifts there. Think of what else do we have. We have Copilot in the company. We've got 150,000 people on Copilot, including yours truly here using that, doing 1.5 million queries every week. So huge productivity lift across the board for any number of things.

And then we've got other projects looking at better, faster, quicker underwriting and more analytics, helping us to streamline processes and automate processes across multiple platforms. Information delivery, speeding that up immensely and compiling 3 or 4 different databases for a better solution. So all those things are coming. And those -- there's many more, there's thousands of ideas that people are circling up, that Catalyst group is responsible for driving it, getting it done fast, getting it out there and getting in finding us more productivity. That will help in our operating leverage and everything because we haven't baked all that stuff in, but that's coming.

As AI has evolved, I'm assuming it's taking a bigger percentage of the $4 billion of growing...

Yes, absolutely. Sorry, yes. And it's all there, the investments -- all the investments we need because we sort of dedicated a fair amount to it.

Got it. If we shift over to the regulatory side, Basel III endgame, we're thinking maybe we get some news here in the third or fourth week of March. So it's coming right up. What are your thoughts on just the regulatory environment and the outlook? Also G-SIB that is another part for...

Yes, I think you're right. I think we'll get a proposal, hopefully, by the end of the month, maybe a little bit after that. So I'm looking forward to -- hopefully, we finalize the capital rules. So that would be terrific. I think the regulators would agree that the banks have a great level of capital to support a growing economy. So -- and I think if you look at for us between the net-net impact of the G-SIB and the Basel III end game would be to lower regulatory capital for us.

So that's a positive thing. I think another thing that sort of occurred more on the operating side is that this on operating procedures around materiality, particularly as it relates to MRAs, I think that was particularly important for us for operating risk because it helps us dedicate the best people at the most critical areas and lower risk overall for -- not only for us, but for the industry. So I think that environment, waiting for the final capital rules, but that's a lot of positive direction there.

Sure. We've run out of time, but I do want to give one last question. And can you talk about the trade-offs between the deployment of excess capital where you think which businesses should receive it versus share repurchases and dividend increase?

Yes. I think when we look at -- we generate a significant amount of excess capital. Our CET1 ratio in the fourth quarter, 11.4%, right above the minimum level of 10% and our sort of buffer there of 50 basis points. So our first inclination is to use excess capital to help our businesses grow, and that's what we always try to do. And again, this is where -- when I said we look at things in our portfolio, every business that we have in every project, all those things I mentioned within the business operate and have different characteristics to it on our consumer side, on the lending side, high return on average capital business drives results over time and you just have to watch a loss rate. If you compare that to investing in Merrill Lynch, which we also would do, you've got also a high return on capital business, but the expense dynamics are much different and they're less efficient as a consumer bank is.

And then my friend, Jimmy, Global Markets, you can invest capital or you can deploy capital really quickly, get a result, get a return, but the returns are lower than those 2 businesses. So I think he came in around 13% for 2025. He has a medium-term target of 15%. But again, that's going to be lower. So what we have to do is make sure we are capitalizing on the opportunities in the market, finding the opportunities that are out there we can drive, but it's a balanced portfolio of where we allocate capital to get the best results and returns and growth for our shareholders.

With that, Dean, thank you so much for joining us. Please join me in a round of applause.

Good morning, and we'll go ahead and get started. So welcome to Bank of America's 34th Annual Financial Services Conference. I'm Ebrahim Poonawala, Head of North American Banks Research at BofA, and it's a pleasure to welcome you all. I would like to thank all the management teams and investors for their partnership, which has helped make this conference such a success.

As part of the conference, we are hosting over 350 institutional investors, more than 130 corporates and a number of timely and thought-provoking thematic panels. We hope it will be a productive few days for everyone here. I would also like to thank my colleagues in research, Craig Siegenthaler, who's sitting up here, who heads the coverage of our diversified financials, asset managers, brokers; Josh Shanker, who heads our insurance coverage; Mihir Bhatia in Consumer Finance; and Matt O'Neill, who just joined us recently and will be launching on the payments and IT services sector. So that's going to be a tough one to launch after the last few weeks.

But before we get started, please save the date for next year's conference, which will be held February 8 through 10. And as always, none of this would be possible without the blessing of our next speaker. So without further ado, it's my pleasure to welcome our keynote speaker, my big boss, Brian Moynihan, Chair and CEO of Bank of America. Brian, thank you very much for being here.

And I should have said Brian is joining us fresh of a Super Bowl loss for the New England Pats. I promised Lee, no hardball questions.

You know your bonus check hasn't cleared yet.

It hasn't cleared.

You can remind me about all that you want, and I can remind you about other things.

We do have a good relationship, as you can see.

So far.

It just got worse. So maybe I think, Brian, just to start out, there's a lot of optimism at least coming into the year on the macro outlook. Maybe give us a sense of like you were at Davos, you were talking to CEOs, you're looking at all the internal data at BofA. Just kind of what the expectations are. Does this macro backdrop look as the strongest you've seen in many, many years? And where are the soft spots, if any?

Yes. So I think you have to go back and think about a little bit of the last 15, 18 months because as we came off the election, your team raised their estimates for '26 in the mid-2s and we're enthusiastic of deregulation and tax policy and things like that. And then we came into the first part of the year and the enthusiasm was confused more than anything by the Liberation Day and tariff policy, et cetera. And as we -- by the time we got through the year and exit the year, you're back up at 2.8% for GDP for '26.

And so the important thing isn't -- is the number, obviously, being nearly 3. But the important thing is it's been -- I think you guys have raised it every month, every new thing, every month for the last 6, 7 months, which means it's building. And so that's good news.

And what's come out of that when I talk to the CEOs around the world, and I host a bunch of sessions with different CEOs plus some of the administration members and CEOs talking about U.S. policies, they see the trade tariff sort of except for the cases of national security-related stuff or certain things, they see it's basically working its way through and the deals are getting done and the outlines are not that impactful. So they're good news. They see the tax, which is a big deal and the bonus depreciation locking and guaranteeing it.

And they're now seeing the deregulation finally coming and it takes longer to get that because they're trying to sell them now. So they're very enthusiastic. And they look at America and they said it's a place to invest, and they just needed some stuff to fall in place. And then obviously, in the trade deals, they're supporting their countries because the countries need them to help make the commitments. So we feel very good.

Now the real question is what's going on in the data. And I think for a fairly long period of time, our research team was giving their estimates. And then the world out there was saying consumers are going to quit 3, 4 years ago after COVID. They're going to spend their money and quit, didn't happen. Earlier last year after liberation, the consumer is going to quit, didn't happen because price rise, didn't happen. The consumers in January spent 5% more money at Bank of America pushed in the economy than last year's January. And that's consistent with the growth rate in the high 2s and if you look at it. And if you look at it, it's across the board, all the cohorts, low, medium and high wage households all grew at different growth rates. So there is some -- the economy is real. The affordability question is real, but it's all growing.

And so for a long time, we have been -- look at what people do, not what they say they're going to do. And you're finally seeing other people recognize that because of all the stuff that goes on around them, they may say they feel one way, but why would cruises be up double digit month after month after month if people really thought they were stressed.

So why are they not stressed? I look to not only us, but all the street economists for the major firms, some of which are in here, nobody has an unemployment rate for all '26 that gets above maybe 4.6%, the highest out of all the different possibilities for every quarter times to 8 or 10 firms. Everybody is -- so people are employed, wage growth. Interest rates are going to continue to come down, and that's very constructive. And then on the deal side, the IPO markets, leave aside the ups and downs in software and all the things, the IPOs flow, the deal comments, especially in this industry are strong. And so people feel pretty good.

And just maybe very quickly, you mentioned the K-shift economy, the consumer affordability issues being front of mind for the administration. Like when we think about one of the proposals that was kind of put out there on our credit card cap. I'm just wondering what the conversations have been like there? Like what do you think the industry can do there?

I think the -- we all -- that arrived around earnings, and we all reflected on the implications of lowering credit availability, dropping people's lines, impact on economy, impact on ability of people to have the flexibility to spend and stuff. So that's all been made. I think at the end of the day, we're all for affordability. So in our company, on a consumer side, if you look at what we've done in the last 15 years for overdraft limits down to $10 and 40%, 50% of our accounts are no overdraft accounts, and we're up to, I think, double digits, millions of accounts now no overdraft capability. Therefore, that's a more affordable account. We have a loan for $500, 8 million customers, I think have taken advantage of that loan in the last 4 or 5 years, where for $5, they borrow up to $500, no interest rate for short-term borrowing, and that was really to push out the payday influence in our customer base.

If you look at -- we have no frills credit card for lack of a better term, annual fee, no rewards, the rates low, not quite that low, but lower. And so I think people are seeing that this is a much more complex question, and we'll see it play out. But the question of affordability, we believe for American Consumers and Banking, we are the most affordable company. And if you look at the FDIC stats, we run the most efficient consumer business, make a lot of money, but we do it through a very low cost to the consumer thing. And so we believe it.

I guess maybe another thing in terms of the macro before we jump into the business. We've argued that as folks who lived through the financial crisis, what you're seeing on the regulatory side, which I like to characterize as back to some level of normalization is playing itself out, and it's a regime shift. Like how do you see it like relative to the last 15 years? And where do you think we are on sort of additional regulatory changes?

So I think if you think about the travel coming out of financial crisis, there were key things that had to be taken care of. We had a bunch of companies that were outside the tent that had an amount of leverage that we put inside the tent, we had to bring them all their capabilities. We had the people that were inside the tent from start, what's the amount of capital required, liquidity requirements, et cetera. So all that came through. And we were kind of done with that by 2015 or so.

But what happened is it just kept coming. And so over time, and people think it's the First Trump administration, Biden, but this goes back before that. What happens just is there's constantly creeping on the capital liquidity, not indexing G-SIB from 2012 data or whatever it was supposed to be. The economy is probably twice as anomaly growth and all that just didn't do well. And so with the current administration and with the Vice Chair supervision, she has looked at this.

By the way, the last -- we were getting there with Jay and others before, it just got sort of out of hand. And so that -- I think you can see the path forward. I think the good news is they're taking the time to get it right. So doing a cost-benefit analysis in a way that ought to stick to the ribs as opposed to being able to be swung back by somebody else saying, I just want to change it. So that's good on capital liquidity, et cetera.

The other major thing, and I think this is important for all of us that operate banks, is the -- this supervisor operating procedures and things like that to go to materiality. This is a huge benefit to the banking system because I've been in discussions with prior people in the supervisory regime. Well, if you do something 10 million times a day and you find amiss 1 or 2 and they say, well, that's a problem. You say, are you expect it to be perfect? No. Well, you find 2 and they say, but that's a problem because we found 2 and you're saying, but you're way in the error rate of Six Sigma levels. So you're going to find some mistakes.

The question is do we have a process that runs a Six Sigma and do we check to make sure it's running Six Sigma? And then when we find a mistake, we fix it. That would end up with an MRA and right. I think that tone change is actually more -- as critical as anything else because if we get that right, our system is much more sound than any system in the world in terms of the proper balance of regulatory reach. That doesn't mean we're all ears for best practices, improving procedures and stuff.

But if you look at what happens with the formality around MRA and by the time you get done with 1,000 reports and all the information, it just really is not -- if it's not material, it's not -- and so people in the outside -- the companies don't -- won't appreciate this as much as inside the companies. And if we can get this right, that will be accretive. So capital liquidity, et cetera, you're seeing that all come, stress testing.

But the real question is we can get the balance back where supervisors on credit gave you insight and didn't try to write up immaterial things and have the license to do that and won't be criticized after that because the unfair thing is something go wrong, everybody says, well, you missed it. That's not fair because if you're going to have them have a balance, you expect banks to fail. We shouldn't be shocked when that happens. The system is set up to have that happen. That's why we guarantee the FDIC. So it can happen without having customer impact.

Got it. And you mentioned the G-SIB, I guess there's expectation around the G-SIB recalibration, Basel end game. Do you think we see the proposals anytime soon or...

I think they're coming soon. But I think they're trying to make sure they've got them really well researched, well built so they withstand scrutiny, not only in the instant case like right now, but they withstand 2, 3, 4, 5, 10 years from now. And I think they'll be constructive, and I think she's outlined her thoughts and they're just doing the work the right way. And I think it won't be everything the industry wants. It will not be like I'll just go back to low tangible common equity and stuff, and it shouldn't be honestly. And so -- but she's -- so we'll be arguing about some finer points in life and Greg Baer and Rob Nichols and our colleagues are here, and they'll be making the points for us. But so don't -- but I think it will be much better than the constant creeping. And over the -- from '19 to '24, I think we showed the data that you saw the capital requirements go up by 20%. And it wasn't apparent to anybody they've gone up. It's just the math behind the scenes was picking actually. It's RWA calculation. And that -- so it was very subtle. It went up and there was no more risk in the industry from '19 to '25, didn't have any consequences.

We have both Greg and Rob joining us for a panel later this morning on next, so it should be insightful. Maybe I guess switching focus to the business, Brian. We had our first Investor Day in a long time, laid out our return on tangible equity targets. Just frame that for us. I think the target is 16% to 18%. I think as we think about the timing of getting there and what gets us to the lower end versus higher end, just how should investors think about that?

So last year, we did 14% plus. It was up 100-some basis points from the year before. And what you're seeing is the NII, net interest income builds. You're seeing a lot of that flows through the bottom line. And that obviously this year will grow 5% to 7%. Well, 200 basis points to 300 basis points of operating leverage. So it's that just kicks in because the NII is, as Alastair showed at Investor Day, a lot of it is a repricing characteristic. And then mid-single-digit loan growth and sort of 2%, 3% deposit growth, which we did 8% loan growth last quarter over the year before. So we feel good about that.

And so the 16%, 18%, we reached 16%, we believe after 8 quarters as being quarter 1. So -- and then we reached the higher end of that range after 12 quarters, and we try to make that clear to people. And -- but it assumes the economy keeps pushing along at 2% to 3% growth, inflation stays in check and et cetera, it does count interest rates coming down, so that's factored in whatever the curve is. So we feel very good about that.

And -- but the important thing is we want to show people this -- we manage this company very tightly on expenses and headcount. And so people are getting paid more. But from 2015 to 2025, we have the same numbers of people. So just noodle on that. The company is probably 50%, 30% in certain areas bigger. People are getting paid more, but we have the same number of people. And we basically have -- we went from -- at that point, 213 down to 205, I think, 204 or something like that. And we went back up to 2018, we're down to 213. This quarter, we're down -- this month of January, we're down again. And so we're engineering out that stuff while investing heavily.

From that time to now, we probably invest $2 billion a year in technology development more than we did back then. From that time to now, obviously, the incentives for the wealth management teammates who do a great job. Their customers are a lot higher. From that time to now, the clearing expenses and the market base is higher, but we still end up with the expense base is growing a lot lower than the rate of inflation. And the headcount is flat, which sets us up to be able to manage the expenses going forward.

I do want to come to the headcount and just how AI is influencing all this. But maybe, Brian, when you think about the revenue growth momentum, be it the 4 large sort of business segments, where are you seeing the most energy and where is the capital or investment dollars being deployed?

Sure. If you think about consumer, that is a place we've gone from 100,000 people to 50-odd thousand people, just to give you a sense, 6,000 branches to 3,700 branches, even when we build out a lot of new branches. So it is all about, especially in the mass customer side, mass market side, driving the expense through digitization, through automation, et cetera, while growing core primary checking accounts, which drive the economics. And so we've driven the deposits over the last 15 years in that business from 350, 400 to 950. And so we feel good about that.

So the growth lever going forward, those primary checking and the mass consumer continue to grow in the preferred business, which is the upper end of that, that is a revenue growth business, and that's driving that. So the dynamics in that are how do you manage the headcount and expense carefully and really rigorously and keep automating and not get ahead of the customer. And then at the same time, drive up primacy. We're up in the 90s, drive up customer scores, all-time highs, drive down attrition all-time lows, both by employees and customers. And that business then has all-in team, say it's going to double its income and it's already earns a lot of money. And so that's that business.

On Wealth Management, we made it -- Lindsay and Eric and Katy moved their view of net new asset growth up from 2% to 3% level we've been at 4% plus. And I think they're busy at work making it happen. And what we're seeing is the Merrill Edge piece helping that because it's growing pretty well. So that team is set up. What they're changing is we're recruiting a little bit more strategically. They are also driving the connectivity of the franchise. They're also -- which is powerful across 100 markets we serve in all local markets and all the work they do here in Miami and elsewhere. And so that's going good.

But we're also able to get because of the efficiencies and some of the AI and some of the other things we're applying just in more digital, you're allowed to -- you're getting more customer ability to do a great job for customers without increasing the headcount a lot, which is important. So they're seeing that.

On global corporate investment -- Global Commercial Banking, Global Banking across the board, look, we're adding bankers in business banking and middle market across America and the markets that we're still undersized. We try to target a market share in every market. We look at the markets below that. We add bankers to make it happen. They've done a great job. The cash manager driving that business. In corporate investment banking, the investment banking team was up 7% last year. They're pushing harder, more in Asia, more in Europe, kind of continue to push the franchise and Matthew team. So we feel good about that business, but it's really the payments piece we highlighted. That's the piece that people -- it gets lost because it gets divided in businesses what Mark Monaco runs for us, the huge payments architecture drives a lot of profitability. And the market is 15 quarters of year-over-year growth.

And now Dennis and Soof, you have to drive that business for us, done a good job. It's more with each customer. And it's -- these are not strategies that you could write down, but the execution discipline of 15 straight quarters of year-over-year growth, nobody has done that. And guess what, spoiler, I think they'll do it again this quarter.

Good to hear. There's some news for you. And maybe just double-clicking on some of the things you mentioned, I think, one...

Actually just in the broadest thing, if you think about just the -- so think about what we did as the business lines, but what you thought is the platforms. So whether it's the EB&I platform, point bank investment platform or the payments platform, whether it's AI and how it's already deployed in Bank of America, we can talk more about that. We tried to feature these platforms that people get lost -- don't see as clearly and watch that they're up and operating. They're hugely scaled, they're market share leaders. And there's opportunity in our 401(k) business, I think we're 6 or 7. That business is growing a lot faster than other people in the industry because we can go to corporate clients, commercial clients and say, we can do a great job for you in this business. And so we can pick up the back-end flow on that the front-end flow.

And that's the workplace retirement kind of -- okay. So maybe just on consumer, like 2 things I wanted to touch upon. One is talk to us about deposit growth, right? Like to me, like just the lifeline for banks, the oxygen is deposit growth, getting low cost. You have a lot of sort of banks talking about branch openings, promotions. It's a competitive environment. Like how does the bank with our market share actually grow deposits in this environment?

So at the end of the day, you've got to grow. But when you think about the core product set, what we call a stair step, the checking account, then you go from there to the first sort of savings investment thing and then the home loan, the card loan, the car loan, so you have these stair steps and you're just going up the stair steps, but you have to have that anchor account. So we were doing about 1 million net new checking customers a year. If you look at them -- you look at our -- even with that kind of growth, which is 3% net new -- 2% to 3% net new checking accounts a year in a population growth in the United States that's sort of half that in the old days and now a lot less than that, that's outgrowing the market.

If you look at our share among young people, it's higher than they're represented by a lot. If you look at our -- and so we have lots of techniques to do that, that to materialize over time. So the key is to be -- to have great customer service, have all capabilities to all people.

And the third key and you mentioned is we weren't in a bunch of markets by historical accident. So our company has been around since 1784. And up until 6, 7 years ago, we didn't have a branch in the state of Ohio. It seems like how would you intentionally do that? It wasn't intentional. It just didn't happen. Now we have 25 branches in -- or 15 in Cleveland, 15, 20 in Columbus, Cincinnati, and we're building out Dayton, so you build that out. So we've done that. So why you have to do that is to cover the markets. That's -- we have to cover all the top 100 markets, and we're pushing into that.

Meanwhile, branch count keeps coming down. So what happens in the more mature markets, you're managing the distribution platform, you're watching the customer move. So -- but you have to build out in these markets. And the brand lift, there's no incremental brand cost to it. And by the way, when we go into some of these markets because of the historical presence of our Practice Solutions group, which lends to doctors and veterinarians and people or Merrill or a commercial bank, we can instantaneously pick up a customer base, which is pretty interesting.

So if you look at our build-out, of all the branches that have been deployed, I think the ones that are open more than a year are way above industry average deposits per branch already. And so we're -- the company we're way above it, but they're already covered it. So our job is just to drive it. So it's about net new household growth. It's about distribution effectiveness. It's about great digital capabilities and now AI capabilities and just driving that. But we have to cover the landscape because incrementally, it's really the cost is really the incremental branch cost in a bunch of markets we were in.

Makes sense. And maybe just one last on consumer. When we think about the card product, we had the preferred cards. I'm happy customer of the card. But I'm just wondering is -- just talk to us in terms of the evolution of that product. Are we doing more in terms of credit card offerings? What's the plan there?

Yes. I mean -- so I think our core strategy is, if you think about the universe of the 70 million consumers accounts, 65 million, 70 million of consumer customers at Bank of America. We're focused on that stair step and that depth of relationship and the card is a key part of that. And so we made a decision. We have great affinities with certain great corporate clients, and that's fine. But the affinity we are driving at is also the rewards program, the preferred rewards program, which is different because it goes across the entire platform. And so that's been the focus of what we've done. So we brought that program across, obviously, the wealth management businesses et cetera.

And so it took a repotting of the card business over a long time to get there because -- so the credit quality is strong. The usage is strong, the pre -- getting people to take the card out of the wallet is high. And now you're seeing -- we're starting to see the ability to grow and Holly is committed to growing the outstanding balances faster.

But with our credit focus, we're trying to keep the charge-offs from having a volatility. We have not had a consumer issue in the United States since the financial crisis. The pandemic unemployment rose, but the government pushed so much money, and there was no change. You are now 17, 18 years since the consumer break, I guess, 17 years since a consumer break. And look, we charged off $50 billion in cards from 7 till 10, 5-0. And so you have to be able to withstand that was a 10% unemployment rate. If you look at us now in our stress test, the 10% employment rate produces 1/3 of that over -- and that's from 0 to 10 instantaneous with no adjustment. So it wouldn't come close to that.

Understood. Maybe pivoting to the wealth management business. So you talked about the platform alert. I talk to our financial advisers very frequently, and it just feels like the bank has done, under your leadership, an amazing job of like connecting the dots over the last decade and the willingness of the advisers to sell credit cards or commercial banking products is super high. Just talk to us about that connection between the thundering herd and the bank, like how that's evolved over the last 10 years when we think about the 4% to 5% NNA growth target that we put out?

So if you back up, the idea is in the Private Bank and Merrill is to own the entire customer relationship from -- through the life cycle. And so the advantage we have is from birth to death, we can carry a customer all the way through that. And so their job -- and to do that, you have to have everything. It's not only transactional accounts and credit with us, obviously, wealth management practice, but it's a financial plan that leads in the state plan it does and that locks in. So that holistic approach is often talked about, but tricky to execute.

And then the second question is the flows in the business. So if you listen to Lindsay and Eric and Katy, they talked about the amount of flow they get from the business banking teammates or vice versa. And so that connectivity in the market, you go to Columbus, what got us started was we had 3 Merrill -- great Merrill offices, a lot of great colleagues. They can start to work with the business bankers and you build out or Pittsburgh or other places in Denver, et cetera. So that connectivity is strong.

So the margin, I think we've got in the high 20s. We've been as high as 30% in the past. As NII kicks in, there'll be a big beneficiary. People forget that, that business has $200 billion-plus deposit base, et cetera, et cetera. So it's very important for that. And it will be a beneficiary of the NII kicking in and the NII continue to kick in. And that will push them up in the pretax margins they have. And so we have industry-leading pretax margins. We're one of the biggest in the businesses. It's the least efficient business on our platform. And so one of the things we try to do, but it's one of the highest return on capital on our platform.

So the question is, and I don't really need new capital. The question is how do I have them do what they do and compete and win in the market and who they are. But secondly, how they contribute more. And so that interconnectivity is very high, and the teammates continue to do a great job doing both in the wealth management businesses and the other businesses working with them here in Miami, we have fellow in, Gene Schaefer, and his job is to get all the people in the market to drive that. We score every market. We go every market. We -- we just -- I won't tell you who won because we'll tell the teams, but we just found out the winner for last year, and there's 100 markets are ranked and it's -- they have great fun. And then we go to the market that wins and take our senior leaders there for a meeting. So 300 people show up in a market to support the market. And it's a connected thing and the financial advisers and the wealth management private bankers are critical to that.

But it's not some mind-numbing thing. It's just discipline of execution time in and time out and also getting our teammates to work with us to understand the magic of it all. When you see us be able to handle not only a business sale, but the proceeds and legacy planning, that's what we're here for as an institution. And anything short of that, we're not doing our job.

Got it. So when we think about the 4% to 5% NNA growth target, is that aspirational? Or do you think given everything that you did that you should be...

We wouldn't have said it unless they could do it. That's whether it's expense -- operating leverage targets, we don't -- we're not here to talk about what -- one of the reasons why we don't spend as much time is we want people to focus on the achievements and what we've accomplished. That's what to extrapolate off of, not what somebody tells you about the future.

And so we told people we'd be able to operate with operating leverage after we came down the expense growth beginning '18, '19, and we've been doing it since 2015, 10 years, 40 quarters, we had a streak of 5 years. We had a streak of about 2 years, and we've now 3 out of 4 quarters. So if you start to take 20 plus, I think it was 8 or 10, it's 30 plus another 2 or 3, that's a lot of those quarters had operating leverage. But we had to get people flip from just expense reduction to operating leverage because, frankly, we taken out 100,000 -- 90,000 people. There was not a lot of easy things left, and you're seeing that. So all those commitments were resolute about handling. We measure them carefully. And Lindsay and Eric wouldn't have said that, and we wouldn't have let them say unless they had a path to get there.

Got it. I guess maybe just moving Global Banking and Markets, you mentioned like just consistency of revenue growth. I think as we think about year-to-date activity, like has it started out as expected, better than?

Yes. It's -- everything is consistent with what we expected. And -- so if you look at it 2 ways, it's still 1.5 months into the quarter, but everything is as we expected, is coming in. The markets are getting the traditional kick in the first part of the year from all our good clients out there. And the real question is, does the market environment affect some of the investment banking. But as we look at it, there's enough other activity that the specified areas that are talked about all the time, and we don't need to get into that because it's the expertise of these people out here to figure out. But at the end of the day, the activity around is strong. So we feel good about the investment banking, good about markets. Loan growth where it's coming that we want, deposit growth is good. So it's setting up to be what we said it would be.

In the markets business, is there still wallet share to be gained for BofA? Like can we...

Yes. There is -- it's just -- so if you look at it over the last 4 or 5 years, we've gone from -- we increased the balance sheet exposure by a couple of hundred billion dollars. We're doing that again this year. And you got to be careful. It's the business that has the lowest return on capital in the company. Not because they're doing anything right or wrong, it's just -- it's up against some pretty [ start ] other businesses. So -- but it's important and critically important to grow the business. So the magic there is to grow with the right ROA and the right -- that produces the right ROTCE, even though it's not a business that, that's typically taking the kind of risk like the equity business that people are going to pay 100 basis points ROA generally for. So the team has done a good job of doing that. They brought the returns up. They brought the breakeven point in the business.

And the reason why I think market share comes, this business is hard. Every day, we file 3 billion quotes around the world. Every day, you have these systems, it takes about $700 million, $800 million of systems expenditure every year to drive the business. You're operating in 37 regulatory jurisdictions or 50-some regulators. You're posting quotes all over the world. You have activities going on, you have to manage the risk well. And so the breakeven point, what Jim and the team and even going back to Tom and Jim and now Soof and these guys, they brought the breakeven point down $1 billion a quarter through engineering at the back. That then means it's -- it used to have a tough quarter to make a few hundred million dollars, now makes $1 billion a tough quarter and more than that in a good quarter. So that is a tremendously different thing. It's hard to do that. And that's why when people say we're going to go into this business or expand this business, it's not just there that people hand it to you. It's hard to do, and the team has done a good job of doing that.

Got it. I guess one last one on the business just around Bank of America, but there's a huge international presence. And I think Bernie talked about it during the Investor Day. Just talk to us where the investment dollars are going either in markets that we are excited about or products that you're leaning into?

So if you look across the international platform, we operate outside 9 states in the Global Banking business, including the transaction services business, the investment banking business, the markets business. And those businesses are global. You have to work with the clients and the audience. We have to know if not these clients because they are all financial services, but if you're -- even financial if you're covering cards and you're not covering on a global basis, you really don't understand the card market. So whether it's research or whether it's corporate capital markets, in markets and whether it's investment banking, government clients. So they've grown very strong, I think 10%, 15%, I think Bernie was showing in the statistics. It goes into all lines of business because it has to be operated on a global basis, global businesses. But Bernie does a great job of bringing them together and driving it.

And where we've seen -- where we think there's opportunities for us continues to be in Europe, always in Asia because just the sheer formation and then the connectivity. When we go to talk to clients, I think to be competitive even in middle market in the United States, you have to have a global business because think about the discussion going on now for a midsized company producing a supply chain on a global basis and getting products from all over the world and how this is all going to work. So our teammates in India spend time with our middle market customers about how it's all going to work as India becomes a build-out for a backbone for the world and things like that. That's unique.

So it's -- Bernie has done a good job of leading the team, all the business leaders drive it, and it's a very important business. It's about 20-odd percent of what we have. So the reason why it's hard to get -- everybody says you want to be bigger. The answer is I never look at it that way because if you think about the consumer business being so big, it's a little hard to keep up with that. And there's just so much opportunity for us in the consumer and wealth management business in the U.S. that's sort of hard -- the rest of the world is not as big as people think. So it's hard to keep up with that. But that doesn't mean they're not growing and doing a great job.

Got it. I guess maybe pivoting to expenses, you talked about headcount a few times. I appreciate, I think the bank did not provide an expense target for the year, but I think there's a huge commitment to operating leverage. Just talk to us in terms of what gives you confidence in the level of operating leverage, what the levers are? As you earlier said, like you wouldn't say that if you didn't believe it. So what drives that confidence?

So start with what we said was 200 to 300 basis points of operating leverage. We said 5% to 7% NII growth and all that is setting up. And a lot of that comes from -- a good chunk of it comes from the rollover of the portfolios and then another chunk comes from loan and deposit growth. So NII is critical to that because when you look at our efficiency ratio back when it was the lowest in the low to mid -- 58 it was, that's when NII was a little higher percentage of the revenue stuff. So that's all there. So we feel good about it.

But how do you drive this? We are applying technology all the time. So each week, 1 million lines of code go in each week we take out. There's a whole bunch of operational excellence projects around the company where we're taking heads out and then redeploying them. And so what that's enabled us to do is from the summer of '25 until now, before we hired the 2,000-plus kids out of schools, we're flat headcount. So we engineered 2,000 jobs out in 4 months. You start to noodle on that. So that's what we're doing. And so you've seen the headcount at the end of January is 213,000, down, above 300 from end of year. You're always just driving that. We did no manager adds in January, which is good news. So how do we have costs that headcount manage out by month. We don't -- there's inflationary aspects. That's something we had to deal with. We've grown our expenses under the rate of inflation for the last 6 years. So yet in the revenue, especially in the fee-based business, have grown twice the rate of inflation. So -- and that's more costly.

So we're pretty confident. But we do measure it. We manage the hell out of it. We look at everybody, every -- we're very tough on hiring because at the end of the day, we have the option each month not to hire 1,000-plus people. So all you have to do is say, don't hire, we could drop it. So all the hiring and the replacement jobs and stuff like that is carefully engineered. And then we look and say, where can we redeploy that headcount capacity more productive. So it's something we've been doing over and over and over again.

The impact of the COVID and inflation pushed up the dollars per person paid, but the headcount being flat allows you to mitigate that back out. If you look from '24 to '25, the revenue from the fee-based businesses were all up high single or double digit and the actual expense base was about the same as it was the years before when they were growing at about half that rate.

And just on that one, Brian, every bank does things differently. If you're a shareholder of Bank of America, the expense control in a world where it's competitive, the need for technology investments, like how would you refuse the argument that this is not coming at the expense of investing in the business?

Well, we'll spend 10% more in technology development this year, I mean in '26 than we did in '25. We'll put several hundred million in AI as part of that. It didn't -- that came from nowhere. We'll build out the branches. It's all in the run rate. We've been building those branches out while we're taking them down. The branch count, I think fourth quarter, fourth quarter was down 100 or something like that. Net they're more costly coming in because we're bigger and built in a modern environment or the rental expense is higher, we're absorbing that. So it's just look at what we've done year after year after year, and it's because we've basically sat there and focus on the headcount.

So then the question is we are investing in new branches, technology development, more revenue-generating employees, and we're up -- we added 50, 70 private bankers over the last 12 to 18 months, we've added commercial bankers. We effectively added 1,000 people in business banking, which is 0 to $50 million by consolidating people out of the branches into it.

And then Sharon and team are actually shaping that down a bit because it was -- but that gave us a 40% -- 30%, 40% increase in the sales force. But people who are already at Bank of America already being paid, we just moved them to a place they could have more effectiveness and then more automated small business branches. So it's just -- the investment is there and has been in the market share you can see, it continues to push up and whether it's commercial banking or consumer banking or markets. And it's just -- it's very -- I believe strongly that we've got to invest in the businesses because we got to have the growth. I also believe strongly we can do that by reengineering the last cost out. It's not 0. And that's -- for a while, we were able to get out to be net 0 or below 0. Now it's going to be a couple of hundred basis points net of the inflation minus the takeout. But we've done it over and over again, and we watch it like a hawk.

But I also -- we put a lot more on the brand, and that's pushed our brand scores up the highest they've ever been and consistently month after month after month and push through our competitors. We've looked at -- we put a lot more in the physical plan around the world and stuff. So it's not for the faint of heart, but you can do it if you just are careful, but you have to invest to grow and look at our revenue growth and loan growth and deposit growth and things like that, but you have to be able to do it efficiently because we're in a big commodity business. You're going to have -- you said 100 or some corporates here. There's 4,000 competitors in consumer bank in the United States. It's not -- and plus the nonbank competitors. So it's not like you're sitting out there saying, we're a consolidated industry like that.

I can assure you the banks are thirsting and extremely productive. So feel good about that. But just very quickly, I know we have a few minutes left. One, so I wanted to hit upon 3 things. One, the role of AI, is this different from anything that we've seen in terms of what this could do in terms of productivity for Bank of America for the industry? Or is it a continuation of just how technology has shaped the industry?

It's both. Because it is something different, but it is a continuation of the paradigm of digitization, machine learning and now this, the thing is different. So we showed a chart at the Investor Day that showed -- we started -- the management team started in 2010, 285,000 people. We got up to 305,000 people. We're now the 213,000 people. But if you looked at what happened for the first big chunk of that time, basically 50,000 people came out of the consumer business writ large and about 25,000 people came out of operations and a net headcount reduction of, say, 85,000, 90,000. So start to think about that question.

What happened to the rest of it when we build out in revenue-producing areas and there were a lot of ability to -- as the regulatory onslaught came, we went from 2,500, 3,000 people in risk to 7,000, 8,000 people in risk and finance, et cetera. So what AI does is give you a chance to work on areas you heretofore haven't had that much of a chance to work on. So in supplying the 10 million [ sales ] we supply every day for the liquidity report that goes to the Fed, that's extremely capable of using AI to help you do and save money. And the audit team, which is 1,400 people, up from probably 600, 700 pre-financial crisis and now we can engineer the headcount back down. So it allows you to attack place.

Now how do we know that? If you looked at the Investor Day, we also talked about the ability to -- that AI is deployed. So a decade ago now, we were trying to put the search engine into our mobile banking, and we couldn't get it to work, the generally available search engine. So we said we need a model that can say, customer says X, this is what they really mean. Let's go do that for. Today, we call it a small language model. Nobody would know what we were talking about back then, and nobody did because we had to go and have somebody build it for a special. They built a thing which we end up calling Erica. Erica today has 20 million people using 150 million, 200 million times a quarter, 200 intents originally being 200 questions that can answer accurately, now 700. And so -- and we think it's 11,000 FTE equivalents that go through that system on a daily basis. So this isn't theoretical. And we took Erica from that, and we put it into the brake fix.

So when Ebrahim screws up his laptop and can't get it fixed, it used to be clicked on and he go call an 800 number and somebody talking through it. Now he clicks on little dot and he's interfacing to a bot. And that bot is actually powered by the Erica engine because we know it works. And look, we'll use other models. We are -- you do use other models, but that's gone. So it went there. Then Erica went into CashPro and several hundred thousand medium-sized and larger businesses use it. And so we took the same model across the platforms and use it, then we brought other models in. And so in the markets business, we have a model that helps put out a daily report of what's going on in markets. We have models which help us in the drafting of pitch books. So this isn't theoretical. And that's why I say it's not wholly different because we had models that did a lot of stuff before. It's just that the capabilities are now reaching other places. So -- and we know it works.

But what did we also learn? Your data has to be perfect. We spent about $3 billion on data cleansing over the last decade. The answer has to be right for the customers who go bunkers. The transmission mechanism has to be really robust. So at any given moment, you could be in a car 60 miles an hour going down the highway and hopefully not driving into this, but get on your mobile banking and ask a question, Erica, we have to hit 110 systems to get the answer right. So the pipe that transmits that, the pace at which it processes, you can't have this latency.

And by the way, you -- in the markets business latency -- so -- and so it's a lot more difficult than people think. So I think, yes, it's not -- it is wholly different. Yes, it's not totally different. But at the end of the day, what it takes is some infrastructure that I think people -- if [ blog bill ] comes, you can just take this model and let it run. The first time it does something with a customer in our business because of the relationship nature we have, you get the term paper wrong, your kid gets the term paper wrong in school. Yes, it's a bad day for him. We give a customer the wrong answer on something. It's not a bad day. It's a life defining moment for him.

Understood. Last question. I know we are over time. But when you think about capital deployment priorities, just talk to us what those are. And as we get more clarity on regulations, do you expect buybacks to ramp up?

So I think we basically have been focused on returning all the capital in incremental quarter. So -- and how do you think about that the other way around, the CET1/TCE stays about flattish, and we're trying to manage that. So we're basically taking all the earnings, paying the dividend and then putting the rest back in the market, we'll continue to do that. And then with the growth of the company, you'll see the ratios come down towards the target ratios. Now the question is how the math behind those ratio calculation goes. And so when we get that, then we'll be able to figure out what to do next. But right now, you've seen us drift from, I think, almost a 12% ratio. I remember down in the, I think, 11.30 or whatever it was last quarter, you'll see that drift down. So all the capital is going back to the shareholders and not because we don't have good uses for it because we are funding everything that's going on at the same time. It's just that our capital efficiency and effectiveness, we're able to continue to engineer that pretty well.

With that, thank you so much, Brian.

Thanks.

Hello, and welcome, everyone joining today's Bank of America Earnings Announcement.

[Operator Instructions]

Please note, this call is being recorded.

[Operator Instructions]

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

Thank you, Leo. Good morning. Thank you for joining us to review our fourth quarter results. During the quarter, we elected to change the accounting method related to our tax-related equity investments in order to better align our financial statement presentation with the economic and financial impact of those investments.

As a result, we filed an 8-K on January 6 and a related mini supplemental package recasting the numbers for the quarters of 2024 and 2025 and the full year of '23 and '24. The primary impact of the accounting change was a reclassification between the income statement line items in our income statement, which had an insignificant impact on net income. Our discussion today is based on those recast numbers.

As usual, our earnings release documents are available on the Investor Relations section of the bankofamerica.com website. Those documents include the earnings presentation that we will make reference to during the call. Brian Moynihan will make some brief comments before turning the call over to Alastair Borthwick, our CFO, to discuss more of the details in the quarter.

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

With that, Brian, I'll pass it over to you.

Thank you, Lee, and good morning, and thank you for joining us. This morning, Bank of America reported net income of $7.6 billion for the fourth quarter. That is up 12% from the fourth quarter of 2024. Our EPS was $0.98 per share. That's an increase of 18% from the fourth quarter of '24. We delivered 7% year-over-year revenue growth. This was led by a 10% improvement in net interest income, up to $15.9 billion on an FTE basis. For net interest income, we have delivered each quarter what we laid out across the year and finished a bit stronger than we expected. We grew average loans 8%. We grew average deposits 3%, we delivered 330 basis points of operating leverage in quarter 4 through continuing disciplined expense management. Alastair Borthwick will take you through the details of the quarter. But first, I want to highlight a few things about 2025 to close the year out.

I'm working off of Slide 2 in the earnings presentation. Our fourth quarter topped off a strong performance by my teammates at Bank of America for 2025. We delivered on our commitments to shareholders across the year with solid growth across revenue, earnings and returns. We drove operating leverage and continued robust investments in people, brand, technology in both our physical and digital networks. Those results reflect the power of our diversified business model and our commitment to drive responsible growth. Some highlights of 2025, you can see here, revenue was a little over $113 billion, was up 7% year-over-year. We generated 250 basis points of operating leverage for the year. Asset quality was strong and net charge-offs improved from 2024. We grew net income year-over-year by 13%. In addition, we grew EPS year-over-year to $3.81 or by 19%. We also increased our profitability and returns during the year. Return on tangible common equity improved 128 basis points. Our return on assets improved to 89 basis points. Our results and prudent balance sheet management allowed us to distribute 41% more capital back to shareholders, more than $30 billion. We grew loans 8% and we grew deposits 3%. Loans outpaced the industry and average deposits now have grown for the tenth consecutive quarter. Our focus on all the markets we serve, whether they're domestic or international, has allowed us to grow our client balances at a faster pace than the industry. Dean described how we do this in the U.S. at our Investor Day, and we will cover it later in the program.

As you look to Slide 3, we've also highlighted some organic growth highlights for the year and the quarter. We grew net new consumer checking accounts by [ 680,000 ] during the year. And that's while maintaining a strong average balance of $9,000 plus. This extended our consecutive quarter net growth to 28 or 7 years straight. We crossed over $6.5 trillion in client balances of investments, deposits and loans across Wealth and Consumer Banking. Our consumer investment totals reached $600 billion. Similarly, our workplace benefits totals, i.e., 401(k) balances related balances crossed over $600 billion also.

It's worth noting that $28 billion of our year-over-year loan growth came through our wealth management clients. Global Wealth & Investment Management showed improved nominal profit growth, stronger pretax margin improvement and continue to draw net new assets within the combined consumer of $100 billion during the year. In Global Banking, average deposits increased $71 billion, up 13%. We saw treasury service fees increased 13% over '24 and ending loans go across each line of business year-over-year, good core customer organic growth driving that.

Investment banking saw good activity. For the full year, our investment banking fees were the -- were the highest they've been since going back to 2020 and the outside pandemic period recovery. They were 7% higher than the prior year. Fees generated in the second half of 2025 were 25% greater than the first half. What does this show? It showed good momentum by our team. It also showed that our corporate commercial clients settled in during the year after tax policy being clear, tariffs became more understood, and they look forward and receive the benefits of deregulation. Global Markets under Jimmy's leadership saw continued growth in sales and trading with its 15th consecutive quarter of improvement and drove a record year of nearly $21 billion in sales and trading revenue. In addition to these stats, I commend you to review Slides 21, 23 and 25. Those highlight the continued progress of digital deployment and activation statistics for each of our businesses.

You should note there the impact of Zelle and the continued usage growth and also note the impact of Erica, our AI agent and its use both across our businesses and with our teammates. A couple of high-level comments on what we see in the economy. It was a pretty good decent environment as we move through year 2025. Consumer spending grew 5% -- at $4.5 trillion grew 5% over the 2024 levels. Account balances in the consumer business, that broad base of the U.S. consumer were stable through the year. Delinquencies and charge-offs improved in 2025 consumer credit. Unemployment in the market remains stable, and the equity market appreciation benefit those consumers or investors in our Merrill Edge products or in our 401(k) platforms. This strong consumer health bodes well for the continued improvement in growth in 2026.

When you go to our corporate commercial customers, again, as the tax law settled in, the tariffs appear to be manageable and deregulation kicked in. They had a pretty good year in good profits, including good credit quality and good money movement activity as we move through the year as they participate in the world economy. A world-class research team has the global growth rate for GDP at 3.4% in 2026 and U.S. at 2.6%. Risks remain out there. They always do, but we're encouraged and constructive on the head -- a year ahead. So I'll turn it over to Alistair to cover the quarter.

Thank you, Brian. I'll start using Slide 4. And as Brian noted, the fourth quarter was a strong quarter for us with 7% year-over-year revenue growth and good operating leverage producing $7.6 billion in net income or $0.98 in earnings per share. Our EPS grew 18% compared to the fourth quarter of '24. Net interest income of $15.9 billion on a fully taxable equivalent basis was strong and a little better than expected, and we saw good momentum from market-based fees that complemented the NII growth. Of the $28.4 billion in total revenue, $10.4 billion came from Sales & Trading, investment banking and asset management fees. And those are 3 of the more highly compensable market-facing areas. It's these areas that grew revenue 10% year-over-year in the aggregate.

On expense, the teams have shown good discipline across the businesses as we held headcount flat across the year despite the volume growth of clients and activity. Most of the year-over-year expense growth was a result of revenue-related growth in markets and wealth-based activities I just described and our continued investments in the franchise. We saw productivity improvements through AI and digitalization more generally, and those enabled us to add client-facing associates as we eliminated work and roles in our operational support areas.

This year, we brought another 2,000 college graduates into the company, and we remain an employer of choice with progressive benefit programs for our employees. And even with those additions, we managed to hold our headcount flat for the year through good management. Provision and net charge-offs declined year-over-year. That's for a second straight quarter, driven by continued stabilization around credit card and lower losses in commercial real estate. The net charge-off ratio fell to 44 basis points and is down 10 basis points year-over-year. And lastly, we reduced our average diluted share count by about 300 million shares or 4% from the fourth quarter of '24.

Slide 5 highlights the various earnings points that Brian and I have covered to this point. So let's transfer to a discussion of the balance sheet using Slide 6 where you see total assets ended the quarter at $3.4 trillion, a little change from Q3 as securities and cash reductions were replaced with loan growth. Deposits grew $17 billion from Q3 and we use those deposits to continue to reduce wholesale funding as part of the plan we've discussed previously to intentionally lower balances and drive a more efficient balance sheet. Average global liquidity sources of $975 billion remain very strong. Shareholders' equity of $303 billion was up less than $1 billion as earnings and a modest increase in OCI was mostly offset by capital return to shareholders.

In the quarter, we returned $8.4 billion of capital back to shareholders with $2.1 billion in common dividends paid and $6.3 billion of shares repurchased, $1 billion increase in share repurchase from Q3 reflects increased earnings over the past 6 months and some reduction in excess capital. Tangible book value per share of $28.73 rose 9% from the fourth quarter of '24.

Turning to regulatory capital. our CET1 level decreased modestly to $201 billion, driven by a $2.1 billion capital reduction from making the tax equity investment accounting change period, and we were not required to restate prior period regulatory capital. That capital reduction reflects the timing of equity and profitability in those investment deals and comes back into our capital over the next several years as those deals wind down. That accounted for roughly 12 basis points of CET1 reduction in the quarter, again, that we'll get back over time.

Risk-weighted assets rose $22 billion from Q3, driven by loan growth. Our CET1 ratio then declined from 11.6% to 11.4%, and it remains well above our 10% regulatory required minimum. Our supplemental leverage ratio was 5.7% versus a minimum requirement of 5% as of December 31 and 3.75% under the new rule, which we are adopting starting in 2026. This leaves ample capacity for balance sheet growth and our $467 billion of TLAC, means our TLAC ratio remained comfortably above our requirements.

On Slide 11, we show a trend of average deposits and the consecutive growth across those periods. Average deposits were up nearly [ 3% ] from the fourth quarter of '24, driven largely by commercial client activity. Mobile Banking grew average deposit $74 billion or 13% compared to fourth quarter '24. Our global capabilities, innovative solutions and our relationship managers continue to offer clients value and access to our award-winning digital platform in CashPro.

Consumer Banking reported its third consecutive quarter of year-over-year growth and low and no interest checking was up $9 billion or 2%. Importantly, ending deposits improved sequentially in every segment. Team also showed continued discipline on pricing while achieving that growth, overall rate paid on total deposits of 163 basis points declined 15 basis points from Q3, reflecting lower rates and disciplined actions in our Global Banking and Wealth Management businesses. Global Banking and Wealth Management rate paid both declined 28 basis points from Q3. The rate paid on the roughly $945 million of consumer deposits fell 3 basis points to 55 basis points in Q4 and remains low driven by the operating nature of that account base and that client base.

Let's turn to loans by looking at average balances on Slide 8. Loans in Q4 of $1.17 trillion improved $90 billion or 8% year-over-year, driven by 12% commercial loan growth. Consumer loans grew at a slower 4% year-over-year pace and importantly, we're up across every loan category of card, mortgage, auto and home equity. For the fifth quarter in a row, every business segment recorded higher average loans on a year-over-year basis. While commercial loan growth has been driven by our Global Markets Group, we've also seen year-over-year growth of 3% in Global Banking and strong custom lending growth of $18 billion year-over-year in Wealth Management as affluent clients borrowed for investments in assets like hospitality, sports, yachts, arts and business. In addition, small business saw its 12th straight quarter of year-over-year lending growth.

Let's turn our focus to NII on Slide 9, where on a GAAP non-FTE basis, NII in Q4 was $15.8 billion. And on a fully taxable equivalent basis, NII was $15.9 billion. And as I said earlier, that's up 10% from the fourth quarter of '24. On a fully taxable equivalent basis, NII grew $1.4 billion year-over-year, and $528 million over the third quarter. Our growth was driven by several factors: First, we saw good core NII performance from loan and deposit growth and disciplined pricing; second, we benefited from asset repricing as higher-yielding loan growth, replaced loan and security maturities and paydowns; third, client activity in Global Markets drove more of the sales and trading growth through NII than fees this quarter compared to Q3. That was about $100 million more of a shift in global markets activity to NII from MMSA than we had originally anticipated. And lastly, we had a small benefit from an average Fed fund rate, which primarily impact our liabilities dropping more than the way average SOFR rates behaved on variable rate assets, so we had a slight benefit there.

Our net interest yield, NIY, improved 7 basis points from the third quarter to 208 basis points, reflecting the growth in NII, while the earning balance remains stable as higher-yielding loan balances replaced lower-yielding securities. And as I said earlier, higher deposits allowed us to reduce wholesale funding while cash balances declined. Regarding interest rate sensitivity, on a dynamic deposit basis, we provide a 12-month change in NII for an instantaneous shift in the curve. That means interest rates would have to move instantaneously lower by another 100 basis points more than the 2 expected cuts contemplated in the curve. On that basis, a 100 basis point decline would decrease NII growth over the next 12 months by $2 billion. And if rates went up 100 basis points, NII growth would benefit additionally by approximately $700 million. With regard to a forward view of NII, let me give you a few thoughts. At Investor Day in November, we indicated our expectation that we would see 5% to 7% growth in net interest income in 2026 compared to 2025, and that's still our belief today based on the latest interest rate curve, which includes 2 rate cuts in 2026.

To reiterate our expectation from Investor Day, we expect good core NII performance from loan and deposit growth that will additionally benefit from sizable fixed asset repricing and cash flow swap repricing to drive the 5% to 7% NII improvement. During 2026, we expect roughly $12 billion to $15 billion in combined mortgage backed securities and mortgage loans to roll off quarterly, and those will be replaced with new assets at 150 to 200 basis points higher in yield or they'll allow us to pay down expensive short-term debt. For Q1 NII expectations I would use Q4 as a base after excluding about $100 million or so for the shift in Global Markets client activity that I referenced, that is likely to be offset in MMSA.

So simply a change in geography that's revenue neutral. I'd also note, we have 2 less days of interest in Q1 than Q4. And of course, we had a 25 basis point rate cut in December. Still we expect Q1 NII will grow roughly 7% from Q1 '25 based on the assumptions on Slide 18, in line with our full year guidance. Okay. So let's turn to expense and we'll use Slide 10 for our discussion. This quarter, we reported $17.4 billion in expense, up a little less than 4% year-over-year. When combined with our 7% revenue growth, this good expense management allowed us to generate more than 300 basis points of operating leverage, and that aligns to our target for the medium-term operating leverage range that at Investor Day. The increase in expense was mainly driven by incentives tied to revenue growth and higher brokerage clearing and exchange costs, or BC&E, costs from trading activity. Those BC&E costs reflect client activity shifting toward higher growth and higher transaction cost overseas markets. Now these costs are the ones that are generally reimbursed by the client, so they're included in our revenue essentially offset one another.

If we isolate change in expense for the incentives tied to Wealth Management, and remember, that reflects a 13% year-over-year improvement in asset management fees and we isolate the BC&E costs that supported a 10% increase in sales and trading revenue. Then combined, they represented roughly 2% of our expense growth for the year and they came with good revenue. Beyond that, productivity improvements from AI and digitalization continued to help offset higher wages, benefits and technology investments. Headcount remains our key driver of expense from compensation and benefits to real estate and technology. And we manage this closely, not only in total numbers, but also an organizational structure aiming to strike the right balance of managers and teammates.

Since the end of 2023, we've operated within a tight range of 213,000 employees. This year, we hired about 17,000 new teammates just to replace departures from what was a very low attrition rate. And every time someone leaves, we take the opportunity to evaluate whether the role needs to be replaced.

[ Coming to ] the third quarter. Noninterest expense was up about $100 million, driven by technology investments and wealth management revenue-related costs. That was partially offset by a $200 million net benefit from the combined impact of the reduction of the FDIC special assessment accrual and some other settlements that modestly increased litigation expense.

Looking ahead, our focus remains on delivering operating leverage for shareholders. We expect to generate about 200 basis points of operating leverage in 2026. Those expectations include a constructive fee environment that complements our expected NII growth. We've seen encouraging momentum in asset management fees, investment banking and Sales & Trading, and we look for that to continue. And importantly, if revenue comes in below our expectations, then obviously, revenue-related expense will be lower. As for Q1, we typically see seasonal strength in sales and trading activity and elevated payroll tax expense.

Combined with the absence of the FDIC benefit we saw in the fourth quarter and combined with ongoing productivity improvements, we expect Q1 expenses to be about 4% higher than Q1 of 2025. And even with that, we still expect to deliver operating leverage.

Let's now move to credit and turn to Slide 11. And where you can see asset quality remains sound with small improvements in several key indicators. It's not a great deal to cover here. Our net charge-offs were $1.3 billion, down about $80 million from the third quarter and driven by lower losses in commercial real estate. Total net charge-off ratio this quarter was 44 basis points, down 3 basis points from the third quarter and down 10 basis points from Q4 '24. Provision expense in the quarter was $1.3 billion and mostly matched net charge-offs. Focusing on total net charge-offs looking forward in the near term, we expect continued stability in total net charge-offs, given the mostly benign consumer delinquency trends and low unemployment data, the continued stability of C&I and reductions in our commercial real estate exposures.

On Slide 12, in addition to the consumer delinquency statistics, note the modest changes in other stats for both our consumer and commercial portfolios. Let's now turn to the performance across our lines of business, beginning with Consumer Banking on Slide 13. Our Consumer Bank had a strong year. And for the full year, the team generated $44 billion in revenue and delivered $12 billion in net income. Net income grew 14% from 2024, and we earned a 28% return on allocated capital. In Q4, Consumer Banking delivered strong results, generating $11.2 billion in revenue, up 5% versus the fourth quarter of last year and $3.3 billion in net income up 17%. So a really strong finish to the year.

These results reflect the value of our deposit franchise and underscore both the breadth of our platform and the success of our organic growth strategy and digital banking capabilities. Our focus on client experience and investments in both physical and digital capabilities, combined with more investment in product innovation and rewards drove the strong results. Business was also managed well for shareholders as we grew expense less than 2%, allowing us to improve our efficiency ratio to 51% and deliver nearly 350 basis points of operating leverage. This 2% expense growth reflects our continued investments in our brand, highlighted by our minimum wage increase to $25 earlier this year and incentives for more production. Digitalization and early utilization of AI helped offset some of the investments. Consumer investment balances grew $81 billion from Q4 '24 to nearly $600 million, supported by $19 billion in full year client flows and market appreciation. Average balance per investment account at $147,000 is up 12% from last year. And this investment platform serves as a great catch basin for first-time investors and for more experienced investors looking to manage some element of their own money.

As mentioned, consumer net charge-offs improved again on a year-over-year basis, and we continue to see stability in asset quality metrics. Credit card net charge ratio of 3.4% improved nearly 40 basis points from Q4 and improved linked quarter.

Finally, as shown in the appendix, this is Slide 21. You can see strong digital adoption and the engagement that all continued, and the customer experience scores remain strong, reflecting the impact of our ongoing investments in digital.

Turning to Wealth Management on Slide 14. And you can see this is a business that has strong momentum right now, and we've improved growth as we work towards the medium-term targets laid out at Investor Day. For the full year, revenue of $25 billion grew 9% compared to 2024, and net income grew 10% to nearly $4.7 billion. Over the past 3 quarters, net income has gone from $1 billion in Q2 to nearly $1.3 billion in Q3 and to $1.4 billion in Q4. Return on allocated capital went from 20% in Q2, up to 28% in Q4. And the pretax margin has climbed back into the high 20% range as we ended the year. Underneath all that, client balances grew $500 billion across the year to $4.8 trillion and that included strong ending loan growth of nearly $30 billion or 13%.

Within that, AUM flows were $82 billion and total flows of 80 -- sorry, [ $96 billion ]. And coupled with the flows of consumer investments, we saw $115 billion of well flows for the firm this year. And for the year, Maryland, the Private Bank added 21,000 net new relationships with the average size of new relationships continuing to grow across both businesses. Importantly, we're not just growing relationships, we're deepening them as we added 114,000 new bank accounts this year. And finally, I'd highlight the continued digital momentum as shown on Slide 23, where new accounts have increasingly opened digitally, underscoring the effectiveness of our digital investments and the evolving preferences of our clients.

On Slide 15, you see the results for Global Banking. The team had a good year and generated $7.8 billion in earnings and that represented about 25% of the company's overall net income. Year-over-year earnings were down a modest 2% as a result of interest rate cuts impacting NII from the variable rate assets in the business. [indiscernible] grew average deposits $71 billion or 13% and grew loans $12 billion. This included the addition of roughly 500 new clients in middle market, banking and more than 1,000 in business banking that chose Bank of America as their financial services provider in 2025.

For the fourth quarter, Global Banking delivered net income of $2.1 billion down 3% year-over-year with a 6% improvement in fees overcoming the NII pressure. Business remains very efficient with a 50% efficiency ratio and we earned 16% return on allocated capital in Q4. We generated $1.67 billion in investment banking fees, up modestly over Q4 '24. And we maintained our #3 position for the full year. And as Brian and I said earlier, investment banking fees showed good momentum, given all the regulatory and tariff announcements around the globe uncertainty settling in and our pipeline remains strong. Noninterest expense grew 6% compared to last year as we position the firm for the future with continued investments in technology and bankers.

Switching to Global Markets on Slide 16. I'll focus my comments on results that exclude DVA as we typically do. The Global Markets team produced a record year of record -- sorry, a record year of revenue, improved earnings and solid returns. We generated $24 billion in revenue for the year, and that exceeded last year's revenue by 10%. Earnings of $6.1 billion for the year were up 8% and the business generated a 13% return on allocated capital. It's worth noting this is the 12th consecutive quarter of year-over-year net income growth. Q4 Global Markets generated net income just shy of $1 billion, up 5% from Q4 '24. Revenue, excluding DVA, grew 10% year-over-year driven by strong sales and trading performance. And focusing on Sales & Trading, revenue ex-DVA, rose 10% year-over-year to $4.5 billion. And it was equities trading that led the improvement, growing 23%, supported by increased activity in Asia. And that brought higher revenue, it also brought higher revenue -- sorry, higher cost in the form of transaction costs as the clients still reimburse us for those fees.

[indiscernible] revenue grew 1% driven by improved performance in macro rates and FX products offsetting a modest decline in credit products. Loan growth continues to benefit from opportunities tied to highly collateralized pools of high-quality assets and clients value our expertise and in delivering these solutions.

On Slide 17, all other shows a loss of $132 million in Q4, with very little to cover here. And as we wrap up, I would just note Q4 effective tax rate was 21%, and it was 19% for the full year. For 2026, we expect an effective tax rate of roughly 20%. And then finally, I'd just note on Slide 18, we provided a summary of the forward-looking guidance that we discussed today. So I'll stop there. Thank you. And with that, we'll jump into Q&A.

[Operator Instructions]

Our first question comes from Betsy Graseck with Morgan Stanley.

Thanks so much for all the detail here. I did just want to understand one thing on the outlook as we're thinking about the expense ratio. I know that you've got the accounting change, and you also have outstanding guidance for the expense ratio over the medium term, I believe it is 55% to 59%, is that right?

Right.

Okay. I'm wondering, are you going to be adjusting that expense ratio guide given the accounting changes that you have made in this quarter?

Well, I don't think -- so at this stage, Betsy, but similar to our comments at Investor Day, the numbers that we put out aren't a cap on our ambition. So obviously, as we go through the course of the next couple of years, if we improved our efficiency ratio by a couple of hundred basis points this year, we're going to keep driving towards that range. And once we get in that range, we'll reassess and we'll consider whether it's time to consider a lower efficiency number in the future.

Yes, I was just thinking mechanically with the accounting change, the revenues improve, right? So with the denominator moving higher, shouldn't that target expense ratio of 55 to 59 move down a percentage point on each side?

Well, remember, we recast the prior periods. So that's already in there when you use the comparative periods. And I think part of the reason that it was important for us just to recast all the numbers and adopt the accounting is because that's how our competitors showed their results. So now we feel like it's on a comparable footing.

We'll now move on to Ken Usdin of Autonomous Research.

So [indiscernible] just a follow-up, Alastair, you made the point about just your outlook for fees is strong, and obviously, there will be compensation aligned with that. So just coming back on expenses in an absolute sense with 4% year-over-year growth expected in the first quarter. And I know everyone is just thinking about just how do you get to this operating leverage algorithm. Is that around what you're expecting just absolute expenses to grow given your underlying base of good fee growth in there?

Well, I think what we're trying to convey is, and we've said this over the course of the past several years. Ours is an organic growth company. We're investing for growth all the time. And when we perform the way that we believe we can, we're going to create operating leverage every year. That's what our North Star is in terms of the financial model. So we've guided you towards NII, up 5% to 7% this year. We've said in the first quarter, we believe the first quarter will be up 4% or so. We've said that we expect the operating leverage to be a couple of hundred basis points. So that should allow you to work backwards into the expense side of the equation, especially since we've given Q1 essentially.

And then I think it would just depend on your revenue assumptions regarding assets under management fees, markets and investment banking because those will be the big drivers. And yes, we remain constructive on all 3 of those.

Okay. Got it. And then so -- as you think about your -- when you talked about the Investor Day, you talked about a 200 to 300 basis point range. So obviously, each year is going to be different things, but you've got -- with a strong base of NII growth and fee growth and we're on the 200 side, what are the things you could do to kind of longer term expand that and potentially get back -- to get up to the 300 side of that 200, 300 range that you had given us in November?

Well, I think one of the things we've talked about when we went back to Investor Day, and this gets back to driving return on tangible common equity over time. You think about the fact that we've just gone from 13% to 14% last quarter. Prior quarter, we were at 15%. We Said we're going to get in that 16% to 18%. If you think about the organic growth opportunity we have around deposits and loans, and then you add the fixed rate asset repricing that drops to the bottom line. And then you combine it with the fee growth that we've talked about. When we manage expense carefully as we have done this year and headcount flat, sort of the core expense minus BC&E and incentive comp closer to 2% type growth. Then you'd look at something that gets pretty interesting over time. So that's what we're trying to drive over a period of time. And you're right, it won't always show up every year where it's exactly the same. But what we're trying to do, most importantly, drive organic growth, keep our expense discipline. That's it.

So Ken, the number one thing is to continue to let the headcount -- work the headcount through operational excellence and applications of new technologies, including AI that we gave you some sense for. So as we told you at Investor Day, today's activity in Erica in our consumer business alone is worth thousands of teammates that we don't have to have to do the great work we do for the customers. So we've applied digital, and that's why I put the pieces in the deck that you can see in the Pages 21 and beyond. We apply the digital capabilities now AI capabilities. And you saw during the year, the headcount was basically flat while we added more people in the field facing off the clients and generating new client flows. And that's why when Alastair talked about the middle market business, particularly in the private bank business, why we're seeing strong growth there.

So it's going to be about bringing up the numbers of people down over time, and we expect the headcount to come down during this year. And each month, we get the -- to maintain neutral headcount, we have to hire at a 7%, 7.5% turnover rate, you got to think it's higher than 1,000-plus people so we can just make decisions not to hire and let the headcount drift down. The team has done a good job of we ended the year basically flat. And we absorbed, as Alastair said, 2,000 very talented teammates from colleges in July. And by the end of the year, we were down to 2,000 people and end up back net neutral. So that's what you're going to get there. If you look at the expense load, it comes from people and it comes from the benefits and compensation, and it ultimately comes from the buildings and computer systems to allow them to do the great job for clients. So that's what we're working on.

We'll now move on to Mike Mayo with Wells Fargo Securities.

If you could just give more of an update on technology. What do you expect your spend to be this year versus last year, your spend on AI? And then Slide 21, again, we -- I think everybody appreciates the data you provide on your digital engagement, which is more than others. But no good deed goes unpunished. I'm just looking at Slide 21 and your interactions in consumer with Erica took a dip down in the last year, even while your users go up. So if you can talk about the spend investments and the results from Tech and especially AI.

Yes. So Mike, we'll be up on initiatives this year, 5%, 6%, 7%, I think, types of numbers. Total spending [ $13 billion, plus $4 billion ] plus in initiatives, that's all new code. And in that spending, remember, also we get the advantage of all the other people. So for example, under the 365 CoPilot rollout, which is now out across a total of 200,000 teammates and using it and learning from it, we expect to get good leverage of that. So that's an increase in the run rate year-over-year. So that's -- the technology is increasing, the technology number is sizable and the team does a good job in implementing change every weekend, frankly, except for 1 a year. So we feel good about that.

One of the things that you'll note is you use these technologies and combinations. So your point on Erica, I asked the same question, Mike, because it's pretty straightforward why would the interactions of the Erica could go down. The reality of that is -- well, we don't show is the amount of alerts that we deliver. So you can set up alerts which then has slowed down the need for Erica because the alerts are up to, I think, billions a quarter that are telling you when you're balanced low and things like that, that avoid you go in and asking the question.

So that combination of things is growing very quickly. So again, what you always try to do is look at a process from a customer to you and figure out how you can get that customer the best client -- the best customer experience at the lowest cost so you can plow that back into the low fee structures, which help us grow the business for, as we said, for 7 straight years in [ checking ] accounts. So there's a technical explanation on the Erica that is a little bit different. But thematically, you can see just the digital enablement just continues to grow and continues to help us leverage our franchise and frankly, consumers now pushing through 50% profit margin, and it will continue to go up.

Okay. And specifically on AI investments, like how much do you spend on that? Or the number of people, if you could dimension that and kind of what kind of outcomes you're looking for, especially as we say here at the start of the year?

Yes. Well, we're looking for -- we have the -- we have -- to give you an example, we have 18,000 people on the company's payroll who code. And we've using AI techniques. We've taken 30% out of the coding part of the stream of introducing a new product to service or change that saves us about 2,000 people. So that's how we're applying it. That was this year's statistic, meaning '25. Next year, we should get more out of it as we figure out and apply it across. So there's different projects going on in the company. I don't know off the top of my head the total expenditure, but it's several hundred million dollars.

Importantly, we're going through the company to generate more ideas how to apply AI. And I use example like our audit team has built a capability they think a series of prompts around doing audits and stuff to allow them to shape the head count back down that they had to grow during the regulatory on side over the last few years. They're going to be able to bring that down in AI, they'll be able to bring it down further, and they've laid out plans to do that. And so that's going on everywhere. But that was organic from there starting to use the copilot capabilities and then learning how to do the prompts and then using it to set up audit practices. So you're seeing it everywhere in the company.

So there's, I don't know, 15, 20 projects going on, and there will be a laundry list of much bigger size as we go through the company now and are generating ideas now that people are using it and getting used to how to use it.

We'll now move on to John McDonald with Truist Securities.

One of the other levers for the ROTCE ambitions that you guys have talked about is the denominator with the CET1 ratio. Could you talk a little bit, Alastair or Brian, about the time line for kind of where you are today with [ 11.4% ] to the target you laid out, which I think was around mid-10s?

Yes. I think, John, if you think about that we're still, as you well know, and your colleagues will now, we're still waiting for the rules to get finalized and they're multifaceted rule set that we got to make sure how it applies. But our goal, we appealed from 11.6% to 11.40%. And you're going to keep peeling that number down through expansion of our markets business, expansion of lending and other uses of RWA and so -- and we bought back a little more stock than in dividends than we earned. And so we'll keep working that down. But the idea is not to take the $200 billion-ish nominal and reduce that a lot. The idea is to use the excess to grow the balance sheet and let that work down as we see the final rules, the constraint may be sort of to common equity ratio stuff or $6.20. Could you be in the mid- to high 5s or something like that, that might be possible. And if you -- so we'll let this all drift down over time. And so just expect us to keep buying back -- to paying the dividend, increasing it and buying back the stock. And remember that as you said, we've drifted down a little bit by growth, but also the accounting change hit it, which will repeat.

So the next quarter we'll keep walking it down. Just the idea is as this will settle in, then maybe we can be more aggressive, but we got to know exactly what we're dealing with.

Okay. And then maybe if we pull back just the broader timeline on the ROTCE path. It looks like for 2025, you kind of ended in the 14, low 14s. What's the ambition to get to the lower end of the 16 and then the 18 over time.

I think we made it clear that you had -- and by the 8th quarter to the 12th quarter, you move in the lower part of the range and then the upper part of the range given a core economy growing it to 2.5% type of number. So -- and all the other attributes. So we made that clear. So that's basically 8 quarters from -- including this quarter, obviously, first quarter '26 and then we move into the 16 level, and then we move to the upper end of the range as we move through the third year.

We'll now move on to Matt O'Connor with Deutsche Bank.

I was hoping you could elaborate a bit on your outlook for loan growth and some of the drivers. You've obviously been bringing loans quite a bit. And just well in excess of the industry and how sustainable is that? And what are some of the drivers?

Yes. So embedded in our NII assumption is loan growth in the mid-single digits Matt. Obviously, we've had pretty good loan growth this year, kind of $20 billion a quarter or so. A decent amount of that has been on the commercial side. And we highlighted that in our financials and in our commentary earlier. So we're still seeing the growth in each of the consumer categories. And that feels like it's in a position where it's likely to continue to grow from here. So we feel pretty good about those 2.

I don't see any reason that it would be a whole lot lower necessarily than it was last year, but last year was a good 1 year, no question. So that's why we're saying mid-single digits. I think it will still be led by commercial. But you see the consumer categories picking up.

Okay. And then I guess, specifically in credit card, the spending was good, up 6% year-over-year or the balances were up just a couple of percent, fees were down. I know at Investor Day, you talked about accelerating the growth there. Maybe just update a little on kind of the initiatives there and the timing.

Yes. So [indiscernible] was very clear about this at Investor Day. It's our intention to continue to accelerate the growth in card. I think we've seen that in the last 3 or 4 quarters. It's picked up sequentially quarter after quarter. And if you were to look at what the team is doing right now, they're investing a little more for future growth. So you can see that in some of the things we're doing around the World Cup this year. You can see it in some of the things we're doing around more rewards in November. You can see it in our rewards program with our co-brand partners. And you could see it in the June cash back rewards offering. So we've got a lot of things going on right now that we're excited about. We know what we've committed in terms of higher credit card growth, and we feel like we're on the right path.

We'll now move on to Erika Najarian with UBS.

I just need to reask this question, Brian, Alastair because as I speak with investors, I think the communication on efficiency and expenses is a big part of what's holding down the stock. So just to clarify in terms of what Betsy was asking, she was asking, well, given the restatement and thereby higher fees, shouldn't you adjust the efficiency ratio range to 54% to 58% because you shouldn't get credit for the restatement, right? So that's why she was asking that. And I think what Ken was asking was, everything that Alastair mentioned, the curve, the growth capital markets, it's hitting this year, right? And so you're on the low side of the 200 basis point -- of the 200 to 300.

And so I guess the question here is what should we take away in terms of the expense messaging? Is it sort of what Brian alluded to that the headcount just needs time to work through and then you'll hit 250 to 300, and we just need to be patient. Is there more investment spend like you told Mike Mayo that you wanted to front load in a great revenue year. Like what exactly do you want your investors to take away in terms of how you're viewing the expense growth relative to your -- the revenue side because, for example, for your closest peer at JPMorgan, they grow expenses to $105 billion, no one really links, right, because of the revenue side. So what is the underlying message for operating leverage for Bank of America over this year and over the 3 years that is underpinning that 16% to 18%?

Let's back up to it. We -- as Alistair said, we are driving these numbers and they have improved on a recast basis by a couple of hundred basis points, and they'll continue to improve. And so the range will move down to lower numbers. And when we get into the range, we'll reset the range. But I think we're focused on the wrong thing. The question is, what are you doing now as opposed to what you say you're going to do. We have a tendency to actually deliver as opposed to talk about what we do in the future, and that's what we focus on. So what have we done? The efficiency ratio came down a couple of hundred basis points on an apples-to-apples basis with the parts of the revenue stream that are least efficient, the wealth management revenue growing very strong in the capital markets revenue.

So when the consumer bank revenue grows in and Global Banking revenue grows at the efficiency ratio there at, they produce a lot more pop than wealth management, which has, obviously, the financial advisory tariffs. So you have to also think of where the revenue growth is coming from to see the improvement, but we moved to 200 basis points. We've moved in past years when rates stabilize, we'll move it into the 50s.

As you get the lower efficiency ratio, the operating leverage can be narrow and you still get a bigger earnings spot. One thing that we've been telling you and that we want to make sure people understand is our goal is to keep driving all the extra NII to the bottom line meaning the difference between sort of the core and the repricing because we owe that to drive the returns up and the rest of it will have more normalized attributes to it.

So we've driven the efficiency down, and we expect to continue to drive it down. It is all going to be due to headcount because that's 60-plus percent of our expenses. We've absorbed inflation and everything while we're doing that. The expense growth Alastair just told you first quarter, 4% with expense increases and base increases and third-party inflation coming through, et cetera. So we're very -- we're very efficiently to our businesses, and we're very efficient relatively to our peers, and that will continue to improve. And that's -- I don't know how to do it.

One of the things when I talk to investors and I actually talked to people own a lot of stock every quarter. Their view is stay away from -- focus people on the operating leverage in the company because at the end of the day, we've got to grow expenses at a faster rate, which we have been doing than a slower rate than revenue -- excuse me, revenue at a faster rate than expenses for operating leverage. We produced that for our last 5 quarters. We had 5 years of it leading up to the pandemic.

You should expect us to get back on a streak. But the reason why they want us to focus on that, the people that own the stock is to get away from the nominal dollar debate every quarter and get more focused on how the team is doing a great job of driving the revenue and driving the expense. The revenue growth slows down because the dynamics outside our company, the expense growth will slow down.

We'll now move on to Jim Mitchell with Seaport Global Securities.

Maybe just a question on deposits. We've seen 3 rate cuts in September. Can you speak to what you're seeing in terms of deposit pricing whether betas are worse, better or worse than expected? And just also what you're seeing with respect to client behavior would just be helpful to?

Okay. First, with respect to our pricing discipline, really when you talk about pricing, we're most focused on the upper end of the corporate banking, commercial banking, a very large global banking deposit base where we're passing on rate cuts essentially the moment that they take place and in full. And so that's why you see the beta there, obviously quite high. Same thing in the upper end of wealth management. Consumer, you see much less in the way of pricing coming down because we have so much in the way of noninterest-bearing and checking and so much in the way of low interest-bearing.

So we feel good about the team's pricing discipline overall. In terms -- and you should expect that to continue in Q1, recognizing that the rate cut was late in Q4. In terms of growth, I think if you were -- to look at Page 7 in the earnings materials, it sort of tells you the picture. On the bottom right, you can see Global Banking. That's had a very good period of growth. Not sure that sustains at that sort of level. But we've had good growth in Global Banking. And most importantly, on the top right, consumer has begun to turn and is growing. And that's the most powerful engine for us. Those are the most valuable balances. We've now got 3 quarters of year-over-year growth. It's poised to grow, place to accelerate. So that's very important and wealth management is bottoming here. So we feel good about the mix of deposits changing in our favor this year. I won't just need to make sure that we keep track of that through the course of the year, but we're pretty optimistic on that, Jim.

Right. So I guess when you think about maybe inflection [indiscernible] in deposits growing loan growth still strong. You have an NII target of 5% to 7% for this year. Could we just drill down and look at NII ex markets, it's grown about 5% over the past 2 quarters. Is that a reasonable growth rate for this year? Or do rate cuts make that a little more challenging? Just how do we think about the markets versus ex markets NII dynamic?

Yes. So markets is going to benefit from a couple of different things. First, we obviously invested 10% plus into the Global Markets balance sheet. So that tends to mean that we're likely to grow NII, okay? Second, a big portion of that growth has been in loans. They're totally about NII. So that obviously is helpful. Third, when rates are cut, because markets tends to be liability sensitive that tends to be good for markets NII, okay. All those things are true. And the only thing, Jim, that I was just making sure that I pointed out in my comments earlier was we ended up at $15.9 billion. That is what I would consider to be mostly all core NII. It just happens that we had about $100 million or so of Global Markets NII that I think will revert back to MMSA next period. So that's the 1 part that I just feel like is important for us to note, but otherwise, I think Global Markets NII will grow with the continued investment in loans and in the business over time.

We'll now move on to Chris McGratty with KBW.

Alastair, on the funding remix. I guess what's left to go in your view based on your core deposit trends? And how much of that is baked into the guide, the liability optimization?

You're talking how much of the wholesale funding can we take down over time?

Yes, that's right.

I'd say probably at this point, somewhere around $50 billion to $100 billion just on ballparking that between repo CP, some of the short-term wholesale funding institutional CDs that we put out there that are just quietly rolling off now quarter after quarter after quarter. So that's the sort of number I would use.

Okay. Great. And then just piggybacking on the loan growth comment. The optimism I heard on the commercial growth. I guess any asset class is perhaps not as optimistic into '26? And if I missed it on the card expectations with the proposal, any comments there about either growth or expectations for -- to offset that would be great.

Just restate the question one more time for me. Just say it again.

Sure. Expectations for loan growth, anything you're not pushing on for growth? And then given the President's proposed 10% cap on card yields, any comments related to that related to your current strategy?

Okay. So on loans, I don't -- I mean, I'd say we're pushing for loan growth everywhere we can find good high-quality loan growth. So there is no place that we're not pushing. We obviously have substantial excess of deposits above our loans. So we've got a lot of capacity there. We've got a lot of excess capital, we'd like to continue to deploy if we can find productive uses with our client base. So pushing everywhere I think commercial has obviously had a good period. Wealth Management has had a good period, too. Some of that relates to things like traditional securities-based lending, but some relates to wealthy people looking to purchase expensive assets, and we're there to help them with that, obviously.

The consumer piece had been quieter last year, maybe picked up a little more this year. We can see the growth now in a variety of categories. Interesting to see home equity beginning to grow and right in across time. Mortgage, a little more activity this past quarter, if you see our originations, so we had more there in resi mortgage. So we're looking to continue to see pickup in consumer activity broadly. And again, we're trying to drive more card balances. So that's really important for us. That remains the front of our strategy.

Chris, on the rate cap, obviously, you're here -- there's a good public debate going out there on the -- if you have unintended consequences of capping rates as has been proposed over many years by various components in Congress and stuff like that. The explanation we've always made sure people understood is that the if you bring the caps down, you're going to get strict credit, meaning less people will get credit cards and the balance available to them on those credit cards will also be restricted. And so you have to balance that against what you're trying to achieve on the affordability. We're all in for affordability. You all know how we run our consumer business. It's the most fair to the consumer, and that's why we get good growth in high customer scores and those increasing. So we build a product to stop people from going to payday lenders. It's called Balance Assist. We've had 1 million -- 2.5 million to 2 million plus consumers have used that product to borrow a short-term loan for $500 or -- up to $500 for a $5 fee.

We have a no-frills credit card with lower rate structure to it, and we've had [ 700,000 ] clients this year took that card. And so we believe in affordability. But if you -- with instruments that cap, you will see unintended consequence of that, and I think that's what you're seeing a debate going on is people are making our points to the various -- the administration and Congress and others involved.

We'll now move on to Glenn Schorr with Evercore.

I think you brought up an interesting point getting people to focus on away from the nominal expense sales. And you obviously mentioned the less efficient revenues are growing good from Wealth and Capital Markets revenues. So my question is in a good backdrop like we're in, good economy, strong economy. Everybody's got a job, markets are doing well. If you take a step back, and you see flattish consumer deposits and down [indiscernible] deposits, it's not what maybe you would have expected. And that's not a you thing. That's an everybody thing. So I'm just wondering if you could address that, even with 680,000 new checking accounts, like why do you think we see this sluggishness in deposits? And do you think we'll see a turn at some point in '26? Because that would help the operating leverage story as well?

Yes. So I think you have to think about what the consumer, especially in the -- even the wealthy consumer, they come to us for the transactional accounts and they come to us, whether they're savings money. And as market alternatives off-balance sheet alternatives, money market funds, et cetera, ran up in rates, you saw a fair amount of money move in that, especially in the wealth management business. What Alastair explained earlier is that's kind of all behind us now the consumer has been stable and and bumping along. The wealth management actually grew in the last part of the year. And so you're seeing it -- and these have settled into much higher levels than they were traditionally. So I think wealth management was maybe $200 billion before the pandemic, maybe $230 billion, something like that $240 billion maybe, and it's moved to $280 billion type of level. So you're seeing a lot more cash towards.

So on the wealth side, it's people putting money into the off balance sheet yielding things because, frankly, we don't need the cash, as Alastair explained on some of the things and the early on the rates paid in CDs and things like that. And then secondly, it's actually the risk on trade of when the market. And on the general consumer side, what's happened is that they fine-tune some of the higher pieces. And a lot of the decline in balances that we experienced up until the last -- about a year ago, most of that decline was driven by wealthy consumers and our consumer franchise.

In other words, the balances for the people had less than $10,000 average balance before the pandemic or that were multiples of what they were pre-pandemic and then have been stable for the last few years. But the people who had $50,000, $100,000, $500,000 and average collective balance is pre-pandemic were down 20%. And with the percentage of total deposits there that drove it down on a relative basis, but again, that has stabilized. So we feel good where it's going. It's a lot of leverage. You have a consumer business, which has a 50% profit margin round numbers. And so it contributes to that. And if you go back and look historically, we have gotten that number down pretty far. And that has the biggest profit engine in the company is core to us driving that expense efficiency across the whole place.

Okay. I appreciate that, Brian. Maybe just a little more color on your comment on the IB pipeline looks good. There's moving parts in the fourth quarter, so I don't want to overemphasize the revenue environment. But maybe you could talk about the outlook, it's expected to be a pretty strong year. The underlying conditions are pretty strong for cap markets activity. So my question is, do you feel like you've made enough investments to capture more than your fair share, pick up share? And do you expect as good as the year as I do.

Well, I mean, I think we feel good about both of those. We feel good about the deal environment. Brian noted earlier, second half of the year, investment banking fees were 25% higher than the first half of the year, and that's largely based on more and more certainty around tax and trade and some of the things that really matter to and CFOs and Boards of Directors. So we feel good about the investment banking environment. We feel good about our pipeline. And yes, on the second question, we feel good about our investments. So you know this, Glenn, but for the benefit of everyone, we've expanded our local banking presence around the United States to improve our client coverage.

Today, we're in 24 different cities. We've got over 200 bankers in a group that really focus on middle-market clients. We've seen the benefit of that. We expect to see that continue as their relationships continue to grow. We're covering newer and emerging companies in things like technology and health care in a different way, earlier in their life cycle, and we're covering more clients internationally. So all of those places, we feel like are sorts of places that we should perform well. So yes, we feel good about that. And then I'd just say when you look at performance overall. Yes, we're at the top with some of the very largest transactions. So we feel like the franchise is in good shape.

We'll now move on to Steven Chubak with Wolfe Research.

So wanted to ask Alastair -- so I wanted to ask on the GWIM targets that you had outlined at Investor Day. You saw some good momentum exiting the year. You outlined the 30% margin target with accelerating growth expectations on the organic side, but new recruitment does require some upfront investment. So I just wanted to understand what gives you confidence you can deliver both the acceleration in organic while still driving better operating leverage.

Yes. So I think if you were to ask Lindsay and Eric, they'd tell you, and if you ask [indiscernible], they tell you that they enjoy significant competitive advantage as it relates to covering our clients. So obviously, we're in the wealth business, but we're also in the banking business. We have high tech and we have high touch. We are digital, but we're also local, and we offer scale. And then in terms of prospecting for wealthy families to add net new -- we've got consumer, business banking, commercial banking, corporate investment banking, all helping that group working together. So that franchise is one then that can deliver.

And if you were to look at what -- if you were to look at, for example, competitive attrition this quarter, the lowest we've seen in years. I think the Merrill FA see the value of our franchise and how they can help their own clients over a long period of time, and we're picking up the recruiting of experienced advisers. That isn't an enormous part of our strategy, but it's a training program so that we're training people in wealth management, Bank of America and Merrill and that is what that's ultimately what we believe we can just keep driving in order to improve the net new flows.

That's great. And then just one ticky-tack question on the tax rate. First off, thank you for implementing the accounting change. It certainly makes our lives much easier from a modeling standpoint. I know that it appeared at least in the 8-K that there was a small stub of tax advantage investments where you didn't adjust the treatment. So I wanted to just understand if that 20% tax rate is expected to hold going forward beyond 2026 or if there's any potential for very modest but still a little bit of upward drift as earnings continue to ramp?

For now, I'd use the 20% -- I mean, obviously, hence the guidance earlier. You're right, there are a small number of deals that don't qualify for the treatment. Now over time, all of those are going to burn down and burn off. And then in addition, you've got the question of whether or not some of the tax credit equity deals will end up expiring after 2027. So I think over a very long period of time, it's possible that the effective tax rate drifts up. But we'll be able to give you more guidance on that as we go through the various years.

We'll now move on to Gerard Cassidy with RBC.

Can you guys share with us, as you know, the Genius Act was passed and there's a lot of talk about stablecoin deposits. I think they're now trying to figure out how to close a loop hole so that the stable coin deposits cannot pay interest. If they are not -- meaning Congress, if they're not successful in closing that loophole, what's kind of the impact that you guys are thinking that could happen from this trend in stablecoin deposits?

So I think I would not -- look, we'll be fine. We'll have the product. We'll meet customer demand, whatever may surface. And so I don't worry about it. But the point we've tried to make, and if you look at some studies, I think, were done by treasury is that they say you can see upwards of $6 trillion in deposits flow off the liabilities of a banking system to as the deposits into the stablecoin environment.

And the key of that is to think that the restrictions to be a stablecoin is basically think of it as a money market mutual fund concept that has to be invested in only deposits, banking Fed or treasuries in short term. And so when you think about that, that takes lending capacity out of the system. And that is the bigger concern that we've all expressed to Congress as they think about this, is that if you move it outside the system, you'll reduce lending capacity of banks that particularly hurts small-, medium-sized businesses because they're largely lent to end consumers by the banking industry where capital markets-oriented companies go off into the market.

So I think in the end of the day at the margin, the industry gets loaned up. And if you take out deposits, they're not going to -- they're either not going to be able to loan or they're going to have to get wholesale funding and that wholesale funding will come at a cost that will increase the cost of borrowing. And so that's the issue that people have to struggle about. Do I think it affects the course of history of Bank of America, no, we'll be competitive and drive it. But I think in the industry overall, I think it's something that we've expressed concern as an industry, and we continue to make sure that they see those issues as they are trade groups and others as they work through the funnel legislation. What will come out of it? I don't know in terms of adjustments or thoughts about that and are working on as we speak.

Very good. And then just as a follow-up question. Obviously, you guys have presented a positive outlook for yourselves for 2026. The industry appears to be setting up very well with deregulation, steepening yield curve, healthy economic growth. Loan growth is picking up according to the H8 data. And as bank investors, we've learned to always look over our shoulder, but it seems like the worry now is there aren't many worries out there. Do you guys -- when you look at -- other than the geopolitical risk, of course, which is always a risk, what do you guys focus on just to keep an eye on in case something goes off the rails or something?

Yes, don't be a [indiscernible] there, Gerard. At the end of the day, think about the structure. We are always doing stress tests that reflect a 50% decline in house prices and market declines and all that kind of stuff and we test ourselves every quarter. We have trading stresses run every day. And so you're always trying to see, at the end of the day, whatever configuration of activities that produce as a result, the result that's going to reverberate into the global financial system and the U.S. financial system and the U.S. banking system is going to be the economy, right, in a recessionary environment, a high unemployment, those types of things.

So what we do is we stress scenarios that produce those characteristics. But really, if you think about it, the stress test is going from where we are today up to 10% plus unemployment, house prices are down, as I said, they don't -- the way the methodology doesn't really allow you to adjust your operating expenses, which we know we would adjust. And you can see the industry passive stress tests, and that's, I think, 1 of the most valuable things that came out of the regulation. And our goal is to get those fine-tuned a little bit so they don't swing back and forth depending on who is supplying to test, but the reality is it's a good thing, and we all support that. So I think that's the way to measure it. Is there [indiscernible] that you can outline you started rattling off and I could [indiscernible] off, yes. But you sat there and said last year at this time, those same dimensions were in place 2 years ago, 3 years ago, 4 years ago, but we just don't see what we see differently than this maybe 3 or 4 years ago is the momentum in the market -- the capital markets activity in the investment in AI and the consumer spending is 150 basis points higher than it was back then -- our customer base, the credit quality is -- we're running at 40 basis points level.

That's a level that is among the lowest in the history that we could find in a company going back 30, 50 years, these are good setups, but we're always worried about what could happen next as you say, and that's why we did the stress testing. That's why we have to balance. And effectively, that's why we drive responsible growth. We have a balance in lending. We're not overlent in any 1 industry. We manage those things. We make sure that we take the credit risk. We don't have a lot of stored risk that the industry had leading the financial crisis, meeting CDOs and things like that. So the industry is in pretty good shape, yet there'll be something that will happen and we'll all have to adjust to it. Let's just hope it takes us longer the next year to happen.

Yes. No, no, I totally agree with you.

We'll now move on to Saul Martinez with HSBC.

I wanted to follow up on credit. And I apologize if you addressed this in the prepared remarks, but it's been a busy morning. But your loan loss provisions and charge-offs have been particularly low in the last couple of quarters. And Brian, you just mentioned the 40 basis points being historically low. Wholesale also very low. I'm just curious your thoughts on whether you think we're at below trend levels of losses and in what categories? And is there a way to think about what more normalized levels of losses would be even in an economic environment that remains benign as we have now.

Well, you're right, asset quality has performed quite well. You can see that in consumer. You can see that in commercial. At Investor Day, we gave an idea of what we thought through the cycle might be. I think we said at the time, 50 to 55 basis points. So you can see right now the last 2 quarters, we were at 47 and 44 overall. So we're obviously happy to see that. We feel like we underwrite the right risk. We feel like we select the right clients. We feel like we've earned that and it happens to be a good environment right now. But maybe the 50% to 55% is the right number or through the cycle. No change to investment.

Okay. Okay. That's helpful. And I guess in consumer deposits, you expressed some optimism that you're seeing an inflection there and some acceleration. Just curious where you think the growth can get to? Do you think we can get to mid-single-digit types of growth in consumer deposits? And what are some of the variables that would drive that? Does it depend on additional rate cuts? And just kind of curious what you think a more normalized level of -- or not on a more normalized level of growth. But where do you think it could go to as rates come down and deposit growth starts to materialize?

Well, look, Brian did a nice job of sort of setting the historical context. We've had an enormous pandemic bump followed by normalization back towards something that would be more just normal for consumers in terms of what they would have in their checking accounts. That has taken years. But what we're seeing right now, Saul, is if you look at the checking account balances, for example, they're up a couple of percent now year-over-year, not 0.

So do I think it can go higher again next year? I believe we do. Historically, we might see consumer deposit growth at GDP to GDP plus type levels. Now that would put you in the sort of 4% to 5% type of range. Maybe we don't get all the way there this year, but we just come off a year where we added 3%. So we're obviously expecting and hoping for something slightly higher again in 2026 as we move to something more normal.

Thank you. At this time, there are no further questions in queue. I will now turn the meeting back to Brian Moynihan.

Well, thank all of you for joining us. And just in summary, it was a good quarter and a good year, and I want to thank our team at Bank of America for producing it. We've laid out at Investor Day, that world-class franchise we have across all these businesses their performance continues to make good progress in '25, both on revenue profitability and returns. The organic growth that I outlined earlier remains strong. The credit is very stable and very good quality. And we continue to manage head count and expense as we talked about to drive operating leverage. So thank you. We look forward to talking to you next quarter.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

If everybody could take their seats, we are going to get started with what is going to be the final presentation at this conference. I do think we have kept the best to last.

So Brian, thank you very, very much for joining us. It is actually the 16th consecutive year. That is definitely a record. So thank you very, very much. I look exactly the same as I did 16 years ago. So do you. You actually look younger.

Anyway, so let's start off with just your take on the macroeconomic backdrop. We've obviously just had the Fed just came out. But I'm curious about how you're thinking about the path for the economy next year, what you're seeing in terms of consumer and corporate engagement heading into 2026?

And I think you have some of the best spending data and I think you do some of the best analytics around it. What have you seen over the fourth quarter? And what does that tell you about the outlook for next year?

Well,-- so thanks, Rich, for having me. The first thing is our team had the Fed cutting rates today. So I guess they got that one right. Yes, I think it was a little surprised about the dot plots and what happens next year.

But if you look at -- our team has the economy in the U.S. growing 2.4% or so next year, that from this time last year to now, isn't a lot changed, but in between, if they dropped 100 basis points off the growth rate liberation day all that stuff and then put it back. And so you kind of got around this trip.

I think the certainty the path forward from 6 months ago to now is higher because the trade and tariff has largely worked through the system in terms of people's understanding of what will happen. I think taxes is done.

So I think immigration deregulation are the issues that are still working through. And I think business looks at that and says, "I've got some basics right now. I can invest." They're still worried about making sure the immigration gets settled down, so they have the workforce they need to do their work. It's what the clients tell us all over the country.

And our small business survey show that labor availability is becoming a bigger issue. It was that a few years ago, that inflation and now it's back to that. And that's just if you're a lot of the services-related business or construction business or things like that, getting workers.

Our consumers in the month of November across all different things, so Liz Everett was on CNBC, she talks about the credit in debit card because they can track that most carefully. But if you look across the whole platform, that's about 20%, 25% of the money movement. -- across the whole platform in a year, it's about $4.5 billion, $5 trillion, $70 million consumers, putting money in the economy. That is up 4.3% November this year versus November last year.

If you think of that in a historical context, that's consistent with the 2% plus growth rate in the economy. The way they're spending the money has a little bit of the elements of the key economy to it. not as much as people think, if you actually watch what's happened in the last few months in 3 terciles. The bottom tercile has been growing at a slower rate, still growing. Top tercile growing at a faster rate, has been keeping that rate it's the middle one, it's moved more -- a little bit less to the higher growth rate of the upper end and above the lower. And that's just a recent phenomenon. So that number was 5% in October, 4.5% in November. But I wouldn't overly read into a 0.5% movement because weekends how the calendar works can affect all that. So consumer is a good shape.

Our credit quality improved in the quarter -- last quarter. It's still there. It's good. Small businesses are fine. They're making money, Middle-sized companies credit quality is strong. They're still using their lines at a lesser rate than they did pre-pandemic. And that's probably an indication of -- it cost for, honestly, the biggest beneficiary of a lower Fed funds rate is a lower SOFR rate and therefore, a lower rate for middle market and small business borrowers. It's counter 2 of the consumer because mortgages are locked in. It's really more beneficial that group. So we'll see if they start using the lines a little more aggressively, but they're all fine credit quality is good. So we're very constructive.

And in the capital markets side, I'll participate in that. I think as you look. We think it's a constructive time and deals are getting done and people are out there didn't on stuff. It's all pretty good. The derailments or all the existential issues you can have connectors rate structure, not -- people not getting the Fed rate path right or the Fed not getting it right hyperinflation, all debt and all that stuff. But over -- in '26, we see pretty good shape.

Then just from a consumer balance sheet standpoint, anything to note in terms of normalization of cash levels and how that looks relative to...

Years ago, people said they're going to spend all the money to give you out of money. If you take the cohort of customers from early 2020 and look at them 6 years late -- almost 6 years later now, they have -- still have a lot more money in accounts, except for the highest balances from that time, like more than 0.25 million in there, they move the money into money market funds and stuff. Everybody else is up somewhere between the multiple 2 and multiple set.

Now remember, across 6 years, people get job promotion and stuff. So you got to be -- there should be a natural progression to all that and cash inflation went up. But there's no indication if you look year-over-year at the cap balance the consumer continue to push forward. And so there's just really -- they're not spending the money down. The credit quality is good. The FICOs and the portfolios are very strong, like you'd expect. The housing is going to be slow just because of the rate structure, but that's not a credit quality. It's not an issue for the consumers that are locked in the mortgages, they're in good shape.

Okay. So you just had the Investor Day, I think it was a month -- pretty much a month ago, right, just over a month ago. You set out both broader targets for the firm. You gave a very significant number of KPIs by business.

From your perspective, what are the 2 or 3 main points coming out of the Investor Day that you want to reiterate? But the other thing I wanted to ask is, I know you spent time with investors since the Investor Day, what do you think is most underappreciated in terms of the message that you wanted to get across?

So I'd start from -- the point was to say we have an organic growth engine, which has a competitive position. And around that competitive position, there are some serious moats that are hard to people to discern in sort of the day-to-day flow of the world. And it's been growing organically. And with all things on the net interest income, you'll see it even grow faster from a rig perspective.

So we came off the quarter with EPS was up 30%. Operating leverage was 600 basis points, et cetera, et cetera, revenue growth 10% and expense growth 4%. It came off a good quarter, and you said this is because of all the work we've done organically growing the franchise and a product quality et cetera. We want to make that message understood. That's number one.

The competitive moat by showing how much the technology spend, the complexity of running a markets business on a global basis with 50 regulators, those types of things. want to make sure people saw that. And then they saw where we had unique programs that we could grow our employee bank investments program, our local markets capabilities, the way businesses work together our international capabilities, which is critical to the middle market business. United States nowadays and even business banking, which is 50 million revenue companies and under.

Those three ideas: organic growth engine, already doing it returns increasing efficiency increasing because the NII. And that's what the investors see and say, we got it. we probably talk to investors a whole 25% or 30% of the stock since then because we have a routine that we go through every fall.

Okay. So the plan does incorporate a significant pickup in growth rates and market shares in a number of businesses. So a couple of questions here. I mean the first is, do you feel the current distribution footprint and platforms are set up for the growth from here? And then secondly, look, a lot of your peers do seem to be leaning into growth. Obviously, one of your peers announced a step-up in terms of strategic and investment spend yesterday. Can you talk a little bit about the competitive environment, what you've seen in the competitor environment so far this year and how you're expecting that to unfold next year?

So if you look at the market share of consumer banking, we have grown that consistently. But the difference between us and others is we've grown primary checking account deposit holds for the mass market consumer. That's a place where you're going to be in the middle of the finance and the household and where you're going to make the most money. And so the $950-odd billion in balances they have a substantial -- the total rate piads and 50-odd basis points or 60. I mean, that's because the mix of deposits is all core, Average deposit in our checking account 9,000 industry 3.

That difference is immeasurably different. And that's because we're not just trying to sell things. We're trying to sell stuff that sticks the room. And so we had a time in this company when we sold 10 million checking accounts a year, and we grew 1 million checking accounts. Today, we sell 4 and grow 1 million primary checking. Think about the difference in terms of amount of work that goes on for those 2 dynamics. And so -- and that just kept kicking 27 straight quarters of growth.

So those types of investments in organic growth are there. And organic growth in commercial were up 8% year-over-year. The market was up half that or something. We're seeing numbers of what we call logos, the clients we had in the midsized business, the 50 new bankers we put the work across the private banking.

I'd say wealth management, we pointed out to the group that we need to -- we take them out of recruiting, experienced advisers, for a bunch of years just because the economics went there. We've now gone back into that to where we need advisers plus the training program. So that's probably the most aggressive -- Eric and Lindsay put the most aggressive targets on the table from going from 2% to 3% net new assets to 4%. And they've worked at that. They've got the plans. Every else. Frankly, what people saw as growth rates were just a compounding of all the work they've done and really a continuation of the growth they've been seeing.

Go to market, we invest a lot $300 billion to $400 billion in balance sheet letting the GS move up because that's what is required and Jim and the team have done a good job. So we -- the place is growing organically, and now we just got to keep hammer home.

And the investment rate is interesting, and we can talk more about that when we talk about expenses because -- if you could talk about expenses because what we've been able to do for a number of years is consistently take money out of stuff we didn't want to do and put it in the stuff we want to do. And that number is staggering, and that's what we tried to -- we showed that in slide Investor Day, showed 285,000 people coming down to 203,000 people, And we were setting up 2 points. When you go from that period of time to now, we added 4,000 more coders. We've added 2,000 more client-facing people in the correlation business in the American business. We had another 1,000 people in the markets business. We had a -- we've been adding people all over the world to support that. Meanwhile the headcount's been basically flattish since 2022,; low point of maybe 20, I point at 216, but basically the last 3 years, 213.1 to 12.9, 1.2, 13.1. Meanwhile, you're putting tons of people in it and you're taking people off the back end of the process.

What AI gives is different, and that gives us a chance to tack a different group of people. The point of that slide was of the people that came out, 80,000 came out of retail and operations. That's not really -- we'll do that, but there's only 50,000 people left in retail. So there's so much you can go. What you're really going to do is take it out of place that you haven't been able to do.

And then on the competitive environment, I mean, what have you actually seen? And what are you expecting -- and then I guess, look, added to that, obviously, regional bank consolidation is obviously a big theme. Is that an opportunity for you because those organizations become inward focus as they integrate? Or is a threat because they actually have more scale? How do you think about that?

So a couple of things. One, when stuff goes on, people had to switch banks, switch names of banks, the client base churns, and that's an opportunity for us. How do we know that? We did it literally, if you go back to company almost -- probably you can count up 1,000 of them. So this is not new to us. We've been on the other side of trade. We know what I have, so we do.

The second of talent comes list because if you're covering client -- middle market companies in market, non-covering middle-market companies were 2 competitors merging, chances of us having an overlap or high, so we don't need 2 of us to do it. And then talent comes available. So we go in and take advantage of that. Will that consolidation continue? Absolutely. We run our consumer business at at cost of goods sold as you take the cost to pay on deposits plus all the operating costs of all the platforms, you get into 150, whatever it is today. That is several hundred basis points off a lot of the competitors. That allows you to have a low fee structure. It allows us to turn to not take place, allows you to invest in a competitive advantage. And that we're doing. As NII picks up that business, we'll go from earn almost X in the next few years.

So that's going on. mid-market space will take advantage. We'll keep happening has to because as much as people debate about scale in our industry, the industry, if you look across many years, the ROA, the industry keeps going down. And so the only -- what we've done is taken the expense out to keep below that and get a constant sort of return on tangible common equity. So we're good in a 4,000-person competitive market to pass through the benefits to the market on a lot of that. But if you aren't doing it, you can't do that. And that's where the fees and other things and the churn of the customers we just don't see in our customer base, and that allows us to price well and grow, get the core household. And meanwhile, it also gives us the right to invest a lot.

So let's talk about efficiency. It's everybody's favorite topic, and you gave a lot of data around this, and I think it's very encouraging. You talked about getting the efficiency ratio back below 60% near term into the high 50s, sustained operating leverage of 200 to 300 basis points.

Talk us through what the efficiency agenda looks like from here, where you see the greatest opportunities. And obviously, look, AI is still a very, very dominant theme. I mean do you think that AI will allow you to reduce the expense base in absolute terms, not necessarily in the next 1 to 2 years, but as you think out over the next 3 to 5 years?

The very last part of that is it will absolutely allow us to reduce the expense base of a particular product service or capability. The question of what you do with that money is going to be based on all the other things we talked about, competitive consumers need to invest in stuff.

So let's back up. Our efficiency ratio was overstated because of a way versus other people's efficiency ratio for 2 basic reasons. One is -- 3 basic reasons. One is the NIi is still kicking in, so that basically all goes to the bottom line. The second was we have a higher percentage of our business in the least efficient business, which is a great business, which is a wealth management business, but that's a higher percentage of our revenues. And so until the NII kicks in, that also slots it down. We're more efficient than in the business.

But the third reason is the -- we had the way we accounted for these tax credit deals, which goes away. And so that was 200 basis points. So whenever you said you're operating at 63, we're actually 61 on apples-to-apples before you make anything. So we for good about getting below 60 because, frankly, what happens over the course of -- you get the growth rate in the NII, which basically pours the bottom line, the fee-based business brings a lot of expense. Obviously, the wealth management business brings $0.50 on the dollar, investment banking brings another chunk in the market is the same. So you'll see that as that pours through. That's what drives it. And that's what we've seen so far.

And we had years we operate with operating leverage every quarter. The efficiency ratio in the mid to upper 50s in investing, and you'll see that come back, and that's largely really -- all things being equal, is just largely due to the NII rolling over and going the other way from 8 quarters ago, whatever it is now.

Okay. So 16% to 18% ROTC. I think you said you plan to get to the lower end in 2 years, the higher end in 3 years. How should we think about the improvement in returns from here? I mean, is it linear over that time period? Or is it more back-end loaded? So maybe talk a little bit about the nearer term versus the longer term

I'd say that it be careful a particular quarter generates different activities. So this quarter marks a little lighter than the first quarter, and that stuff happens. But generally, you'll see a progression year-over-year in the current plan. We put together a multiyear plan, you basically see a breakthrough towards the middle end of the second year breaks in and then it breaks the higher -- towards the 12th quarter.

So as you said, 7, 8 quarters in 12 quarters, 8 to 12 quarters, it's really kind of rolls into it and then rolls out. It's a 3- to 5-year target. I just told you we shut it in the third year, and that would be pretty ratable. Although a particular quarter, it could go up and down depending on how the market's doing.

Okay. So nearer term, can you just give us some high-level thoughts on the fourth quarter? Has anything changed since you last spoke either in terms of NII or trading? Is there anything we should be aware of in terms of credit and expenses? How is the fourth quarter shaping up?

Look, so on on NI no, no news. That's good because we keep hitting that progression. And on in credit, we're seeing charge-offs basically flatten out. So we don't see any news there.

I think the 2 or 3 things just to make clear. If you look at investment banking fees for 25 million or 24%, we expect it to be up about 4-ish percent. That number would mean the fourth quarter implied at least sort of flattish to a little bit down from last year, 1.5, 1.6. That largely had -- we did $2 billion last quarter. You were saying what, its largest deal flows and timing the stuff so we feel good about that.

Markets, we think, if you look at it year-over-year, as we think the fourth quarter finishes up, will be up 10% year-over-year and the fourth quarter will be up high single digits or close to 10%, and that's pretty good. would be 15, 16 consecutive quarter of linked quarter growth. So we feel good about that. So NII, what we told you those 2 items, everything else.

Expenses. Look, the thing on expenses is that from 24 to 25 million you'd look at it, we're up 4-ish percent, 4.25%, 4.5% 4.4%, I think if you come in at the year-end. Last year's fourth quarter, this year's fourth quarter, you're going to be up 4% and change. and that the pressure on that is all due to the wealth management business, and that's incremental on some of what they call BC, the clearing expense on markets. But if you look at that and look at it fairly last year, we had the credits in the FDIC. So it's up about 2.5.

And so we think it will be -- we said it would be flat is should we bounce around that, maybe I think, $100 million either way, but this pretty good expense growth control year-over-year. that's come from headcount. That goes back to what I said. The headcount has basically been able to manage flat head count in the aggregate with redeploying a ton of people going in different directions. And that brings you to a question of AI, which at the end of the day, AI today at Bank of America, in America in the consumer business. In the month of November, we added 1.4 billion digital connections with our customers. Eric has 20 million customers about 200 million times a quarter. We think it saves today about 11,000 FTE equivalents.

Now the big debate of that is, does it atomized behavior? What I mean by that is do you touch it 3 times a day where you wouldn't do something else 3 times a day. So you got to be careful about that. But the numbers are touch would equate to that. So -- and that's today. That's not -- yesterday, the 24-hour period, it does 2 million interactions. So we feel very good about its impact.

We took that same thing, to give you a completely historically different example, and put it into the brake fix technology widget. So when you go in and say, I need to change my password, my computer, I need something to done, whatever, we went from people answering that or one-to-one chat to the spot answer and half the questions 60 days. So you can see how it can affect process.

So we still have a lot of places where we think it can an audit in -- which is 1,200, 1,300 people for us and risk, which is 8,000 plus people in finance, which is 5,000-plus people where you have not had a tool that could change process as much as this tool has a potential. And so that's where we think the upside comes from.

We've been taking out cost years and years and years out of the operations processes out of that, investing in technology, probably doubled the amount we spend every year on technology initiatives, and we spend the $10 billion or just running the platform and keep them secure and all the stuff. And we invested in new branches and all that stuff. But the gig is different because the -- what you did there was a lot of process reengineering that you didn't have this tool for. So even on those, you can go back and get more credit offering memorandum preparation, pitch book preparation; these are all often operating. So what the debate we have is how precise you can be in the very near term. We just rolled CoPilot with the whole 365 Copilot. -- will be 200,000 people using it by the end of the year. and enroll additional feature functionality. How do you say what you get out of it? And that's the question? Do you just have to focus people on the [indiscernible] to be x percent more efficient over 2 or 3 years to pay for the amount of time and effort you're putting in that? That's a tougher question because it's not a process we're applying a technology, even an AI technology and saying 5 steps went to 3 steps. The 3 steps were enhanced this play, And you save money.

So it's going to be a little more interesting to that. But right now, we've been able to keep the head count flat. So all the expense growth is really inflation around people costs, incentives to wealth management business and then transactional costs. And inflation around people costs, the only way you're really going to manage it is to continue to drip the heads down. And that's where a couple of years ago, we said we had to get back on the other trail, and we've done it. Meanwhile, you're putting tons of people out to the front. And we think commercial bankers will get a 10% efficiency of the tools we gave them this year or next year, which means they can do more logo development with the same number of people they would have otherwise done.

Okay. So you mentioned the credit picture. But anything that you've seen of note in terms of early delinquencies. And then I guess? And I think the bigger picture question here is on the consumer side, in particular, asset quality has improved despite some of the weaker data from retailers and restaurants. Why do you think we're seeing this divergence between the banks and some of these other data points?

I think the how person spends money has -- is a different determination whether they pay their credit because if they don't pay their credit, they get then we can see in a FICO and they've just changed their life, whether they decide to have to go out to dinner onetime less or not.

So the rate of spend of restaurant stuff is growing. It's just not growing at the same rate spending like on cruise. This is growing double digit in our hard base, so you'd say. So we don't see there's indications of consumer stress. All the spending is growing. The credit quality is good. The charge-offs in our consumer business came down and just basically plugging along at a level that is 3.5% in the credit card business, which 20 years ago, I thought that was Nirvana.

Would you expect it to decline from those levels on ...

I don't think so because we take risk. And so you got to take the risk. So we underwrite 100 people, some where we're going to not turn out to have a they got to get to bore going to stick, they're going to lose their job, et cetera. So that's -- even with a prime business, you're taking that risk. So we expect to have that rate or a little bit higher, actually. So it's just performing about as good Will there be times when it would go up and be a little better or not yet, but just sort of structurally, if we were much below that I'd be worried we weren't taking the risk. And so -- but we just don't see any way our mortgage book very little line the LTV or something like that, the home equity book, the combined LTV is around the same, the FICO 700, we've had credits, so to speak, recoveries in the home equity book, which is really old loans that keep drifting through the system from years ago. It's all prime book. So we don't see any deterioration at all.

Now we're not in the subprime space. So you've had other people who could talk about that. And so a prime credit we're seeing. And remember, that's 1 of our strategies is we don't go seeking stand-alone credit. We really go after the combined relationship, what we call the stair step on the consumer side, which is operational count, first borrowing, second borrowing, credit card, home equity or car the home or home equity. That's the travel and investment. And so it's a very disciplined process. So you're inking off a good customer, you've actually seen an action stuff like that.

And on the small business side, we've seen a normalization that small business card charge-offs, which are higher than 4.5%, I think, or something like that. But that's just a nature of small business success or not success.

And then commercial really, it's -- we all talked about commercial real estate 2 years ago. That's run through the system and saw its way down and then really not a lot else. Episodically, you get 1 of these things and 1 of those things, but you're seeing no deterioration in the core portfolio.

Okay. So I'm going to talk about a couple of your growth initiatives in a second. But just on the loan growth side, can you just touch on what you're seeing on the commercial side and the commercial real estate side? Does seem that some of your peers are talking about that inflecting heading into next year.

And then the other thing I would be curious and getting your views on is OCC rescinded some of the rules around levered lending. Does that in any way impact how you think about the opportunity set in commercial lending over the next few years?

So if you've taken the last part first, the -- that's helped because the statement was you could do a handful outside of that guidance. And the guidance wasn't a rule, but you could do a handful. So let's define a handful. Let's do find a handful when you have 10,000 middle-market 20,000 middle market clients. [indiscernible] handful when you have several million small businesses, let's define a handful that's like in the busier. So what happens when you did one, you get your head beaten around to do it.

So getting rid of that as a principal as a good principle. Let us make credit -- we're pretty good.

And it just improves simplicity.

It what also just says, if this deal is a deal you want to do go do it. So I think that will help because it was -- you could never be right. it was only looked at after the fact. So we went through SNC exam or SNC examining. So we're all fine. You look at the credit portfolio you're saying, so why do you -- so I think what they realized is let us underwrite the credit. And our credit process doesn't work, right, if we have an adverse amount of it talk to us then, but don't overprescribe the precision of which you see a credit versus what our experts see.

By the way, we got people -- this is all they do 24/7. I couldn't tell them how to do it either. So we feel good about it. It's more of the spirit of doing that. It lets us compete in the market. And when you come to the private credit side, which is 1 of the difficulties competing private credit has been that imply constrained or explicit constraint in the application that that now lets us look at a middle market company that's going -- doing a recap with a private equity firm or a large if they're selling 1 of our clients is buying them, and they want to borrow at 5x or 7x for 6x in the right industry and believe the cash flow and have a good plan, we can do it. And so that's what the constraint was. And the rest of the commercial loan growth largely be -- I think we're up 8% year-over-year, third quarter something like that.

And the markets business has grown, but also the core small business has grown. I think they're up low mid-single digits. That's good. And then the commercial credit to wealthy people has grown very nicely. That was up and that really comes from wealthy people putting more in the market in its commercial credit because the structure of it. So we feel good about the commercial loan growth.

And now commercial real estate, I would say, after years of kind of bump along at the same level, you're seeing some life to it in well structured deals. But but that's a to do for next year. Right now, you're just seeing the start of it.

Okay. So credit card and growth in the card business is 1 of the drivers to the improvement in the return of the consumer business. It does feel like that is a particularly competitive space. Obviously, you've had a number of refreshes, a number of people looking to grow that.

What do you think is your key differentiator in terms of growing the card business from here?

If you look at the business we had from 3 or 4, 5 years ago to now, it's actually grown at 5%. What we did is we sold off some portfolios in the time frame. And so we can see the way we operate the business, Bank America branded cards few key co-branded partners driving that origination practice, we can get 5%. And so it's kind of embedded in there. And it has to not come out the other side, and that's the challenge for us.

So Holly and the team that run the consumer business, David Tyree runs marketing, Mary Docs products. We just announced this product for the World Cup, which is a chance to get tickets and things like that. All this is just to get people's attention on in a branded World Cup card, and we got a lot of uptake compared to our usual promotions and stuff. So they're out there driving it. We spend the money in advertising. We have some limited great affinity partners, but definitely we drive into this Bank of America. And the combined rewards program is why our consumer business stability is different than [indiscernible].

And so if you look at our consumer business, the piece we call preferred, which is the higher in the consumer business, 1/3 of the customers, 80% of deposits, but also has a deep penetration of cards in a combined rewards program. That is the competitive advantage that nobody can do that across multiple products. And so that's the way to play games.

So we think we can move that from basically a 1% type of growth rate up to 5%, but it's more by taking away the negative in the near term that is changing the growth rate on the top, that's been going on, so to speak.

And then a similar question on the wealth business. I mean, you've obviously got great brand, great franchise, but it is a step up in growth relative to the past, What -- again, what is it that you're going to do?

It comes down to 2 or 3 things that they described. One is that we started recruiting and experienced advisers because we just have tremendous client opportunity referrals from the commercial business to them and the consumer business we just didn't have the capacity. So we bring in advisers retool part of their book and then drive it. The second is we've created capacity and advisers not only automatedly, but also by household levels and things that Lindsay and Eric have worked done.

And third is the training program. We're returning into the training program that we started -- that we reinvigorated 4, 5, 7 years ago that those people get it more productive. And then we got the Merrill Edge piece. And so that also is growing. It's accounts and structures. It is well over $0.5 trillion in client assets. And so that's a starter case that we can use for people and MEGI within $40 billion, $50 billion of couple robot managed, so to speak, that we all talked about robo advisers 5 years ago, it seems right now, but that was a big new thing. We actually do it and we have a bucket it runs and it grows. And so we feel good about that because you can't forget that continuing piece.

And then the private bank Katy has put out 50, 60 more private client advisers over the last 24 months from other firms. They've gone through all the things that you're talking about. And so we feel good about that.

So you put that all together, it's really going to come down to the execution of the field by Lindsay and Eric's team to drive it, and they're confident they can just keep incremental. They've seen it move up and they just got to push through.

Okay. We've got a couple of minutes left. Let's talk about capital. You set out a 10.5% CET1 target. A couple of questions here. I mean the first is, can you talk about the path to the 10.5% in terms of increased deployment versus capital returns to shareholders?

Second, look, there's obviously more regulatory reform to come. So do you think that 10.5% could change after we get the Basel III endgame G-SIB recalibration?

And then lastly, can you talk about your appetite for inorganic growth for acquisitions as a way of accelerating what I think is a really good organic growth story?

Yes. So I think just on the inorganic. Remember that there's no legal way we can acquire deposit franchise has deposit. So that takes off the table, most of what would be interesting, except in a failed deal. So we'll see if people can bumped up or something like that.

And then outside that, it's line of business oriented. And so we've acquired various payments firms. We keep doing that smaller ones that you wouldn't see, so to speak. They just get absorbed and so we'll continue to do that.

I think we've made a decision on the wealth management business, how we're going to operate, which is the asset management is a different business and to make that have any kind of impact on us, we'd have to do something. So I don't -- so we look at it and say then it's just people and hire people. So we're in every market around the world for markets and commercial banking and treasury services and investment banking. We just keep adding people and adding expense and then making that more efficient. So that's sort of table.

On capital, we -- if you think about our nominal amount of capital, if that capital counts for more into the GSIB recalibration, which is, I think most important to us as an industry and is also, frankly, the thing that has gotten most wrong, frankly, so we can debate advance standardized and all of what happened with GSIBs you think it hasn't calibrated since 12 of 12 data.

And then you had this massive nominal growth rate in the economy from '19 to now. and they didn't change any of the stuff. So what's happened is we have actually grown our GSIB number from 250 to 300 to 350. And you're saying, but we're not taking any more risk relative side of the economy. So the whole thesis of it has been polluted by them not recalibrating. That helps us. And the question -- but it's got to be a rule got to be passed. We've got to understand the dynamics of it. And so when that comes Basel III finalization -- and so -- but that's the most beneficial thing to us. So I don't know until I see that. You see some of the outlines of it, but then they say, well, there'll be stuff over here, stuff over there. We got to get a set of rules on the table that we agree with. We do that, I think that allow us to have more excess capital, and we'll probably use that to grow into it while we take 100% of the capital or more is going out in earnings -- excuse me, in dividends and buybacks in this quarter, we'll buy back a little bit more as we go through the quarter because largely we earn more than we had in our capital plan last quarter. So we'll continue to do that.

But that then keeps capital from building for lack of a better term. And then what you do is you grow into that. And if we got a step-change in relief on the G-SIB, then you can make another decision whether you can step up the buybacks more. But right now, we're -- there's a glide path. I don't want to constrain markets ability to grow. We don't want to constrain marketability to grow and things like that. And that's the major users of GSIB.

So if you look at it year-to-year, they're 75%, 80% of the points usage, that's letting Jimmy keep pushing that business out there.

Okay. I think with that, sadly, we're out of time, but pleasure as always. We look forward to seeing you again next year. Thank you.