Earnings Call Transcript - BAC Q3 2025

Operator, Operator

To all sides on hold. We do appreciate your patience and ask that you please continue to stand by. Please stand by. Your program is about to begin. If you require assistance throughout the event today, please press star zero. Good day everyone, and welcome to today's Q3 Bank of America Earnings call. At this time, I would like to turn the program over to Lee McIntyre. Please go ahead.

Lee McIntyre, Executive

Good morning. Thank you. Thank you for joining us to review our third quarter results. Our earnings release documents are available on the Investor Relations section of the Bank of America website. Those documents include the earnings presentation that I will refer 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 just remind you that we may make forward-looking statements and refer to non-GAAP financial measures during the call. The forward-looking statements are based on management's current expectations and assumptions, and those are subject to risks and uncertainties laid out in factors that may cause our actual results to materially differ from expectations. Our details are in the earnings material available on the SEC filings on the website. Non-GAAP financial measures, including reconciliations to U.S. GAAP, can also be found in our earnings materials on the website. With that, Brian, over to you.

Brian Moynihan, CEO

Thank you, Lee, and good morning, and thank you all for joining us. Bank of America delivered a strong third quarter with good growth both in the top line revenue and bottom line EPS, all driven by strong operating leverage. Our ROTC improved to 15.4%. This quarter's results provide good momentum as we finish 2025 and head into 2026. We have been demonstrating consistent organic growth for many quarters. This quarter's results highlight the continued organic strength of our world-class deposit and lending capabilities. Our results also underscore the benefits of a diversified business model with top-tier positions not only in lending and deposits, but also across the markets, businesses, and wealth management, global markets, and global banking. Before I turn it over, I’m going to hit a few highlights here. We reported revenue of $28 billion, up 11% year over year. EPS was $1.06, up 31% year over year. We drove operating leverage of 560 basis points in the quarter. The efficiency ratio fell below 62%. The return on assets reached 98 basis points. During the quarter, we returned to our shareholders $7.4 billion through dividends and share repurchases. Net interest income on an FTE basis reached a record $15.4 billion. That was supported by strong commercial loan and deposit growth, along with continued balance sheet positioning. Investment banking fees exceeded $2 billion, up 43% year over year. Our team in sales and trading grew revenue by 8%, marking our 14th consecutive quarter of year-over-year revenue growth. Our asset management fees increased 12% compared to last year. All the business segments contributed to earnings improvement, but two stood out this quarter. Our consumer banking team delivered $3.4 billion in after-tax earnings, up 28% year over year, with 600 basis points of operating leverage. This reflects strong revenue growth and disciplined expense management. This business is driven off the core operating accounts of our consumer customers, and we gained more of them this quarter. These accounts have strong balances per account. The customers give us great customer scores and we operate them at lower costs with more primacy in the account and lower attrition compared to anyone in the industry. That is a winning combination. Our global wealth and management teams posted net income of nearly $1.3 billion, up 19%. That was driven by the strong Merrill and private bank advisor productivity. Lending in this business was particularly strong, with $12 billion in loan growth in this quarter. GWIM also opened another 32,000 banking accounts and grew deposits by $3 billion from quarter two. Looking ahead, we believe this quarter's performance reflects the impact of the investments we have made on a continuous basis for many years in technology, talent, and client experience. These continue to translate into strong financial results. We have been growing loans with the right risk and deposits as we continue to gain market share through organic growth. That translated into continuous NII improvements and complementary growth in our fee-based businesses. I also commend you to look at the digital slides in the appendix on slides 20, 22, and 24. They show continued progress across all businesses regarding applied technology, with extensive discussions going on about technology and AI. We provide the stats; what you'll see in these slides is the customer-facing activities of Erika. This application has been handling successful interactions for years at scale and that application has now been applied across other businesses and our employee base. So we're confident in our trajectory of results, and we are excited about the opportunities ahead. We look forward to discussing this further with you at Investor Day in November. I'll turn it over to Alastair to walk through the financials in more detail.

Alastair Borthwick, CFO

Thank you, Brian. I'm going to start with slide three to begin our discussion, and I have three things on the income statement that I want to add to Brian's comments. First, we're pleased with the continued demonstration of expense discipline across our businesses. So in the third quarter, we delivered 11% year-over-year revenue growth, significantly outpacing 5% expense growth and resulting in that strong 6% operating leverage. Of the $28.2 billion in total revenue, an aggregated amount of $11.3 billion came from our sales and trading, investment banking, and asset management fees. Three of our more highly compensable market-facing areas. Those areas grew 15% year over year. This revenue growth helps frame the 5% expense growth, even better. Importantly, expense growth versus the second quarter was held to under 1%, while those same compensable revenue streams grew 8% sequentially. This further reinforces our ability to scale efficiently and invest where it matters most. Second, provision expense improved this quarter with net charge-offs declining 10%, and we had a modest reserve release as a result of both credit card and commercial real estate improvement. The strong asset quality reflects the continued strength of our credit portfolio. Years of disciplined risk management and higher growth of the portfolio than other banks with good credit results. Lastly, our average diluted share count declined by 24 million shares from the second quarter, and this quarter included the dilution we've highlighted before in our filings, resulting from our 2008 issued convertible preferred Series L stock. On slide four, you'll note the various earnings highlights that Brian and I have talked about. I have little to add here. I’d prefer to spend a moment on our continued organic growth, which is powering our loan and deposit activity. We added new clients and deepened relationships with existing clients across consumer wealth, commercial and institutional businesses. Our teams are winning in the marketplace by putting our clients first. As always, we highlight the continued organic growth across each of our businesses, driven by client engagement, disciplined execution, and strategic investment. You can see the results on slide five. Consumer banking continued to show strong momentum. We grew another 212,000 net new checking accounts, extending our streak of consecutive growth to 27 quarters. This includes the fourth consecutive quarter of increased average noninterest bearing deposits, which are essential as they serve as the primary operating account for a relationship and are quite beneficial as a low-cost funding source. Additionally, card, home, and auto loan balances grew year over year, reflecting healthy consumer demand and further cementing the relationship beyond just the operating account alone. In small business, we continued our strength, maintaining our leading position as the number one provider of credit to small businesses in the United States. Wealth and investment management saw client balances climb to more than $4.6 trillion, driven by strong AUM flows of $84 billion in the past year alongside strong loan originations and market appreciation. Our advisors continue to deliver comprehensive solutions to help clients achieve their financial goals. In global banking, we saw a nice pickup in client activity in investment banking, resulting in market share gains and leadership rankings across many products, recording the highest non-pandemic fee quarter in our firm's history. Commercial client activity showed a continuation in loan and cash management demand, as Treasury service fees increased 12% year over year, alongside deposit growth of 15%. Markets continued to deliver on their string of year-over-year revenue growth and also continued to grow loans from healthy client demand. Looking at the balance sheet on slide six, total assets ended the quarter at $3.4 trillion, down $38 billion from the second quarter, as good loan growth was offset by lower global markets assets and wholesale funding reductions as part of our plan to continue to tighten the balance sheet. Importantly, this balance sheet tightening will continue to benefit the net interest yield. NII deposits ended just over $2 trillion and were up $72 billion from the year-ago period, with growth in both interest-bearing and non-interest-bearing deposits. Average global liquidity sources of $961 billion remained strong, and shareholders' equity of $304 billion was up $4.6 billion from last quarter as we issued $2.5 billion of preferred stock. There was also a $2 billion increase in tangible common equity to $208 billion, which included a modest capital build as net income slightly exceeded capital distributions. We returned $7.4 billion of capital back to shareholders, with $2.1 billion in common dividends paid and $5.3 billion in shares repurchased. Tangible book value per share of $28.39 rose 8% from the third quarter of 2024. Looking at regulatory capital, our CET1 level increased modestly to $203 billion, while the risk-weighted assets were relatively flat, driving our CET1 ratio higher to 11.6%. This is well above our October 1st 10% regulatory minimum. Our supplemental leverage ratio was 5.8%, with a minimum requirement of 5%, which leaves capacity for balance sheet growth. Our $473 billion of total loss-absorbing capital means our TLAC ratio remains comfortably above our requirements. On slide seven, we show a ten-quarter trend of average deposits to illustrate the extension of consecutive growth across those periods. Average deposits were up $71 billion, or 3.7% from the third quarter of 2024. Consumer deposits were up 1% year-over-year, while global banking deposits grew 15% compared to a year ago. Our global capabilities, digital solutions and relationship managers continue to win clients in the marketplace. In addition, we remain disciplined on pricing to achieve that growth. The overall rate paid on total deposits declined by 32 basis points year-over-year, reflecting both lower rates and disciplined actions in our global banking and wealth management businesses. The rate paid on the roughly $950 billion of consumer deposits remained low at 58 basis points in Q3, driven by the operational nature of that account and client base. Compared to the second quarter, total deposit rate paid rose two basis points due to a mix shift into interest-bearing accounts, and we expect improvements in the next quarter, driven by repricing after the Fed funds rate cut in late September. On slide eight, we can see average loan balances in Q3 were $1.15 trillion, improved by 9% year-over-year, driven by 13% commercial loan growth. Consumer loans grew at a slower pace, but importantly, were up across every loan type for the second consecutive quarter. Every business segment recorded higher average loans on both a year-over-year basis and on a linked quarter basis. Focusing on commercial loans and global markets, we continue to take advantage of the strong financing demand in the marketplace from institutional borrowers, where we lend against diverse collateral pools. Small business continues to benefit from our newly combined local market-based coverage model, creating more capacity for client expansion. Note the 9% improvement in wealth management as affluent clients borrowed for investments in assets like sports, arts, and businesses. So all of that balance sheet activity across deposits and loans results in net interest income. Looking at NII on slide nine, on a GAAP non-fully taxable equivalent basis, NII in Q3 was $15.2 billion; on a fully taxable equivalent basis, NII was just under $15.4 billion, up 9% from the third quarter of 2024. NII grew $1.3 billion from last year and $572 million on an FTE basis over the second quarter, driven by higher loan and deposit balances, benefits from fixed-rate asset repricing, and versus Q2, we also gained an extra day of interest. The net interest yield improved seven basis points from the second quarter, reflecting the growth in NII, while the earning asset balance modestly declined as loan growth replaced lower-yielding securities and global markets balances declined slightly. We reduced expensive wholesale funding and cash. Regarding interest rate sensitivity on a dynamic deposit basis, we provide a 12-month change in NII for an instantaneous shift in the curve. A 100 basis point decline would decrease NII over the next 12 months by $2.2 billion, while if rates went up 100 basis points, NII would benefit approximately $1 billion. For the forward view of NII, we expect to exit Q4 of 2025 with NII on a fully taxable equivalent basis in the range of $15.5 to $15.7 billion, noting that growth should accelerate in the second half of 2025. Despite uncertainties around tariffs and rates, we have seen good performance against our expectations. Even with the quarter's late interest rate cut and with the curve anticipating two more cuts in October and December, we believe fourth quarter NII will be at the higher end of that range, representing approximately 8% growth from the fourth quarter of 2024. For the full year of 2026, our expectations about growth drivers align with 2025 performance, and we anticipate similar growth rates in NII driven by core loan and deposit growth. Let’s move to expenses on slide ten. We reported $17.3 billion in expenses for this quarter, a modest increase compared to the second quarter and up 5% year-over-year. The year-over-year increase was primarily driven by incentives tied to growth, especially in our market-facing businesses, as well as ongoing investments across the enterprise. For Q4, we expect expenses to remain roughly in line with Q3. As you know, headcount is the key driver of expenses due to compensation, benefits, occupancy costs, and technology, and we manage this closely. Over the past three years, we've reduced our headcount from a peak of 217,000 to 213,000. Since the third quarter of last year, we're down 500, including the addition of nearly 2,000 college graduates last quarter. This disciplined approach supports both efficiency and growth. Moving to credit on slide 11, asset quality remains sound with improvements in several key indicators. Net charge-offs were $1.4 billion, down about 10% from the second quarter, with improvements mainly in credit card and commercial real estate. The total net charge-off ratio this quarter was 47 basis points, down eight basis points from Q2. Q3 provision expense was $1.3 billion and mostly matched net charge-offs, with a modest reserve release related to improved outlooks for both credit card and commercial real estate. Regarding total net charge-offs, we do not expect much change given consistent consumer delinquency trends, stability of CNI, and reductions in CRE exposures. On slide 12, in addition to improvements in consumer losses, non-performing loans are down 19% from Q2, and reservable criticized exposure in commercial real estate is now down nearly 25% from Q3 2024, as we dealt with the more problematic exposures throughout the year. Next, turning to performance across our lines of business, beginning with consumer banking on slide 13, generating $11.2 billion in revenue, up 7% year-over-year, and $3.4 billion in net income, reflecting 28% growth. Return on allocated capital rose to 31%. These results reflect our deposit franchise's value, underscoring both the breadth of our platform and the success of our organic growth strategy and digital banking capabilities. Innovations such as family banking and high-value cash back credit cards are delivering differentiated value to clients. This client value proposition, combined with disciplined pricing, helped drive a 9% year-over-year increase in net interest income. Another strong highlight this quarter was expense management, which enabled us to deliver over 600 basis points of operating leverage. Continued innovation and advanced technology deployment helped us hold expense growth to just 1% year-over-year while significantly increasing revenue. Our efficiency ratio improved, falling below 50% for the quarter. We continue to invest in high tech, driving higher digital engagement, and we continue to expand into new markets while supporting our brand in those communities. As an example, we opened four new financial centers in Idaho over the past six months to enhance service for clients in that region. Consumer investment balances grew 17% to $580 billion, supported by market appreciation and $19 billion in full-year client flows. The third quarter average balance per new account of $110,000 is up 6% from last year, and the investment platform serves as a significant catch basin for first-time investors and affluent investors. Consumer net charge-offs improved on a linked quarter basis following a decline in delinquencies. The largest component of consumer losses is credit cards, and our loss rate decreased from 3.82% to 3.4% linked quarter, contributing to an improved risk-adjusted margin on credit cards approaching 7.5%. As shown on appendix slide 20, strong digital adoption continues, and customer experience scores remain elevated, reflecting the impact of our ongoing investments in digital capabilities. Move to wealth management on slide 14, the business delivered a strong quarter marked by improved profitability. Net income grew 19% year-over-year to nearly $1.3 billion, driven by new household growth, strong AUM flows, loan growth, and disciplined expense management that produced meaningful operating leverage at a 26% return on allocated capital. We achieved 300 basis points of operating leverage, which contributed to a 27% pre-tax margin, an improvement of over 200 basis points. Merrill and the private bank managed $4.6 trillion in client balances and continued to generate organic growth with $84 billion in AUM flows over the past year, reflecting a healthy mix of new client assets and existing clients investing more capital. During this quarter, Merrill and the private bank added 5,400 net new relationships, with the average size of new relationships continuing to grow across both businesses. Importantly, we are not just adding relationships; we are deepening existing ones, reflecting the strength of our integrated model and product offering. The percentage of clients with banking products continues to rise and is now at 63%. In Q3, GWIM reported record revenue of $6.3 billion, up 10% year-over-year, led by a 12% increase in asset management fees. Loan growth remained strong, and we saw a notable pickup in custom lending, driving a 9% year-over-year increase in average loans. The continued digital momentum is illustrated on slide 22, where new accounts are increasingly opened digitally, showing the effectiveness of our digital investments and evolving client preferences. On slide 15, global banking results benefitted from improved investment banking activity, significant deposit growth, and solid loan performance in Q3. Global Banking delivered net income of $2.1 billion, up 12% year-over-year, supported by 500 basis points of operating leverage and a 17% return on allocated capital. The standout driver of performance was a 43% year-over-year increase in firmwide investment banking fees, fueled by 7% overall revenue growth. Firmwide investment banking fees rose across the solution set; advisory was up 51%, debt underwriting increased 42%, and equity underwriting grew 34%. We maintained our number three position year-to-date while gaining market share during the quarter. Notably, we participated in several of the industry's largest transactions, confirming the value clients place on our financial advice and solutions. Non-interest expense grew compared to last year as we continue to invest in the future. Average deposits grew 15% year-over-year, contributing to a 6% increase in global transaction services revenue, and disciplined pricing coupled with lower rates led to a 47 basis point decline in rate paid compared to a year ago. Switching to global markets on slide 16, excluding DVA, we once again achieved solid revenue and earnings performance, once again achieving a 13% return on allocated capital in Q3. Global markets generated net income of $1.6 billion, up modestly year-over-year, consistent with the prior quarter revenue. Excluding DVA, year-over-year revenue rose by 10%, driven by strong sales and trading performance and increased investment banking revenue shared with global banking. Sales and trading revenue, excluding DVA, rose 8% year-over-year to $5.3 billion. Fixed revenue grew by 5% driven by improved performance in credit products, with equities trading revenue increasing by 14% supported by increased financing activity in Asia. Expense growth year-over-year reflects both the revenue increase and higher trading-related costs in certain Asian markets, which are passed through to clients and appear in both the revenue and expense lines. We continue to benefit from lending opportunities tied to highly collateralized pools of high-quality assets as clients value our expertise and liquidity in delivering these solutions. In slide 17, the 'All Other' segment shows a loss of $6 million in Q3 with limited noteworthy items. Our effective tax rate for Q3 was 10.4%, and excluding tax credits related to investments in renewable energy and affordable housing, the effective tax rate would have been much closer to a normal corporate tax rate of approximately 23%. Thank you, and with that, we'll jump into the Q&A.

Operator, Operator

At this time, if you would like to ask a question, please press star and one on your telephone keypad. You may withdraw yourself from the queue at any time by pressing star two. We'll take our first question from Glenn Schorr with Evercore. Your line is open.

Glenn Schorr, Analyst

Hey, Glenn. Hi. Thanks. Hey, Glenn.

Brian Moynihan, CEO

Glenn, before you start, let me just say it seems like one of the phone lines may have cut out at some point during the call, but the webcast was working throughout. So just a reminder that the website will have the replay of the call in case you were on one of the lines that might have had a break in it. So, Glenn, go ahead.

Glenn Schorr, Analyst

No problem. No problem. So, Alastair, I heard your question. Your comments on the expense message for the fourth quarter. So appreciate that. I guess I have a bigger picture AI question. Okay, your big banks still are. You're ahead of the curve in terms of digitizing the whole franchise. But with the infusion of AI throughout the organization, and you still have big manual functions throughout the firm, why aren't you and others talking about AI as a huge efficiency driver of better margins in the years to come? Is it just a little too far off? Am I a little too optimistic? I'm just curious on that front. I think, you know, your operating leverage is great. I'm not talking about that. I'm just talking about AI's potential in general.

Brian Moynihan, CEO

I think, Glenn, it's Brian. Good to hear your voice. Look, we believe applied technology, which includes a range of outcomes from the digitization that we show in those pages in 2022 and 2024 over a period of time. And the customer adoption of technologies and interfacing with our company and technology always provides that. We had 280,000 people 15 years ago. We have 213,000 people. Three years ago, we had 217,000 people. After the pandemic and all the manual tasks we had to build up, we worked that back down. We believe strongly that all technologies help drive that. This technology and artificial intelligence allow you to do things we couldn’t do before. The implementation requires careful attention; you have to ensure data is appropriate, models give the right answers, and it has to be in a controlled environment. In a regulated institution like ours, we have to be precise. If we decline a mortgage loan under automated underwriting, we are liable for the outcome, irrespective of the method. We’re seeing it applied broadly, and customer activity is significantly up, reflecting this technology's effectiveness. We had 2 million interactions handled through the platform just yesterday. This isn’t something for the future; it’s currently operational, and we are proud of our team for implementing it thoroughly across the company. We strive to manage operations while growing revenue faster, which ensures efficiency improvements.

Glenn Schorr, Analyst

Okay. So more revenue and same expenses. That would still bring us better margins in the future. That's really where I'm going. Sounds like you agree, but you don't want me to pin you down on a point in time.

Brian Moynihan, CEO

Yes, but be careful about expecting immediate results. We need to ensure implementation and accuracy. In the last five years, we’ve seen a 20% increase in core checking holders. In consumer checking, balances are up by 50%, which demonstrates the leveraging of growth.

Operator, Operator

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

John McDonald, Analyst

Hi. Good morning. You guys had good results across all your capital markets businesses, sales and trading, IB, wealth. It's always hard to have an outlook here, but just wondering broadly how you're feeling about the environment, pipelines, and investments made in those businesses against what's usually a seasonally slower fourth quarter and coming off such a strong third quarter?

Alastair Borthwick, CFO

Thanks, John. I'll start with investment banking. We've seen a pickup in activity here in the third quarter. We're happy to see that as we've seen more certainty around trade and tariffs and taxes, allowing our client base to make longer-term decisions, reflected in our investment banking activity. Regarding pipelines, they’re up, over double digits, and we feel good about the development. We need to see how the transactions execute in Q4, but it feels like a constructive environment for M&A at this point. For our global markets business, we’ve made significant investments, especially in investment banking. Normally, Q4 sees a seasonal slowdown in client activity, which is quite typical. However, the constructive environment remains as investor clients continue to reposition based on rates and policies.

John McDonald, Analyst

Great. Thanks, Alastair. You mentioned deposit beta. What are your expectations for deposit beta across your various businesses if we continue to see the Fed moving rates down?

Alastair Borthwick, CFO

You will see us do the same as we've been doing. In the wealth business, we tend to fully pass through money market rates. For global banking, we always do it on a client-by-client basis. Particularly around interest-bearing accounts, we expect to pass through rate cuts as they develop. You should see us with the same disciplined pricing on the way down as we offered on the way back up. Because the September rate cut arrived late, you won't see that in our Q3 numbers but will see it in our Q4 numbers.

Operator, Operator

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

Jim Mitchell, Analyst

Hey. Good morning. Alistair. You noted you took down more expensive wholesale funding on the liability side, which kept the balance sheet relatively flat. This seems more creative than NII accretive. So the question is, how many quarters do you expect this? What sort of earning asset growth should we expect over the next year?

Alastair Borthwick, CFO

We've discussed focusing on net interest yield improvement over time. First, net interest income will continue to increase, and second, we expect the balance sheet to not grow as fast as loans and deposits because there's still more wholesale funding to pay down. As you mentioned, it has no impact on NII but is net interest yield accretive. We have more of that to do. It won't be the main driver of any NII accretion. Think of it as about 1% slower growth over the next year or so.

Jim Mitchell, Analyst

Okay. That's helpful. And then pivoting to capital, you're well above your 10% minimum. Why not take that down a bit? How do you view your target, and do you have a longer-term target?

Brian Moynihan, CEO

Our target remains sort of 50 basis points over the regulatory minimum. You can expect us to keep working that down. Interestingly enough, this quarter's ratios were flat because of extra earnings and capital distribution. We returned $7.3 billion of capital back to shareholders. You should expect us to be at a good rate, and through good organic growth, we use up some of it. As for any uncertainties, we need finalization on some rules, but we expect to grow our way through it, which would lead to more earnings.

Operator, Operator

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

Erika Najarian, Analyst

Hi. Good morning. You reported a standout quarter with a ROTC of 15.4%. One of your closest peers, Wells Fargo, did put out a medium-term target of 17 to 18%. Given that you've hit this target, should we presume that you could sustain it over the near term and perhaps work upwards, closer to those targets?

Brian Moynihan, CEO

Erika, I think you should expect us to keep increasing ROTC. We’ll walk you through that at Investor Day. If you think about NII growth anticipated to compound over several years, combined with organic growth and the boost we get from fixed-rate asset repricing shows promising potential.

Erika Najarian, Analyst

Got it. Thank you so much.

Operator, Operator

We'll take our next question from Mike Mayo with Wells Fargo Securities. Your line is open.

Mike Mayo, Analyst

Hey, Brian. I’m looking for more clarity on the efficiency ratio. You expect it to improve. It was 65% last year, 65% last quarter, and now 62%. What's your target for that, or will we have to wait until November 5th?

Brian Moynihan, CEO

The question is where is the revenue coming from for the next four quarters? NII is more efficient because the same loan balances involve the same people producing additional credit relationships. Consumer production costs are structured to yield positive margins. We’re confident in expense management. We’ll provide guidance, but we aim to continue to grow revenue faster than expenses for operating leverage.

Mike Mayo, Analyst

Could you provide more on AI? You're ranked top ten globally in AI utilization and deploying patents. What are your best initiatives in this regard?

Brian Moynihan, CEO

We view AI as enhanced intelligence that our teams will use in delivering services, not as artificial intelligence replacing them. The impact of this technology is already realized; we had 2 million interactions handled through the platform just yesterday, reflecting effectiveness across operations. Our focus is on proper implementation that meets all regulatory standards. The work we’ve done quite successfully advances client interactions, and the efficiency improvements will be substantial, providing increased capability without compromising service.

Operator, Operator

We'll take our next question from Chris McGratty with KBW. Your line is open.

Chris McGratty, Analyst

Overall credit results have been strong. But is there anything giving you pause versus three to six months ago? Anywhere you're avoiding?

Alastair Borthwick, CFO

Broadly, we don't see any change. Credit remains strong, with charge-offs decreasing. We feel confident as we have a defined strategy for responsible growth that meets credit quality needs while achieving loan growth that exceeds others. We're always monitoring the landscape, but credit portfolios are performing well.

Brian Moynihan, CEO

It’s important to highlight that our industry undergoes thorough regulatory examinations. If you look at the statistics across our industry and peers, the results show strong positions. We're comfortable, having both the ability to grow and maintain good risk standards.

Operator, Operator

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

Ken Usdin, Analyst

Hi. Good morning. Just a follow-on regarding the commercial loan growth. How much capacity do you have to continue to expand this part of the book? How robust is the demand, and what is your view on spreads and returns?

Alastair Borthwick, CFO

We have substantial capacity; with $2 trillion in deposits and $1.15 trillion in loans, there's significant room to provide funds over time. Demand has been reasonably robust, and we are in a position to capitalize. Spreads remain attractive, which has allowed continued global market improvements.

Ken Usdin, Analyst

On the retail consumer side, consumer deposits have shown a slight sequential decline recently. What’s your outlook for that growth? Is it a sign that funds are moving elsewhere?

Alastair Borthwick, CFO

We're encouraged by the year-on-year growth. A little of this may be seasonal effects from Q2 to Q3. We expect to see more growth in consumers, ideally back to the previous 4% plus levels we enjoyed. It's crucial for us to maintain core quality without chasing temporary, higher-rate deposits.

Brian Moynihan, CEO

If you look at the left lower part on page 19, you'll see our growth, which, as Alastair highlighted, reflects 1% growth in the low interest and non-interest-bearing categories, beneficial for operating deposits. The growth in core transactional accounts is also significant.

Operator, Operator

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

Matt O'Connor, Analyst

Good morning. Can you discuss sensitivity to lower medium and long-term rates? We've seen noticeable drops recently. How might that affect your NIM?

Alastair Borthwick, CFO

I don't have much updated information beyond the earlier comments. A 100 basis point drop in both short and long-term rates generally indicates an impact of $2.2 billion of NII, but it requires a specific set of market conditions to materialize.

Matt O'Connor, Analyst

As for the medium-term NIM outlook you've discussed, are there updates to its level as it pertains to growth?

Alastair Borthwick, CFO

There’s no substantial update; we're one quarter further. We have effectively added seven basis points this quarter, and the team and I are clear on what we need to do to maintain our targets.

Operator, Operator

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

Betsy Graseck, Analyst

Hi. Good morning. On the guidance for NII as you're thinking about 2026, highlighting that inputs are similar to this year, you indicated a 5% to 7% NII increase for 2026 over 2025, is that correct?

Alastair Borthwick, CFO

That's correct. The expectation for core growth from clients remains steady, and we are expecting a slight boost from fixed-rate asset repricing. Overall growth should position itself well with NII increasing around those projections.

Betsy Graseck, Analyst

On expenses, are you also considering revenue projections for capital markets and others to get the full picture?

Alastair Borthwick, CFO

The overall expense base for the company is expected to be flattish for Q4, given headcount stability, but triggers for revenue are uncertainties we need to monitor closely.

Operator, Operator

We'll take our next question from Gerard Cassidy with RBC. Your line is open.

Gerard Cassidy, Analyst

Hi, Alastair. Hi, Brian. You mentioned consumer deposits, and looking back at the fourth quarter of 2019, it's evident that consumer deposits have grown significantly post-pandemic. Any insights into behaviors leading to higher deposit levels?

Brian Moynihan, CEO

Back in 2021, the debate revolved around whether cash entered into the economy would flow back out quickly. If you traced the growth rate leading up to 2019, the economy, being larger now, reflects increasing cash once more. Most importantly, we've gained market share in core transactional accounts and have strengthened our deposit transactions.

Operator, Operator

We'll take our last question from Saul Martinez with HSBC. Your line is open.

Saul Martinez, Analyst

Hi. Good morning. You've seen impressive growth in commercial loans and markets lending. Given your track record, what gives you confidence that you're not compromising on risk for such growth?

Alastair Borthwick, CFO

This is not new for us; it's client-focused. Our clients are leading asset managers and financial institutions, where we seek high quality, diversified collateral pools with robust structures. Our low loss content and risk ratings remain solid as evidenced by continued strong portfolio performance.

Saul Martinez, Analyst

What about the sustainability of your capital markets results? Given current strong levels, can investment banking fees stay consistent with your market business performance?

Brian Moynihan, CEO

This is a reason we disclose global markets separately. It supports the broader company structure, including wealth management and consumer. Through disciplined management, we've achieved 14 consecutive quarters of revenue growth, reflecting ongoing profitability and stability. Investment banking activity has seen an uptick, and we remain focused on ensuring a stable, yet profitable approach that encompasses all client interactions. Thank you, operator. I want to thank our team at Bank of America for their hard work in what has been a successful quarter, setting the stage for good performance as we close out 2025 and head into 2026. For investors, this quarter reflects strong returns, solid growth across core businesses, and good operating leverage. We are excited as we approach Investor Day in a few weeks and appreciate your engagement.

Operator, Operator

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