Earnings Call Transcript - BAC Q2 2025

Operator, Operator

Good day, everyone, and welcome to today's Bank of America Second Quarter Earnings Call. Please note, today's call will be recorded, and I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to Lee McEntire. Please go ahead.

Lee McEntire, Executive

Thank you, Chloe. Good morning, everyone. Thank you for joining us to review the second quarter results. Our earnings release documents are available on the Investor Relations section of the bankofamerica.com website. Those documents include the earnings presentation that we'll make reference to during the call. Brian Moynihan, our CEO, will make some opening comments before he turns the call over to Alastair Borthwick, our CFO, to discuss more of the details. Let me just remind you that we may make forward-looking statements and refer to non-GAAP financial measures during the call. Forward-looking statements are based on management's current expectations and assumptions that are subject to risks and uncertainties. Factors that may cause our actual results to materially differ from expectations are detailed in our earnings materials and the SEC filings available on the website. Information about our non-GAAP financial measures, including reconciliations to U.S. GAAP can also be found in our earnings materials available on our website. With that, Brian, I'll turn the call over to you.

Brian Moynihan, CEO

Good morning, and thank all of you for joining us for our second quarter 2025 earnings results. First, a couple of words on the environment. We continue to see solid consumer spending data, which you can see on Page 21 of the deck. Improving credit quality that Alastair talked about from already strong statistics, plenty of household net worth growth, and market growth, and also the cap balances, again, staying strong above where they were pre-pandemic. We see solid commercial loan growth, and we see good credit quality with the exception of commercial real estate and office, which we'll talk about. We also see our clients continue to have clarity with the changes in trade and tariffs and now with the Tax Bill passing; we can see them start to understand the future and expect them to behave accordingly. We saw improving market conditions during the quarter, and that leads our worldwide leading research team to continue to predict no recession, a modestly growing economy about 1.5% at the end of the year, and continued no Fed rate cuts until next year. So with that backdrop, we talk about our second quarter. Key points on the second quarter are as follows: We produced another solid quarter of revenue growth, earnings, and returns. These earnings are driven by strong organic growth across all businesses. We continue to drive technology innovation, both on the product side that we offer our customers and also on the operational excellence side. We're continuing to see the benefits of our long-term investment in technology capabilities, digitization, machine learning, and now we're starting to see the beginning of our AI practices pay off, and we're looking forward to much more. On Slide 2, we start the earnings discussion. This morning, we reported revenue of $26.6 billion on an FTE basis, net income of $7.1 billion after tax, and earnings per share of $0.89 for the second quarter. On a year-over-year basis, we grew revenue 4% and grew earnings per share 7%. We produced a return on assets of 83 basis points and a return on tangible common equity of 13.4% in the second quarter. We produced $14.8 billion in net interest income, a record for the company, growing 7% from the second quarter in 2024. This represents the fourth quarter of net interest income growth in line with the guidance we've been giving you. Supporting that, average deposits have now grown for 8 consecutive quarters, and we have achieved this while maintaining very disciplined deposit pricing. That's great work by our teams. Market-related revenue gained momentum throughout the quarter. We recorded our 13th consecutive quarter of year-over-year sales and trading growth, given the bar, and the team continue to do a good job there. Revenue was up 15% over the prior year quarter. We also produced more than $1.4 billion in firm-wide investment banking fees, and the better quarterly results improved as each month of the quarter progressed. We reported expenses below $17.2 billion this quarter, $600 million lower than the first quarter of 2025, in line with the expectations we gave you. We reported our sixth consecutive quarter of net charge-offs at around the $1.5 billion level. This is a little bit of a tale of two cities. Consumer net charge-offs were lower, offsetting that; we had elevated commercial real estate office charge-offs. We resolved a number of credits in this quarter in the second quarter. When those credits closed in the third quarter, you'll see the reduction in non-performing loans related there, too. The good news is that most of those second-quarter charge-offs were previously reserved, so it had a modest impact on profitability for the quarter. We provided capital in support of our customers and clients to help them grow. For example, we delivered strong commercial loan growth, as you can see. We also provided more balance sheet to our institutional clients for their financing needs. At the same time, we also increased the capital return to our shareholders. In the second quarter, we repurchased $5.3 billion in shares and paid $2 billion in dividends. In the first half of 2025, we have returned $13.7 billion in total capital, 40% higher than the first half of '24. Tangible book value per share continued to grow this quarter. Let's move our discussion to organic growth. You can see that on Slide 3. We added new clients and deepened relationships with our existing clients across all our businesses: Consumer Wealth, Commercial, and our Markets business. Our teams are winning in the marketplace by putting the client first. For example, in Consumer Banking, we continue to grow primary checking accounts. We grew average consumer deposits for a third consecutive quarter. Balances were up year-over-year for the first time since 2022, putting the effects of the pandemic surges behind us. This quarter, we grew across the milestone of 5 million net new checking accounts over the last 6 years. We saw increases in the average consumer checking account balance of our clients for 2 consecutive quarters, and now the average balance per account is over $9,200, with 92% of the primary checking accounts in the household. On the investment side, our clients carry an average funded balance of more than $130,000, strong when compared to the industry. Our home and auto originations grew on a year-over-year basis this quarter. We continue to be a leading supplier of credit to small businesses, helping the core segment economy grow. Loans were once again up year-over-year, reflecting the commitment to add more bankers in the markets that we serve across the United States. In Wealth and Investment Management, client balances reached $4.4 trillion. We saw strong asset under management flows and loan demand as well as market appreciation. Our advisers continue to deliver comprehensive banking solutions to help our clients achieve their goals. In our Global Banking business, client activity remains solid. Commercial clients are actively using their credit facilities, albeit at still a lower level than they used them as a percentage prior to the pandemic. Our risk management approach remains very disciplined. We added more than 1,000 net new clients, most of them driven by our payments capabilities. Global markets continued to perform well, with a record second-quarter level of sales and trading revenue. Institutional clients are funding their warehouse of loans and other needs at an increased pace for high-quality collateral. Organic growth means that we're also investing in our own capabilities, our people, and our technology to serve our clients more effectively. Those investments have led to continued expansion in digitalization and engagement across all our lines of business. Nearly 80% of our consumer households are now fully digitally engaged, and they benefit from our award-winning platforms. Just to give you a sense of the volumes, in the second quarter alone, 4 billion logins were made by our consumers. In the second quarter, 65% of our consumer product sales were digital. You can see all these trends in our disclosures on Slides 24, 26, and 28 in the appendix. I commend you to review them to see how the technology application can be scaled and applied across the businesses. We also continue to invest in our teammates and are moving more money into the AI side and machine learning side. And as we think about the quarters ahead and the operating leverage you're turning in the company due to the net interest income growth, it's key to note we have fully absorbed the cost of the last several years of inflation and wages and other third-party provided services. 15 years ago, to make an understanding of how much an impact technology had, the company had a head count of 300,000. Today, we have 212,000. We did that with a relentless application of scalable, secure, resilient technologies. Customer behavior also changed, matched digitization, simplification of products, machine learning, and models and process improvements to help us get there. Now we have a chance to capture the value that with the new enhanced capabilities of AI and machine learning. Artificial intelligence allows us to change the work across many more areas of our company effectively than prior tools allowed us. We have deep scaling experience in AI capabilities with Erica, our AI assistant, which is the most recognized aspect of that. As you can see on Slide 4, we think about the way we apply artificial intelligence and augmented intelligence in 4 different pillars: AI agents, search and summarization, content generation, importantly coding and automated processes. First off, as an example, is our virtual system, Erica. This is a model we introduced back in 2018 and developed prior to that. It was the first true banking industry virtual agent. It averages over 58 million interactions per month today, helping to make it easier for clients to bank how they want and where they want. We also leveraged Erica capabilities for use of our commercial clients in CashPro as well as with our employees in Erica for Employees. To give you a sense, 90% of our more than 210,000 teammates have now utilized Erica for Employees to complete such tasks as password updates, equipment refreshes, etc. In wealth management and our other relationship management banking businesses, AI is helping those relationship managers and advisers search and summarize information, preparing them to deliver personalized planning and personalized pitches to clients for their business and help with their advice. Copilot helps them organize the prospecting process, and all this is implemented and going through the system. In our operations group, AI tools help improve our processes around customer satisfaction. One chat-based AI product works between markets and operations, allowing us to have 750 people engage with AI agents to allow them to reconcile trades, which has saved many full-time employees already. In addition, as you can see, we have 17,000 programmers using AI coding technology today, saving 10% to 15% in co-generation costs, and we expect that to continue to rise. Overall, we have 1,400 AI patents and have created over 250 AI and machine learning models in the company. We're currently working through many dozens of AI proof of concepts beyond what I just spoke about. These investments are intended to help both improve the client experience and our own productivity. So if you think about the quarter before I turn it over to Alastair, just a few points: We saw good organic client activity. We enjoyed good growth in revenue and earnings per share. We continue to invest in that growth and are beginning to see the impacts of AI, again, aiding our efficiency. We manage risk well, that drove healthy returns, and we kept delivering more capital back to you as our shareholders.

Alastair Borthwick, CFO

It was a little lower than last quarter, driven by $180 million of discrete items. Excluding those $180 million of discrete items and the tax credits related to investments in renewable energy and affordable housing, the effective tax rate would have been much closer to a normal corporate tax rate at approximately 24%. So with that, I'll stop there. Thank you, everyone. And with that, we'll open up for Q&A.

Operator, Operator

We will take our first question from John McDonald with Truist Securities.

John McDonald, Analyst

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

Brian Moynihan, CEO

Well, at the end of the day, if you look at the Consumer business with $950 billion in deposits operating very efficiently, the cost of deposits, meaning all the costs over the deposits, run in under 146 basis points, and the total rate paid is 58 basis points. Fifty-eight percent of the balances are in checking accounts. It's a tremendous business, and we'll only get more and more profitable as net interest income kicks in because they're the biggest beneficiary of that. So if you think about it in terms of deposit growth, we look pre-pandemic now, our team has gone from roughly $700 billion to $950 billion. We've grown our deposits as a company faster than the industry grew from pre-pandemic to now at a rate of 39% versus the industry's like 37% and large banks at 32%. And obviously, we contributed to that large bank growth rate. So we feel very good about it. The key is they've grown checking accounts for 5 years now. They've grown retail deposits, which were influenced a lot because of our mass market customer base, being such a large amount by the pandemic stimulus that has all gone through the system, and you're seeing retail consumer deposits growth for the last 3 quarters in a row now. And the key is that the average checking account balance is at 9,200, that went into the pandemic about 6,000 or 7,000. So you're seeing that growth. So we feel good about that. Overall, our average deposit size per branch is $500 million versus the next best at $400 million, and the one behind that at $300 million. So I don't know all these methodologies. You guys can look at them. It's a lot of collaboration, a lot of debate. But at the end of the day, we're growing deposits faster than the industry, and 92% of core checking and consumer satisfaction is the highest it's ever been.

John McDonald, Analyst

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

Alastair Borthwick, CFO

Well, I think what we're trying to say is it always starts with us with headcount discipline. So the headcount has been pretty flat. We've managed that pretty well all the way through the year. We don't see any change in that. So then the only variable that's left really is going to be around revenue-related. Now we've seen pretty good growth, obviously, in sales and trading, up 15% year-over-year. We've seen pretty good growth in asset under management fees, up 10%. So I anticipate that any expense growth would be revenue-related and that we should be pretty flat. Maybe we benefit in Q4 from seasonally slower activity.

Operator, Operator

We'll take our next question from Ken Usdin with Autonomous Research.

Kenneth Usdin, Analyst

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

Alastair Borthwick, CFO

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

Kenneth Usdin, Analyst

Okay, can you provide more details on the cash flow hedges and what you are observing there? Are you continuing with the same strategy of adjusting positions and how much you are acquiring?

Alastair Borthwick, CFO

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

Kenneth Usdin, Analyst

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

Alastair Borthwick, CFO

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

Operator, Operator

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

Matthew O'Connor, Analyst

I just want to follow up on the expenses. I guess if you kind of flatlined or flat to just down a little bit, that will put you up, call it, 3.5% or so on a full year basis. And I think the prior guide was up 2% to 3% or the high end of 2% to 3%. Can you just kind of circle back to the cost versus what you were thinking previously? And maybe talk about some of the regulatory costs that I think are keeping a little bit higher.

Brian Moynihan, CEO

Looking at the year-over-year expense growth from the second quarter of last year to this year, $400 million was primarily due to incentives in the Wealth Management sector and costs associated with market-based transaction activities, which reflects revenue-related growth that is positive for our bottom line. Conversely, other expenses increased at a relatively modest rate. Moving forward, we have allocated 1,000 to 2,000 employees to address issues related to AML, and we are starting to see progress in that area as we approach the second half of the year. Overall, the inflation rate for expenses is beginning to stabilize despite ongoing discussions about general inflation. We have maintained a stable headcount and third-party rent costs, which is encouraging. Our goal is to reduce headcount further; over the past 15 years, we've decreased from 300,000 to 212,000 employees and need to continue this trend. We have kept headcount flat for the past 4 to 5 years while heavily investing in the front end of the business, and we expect to accelerate progress with new methods. We are optimistic about our expense trajectory, acknowledging that some factors remain unchanged, and controlling headcount is within our control.

Matthew O'Connor, Analyst

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

Brian Moynihan, CEO

That's an outsized sort of market growth or market-related activity growth way above what a normal absorption rate would be. If we have a model we can run the place on a couple of hundred basis points net of expense growth, which is an inflationary cost of 3%, 4%, and then offsetting it by a lot of activity. As the net interest income kicks in, each quarter, we see it growing and then growing at a little faster rate, frankly, as Alastair talked about, that's the operating leverage kicking back in. So we had 5 years of operating leverage disrupted by the pandemic. Now we're back in, and then the rates will fall off, obviously hurt us from net interest income; as that now hits a record level this quarter and is going to grow off of that record level. You'll see the operating leverage overall kick back in. And the size of that revenue stream in all the businesses is huge. And the company is obviously huge, and that all pretty much follows the bottom line.

Operator, Operator

We'll move next to Gerard Cassidy with RBC.

Gerard Cassidy, Analyst

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

Brian Moynihan, CEO

So Gerard, we discussed a notable difference in the efficiency ratio, which is a couple of hundred basis points due to the accounting treatment for tax incentive clean energy deals. The impact from housing won't change, but the adjustments are now reflected. Comparing to 2019, the efficiency ratio has been affected by an increase in another income loss, which has negatively impacted revenue but is compensated through the tax line. Overall, the company experiences a positive effect. This 200 basis points difference is because we previously had around $300 million a quarter from tax benefits, but now that figure is $900 million. You'll notice this will decline as these deals come to an end. Furthermore, net interest income is expected to improve, and we anticipate the consumer business will become very efficient again, similar to the past, as net interest income positively influences the bottom line. We are optimistic about returning to the low 60s efficiency ratio and possibly exceeding that due to the net interest income and operating leverage. Additionally, the tax credit deals will begin to phase out due to statute changes.

Gerard Cassidy, Analyst

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

Brian Moynihan, CEO

Yes. Focusing on stable coins as a means of transaction, we see them as a new payment method that can significantly impact the trillions of dollars we handle for our clients daily. If our clients choose to use stable coins for transferring part of their funds, they will do so. They can have an account to send money in U.S. dollars and initiate transactions that convert into euros or stable coins. We believe both our company and the industry will adapt. We've conducted extensive research, but we're still determining the scale of this trend, as some areas show limited money movement. We know changes are coming, and our company will evolve as needed. Ultimately, the key issue will be the magnitude of this trend and its effectiveness as a payment method. Small balance transfers internationally illustrate this potential. We can also see the benefits in smart contracts, money movement, digital-native apps, and in-app payments. We'll adapt just as we did when transitioning from checks to Zelle. If you had spoken to me 6 or 7 years ago, you might have mentioned the rise of Venmo, and now here we are with Zelle payments surpassing total volumes across the industry. Our ability to move money efficiently is crucial, and we must remain vigilant against challenges to the payment system, ready to defend our position.

Gerard Cassidy, Analyst

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

Brian Moynihan, CEO

I believe it will involve all of the above. On the commercial side, there may be individual applications, but overall, networks are essential for everything to function. We will collaborate with some stable coins, and we already have existing partnerships with a few. It will be a complex system, but we aim to ensure it is not complicated for the customer.

Operator, Operator

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

Michael Mayo, Analyst

I feel like you served up a good meal here. I mean the main course, we don't lose sight of $2 trillion of deposits where you pay 1.76% and that's certainly down quarter-over-quarter, year-over-year. The side dishes certainly look good with the net interest income going to escape velocity, I guess, from $14.8 billion, you said to $15.5 billion to $15.7 billion by the end of the year. But I'm still left hungry. I guess I did my dessert or something. I'm just wondering why, even with all that improved performance, the net interest income guide isn't even higher given the pace of loan growth. You certainly see the expectations, as Alastair said. Every segment of commercial lending is doing well. You seem very optimistic about that. You're also asset sensitive, and there's less rate cuts. So I guess I'm whining for some dessert, some extra; I'm left hungry. Why not more?

Alastair Borthwick, CFO

Well, Mike, you have a future as a chef. If you look at the net interest income bridge on Page 11, we put this out at the beginning of the year. A lot can happen within a year, and I don't think any of us expected all the different events that have occurred over the last 6 months. For instance, international rates have been cut significantly, which is a headwind we haven't factored in here. You're absolutely right; there are aspects of loan growth that we're pleased with, while others have not grown as rapidly. I would still like to see consumer noninterest-bearing deposits growing a bit faster. We have seen some good growth, but we would appreciate a little more in that area. Overall, despite the various inputs, everything still aligns well six months later. We have removed a lot of risk from the equation, and now we need to monitor what happens with rates in the second half of the year. We should continue to drive the same organic growth we've been achieving. If we do that, we're looking at net interest income growth for the year in the range of 6% to 7%, which would hopefully set a record and leave us satisfied by year-end, but we will also be focusing on preparing for next year during the latter half of this year.

Michael Mayo, Analyst

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

Alastair Borthwick, CFO

I will say that we will discuss next year more in detail during our Q4 conversation in three months. However, I believe the organic growth that Brian mentioned, which is driving both the deposits and the loans, should continue. We will also keep benefiting from the fixed-rate asset repricing next year. Our goal is to replicate and sustain these results over an extended period.

Operator, Operator

We'll move next to Steven Alexopoulos from TD Cowen.

Steven Alexopoulos, Analyst

I wanted to start the conversation first. I love this AI Slide 4. I might frame it actually. But to start the conversation there, as we've spoken to the banks, there seems to be a fairly wide range of how banks are thinking about AI. Some are using it really to boost productivity; others are more fully embracing it to leverage digital workers. You seem to be in the second camp. I don't know if you guys saw at the JPM Investor Day where Marianne put that slide up, looking at headcount coming down about 10% or so in the consumer bank over the next 5 years. Wherever that number ends up being, how should we think about your company as you leverage these tools? Should we think about you as leading, fast follower to whatever JPMorgan does? I'd love to hear you unpack this for us.

Brian Moynihan, CEO

Let me take a moment to provide some context, Steven. Looking back at our application technology, 15 years ago, our Consumer Business had 100,000 employees, but today we only have 53,000. At that time, deposits were around $400 billion, and now they exceed $900 billion. We've seen a 50% increase in the number of checking accounts, and transaction volume has surged. All of this growth is powered by scalable application technology, which offers control and resilience. With 2 billion digital interactions, it’s crucial for our systems to remain operational at all times. We've invested approximately $2 billion in what we call 'never down' backup systems to ensure this continuous operation. The data speaks for itself: we’ve halved our workforce in this area while expanding the business in complexity and reach. Consider the example of Erica, which was developed before we fully understood large or small language models. It is now actively used by 20 million consumers each quarter, generating 60 million interactions per month that would previously have required phone calls. As we expand its capabilities throughout the company, including in commercial areas with CashPro and Erica for Employees, we are training the models on carefully curated data. This strategic approach allows for accurate decision-making and greater application across various facets of the business. Currently, we have doubled the number of relationship bankers since our initial phases. We've reinvested some of our savings to consistently drive checking account growth over the past five years. With around 5 million net checking accounts averaging $9,000 in balances, we’ve effectively expanded our bank in a meaningful way over the last four to five years. Simultaneously, our cost structure has decreased by $1 billion quarterly in consumer banking over this period. Regarding our Optimus model, it's a collaborative framework we’ve developed using third-party insights, enhancing our fixed-income trading capabilities. We have established a unified equity approach with 300 CUSIPs for fixed income, streamlining trade reconciliation through bots and agents to improve operations. This initiative is still in its early stages, but we’re already witnessing benefits as we gradually implement it with our teams. We acknowledge the importance of making informed decisions because they significantly impact people's lives, and we must avoid errors that could undermine our customers' confidence. Our objective is not just to be a fast follower or a leader but to effectively implement these advancements at scale. Achieving this scale determines whether we can reap the associated benefits. In five years, we will see if we are recognized as a leader in this area, bolstered by our patents and models, while we continue to adapt and grow, remaining in the early stages of this journey.

Steven Alexopoulos, Analyst

That's an interesting point. Regarding Brian's earlier response to Gerard's question about digital assets, I'm looking at Bank of America and noting that you were the first bank to launch a mobile app and the first to introduce Erica, your digital assistant. However, it appears that your approach to stable coins is somewhat cautious. Other banks like JPMorgan and Citi have already implemented tokenized deposits, but I haven't seen any similar announcements from your side. Additionally, your cross-border business isn't as extensive as some competitors. It seems you have the potential to be a game changer in this new ecosystem, just like you were with mobile technology and your digital assistant. Are you perhaps hesitant about the long-term implications of this shift? Why not fully embrace this innovative technology as you have with your previous initiatives?

Brian Moynihan, CEO

You're overlooking that for any customer-facing activities in this area, we needed to ensure we had legal clarity, which is still ongoing. The business cases for these initiatives and their incremental value are yet to be fully validated. Regarding Bitcoin and Blockchain, we hold numerous patents and have applied them in trade, where a lot of data and money needs to move. However, it's important to remember that we process $3 trillion or $4 trillion today, with 99% of it being digital. Aside from the cash withdrawn from ATMs and the checks written by consumers, which have decreased by 8% to 10% year-over-year, everything else in our company is predominantly digital. We are exploring what the improved processes will look like and how real-time connections play into it. Our focus is figuring out client demand. Once we gauge that, we have the capabilities to proceed and can implement the technology.

Operator, Operator

We'll take our next question from Erika Najarian with UBS.

L. Erika Penala, Analyst

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

Brian Moynihan, CEO

We believe that an appropriate buffer is 50 basis points, plus or minus, and that's what we are aiming for. We want this to be utilized by our core businesses since that is our primary focus. We pay our dividends and are allocating all incremental capital to share buybacks while allowing the business to use any excess capital for growth. At one point, we were at 12%, and now we're down to 11.5%, indicating that they are utilizing it. Recently, we increased the amount available, and we expect them to use it, pushing down to 50 basis points. We are currently debating averaging versus not averaging. The supplemental leverage ratio is not particularly relevant for us because other ratios would ensure compliance before the SLR comes into play. The G-SIB calibration is crucial, as many seem to overlook that it needs to be updated since it uses outdated data from 2010, '11, or '12 to determine systemic importance. We need to address this to account for growth since the pandemic. Expect us to manage that capital effectively, but we will always aim to grow the company. The extra capital is intended for growth in loans, deposits, and overall transactions, and we have successfully increased our market balance sheet. The target buffer remains at 50 basis points. Recently, there has been a change, and we are still discussing when to implement it. We also need to finalize the G-SIB issue because if it isn't indexed, we could face an increase in about a year. Overall, we are committed to returning all capital back to our shareholders and will continue to do so, especially if the business isn't able to utilize it for growth.

L. Erika Penala, Analyst

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

Brian Moynihan, CEO

I believe the question of the buyback size is clear since we have just completed one. This indicates our willingness to invest. Each business has growth opportunities, though some require more risk-weighted assets than others. It’s worth noting that risk-weighted assets in the industry have been increasing, and ours have experienced significant growth as well. We need to adjust accordingly, partly due to the models and dynamics influencing the situation. I hope we can engage in more rational discussions on this. Every business has the potential for growth, and one critical decision we made was to allocate more capital and capacity to Jim DeMare and his team, which they have utilized effectively. However, across our businesses, the lowest return on allocated capital needs to be addressed. We must ensure that our wealth management and consumer businesses, which generate high returns on capital, are also on a growth trajectory. All entities have the potential to grow, and if they require capital, they will utilize it. The real question is about the amount of expense we can allocate to drive that growth, rather than the capital itself.

Operator, Operator

We'll move next to Betsy Graseck with Morgan Stanley.

Betsy Graseck, Analyst

Two questions. One to follow up on what you were just talking about. I was wondering, with relation to markets RWA, I thought in the past, there had been kind of a ceiling on that, that now has gone.

Brian Moynihan, CEO

As long as they achieve the necessary returns, it's essential because we need to consider their return on allocated capital. We also need to take into account how this affects net interest income. Jim and the team must secure returns that not only support their business but also benefit the entire company. That's why calibration is so important. These components need to be harmonized, and the calibration of G-SIB is crucial. The reality is that there has been around a 20% increase in the capital requirement. There hasn't been a significant change in risk for most of us over the past three to four years, mainly due to methodologies related to G-SIB adjustments and RWA calculations, where they're pushing us on the models and similar factors.

Alastair Borthwick, CFO

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

Betsy Graseck, Analyst

Okay, great. The follow-up question is regarding how you are managing your wind and solar investments in light of the tax plan currently in progress. What are your thoughts on that business, and how should we expect it to impact your P&L?

Alastair Borthwick, CFO

Yes. I read your report, and I think it was pretty good in terms of laying out what the issues are. What we're anticipating is there's going to be a period here where our clients are still going to want to install wind and solar. So we're obviously going to support that. Now, they have to get them into production, and they have to get construction started by a couple of different dates. But you can think about it as between now and 2027, that's when you're going to see all of these things begin to slow and then stop. We happen to have, number one, an installed base of production tax credits. So that will stay with us. But those will begin to burn down over the course of the next 8 years. That's the way I would think about that. And then the low-income housing tax credits aren't impacted. So we anticipate we'll continue to be involved with those. So I would say we're likely to be involved in deals for the next couple of years, and then you'll start to see the portfolio come down in the course of 2028, all the way through 2033. And just burn down gradually over time, Betsy.

Betsy Graseck, Analyst

And then the housing. Does the housing investments increase to offset that wind and solar paid?

Alastair Borthwick, CFO

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

Brian Moynihan, CEO

I think the housing has been a relatively constant number where the clean energy, the wind and solar, in particular, is going to be intertemporal now because of the stuff that goes on and the effects downstream, etc. The housing is pretty consistent. It's just a question how, as Alastair said, how big the demand can be and how competitive the market other people go for, too. So I would expect that to come close to absorbing.

Operator, Operator

We'll move next to Chris McGratty with KBW.

Christopher McGratty, Analyst

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

Brian Moynihan, CEO

And we're seeing every consumer category, I think, grew a little bit this quarter, and we can probably push a little harder in some areas there, and the team works on that. But you got to be careful of the volatility of consumer credit when we still have unemployment predicted to go up in most of the surveys we look at. So we're being careful there too.

Operator, Operator

We'll move next to Jim Mitchell with Seaport Global.

James Mitchell, Analyst

Alastair, I understand you prefer not to set a specific target for next year's net interest income, which I appreciate. However, considering the strong starting point and various factors at play, there might be challenges from the accretion tapering off and the rate cuts reflected in the forward curve. On the positive side, loan and deposit growth are gaining momentum, cash flow hedges are expiring, and assets are being repriced. How do you see all of this coming together for next year? Do you believe it's possible to grow from that Q4 starting point? Any insights would be helpful. And is the answer yes?

Alastair Borthwick, CFO

Yes. Look, the answer to that is yes because the company is built, as Brian said, for organic growth. So as we continue to add clients, as we do more with the existing client base, that's when you see the loan growth and the deposit growth coming through. So there's always headwinds in any given year, but our mentality will be, when we come off of Q4, how do we grow net interest income sequentially each quarter from there? And we're going to benefit again from that fixed-rate asset repricing again next year. So that acts as a tailwind. The first quarter is just a little bit different because of day count. But in general, I think you should think about net interest income. At least our expectation is we're just going to keep growing it quarter after quarter.

James Mitchell, Analyst

Okay, that's great. You mentioned that the balance sheet mix has changed slightly, and your focus is now more on net interest income growth rather than NIM. I know you had previously discussed a longer-term target of 220 to 230. Is that still the case, or how do you view that target now?

Alastair Borthwick, CFO

No, it's not different. I believe any quarter can be significant, and this particular quarter was notable for a couple of reasons. First, we experienced very high volumes in active markets. During such times, our Global Markets clients seek balance sheet support, which we are willing to provide if it's priced appropriately, and we felt it was. As a result, our Global Markets business took on more earning assets, which can sometimes dilute the net interest yield but can still be slightly positive for net interest income. Additionally, in the commercial sector this quarter, we accepted a couple of large commercial deposits at the end of the quarter. These deposits are NIY dilutive but slightly positive for NII. Overall, this quarter was interesting as the net interest margin came in slightly differently, but our long-term outlook remains the same. Our goal is to drive it back to the 220 to 230 range with every opportunity we have.

Operator, Operator

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

Brian Moynihan, CEO

So thank you again for spending time with us this morning. I leave you where we started. We saw, again, client activity across the board. We're now seeing the second half benefits kick in, and we'll expect to get to kick in and net interest income pushing operating leverage back in the business. That will continue to be solid revenue growth and earnings per share as we look forward. As we talked about and showed you some examples, we're now seeing the augmented intelligence, artificial intelligence capacity starting to build in the company, which will add to our efficiency efforts going forward. Thank you for your time, and we look forward to talking next time.

Operator, Operator

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