Bank Of America Corp (BAC) September 14, 2026 Conference Transcript

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 a very productive morning, and we look forward to continuing on with another two days, an afternoon, another two 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 infarctuous. Since becoming CEO in 2010, Brian has overseen the remarkable stabilization transformation and de-risking 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 precarious 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 location was meticulously chosen or simply a product of especially super-triplean mourning. Fortunately, today's discussion should provide less aniphorictus than some of the earnings transcripts, and I trust none of us will also develop the fan toys 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 in the ACTs.

Me, too. Those colleges are really expensive.

We were thinking. 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 today I started 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.

Yes, it's safe for the college. I guess, Brian, maybe the best place to start is you describe the U.S. economy as proving more durable than many expected, supported by strong consumer spending and AI-driven investment. 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 and lower growth rate, but regular full-serve restaurants, a higher growth rate. So the consumer spending on a broad-based out-of-home entertainment, it's 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 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, long time. I mean, so, you know, we're normalizing or normalized to levels that are equivalent to where pre-pandemic, which everybody said was, oh, things were growing. You're saying, well, 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 their 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 crawler is good in a commercial book that the small-medium size 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 a broader economy as unemployment. So we feel very good about the underlying U.S. economy. I mean, our team, like your team, has mid-twos growth, you know, for the year, and federal raised 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?

We always watch to make sure that, you know, we watch the new claims from unemployment, unemployment levels. We watch any delinquency movement. We watch any sort of stress in the consumer payment cycle where 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, even September so far, spending on gas is up, you know, 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, 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 the consumer still spends money on their minds affordability. That will be the issue to reconcile as will wage growth catch up, and will there be real wage growth?

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

Yeah, I think if you look out, just starting with the capital markets, as you said, Jason, because that's the one that's interesting. You know, 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 deologic fees type of things. We're not as well positioned in some of the businesses that have more activity, so we'll be down probably a bit more than that. I'd say $1.6 to $1.8 billion in fees will be kind of the number. On sales and trading, it'll be one of the better three quarters we've 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 in international business in Asia, you had a lot 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 to 1.8, sales and trading flat. Investment management AUM fee is up 10% to 15%, which is good news. And then you back into loans and deposits. Everything has happened like we thought it would. Loans in the commercial side grow in mid-douple, 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. We've got $2 trillion in deposits, $2 trillion in loans, but the deposits are good. But NII is doing exactly what he said, not only to dollar amount and to growth rate, but also the NII yield is going up. So we feel very good about the rest of the company. And expenses are bouncing around at the 18.6 level, which makes this quarter tougher operating leverage with a quick downdraft in 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 on you. It takes you a quarter or two to get back underneath it.

So we feel the underlying economy is good and the business is good.

So it's kind of this capital markets movement makes you not feel good, but we 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're up 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 this backdrop of rising rates as early as Wednesday?

Yeah, 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 for the general mortgage business and the consumer side. Autos are fine, but, again, not growing real fast, just kind of moving along at the same pace. When you get the commercial side, that's where the growth has been strong. The good news is, in 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. to warehouses for mortgage lending companies, asset accumulation companies, things like that. That's basically the growth rate slowed down, and the rest of the 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. But that's good news because that means people are investing in the broad base of American businesses and putting the money to work.

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

If you look at the consumer business, the deposit growth, what we're seeing last quarter, And this quarter is continuing in the non-interest-sparing, 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 five years, we've done $5 million. The average balance continues to grow, which means we're getting a primary account, and that's the focus in the consumer business. When you go to the 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's performing, as you said, So I think you'll see solid deposit growth, but we won't see a lot. We just don't do on 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 at the Fed at 3.7, whatever that was. And, you know, we don't do things to lose money, and 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, you know, we have lots of access. So our customers can come at us and say, I want higher yield, and we just put them 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. You know, given Bank of America already offers a superior set of products and services, have you ever considered, like, paying higher deposit rates as a way to accelerate market share gains? And just looking further ahead, there's, you know, a growing discussion on stable coins, automated sweep technologies, other innovations that can maybe reshape how people think about deposits to manage liquidity, and just, you know, how ultimately do you think this deposit landscape plays out?

I think I'd separate that dramatically into two different buckets, because for the non-transactional deposit, they're flippant. 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 number one, the primary household account for a business or small business, and so that's what we Deposits, which in the consumer side were, I don't know, 50 basis points all in cost paid on a trillion of it, 950, and then on the rest of it, it's higher and brings up to a buck and a half 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, you know, an 160, 180 basis points type of number. That's a very advantaged position, and there's no reason. So that's, you know, the idea of bidding for non-transactional deposits, you need to do something with the money. You need to fund a balance sheet, and our balance sheet's very liquid. We're sitting with almost a trillion dollars of liquidity every day. So that just doesn't make sense. That said, we take them to market. In the commercial side, we have to pay what the market bears. So when you get in a larger corporate 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's completely different because it's not – the question is – there'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 non-interest-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 in the lending capacity. That's the argument that broad-based 4,000 banks keep making. And whatever amount it shrinks it by, its lending capacity comes out because the only thing a stable coin can do is own treasuries or put the money at a bank or the Fed 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, a trillion, you're basically taking that lending capacity out of the 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, mortgages, more market-based choices. So that's the point. So the idea of stablecoins, the industry's built multiple products. We've minted our own stablecoins. When the consumer demands, when the customer demands there, we'll do it. The industry, you've seen some consortiums announced. Then 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 a real-time payment system at the Clearinghouse, you can do $10 million, you know, 24 by 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, you know, two 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's proven a tremendous payment system. Taking that cross-border is not the hardest thing to think about. And so connecting with other mechanisms in the industry has been working on that.

Got it. Maybe we'll stick with the balance you started before moving on. To the income statement, but just on capital, broadly speaking, but, you know, we've seen this overall second quarter results, you know, 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, you know, 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, you know, contributing? to the overall landscape.

To the overall landscape or to the Bank of America? To Bank of America. To Bank of America. We announced an infrastructure effort to say we deploy more than AI just across all infrastructure in the six quarters from the start of this year to the July 4th of 27. We deployed $250 billion. The team's on course to do that. That's a broader than AI, but it's a standard part of AI. We're participating in those transactions where they make sense. And 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. And our team's estimates, your team's estimates is a point, is a third 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 at the end of the day, the capacity 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 in outside America across the 30, 40, 50 markets we do business in. And so that growth is coming the hard way, one more client getting their fines of credit and their facilities that they're using, and that's where that growth is coming from. So it's two 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 the online consumer lender in India. I think to some that appears somewhat out of character for the company. Can you 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 the United States, we do all eight businesses. Outside the United States, we do middle market lending, large corporate lending, treasury services, investment banking, and capital market 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, medium-sized business lender. So we partnered with GEO, which is a premium company, Reliance and McKesh and Bonnie, and the Reliance structure and GEO is the subsidiaries and various things. So they have one in 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, medium-sized lending, coupled with their reach, hundreds of millions of customers. There's a couple with their knowledge of India, and we could do it. And so it's a sizable country going to 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 tended to stay in the upper middle market, and we've announced initiatives like in Switzerland and the U.K. and Germany and Canada for years and 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, munisized businesses, which were the largest in the United States, stops us from going outside the United States, especially accepting 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, you know, I also saw that you announced a capital deployment plan in further support of the U.S. critical infrastructure build-out with financing and initiative modeling America's 250th anniversary. I mean, what role do you see for other uses within B of A's capital strategy going forward in any specific areas of focus?

Well, so if you think about, we earned $9 billion last quarter, whatever it was. We paid a couple billion dollars out in dividend. That gives us $7 billion. We always want to deploy that to help the businesses serve their clients. So if we see long growth, we put $100 billion more in the capital markets balance sheet at 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 to get the returns. 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 CT1 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 the Plenty Capital will deploy it. This thing at a joint venture you mentioned is there. When you then get to what we talked about a little bit earlier, the 250, that's really supporting our clients' development of assets related to the infrastructure buildup this country needs along power, both generation, transmission, new sources, import-export, et cetera, around AI, data centers and things like that. We have all the different aspects of that, and around, you know, railroads and other things that need to have another level of investment in. If you could redomesticate a lot of production activity, manufacturing, other types of activity, you need to move those materials. So we, and it's airports, it's whatever we can do. So some will be on balance sheets, some will be in the capital markets, but that's the capital employment we announced. In the end of the day, it won't be a lot of capital needed for that because a lot of it will be going to capital markets, ultimately.

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

Well, I think the upward pressure is kind of mitigated, which is good. And if they index, that's important. When they index from, you know, and the final rule will be important because that, you know, are we going to go back to 12 that was in the original statute, or are you going to pick 19, or are you going to pick 20, whatever period of time they do, and they'll announce a rule and that will start. 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 at the end of the day, what we watch and what the rating agencies and other people who actually, you know, own the debt and think about companies, you know, you watch the tantric common equity ratio. And at six, you're getting to the point where you've got to be careful. You know, can you go a little lower than that now with the amount of no-risk assets we have on the balance sheet? Yeah, but remember, if you go back and think about 2008, you know, tangible common equity ratios at 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 that's part of a risk thought process we think are with our board and others about what's the right tangible common equity, because at the end of the day, that's what the rating agencies, and they have their own risk-based methods and stuff, but at the end of the day, they also look at that. So you're trying to manage the dichotomy, and at 6, we're kind of, we're 6.07 or 6.05, whatever it was last quarter. You're kind of around the range where you've 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. We can return it all if we don't have good use for it.

Got it. Maybe pivoting back to the income statement, you know, you kind of gave an overview of guidance at the onset. That you talk about good loan and deposit growth. You know, 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?

So if you back up, the net interest income growth we gave you estimates for the year back on Investor Day, and then that was multi-years, and Alistair showed the charts and stuff. Everything's worked out, and if rates go up a little bit, that'll 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 a 6% chance of a copy 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 it was up 14 basis points second quarter last year, second quarter this year, which doesn't sound a lot. That's 7% on the basis of two. So it was a big move, and we expect that to keep moving. So you're going to have larger dollar volume growing at upper single-digit, we said 7%, 8% type of numbers, and then I yield growing two. 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 and are growing at now. And then it just keeps compounding in. It's a wonderful thing. So even the loans... You know, from last year's second quarter, this year's second quarter, 20-odd billion, 30 billion of loans, whatever it grew. You capitalize that out at a couple hundred basis points of spread. That's a lot of NI in the future. So we're just running this virtuous circle more, but the NI yields picking up, which then makes showing the balance sheets getting more efficient as the repricing goes through. And it's a multi-year context here.

I guess in Ambassador Day, you talked about a 2.3% medium-term net interest margin. You know, with the Fed potentially taking Wednesday 10-year until it's now over 5% today, does that make you feel more comfortable with that projection?

It does because the repricing, you know, comes in at a higher rate. The trick is you always have to remember when the rates are higher or lower, 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 know, you don't see day, week, month. We see day, week, months, you know, 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 advantage deposit base now growing, you know, it was 1.9, probably. It ended up at 1.8, so it went up to 2.1, 2.2, 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. And our yield then kicks off of that, so you start getting $2 trillion deposit funding advantage and drive that. And then the loan growth, you know, in the end of the day, it's coming to commercial business in the areas where the yields are pretty good.

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

So just backing 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 new helpless cover in the middle market. We're up to 250 people, and we're growing that. That's about a third of the business, and it's all kinds of things. It's not only debt capital markets. It's some equity capital markets in 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 last year we did about $2 billion. This year it was $1.618 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's 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. And 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. And 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, or recapping family business to take some money off the table.

And even, I guess, if trading is flat year over year, it probably still makes 2026 a record year and a very big number. Or just, you know, how do you think about that business looking out in terms of, you know, it was kind of flat to down for many years. We've now had four, five, six years of kind of growth.

Yeah, this, you know, these guys do what they're supposed to do. We'll get seven, this will be the 17th straight quarter of growth, so we're in a dogfight for it. But that's, you know, a lot of years. And what we started on about a decade ago was getting the infrastructure set and dropping the break-even cost. It's under Tom Montag and Jimmy, and now Suf and Dennis. And the idea was you had to bring that cost structure down and be more precise and then build out from there. And they dropped it by almost a billion a quarter. We started making good money, got the returns up. The returns now is a debate. Are we going to get, you know, 14 or 13 or 16 in a quarter, not eight, nine? There was a time when people would say, will you ever get over a 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, you know, the funding structures and things, It's more structured notes to fund itself so it can grow, but we've got about a $600 billion balance sheet, about a trillion in the last six, seven years in that business, and we will continue to grow it. Where we see share opportunities that we gain is really in the fixed income area up until the recent past. Now the equities have had strong performance, so we feel good about that. So, you know, there's 57 regulators to touch that business to be in a global business for 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 managing team meeting this morning. We were 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 who can do it to scale. Now, when you have it, the interesting thing is your middle market U.S. space, execution around the world, if a middle market company has a supply chain and needs to do trade finance and currency conversions, et cetera, they need to know about what's really going on in Vietnam, Thailand. You can bring India. 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 systems, about a billion dollars of systems development work a year between that and the capital markets area to keep it current, good products, good services, and everything. So you can create a new co and do it tomorrow morning with some AI and stuff. It's a lot of data. I'd say 3 billion trades a day. We 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. How do you think about that in terms of what the market gives you versus Bank of America's advantages and just the out-of-faire, particularly in the light of evolving AI and the like?

Yeah, so I think if you step back most broadly from what we have uniquely at Bank of America is a continuum from first-time investors, Merrill Edge, all the way through the highest, richest families in the world with a private bank in Merrill. And what we did is build it so it could go womb to tomb, so to speak. It could start with people and work their entire lives, 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 $100,000 versus $2,000. These are good core investors. We work at integrated in the model in terms of its presentation in the digital space and how we sell it 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 into Merrill and the private bank, which are more traditional financial advisory-led businesses. The combination gives us the largest trust business in the world, trust and estate execution. We do a ton of art lending and airplane lending and stuff that's unique. 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%, their revenue line from their brokerage and AUM fees is $5 billion a quarter. So it's two or three times the investment banking fee rate 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 out of recruiting. The deals got crazy and everything, but we're recruiting exactly what we want in the 600 offices we have and the 97 markets we have because our view is we have a competitive advantage because our mayoral teammates working in a market with our consumer teammates, our business banking, which is $0 to $50 million segment, and our middle market teammates, $50 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 it. And then 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's done a good job, but it really comes down to a little more recruiting so the advisor 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, G-wimps, profit margins, that made more, and you're seeing that come back up to the traditional 30 as the value of the loan and the 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 will be presenting here. And so it has the same dynamics. So as NI picks up in the franchise, they get a good chunk of it. And the lending side is a very strong lender. But the key is just more advisors and deploying more advisors. Now, AI, we talked more generally about it. AI is important to this business on the ability to assist an advisor 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 advisor or the PCA, the private client advisor, and the people that work for them in the portfolio management process. This will have a big impact. It's just got to be done carefully crafted, but we still believe a human is the most important advisor we got. And so we remember Merrill Edge is all automated. If you remember the days of robo-advising and all this stuff, we have, I don't know, $30 billion in that. Other people have gone out of business already because it's self-guided investing. You put it 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 because it's hard stuff, but you can make that advisory structure more important. So it's a great business, and you'll see it continue to grow, and it will continue to invest in it. And the team running it between Katie and Lindsey 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. And I was on Kramer's show, Jim's show the other day, and I was on the Florida Exchange, and somebody asked me, And when the last time I rang the bell was, it was when we announced $0 trades in 2005 or 2006. This is not a new concept. We took equity trades to zero at Old Bank of America back then because we just didn't have that much revenue to lose, and we figured it would do it. So the idea is you're not going to make money charging zero. So the question is, how do you make money in the advisory side, even in that business?

I guess on the expense side, you've tried to move us away from looking at expense growth in terms of dollars or percentage and more focus on operating leverage. You know, you start out the year at 200 basis point target. In 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 at the end of the 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 management business, If you look year over year, second quarter last year, this year, the billion, two or three we had in expense growth, 400 of it was just the incentives in that business. That's good news. And then another 400 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 and making it better, data center environments, all those things. For a while, we could keep taking it down. Then we hit the bottom in 19 and said, you know, 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'd push back. 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 back in the saddle. And this happens, like, over the last many years. We had five years straight of operating leverage, then we had 13 quarters, and then we had – this was our fifth or sixth, so we would have been back on the street. But it usually happens when you have this quick churn in the market. It's just hard to get underneath it for a quarter.

Understood. Understood. Maybe just talk about how AI can maybe impact expenses and the bank overall. You guys all report earnings the same day, so not everyone goes to all your materials, but I know slide 20 of your earnings deck really stood out to us. You know, 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 know, you've talked to this kind of 55% to 59% efficiency ratio target over time. Is even something better than that conceivable?

Yeah, so I think, you know, 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. You know, that was a decision we made early on was, wait, we are responsible for everything that goes on with our customers. And so our teammates that use, you know, an investment banking function that do pitch books with a spreadsheet that's been helped by, you know, 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 spreadsheet 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 it start getting answers about humans, checking to make sure the answer was right, both just common sense, but also literally making sure it's right. That was one risk. And then obviously the cybersecurity penetration risk. And both those, the team is working. And that's a cost pressure, frankly, in the current term is just building the amount of patching we all had to do across the industry. And then, you know, 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, you flip it around, what's the reward of this? We're now probably 130, 140 of 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, you know, we've been able to manage the headcount very carefully. So we're about 210,000, 9,000 people a day. We're at 212, 213 at the beginning of the year. That's just all managing attrition's 8%, 8.5% right now. It's 200,000 plus people. That means you've got to hire 1,000 plus a month. All you do is hire 1,000 versus 1,300. You've got to own 300 people. So we're always managing the headcount because in the end of the 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've deployed across all the teammates have access to AI. We haven't had an issue because 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... And each idea is costed out to the nth degree to say, I spend X, I get back Y, and here's the payback, et cetera. But importantly, the way you think it from a macro basis is, are you seeing the revenue of the company grow in the headcount in the company? You 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. 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 all 209,000 people have access to it. The range of things they have access to keeps increasing. With the specialized models that 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, you know, we're taking advantage of that. But it's good. But we own the answer. And so you have to do it carefully from both the teammate to make sure the teammate is able to make their work easier or else you've just not gotten anything out of it. And from the client to make sure the client doesn't start getting lacking answers. That Erica that you see, which we started developing 10 years ago, which is an AI thing, Deployed seven 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 prompt in different words. Nobody knew what the hell we were talking about. We said we were talking about intents in Erica. It started 200, got the 700. But it's only 700 because it has to be absolutely right because the tolerance to get a wrong answer is nil. 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 in that inquiry, Either a chat, an email, or a phone call, or a branch visit. You would come up to about 10,000, 12,000 people. But it has to be exactly right where 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 need to do it. 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 idea generation and idea cost, and the way we did the dot-com area, the e-com, you know, build out, 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 three questions left in three, about three minutes, so we'll go quick.

Credit quality, super quick. Careful. Higher rates, AI build-out, private credit, anything keeping you up at night?

No, we don't see it. Consumer, we're a prime business. Delinquency rates and stuff, basically, came down, went up a little bit, came down, and flattened out, and good. Commercial, three or four 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 pretty much the system. And so we feel very good about the commercial credit, the ratings, the upgrades, the outgrades, et cetera, and the consumer credit. And so we feel very good about it. And, you know, but we in our industry and we in our company manage leverage carefully. We don't over lend, and that's holding us in good stead right now.

I'll combine the last two questions and kind of maybe tying everything together. We had this big investor day last November. You know, you laid out a goal of, you know, 16% ROTC within two years, 17% to 18% within, you know, three years, and the potential to do better over time, you know, if the environment helps. Just how do you feel about that journey today? You know, what do you think needs – what do you think Bank of America needs to do to operate at kind of a high-team level returns and kind of the KPIs you laid out, you know, 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, you know, people were saying, well, can you get to the, from the 16 to the 18 faster? And it, as I said then, I'll say now, we're letting it all flow through. We're not, like, saying, oh, because we're at 17, you know, 16.2, we can invest more. So the way we're operating the businesses 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% all the way, which we're operating at, over 6% is 16, and we're there. And then the idea is just you tighten that balance sheet and come back, and I yield. That will push you 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 top end of those ratios. So we feel good about getting that. That's just literally just maturing the N.I. again through. A lot of that comes from that, just operating the company well. The net new asset was the one that, you know, 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 you're generating, and that they're already hitting everything. They said the gross assets, non-paying assets is a trick because we always have a lot of conversion off the brokerage. So Lindsey and Eric and the team are working on that. But we feel good about all those targets because we wouldn't tell you unless we had a path to get there in our current plan, and we're hitting it.

On that note, please join me in thanking Brian for his time today. Thank you. Well done.