Next, we have Bank of America, and I am delighted to have with us today Jim DeMar, co-president of Bank of America. Jim, thanks so much for joining us.

Thank you for having me.

So, Jim, you and Dean Athanasia have been co-presidents for about nine months now. So maybe to start, can you spend some time talking about your new responsibilities to drive growth across the lines of business? And what you're most focused on where you see the biggest opportunities.

So, you know, Brian asked us in the fall to take the co-president role, and as he stated, it was to help the businesses run, I think was the quote. And so over the last, you know, particularly the last six months as we were kind of getting through Q4 of last year, was to really take a look across our businesses. And we've really started to look at them in the light of two continuums. You know, one is, we're saying the wealth continuum, so thinking consumer investments, Merrill to the private bank, and then also, excuse me, on the business and banking side, just thinking about that continuum. So from business banking to commercial banking to corporate banking, and really trying to think about those as horizontals, not only in terms of how we face outwardly to clients, client acquisition, or as they migrate along that path, excuse me, but also, you know, tech and ops so we can drive synergies there and then have those dollars available to reinvest. And it's really – it's a similar approach to what I pushed through in the markets business when we were looking at complex technology and operations platform and really turning around and saying, where are the synergies? Where can we drive that cleaner, simpler, better, and then drive value out of that?

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

Yeah, so I would say, generally speaking, not dislike what you're reading out there. as, you know, there's more, I would say, concern and cautiousness than is what's reflected in the general level of activity. You know, I was joking around with someone recently and saying, you know, it's kind of what you see, you know, broadly, whether it's on the consumer side or on the business side, where the surveys, various surveys, are reflecting considerably more caution than what we actually see in the numbers, whether that's consumer spending, you know, still, you know, mid-single digits increase off a little bit from where it was, and that's off the most recent data that we had out. And on the investing side and on the banking side, it's similar. Similar in the sense of there's caution, but at the same time the environment's pretty right. Corporate credit spreads are tight, even though yields are higher, depending on where you are on the focus in on the U.S. for a moment, but U.S. interest rate's up anywhere. 20 to 50 basis points where you are on the curve, corporate spreads are tight. That's obviously attractive for both M&A and general CapEx that people are spending on. And from the investor side, the equity business has been where there's been increased activity and I don't want to say euphoria yet, but there's a lot of excitement about technology, CapEx, and what the future looks like. Whether you're utopian or dystopian, that is a big focus.

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

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

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

Pipeline still remains plentiful, I would say. Again, a lot focused on technology, broader technology. Obviously, there's large IPO pricing this week. There were a couple S1 filings over the last few days from some of the larger names that are out there in these market capitalizations between, you know, take conservatively $900 billion to upper, you know, trillion and a half plus, you know, these are numbers that we've never seen before. And even if you think about the typical 5% to 10% that is placed off of that, you know, those market caps, you know, these are larger than total company sizes that we were talking about, you know, not too long ago. So I would say, again, there, people are disciplined. I mean, yes, there's enthusiasm around the tech names, but I think, you know, away from the tech names, you know, companies with positive free cash flow and good outlooks are what people are focused on.

Got it. So we'll dig down into global markets and the investment bank in just a second. But maybe just while we're talking about the co-precedent role and just given your role, which I guess capitalizes off of your previous position running global markets, I assume you still have primary responsibility for the commercial and institutional side of the business. It would be great to get your thoughts on the connections of those two businesses and how that makes B of A more competitive. Sure.

I think it's one of those things where if you don't have both those capabilities, it's difficult to imagine how powerful they can be. I mean, we talked about it during Investor Day, and we've talked about it time and time again. But it's a pretty powerful position to be in to have, you know, the banking, traditional banking relationship also with the capabilities of a market's business. You know, why? It's pretty straightforward. But, you know, for those that aren't as familiar with it, I mean, obviously, many companies are international, you know, foreign exchange, whether it's hedging or payments, you know, we can be there for them. You know, interest rate hedges, also a big part of that business. I think people often overlook those two, much more familiar with debt capital markets, equity capital markets, and that kind of IB and advisory work that you have there. But when you look at rates, foreign exchange hedging, plus payments, it's pretty powerful. And I think there are only a few of us that really have global scale and capabilities to execute on that. And I think it's really underappreciated.

Got it. Okay, so let's dig down into the global markets business. The trading business, you've seen consistent growth across the past four years. And, you know, you spoke about diversification. It's highly scalable. What are the most important drivers of this consistent growth?

I think the diversification, well, I would say a couple things. There's things unique to us, which I think the diversification, again, unless you have it, it's difficult to imagine how powerful it can be. I always used to say, to the dismay of some of the people in the markets business, whether markets go up or down, spreads tighten, widen, whatever it may be, we're less concerned about that. Obviously, a rising market is more favorable. But when you have the capabilities and the diversification, you know, across client types, you know, a hedge fund is going to respond differently than an insurance company or a traditional asset manager. Similarly, you may have clients in or could be, you know, foreign, you know, non-U.S. clients or U.S. clients that want to access, you know, Asia markets, for example, or European markets or South American markets. And so as long as we have top tier capability across the business, we're, you know, we're going to earn the business and we're going to see it. So as opposed to someone who may be highly U.S. centric or, you know, only a macro product or a micro product or boutique, you know, it's much more volatile. You know, the highs may be higher in terms of what they earn during those periods, but the diversification without question, you know, gives us the ability to, you know, to serve clients and to continually drive returns.

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

Yeah, I would say for us as a company, yes, that is a big driver. I think the size and the structural changes in the market are also strong contributors. And I think, again, depending on how long you've been in the business, from 2010 up until, well, let's say 2010 through 2015, when new rules and regs were being put in place and we were all trying to digest the cost of being in these businesses, We were also doing it, meaning there were higher capital charges, there were higher liquidity charges, so on and so forth. Not surprising, but when you were in an environment that was heavily influenced by, you know, central bank policy and we had, you know, quantitative easing, you had suppressed rates, you had suppressed volatility, and you had suppressed growth. So those all keep a damper on what the opportunity could be. You know, where are we today? I mean, you know, we barely got over, you know, 3% rates for a 10-year period, you know, and we've been above, you know, 3%. The size of the markets themselves have also grown materially. If you look at outstanding debt, you know, for whether it's corporate bonds, sovereign debt, you can kind of mortgage, U.S. mortgage, you know, agency debt. All those are, you know, larger markets growing, and not to mention the equity market, you know, has grown considerably, not only in the price in aggregate or market value of the indices, but take a look at the volumes. I think we were doing, you know, like $7 billion a day in trading volume in equities pre-COVID. I think we got up to, you know, $11 or $12. You know, we're between $15 and $17 a day today. Hey, you know, more volume, larger markets, more volume, higher prices, and getting a piece of that is valuable.

And then you mentioned structural changes in the market as well.

What are you thinking about that? So structural changes there, meaning because capital requirements increased for, you know, complex products and also with movement of products towards exchanges or swap exchange facilities, for example, for interest rates. And more of the activity of the banks today is in, and brokerage houses are in, you know, level one and level two assets. So those that are liquid, observable, and, you know, higher trade volumes. I don't even hear anybody talk about level three assets anymore as a part of their balance sheet, which, you know, from 2010 to 2019, you spent more time than not talking about what your level three assets were. So when you think about it, it's, and again, part of Dodd-Frank and other, there's just been that shift towards facilitation of activity, more product being traded on exchanges, growth in market, and it's a pretty strong flywheel.

That's less capital drag as well? Okay. And then to round out that discussion, when we think about fixed income financing and NII revenues within the markets business, are you leaning into the fixed financing business, and how does that drive the NII?

So, yeah, so, you know, an interesting point on that, you know, we had been, you know, in that business for as long as I can remember in varying kind of forms. You know, I joined the firm back in 2008, and I think once we got out of the financial crisis and the economies were starting to kind of rebuild and reenergize, you know, we had done various forms of that activity. So we've been in it for a long time, you know, consumer receivables, mortgage, you know, warehouses, those types of things, some credit extension. But I think the part that is misunderstood or maybe underappreciated is if you take a look at the economy, the U.S. economy between, you know, pre-COVID to, you know, where we ended, you know, last year, I think we've had aggregate nominal GDP growth of 37% or 38%. You know, that's a considerable number. And if at the same time bank capital was going higher, it wasn't coming down, you know, by default to achieve economic growth, which the U.S. economy credit, you know, it's part of our philosophy as an economy that credit extension is part of economic growth, the growth had to come from somewhere, right? So when we looked at the business, we just looked at it and said, hey, these are assets we have expertise in decades-long, clients we've been dealing with for a long time. We're going to focus on client selection, and we're going to focus on the collateral and having robust structures, and we feel comfortable with it. I wouldn't say that we were going after something more aggressively or less aggressively during that period, but I think those stats i provided give you a good sense of the economy was growing that you know there was always this discussion around what's occurring outside the banks versus what's inside the banks you know um non-regulated bank you know non-bank financial institutions grew and you know we were part of that ecosystem so it was a little bit less about we always stick to our our our guns so to speak on you know what we view is you know what's the return that we want to achieve along with the other criteria that I mentioned. So opportunistically, things get more attractive for us, and we'll look at that more closely. But we didn't lean out. We didn't lean in. It's a core part of the business, and we just follow it accordingly.

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

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

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

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

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

It's going to be a good quarter. You know, we're continuing to see the activity. You know, there's deals that have been announced, not to get into any of them specifically, but activities remains, you know, remains robust.

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

Yeah, so, you know, overall I would say was constructive, showing the growth where we indicated we were going to have the growth. Starting off with the operating margin, you know, we had guided 2% to 3% as kind of a target for operating margin. We got close to 3% for Q1. I think we're talking north of 4% for Q2. So I think that's a good indicator of kind of where we're seeing things trending. You know, we've talked a lot about NII and NII and repricing of assets, and, you know, part of that pulling straight through to the bottom line and not occurring additional expenses on that is what's helped driving that. And so from a numbers perspective, I think, Lee, we were saying 1.8, right? Yeah, 1.8 on investment banking. and an NII guidance, we're sticking the same.

Got it. Okay, so on the operating leverage side, over 400 basis points in the second quarter. All right, perfect.

And I think it's important on that to note, you know, there's a lot of discussion or comments being made, you know, you know, is that at the expense of investment? You know, it's not. You know, we view everything as, you know, there's, you know, we're always looking to grow, you know, where we should be growing and in a way that we should be growing, and at the same time, you know, expense management and managing expenses accordingly so that you can make the right investments is the real philosophy, you know, for us. I mean, tech investments are significant. We've talked about them, you know, our annual tech spend and how much we've been putting into, you know, specifics, whether it's AI and other, you know, we want to keep driving that efficiency, cleaner, simpler, better, reduce systems, bring synergies, and then use those dollars to plow back into tech investment.

So given the strong momentum you have on the revenue side and the operating efficiencies you're generating on the expense side, there's enough room for both investment spend and positive operating leverage. And then I think you spoke about 200 to 300 basis points of operating leverage. That was a full year number for 2026.

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

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

Yeah, great question. I think one of the things you're going to start to hear more regularly while we've done it, But the theme will be, I think, more consistent, you know, across the firm. I used to say to the markets business, you know, you know, doing more with the clients that we have today, you know, apply that to customers. And if you think about across our businesses, whether it's, you know, consumer or various banking businesses, plus, you know, investment banking, you know, markets, you start to see some of that play out. So when you look at our investment banking business, we've got M&A top five player. I think it's like 5.3%, 5.5%, something like that for market share. If you get into investment banking overall for corporate, you get to a number where we are fourth. I think that gets us mid 6% market share, low 6% market share. But the really powerful thing is if you start to look at where we have relationships, corporate banking relationships, that IB business grows materially. So we're, I think it's like 300 basis points higher approximately where our market share with those clients. So that puts us up to like number two. So if you look at clients that we're doing corporate banking and investment banking, we rank much higher. It's further, you know, exaggerated in the commercial banking business. You know, we have 12% to 13% market share, and we're number one with our clients there. And so it's nuanced, but once we have those relationships and the trust is built and then we have the capabilities, that flywheel just keeps running. And so that's a key component or a key part of the strategy. And then we had talked about, you know, other synergies that we had during Investor Day, you know, around international growth opportunities, banking, markets, payments, investment banking, markets, and payments. And that's a pretty powerful combination for us as well. You know, for those businesses, we have about 40% of it. When you look at the – it comes from international on a top-line basis. Again, doing more with those clients that we're already doing business with. I think we had it on the market side. It was something like 95% or 96% of the clients we're already doing business with. We wanted to do more. You look at that, it's about 40%, I think, for corporate clients, so there was the opportunity to increase that there. When you bring those capabilities together, markets, banking, investment banking, and corporate banking, it's a pretty powerful combination of capabilities and, again, building trust with clients and the ability to execute opportunistically when they need us to and at the same time day-to-day in their regular course of business is important.

So 40% of the combined global markets and corporate investment bank business is international. Yeah, I think that's the number that we – yeah, got it. Yeah, and I guess within that business, you outlined some of the opportunities that you're seeing in the near term, but as you look out over the longer term, where do you see the best opportunities there?

Well, they're pretty for international. I mean, it's a pretty staggering number. I think we cover like 80% of the Fortune 500 companies. you know, it's an incredibly high number. The U.S. number is even higher. It's like 95 or 96% of the Fortune 1000. But, you know, we've talked a lot about, you know, for the most part, it doesn't mean that there's modest expansion in a country. But for the most part, it's in the regions we're already operating in. So obviously, and where there's more opportunity. So, you know, clearly with higher interest rates in Japan and with a change in regulatory environment, there's, you know, a newfound enthusiasm for, you know, for companies and non-Japanese investors to invest there. So, I mean, that just comes to mind as one that, you know, that we have a lot of conversations about. I mean, obviously, we cover Asia well and Europe and, you know, Latin America as well, and obviously in the Middle East, there's likely to be, once things are resolved, that there's going to be a great need for lending and capital markets activity to rebuild a lot of the infrastructure and other that's been destroyed.

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

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

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

So, again, there is, you know, a significant need for capital for all this investment that's, you know, that's taking place, predominantly broadly defined infrastructure, you know, digital infrastructure, power, and broadly energy. And I think that those are the areas that you're going to continue to see it. You know, the candid response on, you know, this risk appetite, you know, some of it was, you know, limited by what the rules and regs were, and some of it's just simply limited by what risk appetite is and where we, you know, where we want to deploy our balance sheet. You know, you live with loans once you make them, so we're very thoughtful about, you know, what it can look like through, you know, through a cycle. That being said, the demand, the size and scale of the financing that's being done is well beyond anything that can be handled in the loan market for banks. And that's why you're seeing the expansion or, you know, kind of regular access into the bond markets, which is why the bond markets were, you know, created in the first place, was just that there was limited, you know, capital and balance sheet, you know, available in the regulated banking system. So, you know, the $25 billion that we, you know, we communicated, you know, that was our way of saying that we're continuing to remain involved. We're going to be, you know, there for clients, and some of this may not meet what our kind of traditional profile of lending is. And we do have some capacity to deploy that when we think, you know, when we think we need to. The reality of it is now, you know, most of the activity or a great deal of the activity you're seeing is more for investment-grade type credit demand. So, you know, I don't – and obviously the private credit, you know, sector is going through a kind of repositioning and a recalibration. But a lot more of the demand we're seeing today for lending is much more on the investment grade.

Got it. On the, I guess, the wealth side, you mentioned the wealth continuum in your opening comments. Yeah, so maybe talk about that. You know, where are the opportunities across consumer investments, Merrill, the private sector?

Yeah, Dean and I spend a ton of time on this. It's really, I think it's a highly differentiated platform. We talk about consumer investments when we talk about the consumer business, But when you really think about that across the continuum, you know, consumer investments plus what we say, Maryland, the private bank, it's just incredible. You know, we're offering investments and investment advice to, you know, traditional consumer bank clients. Obviously, they need a certain profile. But we have that channel, and that's an acquisition channel, and that's going deeper with clients that we already have a traditional banking relationship with. You know, then you move over into Merrill. We've got, you know, obviously financial advisors. It's very powerful in terms of acquisition, but it's also, you know, powerful for those clients that want, you know, a more high-touch, you know, advisory role. But we also have digital capabilities that's a product. It was predominantly used as the investment interface and product for consumer, but growth does occur in the digital space for the industry, and that's an area that we're focused on not only for consumer but for Merrill and for the private bank. And then you get into the private bank again, another jewel. And when you really look at all these businesses, they're durable as they are today. However, there's areas where they can all grow, right? For Merrill, you know, where it's, I don't know if we disclosed the numbers, but it's the majority of this coming from the earnings, top line and bottom line come from investments. Lending and banking, we do talk to those clients about that, but that's where there is a bigger opportunity for us, not only on the investment side, which people think about, but lending and banking. And when you see those relationships, again, like we were talking about on the corporate and institutional side of the business, it really drives a powerful flywheel. The private bank is almost the reverse, predominantly lending and trust services with less on investment. And we think that there's opportunity for growth there on the investment side. And we just think that there's growth opportunity, excuse me, really across the board. And being unified in that approach for tech dollars, for operations capabilities, again, that's another part of the flywheel where we need to drive that efficiency, make it easier, and then this way we can have both external and internal efficiencies that we can just drive.

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

Like any new, any innovation, you know, that's talked about, we spend, you know, serious time having discussions and analyzing it. I mean, yes, this is a more advanced version of when you could first pull up, I forget what the company was, but, you know, you could look at different, you know, borrowing rates for mortgages when someone just decided to aggregate them on the Internet and turn around and say, here's your menu of what you can get for a mortgage rate. So, you know, we're focused on it. We're not, you know, you can't dismiss anything. I do think we're, for a certain profile of customer or client, that's, you know, that's beneficial. We're not seeing requests for broad adoption for that yet, but it's obviously on the menu of things that we think about and are focused on. All right, perfect. Perfect.

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

So I think there are a few ways to look at it. I don't think that there is a simple answer. we're always trying to optimize, you know, capital and financial resources. So capital is the one that's the most easily observable and reported. You obviously have liquidity, you have balance sheet, and you have some others that are of less consequence but are all part of the, you know, evaluation process. So what we really try to do across the company is to turn around and, you know, forecasting, as you know, can be difficult, but have the flexibility to move capital around when we can and to go back to the markets business and our discussion on what those balance sheets look like, it's highly liquid securities where most of the balance sheet is deployed once you exclude the loans and that pure lending part in the markets business. So you have balance sheet capital and liquidity that's scalable that we can adjust up and down, and we have to be very cognizant of what the rest of the company balance sheet looks like. So, we try to match what clients need, where those opportunities are, with, you know, looking at what the returns are by business. Obviously, some businesses have much higher capital returns because they use a lot less capital. So, yes, the markets business always is a larger user, and we have lower returns there. So there's optimization not only within the markets business to continue to drive that higher, which we grew a couple hundred basis points higher. Over the years that I was running, a continuous focus on continuing to drive that higher.

Does that answer the question? That does. And just to follow up on that, with the new rules that we have, does that change anything in terms of how you're thinking about capital allocation? The process isn't changing. Fair enough.

With that, we're out of time. Thanks so much for joining us.