Quarter 1
Q4 2025 Earnings Call — January 14, 2026
Betsy Grosick (Morgan Stanley): Hi. Good morning. Thanks so much for all the detail here. I did just want to understand one thing on the outlook as we're thinking about the expense ratio. I know that you've got the accounting change, and you also have outstanding guidance for the expense ratio over the medium term. I believe it is 55% to 59%. Is that right? I'm wondering, are you going to be adjusting that expense ratio guide given the accounting change?
Management: I don't think so at this stage, Betsy, but similar to our comments on Investor Day, the numbers that we put out aren't a cap on our ambition. So obviously, as we go through the course of the next couple of years, if we improved our efficiency ratio by a couple hundred basis points this year, we're going to keep driving towards that range. Once we get in that range, we'll reassess and we'll consider whether it's time to consider a lower efficiency number in the future.
Betsy Grosick (Morgan Stanley): I was just thinking mechanically with the accounting change, the revenues improve, right? So with the denominator moving higher, shouldn't that, you know, target expense ratio of 55 to 59 move down a percentage point on each side?
Management: Remember, we recast the prior periods. So that's already in there when you use the comparative periods. And I think part of the reason that it was important for us just to recast all the numbers and adopt the accounting is because that's how our competitors showed their results. So now we feel like it's on a comparable footing.
Betsy Grosick (Morgan Stanley): Thanks so much.
Ken Usdin (Autonomous Research): Hi, thank you. Good morning. So just a follow up, Alistair, you made the point about just, you know, your outlook for fees is strong and obviously there'll be compensation aligned with that. So just coming back on expenses in an absolute sense with 4% year over year growth expected in the first quarter. And I know everyone's just thinking about just how do you get to this operating leverage algorithm? Is that around what you're expecting just absolute expenses to grow given your underlying base of good fee growth in there?
Management: What we're trying to convey is, and we've said this over the course of the past several years, ours is an organic growth company. We're investing for growth all the time. And when we perform the way that we believe we can, we're going to create operating leverage every year. That's what our North Star is in terms of the financial model. So we've guided you towards NII up 5% to 7% this year. We've said in the first quarter, we believe the first quarter will be up 4% or so. We've said that we expect the operating leverage to be a couple hundred basis points. So that should allow you to work backwards into the expense side of the equation, especially since we've given Q1 essentially. And then I think it will just depend on your revenue assumptions regarding assets under management fees, markets and investment banking, because those will be the big drivers. And yes, we remain constructive on all three of those.
Ken Usdin (Autonomous Research): Got it. And then, so as you think about your, when you talked about the investor day, you had talked about a 200 or 300 basis point range. So, you know, obviously one each year is going to be different things, but you've got with a strong base of NI growth and fee growth, and we're on the 200 side, what are the things you could do to kind of, you know, longer term expand that and potentially get back to, you know, you get up to the 300 side of that, of that 200, 300 range that you had given us at in November. Thanks.
Management: One of the things we've talked about is, when we went back to investor day, and this gets back to driving return on tangible common equity over time, you think about the fact that we've just gone from 13% to 14%. Last quarter, prior quarter, we were at 15%. We said we're going to get in that 16% to 18%. If you think about the organic growth opportunity we have around deposits and loans, and then you add the fixed rate asset repricing that drops to the bottom line, and then you combine it with the fee growth that we've talked about. When we manage expense carefully, as we have done this year, and headcount flat, sort of the core expense minus BC&E and FA incentive comp closer to 2% type growth, then you'd look at something that gets pretty interesting over time. So that's what we're trying to drive over a period of time. And you're right, it won't always show up every year where it's exactly the same. But what we're trying to do, most importantly, drive organic growth, keep our expense discipline. That's it.
Ken, the number one thing is to continue to let the head count, work the head count through operational excellence and applications of new technologies, including AI that we gave you some sense for. So as we told you yesterday, today's activity in Erica and our consumer business alone is worth you know, thousands of teammates that we don't have to have to do the great work we do for the customers. So we've applied digital, and that's why I put the pieces in the deck that you can see in the pages 21 and beyond. We applied the digital capabilities, now AI capabilities, and you saw during the year the headcount was basically flat. Well, we added more people in the field facing off to clients and generating new client flows, and that's why when Alistair talked about the middle market business, particularly the private bank business, why we're seeing strong growth there. So it's going to be about bringing the numbers of people down over time, and we expect the headcount to come down during this year. And, you know, each month we get the – to maintain neutral headcount, we have to hire at a 7%, 7.5% turnover rate.
You've got to think it's higher than 1,000-plus people so we can just make decisions not to hire and let the headcount drift down. The team's done a good job of it. We ended the year basically flat, and we absorbed, as Alistair said, 2,000 very talented teammates from colleges in July. And by the end of the year, we were down to 2,000 people and ended up back net neutral. So that's the way you're going to get there. If you look at the expense load, it comes from people, and it comes from the benefits and the compensation, and it ultimately comes from the buildings and computer systems to allow them to do the great job for clients. So that's what we're working on.
Ken Usdin (Autonomous Research): Okay, guys. Thanks a lot.
Mike Mayo (Wells Fargo Securities): Hi. If you could just give more of an update on technology, what do you expect your spend to be this year versus last year, your spend on AI, and then slide 21. Again, I think everybody appreciates the data you provide on your digital engagement, which is more than others, but you know, no good deed goes unpunished. I'm just looking at slide 21, and your interactions in consumer with Erica took a dip down in the last year, even while your users go up. So we can talk about the spend, investments, and results from tech, and especially AI. Thank you.
Management: Yes, so, Mike, we'll be up on initiatives this year, 5%, 6%, 7%, I think, types of numbers. Total spending, $13 billion plus, $4 billion plus in initiatives. That's all new code. And in that spending, remember also we get the advantage of all the other people. So, for example, under the 365 co-pilot rollout, which is now out across a total of 200,000 teammates and using it and learning from it, we expect to get good leverage of that. So that's an increase in the run rate year over year. So the technology is increasing. Technology number is sizable, and the team does a good job in implementing change every weekend, frankly, except for one a year. So we feel good about that. One of the things that you'll note is you use these technologies in combination. So your point on Erica, I ask the same question, Mike, because it's pretty straightforward. Why would the interactions with Erica go down? The reality of that is what we don't show you is the amount of alerts that we deliver.
So you can set up alerts, which then has slowed down the need for Erica because the alerts are up to, I think, billions a quarter that are telling you when your balance is low and things like that that avoid you going in and asking the questions. So that combination of things is growing very quickly. So, again, what you always try to do is look at a process from a customer to you and figure out how you can get that customer the best customer experience possible at the lowest cost, so you can plow that back into the low-fee structures, which help us grow the business for, as we said, for seven straight years in checking accounts. So there's a technical explanation on the Erica that is a little bit different, but thematically you can see just the digital enablement just continues to grow and continues to help us leverage our franchise, and frankly, consumers are now pushing through 50% profit margin, and it will continue to go up.
Mike Mayo (Wells Fargo Securities): Okay, and specifically on AI investments, like how much do you spend on that or the number of people, or if you could mention that and kind of what kind of outcomes you're looking for, especially as we sit here at the start of the year.
Management: Well, we're looking for, we have, to give you an example, we have 18,000 people on the company's payroll who code, and using the AI techniques, we've taken 30% out of the coding part of the stream of introducing a new product or service or change. That saved us about 2,000 people. So that's how we're applying it. That was this year's statistic, meaning 25. Next year we should get more out of it as we figure out how to apply it across. So there's 20 different projects going on in the company. I don't know off the top of my head the total expenditure, but it's several hundred million dollars. Importantly, we're going through the company to generate more ideas how to apply AI, and I use example, like our audit team has built a capability, they think, a series of prompts around doing audits and stuff to allow them to shape the headcount back down that they had to grow during the regulatory onslaught over the last few years. They're going to be able to bring that down. And with AI, they'll be able to bring it down further. And they've laid out plans to do that. And so that's going on everywhere.
But that was organic from there, starting to use the co-pilot capabilities and then learning how to do the prompts, and then using it to set up audit practices. So you're seeing it everywhere in the company. So there's, I don't know, 15, 20 projects going on, and there will be a laundry list of much bigger size as we go through the company now or generating ideas now that people are using and getting used to how to use it.
Mike Mayo (Wells Fargo Securities): All right. Thank you.
John McDonald (Truist Securities): Thank you. Good morning. One of the other levers for the ROTCE ambitions that you guys have talked about is the denominator with the CET1 ratio. Can you talk a little bit, Alistair or Brian, about the timeline for kind of where you are today with 11.4 to the target you laid out, which I think was around mid-10s?
Management: I think, John, if you think about that, we're still, as you well know and your colleagues well know, we're still waiting for the rules to get passed. finalized in their multifaceted rule set that we've got to make sure how it applies. But our goal, we peeled from 1160, 1140, and you're going to keep peeling that number down through expansion of our markets, business expansion of lending and other uses of RWA. And we bought back a little more stock and dividends than we earned, and so we'll keep working that down. But the idea is not to take the $200 billion-ish nominal and reduce that a lot. The idea is to use the excess to grow the balance sheet and let that work down. As we see the final rules, you know, the constraint may be sort of 10 or common equity ratio stuff or 620. Could be in the mid to high fives or something like that. You know, that might be possible. And so we'll let this all drift down over time. And so just expect us to keep buying back, paying the dividend, increasing it, and buying back the stock. And remember that, as you said, we've drifted down a little bit by growth, but also the accounting change hit it, which will repeat. So the next quarter, we'll keep walking it down. The idea is as these rules settle in, then maybe we can be more aggressive, but we've got to know exactly what we're dealing with.
John McDonald (Truist Securities): Okay. And then maybe if we pull back just the broader timeline on the ROTCE path, it looks like for 2025 you've kind of ended, you know, in the 14, low 14s. What's the ambition, you know, to get to the lower end of the 16 and then the 18 over time?
Management: I think we made it clear that you had by the eighth quarter to the twelfth quarter you move in the lower part of the range and then the upper part of the range given a core economy growing at 2.5% type of numbers, and all the other attributes. So we made that clear. So that's basically eight quarters from, including this quarter, obviously, the first quarter, 26, and then we move into the 16 level, and then we move to the upper end of the range as we move through the third year.
Matt O'Connor (Deutsche Bank): Good morning. I was hoping you could elaborate a bit on your outlook for loan growth and some of the drivers. You've obviously been bringing loans quite a bit and, you know, just, you know, well in excess of the industry and how sustainable it's at and what are some of the drivers?
Management: Embedded in our NII assumption is a loan growth in the mid-single digits, Matt. Obviously, we've had pretty good loan growth this year, kind of $20 billion a quarter or so. A decent amount of that has been on the commercial side, and we highlighted that in our financials and in our commentary earlier. So we're still seeing growth in each of the consumer categories, and that feels like it's in a position where it's likely to continue to grow from here. So we feel pretty good about those two categories. Don't see any reason that it would be a whole lot lower necessarily than it was last year. But last year was a good loan year, no question. So that's why we're saying mid-single digits. I think it will still be led by commercial. But you'll see the consumer categories picking up.
Matt O'Connor (Deutsche Bank): And then I guess specifically in credit card, you know, the spending was good, up 6% year-over-year for the balances. We're up just a couple percent. Fees were down. I know at Investor Day you talked about accelerating the growth there. Maybe just update us on kind of the initiative there and the timing. Thank you.
Management: Holly's very clear about this at Investor Day. It's our intention to continue to accelerate the growth in CARD. I think we've seen that in the last three or four quarters. It's picked up sequentially, quarter after quarter. And if you were to look at what the team is doing right now, they're investing a little more for future growth. So you can see that in some of the things we're doing around the World Cup this year. You can see it in some of the things we're doing around more rewards in November. You can see it in our rewards program with our co-brand partners. And you can see it in the June cashback rewards offering. We've got a lot of things going on right now that we're excited about. We know what we've committed in terms of higher credit card growth, and we feel like we're on the right path.
Erica Najarian (UBS): Hi, good morning. I just need to re-ask this question, Brian Alistair, because as I speak with investors, I think the communication on efficiency and expenses is a big part of what's holding down the stock. So just to clarify in terms of what Betsy was asking, she was asking, well, given the restatement and thereby higher fees, shouldn't you adjust the efficiency ratio range to 54% to 58%? Because you shouldn't get credit for the restatement, right? So that's why she was asking that. And I think what Ken was asking was, you know, everything that Alistair mentioned, you know, the curve, the growth, capital markets, it's hitting this year, right? And so you're on the low side of the 200 basis point, of the 200 to 300.
And so I guess the question here is, you know, what should we take away in terms of the expense messaging? Is it sort of what Brian alluded to that, you know, the headcount just needs time to work through and then you'll hit 250 to 300 and we just need to be patient? Is there more investment spend like you told Mike Mayo that you wanted to front load in a great revenue year? What exactly do you want your investors to take away in terms of how you're viewing the expense growth relative to the revenue side? Because, for example, for your closest peer, JP Morgan, they grow expenses to $105 billion. No one really blinks because of the revenue side. So what is the underlying message for operating leverage for Bank of America over this year and over the three years that is underpinning that 16% to 18%?
Management: Let's back up to it. We, as Alistair said, we are driving these numbers and they have improved on a recast basis by a couple hundred basis points, and they'll continue to improve. And so the range will move down to lower numbers, and when we get into the range, we'll reset the range. But I think we're focused on the wrong thing.
The question is what are you doing now as opposed to what you're saying you're going to do. We have a tendency to actually deliver as opposed to talk about what we do in the future, and that's what we focus on. So what have we done? The efficiency ratio came down a couple hundred basis points on an apples-to-apples basis. With the parts of the revenue stream that are least efficient, the wealth management revenue growing very strong in the capital markets revenue. So when the consumer bank revenue grows and the global banking revenue grows at the efficiency ratio they're at, they produce a lot more pop than wealth management, which has obviously the financial advisory tariffs. So we have to also think of where the revenue growth is coming from to see the improvement. But we've moved to 200 basis points recently. In past years, when rates stabilized, we'll move it into the 50s. As you get to lower efficiency ratio, the operating leverage can be narrow and you still get a bigger earnings pop.
One thing that we've been telling you and that we want to make sure people understand is our goal is to keep driving all the extra NII to the bottom line, meaning the difference between sort of the core and the repricing, because we owe that to drive the returns up and the rest of it. We'll have more normalized attributes to it. So we've driven the efficiency down. We expect to continue to drive it down. It is all going to be due to headcount because that's 60-plus percent of our expenses. We've absorbed inflation and everything while we're doing that. The expense growth, Alistair just told you, first quarter, 4 percent with expense increases and base increases and third-party inflation coming through, et cetera. So we're very efficient. We're very efficient in each of our businesses, and we're very efficient relatively to our peers, and that will continue to improve. And that's – I don't know how to do it.
One of the things when I talk to investors, and I actually talk to people on a lot of stock every quarter, their view is stay away from – focus people on the operating leverage in the company because, in the end of the day, we've got to grow expenses at a faster rate, which we have been doing, than – a slower rate than revenue, excuse me, go revenue at a faster rate than expenses for operating leverage. We produced that for our last five quarters. We had five years of it leading up to the pandemic. You should expect us to get back on the street. But the reason why they want us to focus on that, you know, the people that own the stock is to get away from the nominal dollar debate every quarter and get more focused on how the team's doing a great job of driving the revenue and driving the expense. If the revenue growth slows down because the dynamics outside our company, the expense growth will slow down.
Jim Mitchell (Seaport Global Securities): Hey, good morning. Maybe just a question on deposits. You know, we've seen three rate cuts since September. Can you speak to what you're seeing in terms of deposit pricing, you know, whether betas are worse, better or worse than expected? And just also what you're seeing with respect to client behavior would just be helpful.
Management: First, with respect to our pricing discipline, really when you talk about pricing, we're most focused on the upper end of the corporate banking, commercial banking, very large global banking deposit base, where we're passing on rate cuts essentially the moment that they take place and in full. And so that's why you see the beta there obviously quite high. Same thing in the upper end of wealth management. Consumer, you see much less in the way of pricing coming down because we have so much in the way of non-interest bearing and checking and so much in the way of low interest bearing. So we feel good about the team's pricing discipline overall. In terms, and you should expect that to continue in Q1, recognizing that the rate cut was late in Q4. In terms of growth, I think if you were to look at page 7 in the earnings materials, it sort of tells you the picture. In the bottom right, you can see global banking. That's had a very good period of growth. I'm not sure that sustains at that sort of level, but we've had good growth in global banking. And most importantly, in the top right, consumer has begun to turn and is growing, and that's the most powerful engine for us.
Those are the most valuable balances. We've now got three-quarters of year-over-year growth. It's poised to grow, poised to accelerate, so that's very important. And wealth management is bottoming here. So, you know, we feel good about the mix of deposits changing in our favor this year, and we'll just need to make sure that we keep track of that through the course of the year, but we're pretty optimistic on that, Jim.
Jim Mitchell (Seaport Global Securities): Right. So I guess when you think about maybe inflection and deposits growing, loan growth still strong, you'd have a NII target of 5% to 7% for this year. Can we just drill down and look at NII X markets? It's grown about 5% over the past two quarters. Is that a reasonable growth rate for this year? Or do rate cuts make that a little more challenging? Just how do we think about the markets versus X markets NII dynamic?
Management: Markets is going to benefit from a couple of different things. First, we obviously invested 10% plus into the global markets balance sheet, so that tends to mean that we're likely to grow NII. Second, a big portion of that growth has been in loans. They're totally about NII, so that obviously is helpful. Third, when rates are cut, because markets tend to be liability sensitive, that tends to be good for markets NII. All those things are true. And the only thing, Jim, that I was just making sure that I pointed out in my comments earlier was we ended up at $15.9 billion. That is what I would consider to be mostly all core NII. It just happens that we had about $100 million or so of global markets NII that I think will revert back to MMSA next period. So that's the one part that I just feel like is important for us to note. But otherwise, I think global markets NII will grow with the continued investment in loans and in the business over time.
Chris McGrathie (KBW): Oh, great. Good morning. Alistair, on the funding remix, I guess, what's left to go in your view based on your core deposit trends, and how much of that is baked into the guide, the liability optimization? You're talking how much of the wholesale funding can we take down over time?
Management: I'd say probably at this point somewhere around $50 to $100 billion, just ballparking that between repo, CP, some of the short-term wholesale funding. institutional CDs that we put out there that are just quietly rolling off now, quarter after quarter after quarter. So that's the sort of number I would use.
Chris McGrathie (KBW): Okay, great. And then just piggybacking on the loan growth comment, the optimism I heard on the commercial growth, I guess any asset classes perhaps not as optimistic into 26, and if I missed it on the card expectations with the proposal, any comments there about either growth or expectations to offset that would be great. Thanks.
Management: On loans, I don't – I mean, I'd say we're pushing for loan growth everywhere we can find good, high-quality loans. So there is no place that we're not pushing. We obviously have substantial excess of deposits above our loans, so we've got a lot of capacity there. We've got a lot of excess capital we'd like to continue to deploy if we can find productive uses with our client base. So pushing everywhere. I think commercials obviously had a good period. Wealth management has had a good period too. Some of that relates to things like traditional securities-based lending, but some relates to wealthy people looking to purchase expensive assets and we're there to help them with that obviously. The consumer piece had been quieter last year, maybe picked up a little more this year. We can see the growth now in a variety of categories. Interesting to see home equity beginning to grow in variety and across time. Mortgage, a little more activity this past quarter. If you see our originations, see we had more there in Resi Mortgage. We're looking to continue to see pickup in consumer activity broadly. And, again, we're trying to drive more card balances.
So that's really important for us. That remains at the front of our strategy right now. Chris, on the rate cap, obviously you're here. There's a good public debate going out there on the – if you – have unintended consequences of capping rates, as has been proposed over many years by various components in Congress and stuff like that. The explanation we've always made sure people understood is that if you bring the caps down, you're going to constrict credit, meaning less people will get credit cards, and the balance available to them on those credit cards will also be restricted. And so you have to balance that against what you're trying to achieve from the affordability. We're all in for affordability. You all know how we run our consumer business. It's the most fair to the consumer, and that's why we get good growth and high customer scores and those increasing. So we build a product to stop people from going to payday lenders. It's called Balance Assist. We've had 2.5 to 2 million-plus consumers have used that product to borrow a short-term loan for $500, up to $500 for a $5 fee.
We have a no-frills credit card with a lower rate structure to it, and we've had 70,000 clients this year took that card. And so we believe in affordability, but with instruments that cap, you will see unintended consequences of that, and I think that's what you're seeing in the debate going on is people are making their points to the various, the administration and Congress and others involved.
Glenn Shore (Evercore): Hi there. I think you brought up an interesting point, getting people to focus away from the nominal expense dollars. And you obviously mentioned the less efficient revenues are growing good from wealth and capital markets revenues. So my question is, in a good backdrop like we're in, good economy, strong economy, everybody's got a job, markets are doing well. If you take a step back and you see flattish consumer deposits and down GWIM deposits, it's not what maybe you would have expected. And that's not a you thing. That's an everybody thing. So I'm just wondering if you could address that, even with 680,000 new checking accounts, like why do you think we see this sluggishness in deposits? And do you think we'll see a turn at some point in 26 is that that would help the operating leverage story as well?
Management: I think you have to think about what the consumer, especially in the well even the wealthy consumer they come to us for transactional accounts and they come to us with their savings money, and as market alternatives, off balance sheet alternatives money market funds etc ran up in rates you saw a fair amount of money move and that especially in the wealth management business. What Alistair explained earlier is that's kind of all behind us now. The consumer's been stable and bumping along. The wealth management actually grew in the last part of the year. And so you're seeing it, and these have settled into much higher levels than they were traditionally. So I think wealth management was maybe $200 billion before the pandemic, maybe $230, something like that, $240 maybe, and it's moved to $280 type of level. So you're seeing a lot more cash stored. So on the wealth side, it's people putting money into the off-balance sheet.
Quarter 2
Q3 2025 Earnings Call — October 15, 2025
Analyst: So we have that to gain numbers of advisors, and then we have the recruiting to gain numbers of advisors. But the number one thing is to retain our advisors, and we're at a very good place right now in terms of retention.
Executive: Okay, but it seems like there could be even better.
Analyst: Yeah, there could be better. At the end of the day, in a business which is advisor-led, you really have two ways, both in the private bank, Merrill, and also the commercial bank. You have two ways to grow the business, more advisors, more relationship managers, and or making them incrementally more efficient, handle more clients through automation. That is going on too, but that takes a little longer to get that through the system.
Analyst: Got it. Okay, great. Let's turn to capital markets, where clearly you've been investing in the markets business, and you are the only firm to grow sales and trading revenue year on year for 12 consecutive quarters, which was very impressive.
Executive: I'll give you a news flash. This won't be 13, I think.
Analyst: This what? I'm sorry?
Executive: This one should be 13.
Analyst: Oh, this one should be 13. Well, it's not closed yet. Okay. Just want to make sure I heard that right.
Analyst: Where have you made the investments to generate that kind of result? And what's been most impactful there?
Executive: So when you think about it over the last chunk of time, after the financial crisis, you had the bones of everything you needed. You had all the major trading areas. You had a great research team. You had the reach of the sales force and all that. We also had some interesting pieces that we had to get out because it became too much of the storage business and the legacy companies. So we did a lot of that. But the reality was we need to make more of a commitment of size, balance sheet capacity, capital capacity, and frankly, expense capacity of that business. And we did that starting, you know, 16, 17, 18. And Jim DeMar and team have done a great job.
So what you're now seeing is a compounding effect of that. That business this quarter we expect to grow mid to high single digits, 13th quarter in a row, by rounding out the FIC platform, by going a little macro versus micro, all these areas which – our hard work. And then geographically, we spread it out. But if you think about what we really did is we, Jim and the team, put to use about $300 billion of balance sheet round numbers on a gap basis over the last three or four years. They took more capital and have gotten the returns from 10% to 13%, 14%. They've also been able to deeper penetrate customers, and they dropped the break-even point in the business by about a billion bucks, which is an interesting because that's where all the automation, the processing capabilities, and as Jimmy calls it, cleaner, simpler, better.
Executive: And so that was important in 16, 17, 18, and 19 because you're investing. To run that business is $900 million in technology investments a year. So it's not for the faint of heart. And so your first $900 million, and by the way, a lot of that is just to be able to run the systems and report and all the venues and all the – I think we report out 3 billion trades, potential trades a day or something like that in that business to give you every single day. We have to report out 3 billion trades, not even execute trades, quotes, 3 billion quotes, excuse me. And so they built that infrastructure. They drove it. And Jim and the team have done a good job.
Analyst: And as we work with our customers in that business, a lot of them which are out in the audience here, they've done a good job of, getting a broader representation of that customer, not only in the equities business, but over the fixed income business. Those all become more important to all these groups, the private capital, lending into those businesses, which we believe we can do in a very smart way to help them grow their business. The coordination with the distribution platform, just because we've got the availability to help people be successful, they've done a great job.
Analyst: What about the international side? Yep. 40% is coming of your revenues in markets and banking, I think, is coming from international. Is that right?
Executive: Yeah, and that's the piece that surprises people because they think of Bank of America, the name, and they never get off the point. But the reality is that 40% of the revenue in a concerted effort going on those same dimensions of time. And so you have in the corporate investment banking area, you have number three market share. Again, this is where you've got to be consistent because this quarter, you know, investment banking, we think about a billion two-ish, you know, not where we want it to be, but great prospects, great conversations, great going.
But that's because we're operating all over the world. And so the key is to think about the global investment, the corporate investment bank, and the global markets business to be global businesses and drive that out. We talked about markets, corporate investment banking. It's not only investment banking capabilities. It's also the corporate banking and the cash manager, GPS, we call it. And we've been building and investing in that. The growth in that is still ahead of us, frankly.
Executive: What we've done interesting lately is dropped the customer targets in some markets from the $2.5 billion minimum revenue size we had down to a billion because we feel more and more comfortable. We can understand the credit looking at firms that, frankly, are tied into the industries and stuff we cover heavily. So the auto industry is a global industry. The supplies come from all over. That's why we're having this discussion and the tariffs and all this stuff. They come from all over the world. And so a mid-sized supplier in Europe is probably also supplying in the U.S. and supplying. So having that ability to help them across the world has been strong.
And so 40% of revenue continues to expand. Bernie Menza runs internationals and overlay. Matthew and Jimmy run the businesses, but Bernie helps us with overlay. We have lots more to do, if we think, in Europe that we can gain even more share there. Asia's always going to sort of reflect the ebbs and flows of Asia, and then U.S. is U.S.
Analyst: Okay. So just to make sure that we got the comments about the quarter you mentioned, markets, revenues. Mid to high single digit, 13 straight quarter growth year over year. Okay. And then investment banking, about 1.2. We'll see what it ends up. There's a lot of stuff in the pipeline that's getting bounced.
Analyst: Okay. And then while we're on quarterly commentary, maybe you could give us a sense on whether or not there's any updates on net interest income.
Executive: Sure. So the broad structure was about a year and a half ago, we said last year's second quarter would be the trough, and that's turned out to be true. And then as you march through each quarter and giving the guidance, in the first quarter of this year, we have no change that guidance. So that guidance, just to reiterate, that guidance, we were at 14.5-ish in the first quarter. We said by the fourth quarter, that'd be 15.5 to 15.7.
And we feel good about that. And what we told you was we grow with a little more kick in the second half of the year, honestly, just because of some of the repricing on cash flow hedges and things that have come through this quarter and then are effective next quarter. So A billion dollars of annual, a billion dollars of quarterly NII pickup first quarter, fourth quarter, 6% to 7% growth of 25 over 24 and exiting at 15.5 to 15.7.
And the stair steps are falling in place. So this will be another quarter of growth, which says last quarter was a trough and we're growing off of that. I feel very good about that.
Analyst: Excellent. And does the steeper curve help just generally speaking?
Executive: It helps, but the thing is it's never a one-hand clap. So if that's happening, there's long growth, what you thought it would be. So you've got to go around. But to hold this through all the different volatility, you think about we're all sitting here in April, Liberation Day just passed, the world was coming to an end, and now it's not coming to an end.
Executive: So you have to take great care of being too far out there saying this is what's going to happen perfectly because it can bounce around. But the good news is nothing has changed even though the rates have moved around. And you're covering up some general economic malaise from that time until now. It's a lot of solar growth predicted, but we're still growing loans okay. We're still growing deposits okay. Better on the HA data, the market better than the economy. But you've got to be careful about over-expecting that until we see the settlement.
Analyst: Okay. But it's based on that time it was, I think, three cuts. And, you know, now there's one, two, depending on who got up this morning and put them in.
Analyst: Okay. Excellent. All right. Thank you. That's it for updates on the quarter, I believe.
Executive: Right. Yep. Yep. That's it.
Analyst: So I did want to turn the conversation towards what you're doing in payments. Clearly, you're a leader in payments, but you've also made some recent comments around stable coin and some of the potential rule changes coming. We've got the Genius Act working through Congress. So are there more crypto opportunities in your future? I would just like to understand how you're thinking about all that.
Executive: Yeah, so I think I'd focus on the stablecoin question. And so at the end of the day, our global payment services business sits behind the entire franchise. And so whether it's consumer wires, which you can do on your mobile app and are growing fast, whether it's commercial wires, which are huge and go out every day, that principle in a felony mark Monaco runs at, GPS for us, and Tongwin.
Executive: And they always work in a strategy on a holistic basis. And so at the end of the day, there's a new potential entry into a payment system, which is a stable coin, right? So the theory is that if you were having dinner on a safari in Africa and you sat down, you could pay by using your credit card, your debit card, or you could also theoretically at some point pay by a stable coin transaction. And so it's a currency. We have to have it. The industry has to have it.
Executive: We've not been quite sure how big it will be, but we have to be ready because in the end of the day, if people use it as a transactional account, we have to be ready to have those transactional deposits stay within our franchise, basically, or else you'll see a major migration of deposits outside the industry. And so we're working with the industry, working individually. We have pretty well understood what we do and how, but the problem before was it wasn't clear we were allowed to do it under the banking regulations, and there was a lot of mystery about that.
Executive: If they get the Genius Act or the Stable Act or anything like that passed, and then they get the markets infrastructure enablement piece, that clarity will allow us to figure out whether there's really a business proposition. At the end of the day, if the customer is needed, customers can make use of it.
Executive: Now, if you're very carefully following a company, you would notice that we just talked about the $10 million real-time weekend movement of money and how well that's been received on the institutional side of the house. As we keep dropping those limits down to have real time go on the weekend and stuff, you'll see more of the need for payment systems that operate off hours, so to speak, goes away because we've actually created a payment system that goes off hours.
Executive: If the Fed goes to a wire service open many more hours a day, that would change the dynamics because then you could settle fairly small accounts. And so there's a complexity to this, but there's also stability of payment systems provided by the way it works today that we have to think through, but we'll be there.
Analyst: I've been a little confused about this because I thought Clearinghouse has real-time payments for easily a decade.
Executive: Well, I'd say that's probably a little strong. We developed it. It's probably been out there for four years. And that allows... If somebody wants to wire $10 million out on a weekend, they can do it. And so you have to be careful because we're facing off. The industry is taking the risk of that being good on Monday. And so that's why we'll keep walking towards it.
Executive: The bigger, more important thing is really that the window for the closing is getting later and later because then you have multiple time zones covered in real time because the Fed wires real time. And also you have transactions that can take place off hours. So if you want to buy a house and settle at 6 o'clock at night, if we can ever convince the deed, the registry to take it, you can settle a house payment.
Executive: If a person wants to buy a car at the agency at 8 o'clock at night instead of, I just watched this happen, I bought a new car a year ago, people are handing out people cash. Because they wanted to buy the car that night, and you're like, that's not a thing. But I think you can... So you can take away a lot of demand for it.
Executive: And so the place, the cross-border, smaller balance, e-commerce, that's where this gets embedded in e-commerce, for lack of a better term. Those are the places where it's a little more interesting. And we'll see it play out.
Executive: And remember, by the time we... If we sat here tomorrow, I would say yesterday, $3 trillion plus went out of the commercial bank, all automated overnight. $200 million plus went out in cash out of the ATMs. 500,000 people walked in the branches, a lot of deposited checks, cash, all this idea that one payment system is going to take over the world very fast.
Executive: In the numbers I gave you before on the total of $1.7 trillion, only 20%, 25% is debit and credit cards. Checks are still 20% of the balances of consumer movement of money. And so it's not as simple as people think. It takes a long time to get people to change their behavior, and that's why they're great customers.
Analyst: Okay. So with that, I think we're done with payments.
Analyst: I would like to understand how we're thinking about the other side of the operating leverage, the expense side. And I think you guided 2025 full-year expense growth to 2% to 3%, but with positive operating leverage. So can you talk about how much investment is embedded in that, and if revenues are lighter, where the levers are to deliver that positive operating leverage?
Executive: So if you put the historical context around this, we have a little bit of an issue that we are always taking expenses down nominally. And there's a time... when we were at $58 billion in expenses, and we said we'd be at $53 billion two years out, and people thought we were crazy, and we actually hit $53 billion.
Executive: But then we said, and this part got lost because of what happened, then we said it's got to start to grow, because at some point you sort of hit, and you're going to start being unable to take out expenses at a faster rate than you need to invest for compensation, for build-outs and stuff. So that was happening right in 2019. Again, this thing called the pandemic came, and then hyperinflation came, et cetera.
Executive: So you go through all that, and you end up with an expense base now, which is $68, $69 billion, whatever it was last year. And a lot of that was just a one-time adjustment around comp, frankly. And market levels generate comp, too. So what we've been able to do now is the headcount then, because of all this stuff and regulatory and all this stuff, and investments went from about $250 5,000, say, to 218,000. It's now down to 212,000, exclusive to the interns that just came in this week.
Executive: And so we've gotten that to manage back down. So over the last six, eight quarters, we brought it down by 7,000, 6,000, 7,000 people. And every quarter, it basically drifts off a little bit by applying technology. So we feel good about the 2% to 3%.
Executive: The parts that will just automatically will be if wealth management revenues are lower because market levels are lower, you'll see that come right through. Or if investment banking revenue is lower, we'll see adjustments on that side. But parts won't adjust as, you know, the 53,000 people in the branch system will still get paid at the same level.
Executive: And so we feel good about the two to three, but it's a basic concept. We'll grow the revenues faster in economy, grow the expenses about half that rate. And the good news is we've been organically growing since like 16, 17 loans and deposits faster in the market, faster in economy.
And leave aside all the rigmarole in 20 and 21. We're now back to that level, and then so that you're seeing the operating leverage kick in. As the NIA recovers, that's what kicks the operating leverage in.
Executive: So the stat I gave you before is a billion dollars a quarter with no expenses attached to it from the first quarter to the fourth quarter. That's what kicks the operating leverage and, frankly, the efficiency ratio back in.
Analyst: And AI clearly has been leveraged in the consumer, retail, and wealth significantly. Can you talk about how there's legs to that into the rest of the organization?
Executive: Well there's so there's legs to it across the board so we have ai is a natural extension of modeling and machine learning and things we have 1700 models or whatever it is about 300 of our ai models about about 30 or 50 of them operating today are generative ai models we have proof of concepts on a that many, that's why those models there, about a third of them are in operation now.
Executive: But to make that all sound like great statistics, we have 1,700 patents on AI, machine learning models, and stuff like that. But what's really going on? Erica, last quarter, 20 million people used it. And it's an AI, generative AI language problem solver for you. Bot, assistant, whatever you want to call it. 170 million times.
Executive: So it's up in scale and operating. We took that and put it into the commercial GPS cash management business. 40% of all the customer interactions are handled by the Erica interface. We took that same model because we knew it was in control and how it would work and trained it for teammates to be able to interface with technology organization for a change of passcode, break fixed, I need a computer, charge or whatever.
Executive: It's tendency half the calls went through Erica as opposed to a person picking it up or a person responding to an email, I need X, Y, or Z. And so then we've taken the capabilities into the markets business. So we have a generated report that takes all our market stuff and puts it easy for the sales traders in the morning instead of pulling up a bunch of different people.
Executive: And it cites it out to all of them. So it's trained on our stuff. It brings in news stories and stuff like that, but it's a very straightforward report, two or three pages. That's going out every day. We take it into the coding area, and we've got about 18,000 coders using it today. They're getting efficiency that we're seeing.
Executive: There's 21 steps to start with ideation on code to implementation on code. Five or six of them are susceptible to AI productivity enhancements. About 30%, 40% of the activities in those five steps, we're applying it. We're seeing about a third of that to half of that potentially go away, and so we're just grinding that through the system. That's new. That's literally over the last six months.
Executive: So we feel good about that. So you're basically looking at all the places you can use this model to help you enhance the basic text-to-text translation or coding. And what text-to-text literally means, I take a bunch of prospectuses today in SEC reports for investment bankers, and I then write a report, and I go edit that as opposed to pulling them out.
Executive: 500 of those were written in the last few weeks. We just put that in for the investment banking team. So the analysts and juniors, as we all call them, are now using that to produce information. It still takes people on top of it because it's still not perfectly accurate. It still takes people checking it. But on the other hand, it gets them a step forward.
Executive: And so all these areas, we really believe this. Now, why do we really believe it? We had 285,000 people on January 1, 2010. We peaked at 305,000 people on probably March of 11, or maybe March 12. We have 212,000 now. We know that technology applied by the customer and by the teammate is a powerful force.
Executive: In that time, we probably spent a billion dollars, a billion and a half dollars in technology code a year. We now do four billion on new code. So we took a lot of money and spent it to develop new code to create more efficiencies. And so the business is bigger and bigger, but you can use technology to keep working at this.
Executive: This just gives you a place to reach that you traditionally didn't have. But you've got to be careful. You have to have your data set. Over the last 10 years, we've probably spent $3 billion on getting our data more and more perfect for all these reports. We have to file all these feeds. We have to file all that stuff.
Executive: But sometimes you've got to get a return on luck. Doing all that for regulatory and other reporting, which we would argue had great value, maybe not so much. But having that done now allows us in our Salesforce application, which goes across all relationship businesses, all the data is scrubbed, for lack of a better term.
Executive: You hear people say, oh, my God, I've got to go scrub my data. It's already been done for a whole other reason. Therefore, they can pick up these new applications. So as we look across it, we have small language models operating on premises. That's Erica. We have large language access models operating at third-party providers we can use and test.
Executive: And then you're going to see the major providers bring it through their products, right? They can't survive unless they bring it through their products. So what an SAP and a Workday and a Salesforce, I'll let them speak to what they're doing, but we're going to be the beneficiary of that.
Executive: And so if you noodle on all that... you can see our ability to continue to maintain this efficiency effectiveness and then figure out how to reinvest. And so the way we run it is we have a centralized team that's driving through these proof of concepts, and then we're funding them centrally so they don't have to get caught in, oh, this will take too much time, and we look at them every couple weeks and implement.
Executive: So tech budget goes up and headcount comes down. Well, even in the coding area, remember what I said, if you – If you have 18,000 people and you're getting efficiency, then you can grow the tech output without growing the numbers of people doing it. That's what's different here.
Executive: Your point was pretty linear. To get more code output, you just had to add more. They'd leave aside the products and the different code languages and stuff. You just had to add more people. That code is broken a little bit now. But it's a human behavior change. A big change is going to come when we implement basically the 365 package and everything, but you've got to get the humans to use it.
Executive: This is the hard thing. We are developing training programs to make sure our team knows how to use these tools because that's going to be the value. It's not going to be by just putting them on the desktop.
Analyst: Okay. Well, we've identified opportunity for growth in the various businesses and the efficiencies that you're driving from investment spend in addition to other drivers. We said the last expense will be down $500 million or $600 million in the quarter, which basically means, take out all this stuff, flat, and we're just bumping along at this level while we're making massive investments in the business.
Executive: That's the dynamic which is interesting. Before, we were able to take out a lot of inefficient business. Now, we're pretty effective, and now we're able to put that expense base, running where it is now, you're allowed to make major investments that are almost double what we made five years ago.
Analyst: And so as I think about the ROTCE and the direction of travel here, looks like it's moving up from what we discussed, I did want to understand thoughts on the denominator a little bit. As we enter into the era of Michelle Bowman as vice chair of supervision, what are you thinking about with regard to what is likely coming on regulation changes?
Executive: Well, I think the Fed, through various dialogues and speeches, even over the last 18 months, has made it clear that Basel III will get finalized in some manner, exactly how, probably up to a little bit more debate now. Obviously, the G-SIB indexing is important to our industry, and it was embedded in the original statute.
Executive: If you look at the original provisions that footnotes talk about, this ought to be indexed. The economy's doubled in size, and it hadn't been indexed at all. And there's, you know, the strange calculations in there are strange. So they've got to fix that, and it was proposed to fix it going forward, and I don't think that's correct thinking, frankly, and we'll see what comes out of it.
Executive: So that's helpful. What do you think would be correct?
Executive: Correct is go back and index it and maybe say, I won't let you drop your capital today to do that. But let's get you on a logic course which says we're going to index this thing consistently because the inverse of what people were thinking about at the time was you don't want these large banks to become too big and you want to put a penalty on bigness or at least have more capital.
Executive: If the bigness fails, you can take care of it. The mistake in that is if you constrain their size, you're forcing the stuff outside the system. And where it's going, you have no insight as to whether it's being done well or not so well.
Executive: And so the idea of gating a fund with draws is akin to gating with deposit with draws. Right. Think of what would happen if we just said you can't take your money out of a bank in the regional banking crisis.
Executive: I mean, so I think there's – people have to think through it. So it's had an effect which is exactly opposite intended now, is now it's allowing more and more unregulated activity, which is regulated in the banks but not regulated elsewhere, go on, and they've got to think that through.
Executive: And then they say, well, we want you to be there in times like the pandemic and help them. We helped in the pandemic, $70 billion a bar. We want you to be there in a regional crisis to help.
Executive: Well, you've got a constraint, which is if we grow the balance sheet to support a bunch of riskless treasury trading by all these colleagues, the ESLR kicks in. So they've got sort of the policy has flipped on its head now, which is how to allow my colleagues and I to make the economy run well.
Executive: So you expect Basel III, because we've just got to put the end behind us, you expect something on the SLR has been said. You expect something on G-sub indexing. And then the other regulations will be helpful.
Executive: But what that will mean is our capital, it's not like we're going to say, oh, let's peel off a lot of capital. We will then let that growth, organic growth, eat it up. But if you think about what we do today, we earn a dollar, we pay out about, 30% round numbers and dividends, and the rest goes to support the business growth.
Executive: We're back to the shareholders. That was $4.5 billion last quarter. That paradigm will keep taking place, which over time may not take down the nominal amount of capital, but as we grow the earnings around it, we'll help the ROTC, because right now we're sitting on a chunk of capital.
Analyst: Well, and significant excess.
Executive: Yeah, that's right. The simple way that I try to explain it, which is if you had 10 factories, to make sure, and I said, you can't only use six of them. That's what all this adds up to be.
Executive: And so we're making as much return on time to common equity as other institutions are, or more than most. And we're only getting to operate with six factories because we have to have the other four ready in case.
Executive: And you're saying, is that the right balance? Originally, that was seven and two. Now it's six and four. And you're saying, you've doubled the excess unutilized capitalist industry for what? And that's what you're trying to say.
Executive: You've got to think about this because it has broader implications. And as a result, as we get these, you know, clarity on where they're going to go, how do you think about optimizing your capital structure?
Executive: Like, let's say we get a rule in the next year or two. Because of the stability of the operations, the platform, and the risk of running the credit book the right way, blah, blah, blah, blah, blah.
Executive: I think we're comfortable with a 50-base point buffer, whatever the risk than applicable requirements. We used to say 100, but I think we feel now that the insight we have and the stress test we do every quarter, we can probably manage 50 better, especially if it keeps the dividend at the 30% level, because then it's really, we're the only person during certain stresses in a pandemic that actually earn a dividend every quarter.
Executive: And so that's, I think, the only person not, and I think, so we built this on a theory that that's what you want to be able to pull back if you had to let the capital not deteriorate by leaving it on a balance sheet.
Executive: And by having that kind of flexibility and that kind of insight and working the hell out of the risk side, 50 basis points looks right. So whatever the – hopefully a smaller number than it is today, CCAR gets straightened out, et cetera.
Executive: But 50 basis points is what we think. So stay tuned. We'll see how the CCAR comes out at the end of the month. We'll see. A lot of these things fall in, but that's where we try to run it. And we've done a lot of analysis and a lot of looks to say that that volatility ought to be manageable.
Analyst: Excellent. Well, Brian, thank you so much for your thoughts and insights and direction and leadership of Bank of America. Thank you so much for joining us this morning.