Bank of America Corporation

Q1 2026 Earnings Call — April 15, 2026

Management: l core. Average deposit in our checking account is 9,000. The industry is three. That difference is immeasurably different. And that's because we're not just trying to sell things. We're trying to sell stuff that sticks to the ribs. And so we had a time in this company when we sold 10 million checking accounts a year. And we grew a million checking accounts. Today we sell four and grow a million primary checking accounts. Think about the difference in terms of amount of work that goes on for those two dynamics. And that just kept kicking, 27 straight quarters of growth. Those types of investments in organic growth are there. And organic growth in commercial, we're up 8% year over year. The market was up half that or something. You know, we're seeing the numbers of what we call logos of clients we had in the mid-sized business, the 50 new bankers we put the work across, the private banking. I'd say wealth management, we pointed out to the group that we need to, we'd taken them out of the recruiting of experienced advisors for a bunch of years just because the economics weren't there. We've now gone back into that to where we need advisors plus the training program.

So that's probably the most aggressive, you know, Eric and Lindsay put the most aggressive targets on the table from going from 2% to 3% net new flow assets to, you know, 4%. And they've worked it out. They got the plans. Everybody else, frankly, what people saw as growth rates were just a compounding of all the work they'd done and really a continuation of the growth they'd been seeing. You go to markets, we invest a lot, $300 to $400 billion in balance sheet, letting the G-SIB move up because that's what is required. And Jim and the team have done a good job. The place is growing organically and now we just got to keep hammering home. And the investment rate is interesting and we can talk more about that when we talk about expenses because, if you're going to talk about expenses. We'll talk about expenses. Because what we've been able to do for a number of years is consistently take money out of stuff we didn't want to do and put it in the stuff we want to do. And that number is staggering and that's what we tried to, we showed that slide in Investor Day. 285,000 people coming down to 203,000 people. And we were setting up two points.

When you go from that period of time to now, we added 4,000 more coders. We've added 2,000 more client-facing people in the correlation business and the American business. We had another 1,000 people in the markets business. Yes, we've been adding people all over the world to support that. Meanwhile, the headcount's been basically flattish since 2022. It went low point at maybe 208, high point at 216, but basically the last three years, 213.1, 212.9, 213.1, and 213.1. Meanwhile, you're putting tons of people in, and you're taking people off the back end, off the process. What AI gives is different, and that gives us a chance to attack a different group of people. The point of that slide was of the 80,000 people that came out, 80,000 came out of retail and operations. That's not really – we'll do that, but there's only 50,000 people left in retail, so there's only so much you can go. What you're really going to do is take it out of place that you haven't been able to do.

Analyst: And then on the competitive environment, I mean, what have you actually seen and what are you expecting? And then I guess, look, added to that, obviously regional bank consolidation is obviously a big theme. Is that an opportunity for you because those organizations become inward focused as they integrate or is it a threat because they actually have more scale? How do you think about that?

Management: So a couple things. One, when stuff goes on, people have to switch banks, switch names of banks. The client-based churns, and that's an opportunity for us. How do we know that we did it? Literally, if you go back in the history of the company, probably you could count up 1,000 of them. So this is not new to us. We've been on the other side of the trade. We know what happens, so we do. The second is talent comes to us, because if you're covering middle-market companies and market, and I'm covering middle-market companies, and we're two competitors merging chances of us having an overlap are high so we don't need two of us to do it and then talent comes available so we go in and take advantage that will that consolidation continue absolutely we run our consumer business at um you know at a cost of a good soul which you take the cost of pay on deposit plus all the operating costs of all the platforms you get into 150 whatever it is today you know, that is several hundred basis points off a lot of the competitors. That allows you to have a low fee structure. It allows this turn to not take place. It allows you to invest in the competitive advantage.

And that's what you're doing. As NI picks up that business, we'll go from earning X to almost double X in the next few years. So that's going on. Mid-market space, we'll take advantage of it. We'll keep happening. It has to because as much as people debate about scale in our industry... The industry, if you look across many years, the ROA, the industry keeps inching down. And so what we've done is taken the expense out to keep below that and get a constant sort of return on tangible common equity. So we're good in a 4,000-person competitive market to pass through the benefits to the market on a lot of that. But if you aren't doing it, you can't do that. And that's where... You know, that's where the fees and other things and the churn and the customers, we just don't see in our customer base. And that allows us to price well and grow and get the core household. And meanwhile, it also gives us the right to invest a lot.

Analyst: Okay. So let's talk about efficiency. It's everybody's favorite topic. And you gave a lot of data around this, and I think it's very encouraging. You know, you talked about getting the efficiency ratio back below 60% near term into the high 50s. sustained operating leverage of 200 to 300 basis points. Talk us through what the efficiency agenda looks like from here, where you see the greatest opportunities. And obviously, look, AI is still a very, very dominant theme. I mean, do you think that AI will allow you to reduce the expense base in absolute terms, not necessarily in the next one to two years, but as you think out over the next three to five years?

Management: The very last part of that is it will absolutely allow us to reduce the expense base of a particular service or capability. The question of what you do with that money is going to be based on all the other things we talked about, competitive concerns, need to invest and stuff. So let's back up. Our efficiency ratio was overstated because of a way versus other people's efficiency ratio for two basic reasons. One is the NII is still kicking in, so that basically all goes to the bottom line. The second was we have a higher percentage of our business in the least efficient business, which is a great business, which is a wealth management business, but that's a higher percentage of our revenues, and so until the NII kicks in, that all salutes it down. We're more efficient than anybody in the business. But the third reason is the way we accounted for these tax credit deals, which goes away. And so that was 200 basis points. So whenever they said you're operating at 63, we're actually at 61 on apples to apples before you make anything.

So we forget about getting it below 60, because frankly, what happens over the course, you get the growth rate in the NII, which basically pours the bottom line. The fee-based businesses bring a lot of expense. Obviously, the wealth management business brings $0.50 on the dollar. Investment banking brings another chunk, and the market's the same. So you'll see that as that pours through, that's what drives it, and that's what you've seen so far. We had years we operated with operating leverage every quarter, efficiency ratio in the mid to upper 50s. In investing, and you'll see that come back, and that's largely really, all things being equal, it's just largely due to the NII rolling over and going the other way from eight quarters ago, whatever it is now.

Analyst: Okay. So 16% to 18% ROTC, I think you said you plan to get to the lower end in two years, the higher end in three years. How should we think about the improvement in returns from here? I mean, is it linear over that time period or is it more back-end loaded? So maybe talk a little bit about the nearer term versus the longer term.

Management: I'd say that be careful if a particular quarter generates different activities. And so this quarter marks a little lighter than the first quarter and, you know, that stuff happens. But generally you'll see a progression year over year in the current. We put together a multi-year plan. You basically see it break through towards the middle end of the second year, breaks in, and then it breaks to the higher, towards the 12th quarter. So I actually said, you know, 7, 8 quarters and 12 quarters, 8 to 12 quarters. It's really kind of rolls into and then rolls out. You know, it's a three- to five-year target. I just told you we should hit it in the third year, and it would be pretty rateable, although a particular quarter could go up and down depending on how the markets do.

Analyst: Okay. So, Neera, Tim, can you just give us some high-level thoughts on the fourth quarter? Has anything changed since you last spoke, either in terms of NII or trading? Is there anything we should be aware of in terms of credit and expenses? You know, how is the fourth quarter shaping up?

Management: Look, so on NII, there's no new news. That's good because we keep hitting that progression. In credit, we're seeing charge-offs basically flatten out, so we don't see any news there. I think the two or three things, just to make clear, if you look at investment banking fees for the 25 or 24, we expect it to be up about 4%. That number would mean the fourth quarter impliedly sort of flattished a little bit down from last year, 1.5, 1.6. We did $2 billion last quarter. It's largely just deal flows and timing and stuff, so we feel good about that. Markets, we think, if you look at it year over year, as we think the fourth quarter finishes up, we'll be up 10% year over year, and the fourth quarter will be up high single digits or close to 10%, and that's pretty good. That would be the 15th, 16th consecutive quarter of linked quarter growth, so we feel good about that. So now I have what we told you, those two items. Everything else, expenses, look, the thing on expenses is that from 24 to 25, you'd look at it, we're up 4-ish percent, four and a quarter, four and a half, four-four, I think it is, if you come in at the year end.

Last year's fourth quarter, this year's fourth quarter, you're going to be up four and change. And the pressure on that is all due to the wealth management business, and that's incremental on some of what they call BCE, the clearing expense markets. But if you look at that, look at it fairly last year, we had the credits in the FDIC, so it's up about 2.5%, 3%. And so we think it'll be, we said it'd be flat, it should be bouncing around that, maybe $100 million either way, but it's pretty good expense growth control year over year. That's come from headcount. That goes back to what I said. The headcount is basically being able to manage flat headcount in the aggregate with redeploying a ton of people going different directions. And that brings you to the question of AI, which in the end of day, AI Today at Bank of America, and Erica in the consumer business. In the month of November, we had 1.4 billion digital connections with our customers. Erica's 20 million customers, about 200 million times a quarter. We think it saves today about 11,000 FT equivalents.

Now, the big debate of that is, does it atomize behavior? And what I mean by that is, do you touch it three times a day where you wouldn't do something else three times a day? So you've got to be careful about that. But the numbers of touches would equate to that. And that's today. Yesterday, the 24-hour period, it has 2 million interactions. So we feel very good about its impact. We took that same thing, to give you a completely starkly different example, and put it into the break-fix technology widget. So when you go in and say, I need to change my password, my computer, I need something done, whatever, we went from people answering that, or one-to-one chat, you know, to this bot answering half the questions in 60 days. So you can see how it can affect process. So we still have a lot of places where we think an audit, which is 1,200, 1,300 people for us, and risk, which is 8,000-plus people, and financial, which is 5,000-plus people, where you have not had a tool that could change process as much as this tool has the potential. And so that's where we think the upside comes from.

We've been taking out costs years and years and years out of the – operations processes out of that, investing in technology, probably doubled the amount we spend every year on technology initiatives, and we spend another $10 billion to just run the platform and keep it secure and all this stuff. And we invested in new branches and all that stuff. But the gig is, you know, this is different because what you did there was a lot of process reengineering that you didn't have this tool for. So even on those, you can go back and get more. Credit officer memorandum preparation, pitch book preparation. These are all operating. So the debate we have is, you know, how precise you can be in the very near term. We just rolled copilot with the whole 365 copilot. We'll be through 200,000 people using it by the end of the year. And then roll additional feature functionality. How do you say what you get out of that? And that's the question. Do you just have to focus people on that you ought to be X percent more efficient over two or three years to pay for the amount of time and effort you're putting in that. That's a tougher question because it's not a process.

We're applying a technology, even an AI technology, and saying five steps, three steps, the three steps are enhanced this way, and you save money. So it's going to be a little more interesting than that. But right now, we've been able to keep the headcount flat. So all the expense growth is really inflation around people cost, incentives for the wealth management business, and then transactional costs. And inflation around people costs, the only way you're really going to manage it is to continue to drip the heads down. And that's where a couple years ago we said we had to get back on the other trail, and we've done it. Meanwhile, you're putting tons of people out to the front. And we think our commercial bankers will get a 10% efficiency out of the tools we gave them this year and next year, which means they can do more logo development with the same number of people than they would have otherwise done.

Analyst: Okay. So you mentioned the credit picture, but anything that you've seen of note in terms of early delinquencies, you know, and I guess, and I think the bigger picture question here is on the consumer side in particular, you know, asset quality has improved despite some of the weaker data from retailers and restaurants. Why do you think we're seeing this divergence between the banks and some of these other data points?

Management: I think the how a person spends money is a different determination whether they pay their credit, because if they don't pay their credit, they get, you know, delinquency and a FICO, and, you know, that just changes their life, whether they decide they have to go out to dinner one time less or not. So the rate of spend at restaurants and stuff is growing. It's just not growing at the same rate spending, like on cruises, was growing double-digit, so you'd say. So we don't see there's indications of consumer stress. All the spending is growing. The credit quality is good. The charge-offs in our consumer business came down. They're just basically plugging along at a level that is 3.5% in the credit card business, which 20 years ago I thought that would be nirvana.

Analyst: Would you expect it to decline from those levels going into next year?

Management: I don't think so because we take risk, and so you've got to take the risk. So we underwrite 100 people. Some of them are going to not turn out to have a – They're going to get divorced, they're going to get sick, they're going to lose their job, et cetera. So that's, even with a prime business, you're taking that risk. So we expect to have that rate or a little bit higher, actually. So it's performing about as good. Will there be times when it will go up and be a little better or not? Yeah, but sort of structurally, if we were much below that, I'd be worried we weren't taking the risk. And so, but we just don't see it going anywhere. And our mortgage book, the LTV is 50 or something like that. The home equity book, the combined LTV is around the same. The FICO is 700. We've had credits, so to speak, recoveries in the home equity book, which is really old loans that keep drifting through the system from years ago. It's all prime books. We don't see any deterioration at all. Now, we're not in a subprime space, so you've had other people who could talk about that. So the prime credit we're seeing.

And remember, that's one of our strategies is, we don't go seeking standalone credit. You know, we really go after the combined relationship, what we call the stair step on the consumer side, which is operational account, first borrowing, second borrowing, credit card, home equity, or car, and then home or home equity. That's the travel and investment. And so it's a very disciplined process. So you're anking off a good customer you've actually seen in action, stuff like that. And on the small business side, you see the normalization, the small business cards charge us, which are higher than the four and a half, I think, or something like that. But that's just nature of small business, success or not success. And then commercial, really, we all talked about commercial real estate two years ago. That's run through the system and it's on its way down. And then really not a lot else. Episodically, you get one of these things and one of those things, but you're seeing no deterioration of the core portfolio.

Analyst: Okay, so I'm going to talk about a couple of your growth initiatives in a second, but just on the loan growth side, can you just touch on what you're seeing on the commercial side and the commercial real estate side? It does seem some of your peers are talking about that inflecting heading into next year. And then the other thing I'd be curious in getting your views on is the OCC rescinded some of the rules around levered lending. Does that in any way impact how you think about the opportunity set?

Management: Commercial lending over the next few years so if you if you've taken the last part first yes the it does help because the statement was you know you could do a handful outside of that guidance and the guidance wasn't rule but you could do a handful so let's define a handful you know let's define a handful when you have you know ten thousand you know, mid-market, 20,000 mid-market clients. Let's define a handful when you have, you know, several small, a million small businesses. Let's define a handful. You know, that's like in the beauty of the eyes of the beholder. So what happens when you did one, you know, get your head beating around to do it. So getting rid of that as a principle is a good principle. Let us make credits. We're pretty good at it. It just improves simplicity. Yeah. It also just says if this deal is a deal you want to do, go do it. So I think that will help because you could never be right. It was only looked at after the fact. So we went through SNCC exam after SNCC exam, except we were all fine.

You look at the credit portfolio, you're saying, so why do you, you know, so I think what they realized is let us underwrite the credit, and if our credit process doesn't work right, if we have an adverse amount of hits, you know, talk to us then, but don't over-prescribe, you know, the precision of which you see a credit versus what our experts see. By the way, we got people, this is all they do 24 by 7. I couldn't tell them how to do it either, so... We feel good about it. It's more the spirit of doing that. It lets us compete in the market. And when you come to the private credit side, which is one of the difficulties competing in private credit has been that implied constraint or explicit constraint in the application of that, that now lets us look at a middle market company that's going, you know, doing a recap with a private equity firm or a large that they're selling or one of our clients is buying them and they want to borrow, you know, at five times or seven times or six times in the right industry and believe the cash flow and they have a good plan, you know, we can do it. And so that's what the constraint was.

The rest of the commercial loan growth, largely, I think we're up 8% year over year, third quarter or something like that. And the markets business has grown, but also the core, you know, Small business has grown. I think they're up mid-single digits. That's good. And then the commercial credit to wealthy people has grown very nicely. That really comes from wealthy people putting more in the market, and it's commercial credit because of the structure of it. So we feel good about the commercial loan growth. Now, commercial real estate, I would say, after years of it kind of bumping along at the same level, you're seeing some life to it and well-structured deals. But that's a to-do for next year. Right now, you're just seeing the start of it.

Analyst: Okay. So credit card and growth in the card business is one of the drivers to the improvement in the return to the consumer business. It does feel like that is a particularly competitive space. Obviously, you've had a number of refreshes, a number of people looking to grow that. What do you think is your key differentiator in terms of growing the card business from here?

Management: So if you look at the business we had from three or four or five years ago to now, it's actually grown at 5%. What we did is we sold off some portfolios in that time frame. And so we can see the way we operate the business, Bank of America branded cards, few key co-branded partners, driving that growth. Yeah, origination practice, we can get 5%. And so it's kind of embedded in there, and it has to net come out the other side, and that's the challenge for us. So Holly and the team that run the consumer business, David Tyree that runs marketing, Mary Drozd runs products, we just announced this product for her. World Cup, which is, you know, a chance to get tickets and things like that. All this is just to get people's attentions on in a brand of World Cup card, and we got a lot of uptake compared to our usual promotions and stuff. So they're out there driving it. We spend the money in advertising. We have some limited-grade affinity partners, but the affinity we drive into is Bank of America, and the combined rewards program is why our consumer business stability is different than anybody else's.

And so if you look at our consumer business, the piece we call preferred, which is a higher in the consumer business, a third of the customers, 80% of deposits, but also has a deep penetration of cards in a combined rewards program. That is the competitive advantage, that nobody can do that across multiple products. And so that's the way you play games. So we think we can move that from basically a 1% type of growth rate up to 5%, but it's more by taking away the negative in the near term than it is changing the growth rate on top. That's been going on, so to speak.

Analyst: And then a similar question on the wealth business. I mean, you've obviously got great brand, great franchise, but it is a step up in growth relative to the past. Again, what is it that you're going to do differently?

Management: It really comes down to two or three things that they described. One is that we started recruiting in experienced advisors because we just have tremendous client opportunity referrals from the commercial business to them and the consumer business to them. We just didn't have the capacity, so we're bringing in advisors. Uh, retool part of their book and then drive it. The second is we've created capacity and advisors, not only automatically, but also by household levels and things that they, Lindsay and Eric have worked on. Uh, and third is the training program. We're maturing into the training program that we started, that we reinvigorated four or five, seven years ago, that those people getting more productive. Um, and then we got the Merrill edge piece. And so that also is growing, you know, it's, uh, it's accounts and structures. It's a, well over a half trillion dollars in, in, and client assets. And so that's a starter case that we can use for people. And Maggie, with its $40, $50 billion of completely robot-managed, so to speak, that we all talked about, robo-advisors five years ago. It seems trite now, but that was a big new thing.

We actually do it, and we have a book, and it runs, and it grows. And so we feel good about that because you can't forget that continuum piece. And then the private bank, Katie's put out 50, 60 more private client advisors over the last, 24 months from other firms. They've gone through all the things that you're talking about. And so we feel good about that. So, you know, you put that all together, it's really going to come down to the execution of the field by Lindsay and Eric's team to drive it. And they're confident they can just keep incrementally. They've seen it move up and they just got to push through.

Analyst: Okay. So we've got a couple of minutes left. Let's talk about capital. You set out a 10.5% CT1 target. A couple of questions here. I mean, the first is, can you talk about the path to the 10.5% in terms of increased deployment versus capital returns to shareholders? Second, look, there's obviously more regulatory reform to come. So do you think that 10.5% could change after we get the Basel III endgame G-SIB recalibration? And then lastly, can you talk about your appetite for inorganic growth, for acquisitions as a way of accelerating what I think is a really good organic growth story?

Management: Yeah, so I think just on the inorganic, remember that there's no legal way we can acquire a franchise that has deposits in it. So that takes off the table most of what would be interesting, except in a failed deal. So we'll see if people get bumped up or something like that. And then outside that, it's line of business oriented. And so we've acquired various payments firms. We keep doing that. Smaller ones that you wouldn't see, so to speak, they just get absorbed in. So we'll continue to do that. I think we've made a decision in the wealth management business how we're going to operate, which is the asset management is a different business. And to make that have any kind of impact on us, we'd have to do something. So we look at it and say, then it's just people and hiring people. So we're in every market around the world for markets and commercial banking and treasury services and investment banking. We just keep adding people and adding expense and then making that more efficient. So that's sort of off the table.

On capital, if you think about our nominal amount of capital, if that capital counts for more under the G-SIB recalibration, which is, I think, most important to us as an industry and is also, frankly, the thing that has gotten most wrong, frankly. You know, so we can debate advanced, standardized, and all that stuff. What happened with G-SIB is you think it hasn't been calibrated since 12, off of 12 data, and then you had this massive nominal growth rate in the economy from 19 to now, and they didn't change any of the stuff. So what's happened is we have actually grown our G-SIB number from 250 to 350, and you're saying, but guys, we're not taking any more risks with all this side of the economy. So the whole thesis of it has been polluted by them not recalibrating. That helps us. And the question, but it's got to be a rule. It's got to be passed. We've got to understand the dynamics of it. And so with that comes Basel III finalization. But that's the most beneficial thing to us. So I don't know until I see that. You see some of the outlines of it, but then they say, well, there'll be stuff over here and stuff over there.

We've got to get a set of rules on the table that we agree with. We do that. I think that'll allow us to have more excess capital. And we'll probably use that to grow into it while we take 100% of the capital or more is going out in earnings, excuse me, in dividends and buybacks in this quarter. We'll buy back a little bit more as we go through the quarter because largely we earn more than we had in our capital plan last quarter. So we'll continue to do that. But that then keeps capital from building for lack of a better term. And then what you do is you grow into that. And if we got a step change of relief on the G-SIB, then you can make another decision whether you can step up the buybacks more. But right now, you know, there's a glide path. I don't want to constrain markets' ability to grow. We don't want to constrain markets' ability to grow and things like that, and that's the major uses of G-SIB. So if you look at it year to year, they're 75%, 80% of the points usage. That's letting Jimmy keep pushing that business out there.

Analyst: Okay. I think with that, sadly, we're out of time, but pleasure as always. Look forward to seeing you again next year, Brian. Thank you.

Management: Thank you.

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.