Bank of America at Morgan Stanley Conference: Embracing Technology and Growth

On Wednesday, 11 June 2025, Bank of America (NYSE:BAC) participated in the Morgan Stanley US Financials, Payments & CRE Conference 2025. The discussion, led by CEO Brian Moynihan, highlighted the company’s strategic focus on technology investments and organic growth, while also addressing challenges such as policy uncertainty for small businesses. Moynihan emphasized the bank’s strong consumer spending and credit quality, alongside its commitment to enhancing customer experience through AI and digital capabilities.

Key Takeaways

• Consumer spending increased by 5% in May year-to-date, reflecting strong consumer health.
• Net Interest Income (NII) is projected to grow from $14.5 billion in Q1 to $15.5-$15.7 billion in Q4.
• Bank of America is investing heavily in technology, with $900 million allocated annually for market business tech advancements.
• The bank is actively exploring stablecoins in the payments landscape, pending regulatory clarity.
• Brian Moynihan expressed confidence in navigating the current economic environment and delivering shareholder value.

Financial Results

• Consumer spending rose by 4% from Q1 to Q4 of the previous year.
• Investment banking revenue is expected to reach approximately $1.2 billion this quarter.
• Wealth management assets are valued at $4.5-$4.6 trillion, with net flows growing at an annualized rate of over 4%.
• Merrill Edge assets have expanded from $200 billion to $500 billion over the past 6-7 years.
• Capital markets have seen a return increase from 10% to 13-14% due to strategic investments.

Operational Updates

• Bank of America maintains an average checking account balance of $9,000, three times the industry average.
• The branch network has seen a $5 billion investment in rehabilitation and expansion.
• Headcount in the consumer bank has been reduced from 100,000 in 2010 to 55,000, with overall headcount now at 212,000.
• AI usage is evident with ERICA, the bank’s AI assistant, being used 175 million times last quarter.
• A significant $3 billion has been invested in data perfection over the last decade.

Future Outlook

• The bank targets 2-3% expense growth for the year, with a focus on positive operating leverage.
• Continued investment in technology and AI aims to drive efficiency and enhance customer experience.
• Bank of America plans to expand its branch network into new markets while increasing penetration in existing ones.
• The bank is optimizing its capital structure to maintain a 50 basis point buffer above required levels.
• The Global Payments Services business is preparing for the potential integration of stablecoins.

Q&A Highlights

• Bank of America is exploring the potential of stablecoins in the payments landscape, awaiting regulatory clarity.
• The company is engaging with regulators to address capital requirements and GSIB indexing concerns.
• Moynihan expects some form of Basel III finalization.
• AI and automation are being deployed across business lines to enhance efficiency and customer service.

Readers are encouraged to refer to the full transcript for a detailed account of the conference call.

Full transcript - Morgan Stanley US Financials, Payments & CRE Conference 2025:

Betsy Graseck, Analyst, Morgan Stanley: Kick off with our disclosure commentary. So for important disclosures, please see the Morgan Stanley Research Disclosure website at ww.morganstanley.com, morganstanley.com/researchdisclosure. And taking a photograph use of recording devices is also not allowed. If you have any questions, reach out to your Morgan Stanley sales representative. Okay.

With that out of the way, we are so thrilled and delighted to have with us today Brian Moynihan.

Brian Moynihan, Chairman, CEO, Bank of America: It’s great to be here. Good to see you Betsy.

Betsy Graseck, Analyst, Morgan Stanley: Chairman, CEO of Bank of America, just in case you didn’t catch the name Brian Moynihan. Thank you so much.

Brian Moynihan, Chairman, CEO, Bank of America: Good to be here. Thank you. You did a great job reading the disclosure.

Betsy Graseck, Analyst, Morgan Stanley: Yes. So now that I’ve got everybody warmed up post disclosure reads. Brian, fifteen years as Bank of America’s CEO driving responsible growth and seeing the significant changes in the operating environment and the industry overall over the past fifteen years. It’s thrill to have you here to talk through how you see the current environment and the forward look. So off, can we talk a little bit about the current operating environment given the considerable amount of policy uncertainty that we had at the beginning of the year and even running through to today.

So let’s start a little bit with the macro on the consumer. How are you seeing the consumer spending, deposits, overall health?

Brian Moynihan, Chairman, CEO, Bank of America: So I think if you look across the consumer and you think about the three or four ways to think of how they’re doing, what their confidence is to spend money, what’s in their accounts, what’s their credit posture, unemployment and things like that the other piece and you all have all the data on that. But if you look at our customer base and our institute just put out some research, but if you look at it more broadly in our customer base in the month of May, the consumers moved into the economy about 5% more than they moved in the month of May year. And that’s consistent with year to date. That’s consistent with what we saw happening earlier in the year and up for about a 4% rate in the first quarter, a little over four percent fourth quarter of last year versus the fourth quarter year before. So 4% moving up to 5% and that’s good.

And so what that goes into moves around. And so with some of the debates about international flights just more on cruises, people spend a lot of movies right now because the movies are good, but they move the money around. And across May year to date that is about trillion 7 of money movement into the economy. So the consumer spending money and that’s a little counterintuitive to the different confidence studies, but those are more impacted by what I feel versus what I do. And that’s what we always try to make sure this is what the consumer is doing.

What they’re telling you to feel is a question for the future. Credit quality is very strong. Charge offs in the consumer credit area came back up over the last couple of years from the post pandemic drop and now basically settled in a level very consistent. So we feel very good about that. And there’s a lot of availability of credit.

In other words, loan to value on our home equity loan portfolio is about $0.50 on the dollar. The home equity in homes is $40 some trillion or something the other day. So there’s a lot of borrowing power if the consumer need to do it. They’re not using a lot of it up right now quite frankly. Our home equity balances came down or bumping along and not growing a lot.

So there’s borrowing capacity. They’re employed as you well know. The wage growth is strong. So even in our small business area you can see the payrolls are okay and fine not as strong as they were. A lot more uncertainty in small business and middle market than there is in the core consumer.

Betsy Graseck, Analyst, Morgan Stanley: Interesting. So but small business, how you feel small business is doing?

Brian Moynihan, Chairman, CEO, Bank of America: The loan growth has been solid and we’re careful on the credit. We know that business well. And so but I’d say that the thing in more in the middle market so in business banking so $1,000,000 of revenue companies to $2,000,000,000 so big swath of the American economy. Their line usage which was about 40% on average pre pandemic dropped down about 34%, 35%, came up to about 36%, got up to about 37%, but it’s leveled off again. And that reflects sort of them trying to think through before they spend, so for plus 300 basis points to fund a piece of equipment to increase their inventories.

They got to think hard about it and the tariffs added a complexity to it. As that shakes down, you’d expect them to feel better. When you go in the markets and talk to them, they’re just trying to figure it out. And whether they are supporters of it or not supporters of the policy, they’re just trying to figure it out to make their business plan. As you move to the annual planning cycle for most businesses, we’re like into it.

You hear them saying, I’d like this to be figured out. And so the good news is, recently this morning you’re starting to see things drop in place that those companies can say, at least I can understand better what I should plan for in 2026. And so they’re very credit quality is strong. Their activity is solid. But if you said, show me the window to your heart, you’d say, why aren’t you using your lines and buy more equipment stuff?

And that’s they’re being careful and really for the last couple of years trying to figure this all out.

Betsy Graseck, Analyst, Morgan Stanley: Okay. Let’s switch to the corporate, the largest customers that you work with. What’s the outlook there for investment given the headline volatility that we’ve had?

Brian Moynihan, Chairman, CEO, Bank of America: I think if you take out the sort of AI infrastructure side of that equation, everybody else is just being careful again trying to figure out what the rules of the game would be. And if they figure that out then they’ll take action. But again making money earnings growth of S and P and everything is very solid maybe less than people hope. But so I think they feel good. They just the economy from the third quarter to say third quarter is projected to slow down by almost 200 basis points.

So they reflect that in terms of that. So if you look at their headcount levels and stuff all being managed carefully what they talk about is I’m being very careful on expansion expenses. I’m trying to figure out this new technology, which we can talk about. But overall, the situation is very stable right now. And it just needs clarity and I think it will come out.

Betsy Graseck, Analyst, Morgan Stanley: Okay. Let’s dig in a little bit on the consumer bank and we’ll go through each of the business lines. But starting with the consumer bank, you have a dominant retail banking franchise with a very strong national brand. I would expect that Bank of America is one of the most well recognized consumer brands out there. Can you talk to what has been key in driving your deposit your checking account growth?

I think it’s been something like twenty five consecutive quarters of net new checking account growth.

Brian Moynihan, Chairman, CEO, Bank of America: Right. So if you look at it more broadly, we run the consumer business with two pieces, two thought process. That’s because the customers are different. In the retail, which is the general consumer business, this is about checking, it’s about start of savings, it’s about the start of investment Merrill Edge and it’s about a home loan and a credit card and an auto loan. And so you don’t need to think about 8,000 other things.

And so the real question has been how do you continue to drive growth in that business? And with that’s like 70% of our consumers and about 30% of balances round numbers. So think of that business as very much an expense driven automation play over many years, but you got to grow, because in that base is a customer of the future. And so that’s where Holli, O’Neil and the team have been able to grow that for twenty five consecutive quarters or whatever it is net new check ins, but $1,000,000 per year of net new checkings while keeping the average balance per checking account overall in the business at $9,000 which is three times the industry average. So it’s not like we’re growing a bunch of accounts with no money.

It’s the primary account. So over the last decade plus they’ve gone from a 60% primary household in that book to 90%. The customer satisfaction has gone up from the 60s to the 80%. The satisfaction with the actual execution has gone up even higher than that. So that then bodes well because it has two purposes: one to make money on the businesses that exist as it does today in the retail.

But secondly, it is the catch up base on which is Bank of America, the branches and everything else. When you go to the preferred business completely different. Now that people have cash flow positive, that’s a different business 30% of the customers 75%, 80% of the balances. Merrill Edge is very important. They’re $05,000,000,000,000 up to now.

We’ve got about three hundred four hundred thousand customers again with about $100,000 average starting account not 3,000 for the Merrill Edge and investment side. Checking account balances to get in there you got to have $25,000 of balances with us gives you lots of rewards programs and again growing organically. You put that together, we’ve outgrown the market every year. We’ve expanded a bunch of markets that we weren’t in over the last ten years. We put $5,000,000,000 into the branch rehab and redo and expansion.

We’ve taken the headcount from the start of 2010 of about 100,000 down to about 55,000. That’s where automation is applied. So this is not a new concept. Mean, think about that. The base has gone from maybe 20 some million checking holders to 30 some million checking holders.

The total balances and deposits $300 odd billion to $950,000,000,000 The execution volumes through the roof and the headcounts come down by 40,000 And that’s just a constant reengineering. So that business is very strong, grows well, gets net new customers. Retail serves the great customers they have, but also as a customer of the future. Preferred, the higher end customers, those customers then graduate into Merrill Private Bank if they go that way. Otherwise, they serve them well.

And then we’ve been adding things to it constantly. ERICA life plans, 7,000,000 life plans, 20,000,000 ERICA users. The mobile usage is penetration is very high. Automated statements, I mean electronic statements yada yada yada fraud protection etcetera all driving that. So we can bring that efficiency down and then pass through those things to customers and that gives you an attrition rate that’s in the low single digits overall and 99% plus in the preferred business.

Betsy Graseck, Analyst, Morgan Stanley: Okay. 99% plus for

Brian Moynihan, Chairman, CEO, Bank of America: the preferred business. Okay.

Betsy Graseck, Analyst, Morgan Stanley: And so you’re everywhere. You have the product set, you have the digital capabilities. What’s the driver of growth in consumer from here?

Brian Moynihan, Chairman, CEO, Bank of America: We basically take a bit of market share by expanding those markets where we aren’t. So we didn’t have a branch system in Pittsburgh or Minneapolis or Cleveland or Columbus or Cincinnati or Denver or Milwaukee or Lexington, etcetera. We’ve added there. And in the big markets we have penetration. It’s growing two ways.

It’s adding customers, but it’s also adding incrementally to the wallet share what we call a stair step, checking account, card, home loan. You just keep going up that stair step and that’s what we’ve been doing. So that penetration has led us to go from probably 40% credit card penetration of the core customer base to 60% whatever it is today and each of the business has that goal even the other businesses.

Betsy Graseck, Analyst, Morgan Stanley: And I know card is something you focus on your depositor customers with. Would you ever think about using card as a way to attract new customers?

Brian Moynihan, Chairman, CEO, Bank of America: Well, we have done that. And that we have a lot of card only customers left over and they get remember out there generating cards and it’s not that we’re turning people down that come to us as a single brand and we convert them. It’s just the cost of acquisition is so different if you’re working off your current people your current customer And that being one of the cost of being in the card business. And then the thing is so the thing is by using the combined rewards program that we have, a preferred rewards program that rewards not on your card, but also rewards your deposit balances and the benefits go to your loans and other at higher rates on deposits etcetera, etcetera. What you’re actually doing is the Affinity brand that we’re pushing hard is called Bank of And so we’re trying to tie the customer in.

So it’s not only getting the product in, it’s getting to be the product out, the card out of the wallet so to speak. So the balances grow more consistently. Other people might grow faster than come down. The credit quality stays very high. But if the economics, the ROA and stuff is very high, everybody says let’s grow faster.

But if you start to go away from that, we know that business and it has a lot of volatility around it. The business that we had in 02/1927 leading up to the last real recession we’ve had in this country, because the other ones were spackled over by a lot of fiscal stimulus and stuff. That cost us $50,000,000,000 in charge offs from 2009 to 2013 2014. And we are the best in the business understanding credit. We had automated models that are written about publicly.

We are way ahead in data and all this stuff. It’s still cost because it’s just unemployment. So we’re trying to keep the risk parameters right because we know even looking at those books the people who are customers overall Bank of America fared much better.

Betsy Graseck, Analyst, Morgan Stanley: Super. That was very helpful. And so the profit growth dynamic is clearly being toggled efficiently. Can we turn to wealth and just talk a little bit about very broad spectrum wealth channel that you have wealth business I should say across Merrill, the private bank, as well as just your affluent offering as well. Can we talk a little bit about what you’re doing to drive growth and profitability in wealth?

Brian Moynihan, Chairman, CEO, Bank of America: So the businesses we have that are dedicated of currently wealthy customers Merrill in the private bank $4,500,000,000,000 $4,600,000,000,000 in assets with clients. Last year the net flows grew at an annualized rate of 4% plus. And that business is good. The thing about the business high return on capital low efficiency ratio because of the compensation methodologies. And so the team Lindsay and Eric and Katie Knox continue to work to push that profit margin back up to 30% in that business through just good engineering of the cost.

But what we call the continuum we have is from Merrill Edge to those businesses. And what we’re trying to do with Merrill Edge is accumulate the investor of the future and the self directed type investor of the current. But we’re trying to grow that so that business which was about $200,000,000,000.06, 7 years ago is now $500,000,000,000 in assets and is growing at a pretty good clip. That’s providing again the feeder of the future. So like retailers to preferred, Merrill Edge is to the wealth management businesses.

So we’re trying to get people started investing and that’s that life plan. 7,000,000 plans have been the customer does it themselves. Artificial intelligence driven financial planning module that they choose their goals. And 7,000,000 are loaded and active and people are putting their data in. So that gives us a broad base.

Then you move to Merrill and it’s a relationship business in Private Bank. And then what we’re doing at Merrill is the teams they’ve done a great job with the advisers and are now recruiting to fill out the offices in areas where we have capacity and developing not only trainees, but also doing some experience recruiting, not a lot, but enough. And then that helps grow the business. And then as you go to the private bank, they’ve had about 30% more private bankers over the last four or five years as there’s been disruption in market. We keep hiring and Katie Knox and team keep driving that out.

Very profitable from a return on capital efficiency lower than the average of Bank of America. But as the NII kicks in, which I’m sure you’re asking about at some point, they get a big hit because it’s a $280,000,000,000 deposit base in that business. So it’s as big as most banks in that business not just in that business.

Betsy Graseck, Analyst, Morgan Stanley: Great. Okay. And what about driving growth through financial advisor acquisition? How important is that to you?

Brian Moynihan, Chairman, CEO, Bank of America: Well, it’s important. The economics of all this is always interesting and get great discussions about it. But at end the day, we recruit people to see the value in our platform and they’ll come in and Lindsay and Eric and the team have done a good job of picking up advisors through the recruiting process that really understand what Bank of America and Merrill Lynch importantly can bring to that group. Clay has been able to add hers. We have on the trainee process, we like all the people continue to refine that process.

And so the FSAs which are in the branches is a great fertile ground to graduate people to be FAs because they’ve got securities license. They have a limited product set because of the nature of the investment need of the customer. But what they do is they can move out. So we have that to gain numbers of advisers and then we have the recruiting to gain numbers of advisers. But the number one thing is to retain our advisers and we’re at a very good place right now in terms of retention.

Betsy Graseck, Analyst, Morgan Stanley: Okay. But it seems like there could be even better.

Brian Moynihan, Chairman, CEO, Bank of America: Yes, there could be better. The end of 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 advisers, more relationship managers and or making them incrementally more efficient to handle more clients through automation. That is going on too. But that takes a little longer to get that through the system.

Betsy Graseck, Analyst, Morgan Stanley: 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 twelve consecutive quarters, which was very impressive.

Brian Moynihan, Chairman, CEO, Bank of America: I’ll give you news flash. This won’t be 13, I think. Is what? I’m sorry. This one should be 13, if I get

Betsy Graseck, Analyst, Morgan Stanley: one should be 13.

Brian Moynihan, Chairman, CEO, Bank of America: Well, it’s not closed yet.

Betsy Graseck, Analyst, Morgan Stanley: Okay. Just want to make sure I heard that right. So where have you made the investments to generate that kind of result? And what’s been most impactful there?

Brian Moynihan, Chairman, CEO, Bank of America: So when you think about it over the last chunk of time, after the financial crisis, you had the bones of everything you needed to add. You’re in 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 they came too much of the storage business in 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 twenty sixteen, seventeen, eighteen. And Jim DeMar team 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 quarter in a row by rounding out the FICC platform by going a little macro versus micro all these areas which are hard work. And then geographically spread it out.

But if you think about what it really is we Jim and the team put to use about $300,000,000,000 of balance sheet round numbers on a GAAP basis over the last three or four years. It 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 breakeven point in the business by about $1,000,000,000 which is an interesting thing because that’s really automation of the processing capabilities and as Jimmy calls it cleaner, simpler, better. And so that was important twenty sixteen, seventeen, nineteen because you’re investing. To run that business is $900,000,000 in technology investments a year.

So it’s not for the faint of heart. And so your $900,000,000 of and by the way, a lot of that is just to be able to run the systems report and all the venues and all the I think we report out 3,000,000,000 trades potential trades a day or something like that in that business to give you every single day we have to report out 3,000,000,000 trades, not even execute trades, quotes 3,000,000,000 quotes, excuse me. And so they built that infrastructure. They drove it. And Jim and the team have done a good job.

And as we work with our customers that business a lot of 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 over the fixed income business as it also become more important to all these groups the private capital lending into those business, 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 ability to help people be successful they’ve done a great job.

Betsy Graseck, Analyst, Morgan Stanley: And what about the international side? 40% is coming of your revenues in markets and banking I think is coming from international. Is that right?

Brian Moynihan, Chairman, CEO, Bank of America: Yes. And that’s the piece that surprises people because they think of Bank of America’s name and they never get off the point. But the reality is that 40% of the revenue in a concerted effort going on the same dimensions of time. And so you have corporate in the Corporate Investment Banking area, number three market share. Again, this is where you got to be consistent because this quarter Investment Banking we think about 1,200,000,000.0 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 cash management, GPS we call it. And we’ve been building and investing in that.

So the growth in that is still ahead of us frankly. What we’ve done interesting lately is dropped the breakeven dropped the customer targets in some markets from the $2,500,000,000 minimum revenue size we had down to $1,000,000,000 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 have 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 midsized 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 continue to expand. Bernie Mensa runs international as an overlay. Matthew and Jimmy run the businesses, but Jimmy helps us Bernie helps us with overlay. We have lots more to do and we think in Europe that we can gain even more share there. Asia is always going to sort of reflect the ebbs and flows of Asia and then U.

S. Is U. S. Okay.

Betsy Graseck, Analyst, Morgan Stanley: So just to make sure that we got the comments about the quarter, you mentioned markets, revenues.

Brian Moynihan, Chairman, CEO, Bank of America: Mid to high single digit, straight quarter of growth year over year.

Betsy Graseck, Analyst, Morgan Stanley: So Okay.

Brian Moynihan, Chairman, CEO, Bank of America: And then Investment Banking about 1,200,000,000.0 We’ll see what it ends up. There’s a lot of stuff in the pipeline that’s getting bounced.

Betsy Graseck, Analyst, Morgan Stanley: Okay. 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?

Brian Moynihan, Chairman, CEO, Bank of America: 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 to that guidance. So that guidance just to reiterate that guidance we are at 14.5 ish in the first quarter. We said by the fourth quarter that would 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 half of the year honestly just because of some of the repricing on cash flow hedges and things that come through this quarter and then are effective next quarter. So $1,000,000,000 of annual $1,000,000,000 of quarterly NII pickup first quarter to 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. We feel very good about that.

Betsy Graseck, Analyst, Morgan Stanley: Excellent. And does the steeper curve help just generally speaking?

Brian Moynihan, Chairman, CEO, Bank of America: It helps. But the thing is it’s never one hand clap. So if that’s happening there’s loan growth what you thought it would be. You’ve got to go around. But to hold this through all the different volatility you think about we’re all sitting in April Liberation Day just passed.

The world was coming to an end and now it’s not coming to so this is 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 slower growth predicted, but we’re still growing loans okay. We’re still growing deposits okay.

Better on the data than market, better than the economy. But we got to be careful about over expecting that until we see the settlement. Okay. But it’s based on the that time it was I think three cuts and now there’s one, two depending on who got up this morning and put them in.

Betsy Graseck, Analyst, Morgan Stanley: Excellent. All right. Thank you. That’s it for updates on the quarter I believe, right? Yes.

Yes. That’s it. 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 Stablecoin and some of the potential rule changes We’ve got Genius Act working through So are there more crypto opportunities in your future? Would just like to understand how you’re thinking about all that.

Brian Moynihan, Chairman, CEO, Bank of America: Yes. So I think I’d focus on the stablecoin question. And so the other 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, it’s commercial wires, are huge and go out every day, that principal in a fellow named Mark Monaco runs at GPS for us and Tongwin. And they always work in a strategy on a holistic basis.

And so at the end of the day, there’s a new potential entrant into a payment system, is a stablecoin, right? So the theory is that if you were having dinner and 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 stablecoin transaction. And so it’s a currency. We have to have it. The industry has to have it.

We’ve not been quite sure how big it will be, but we have to be ready because in the end 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 on it individually. We have just pretty well understood what we do and how. But the problem before was it wasn’t clear we’re allowed to do it under the banking regulations and there was a lot of mystery about that. They get the Genius Act or the STABLE Act or anything like that passed and then they get the markets infrastructure enabling piece That clarity will allow us to figure out whether there’s really a business proposition.

At end the day, if customers need it, customers can make use of it. If you’re very carefully following our company, would notice that we just talked about the $10,000,000 real time weekend movement of money and how well that’s been received on the institutional side of the house. That 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 pays that goes off hours. 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.

Betsy Graseck, Analyst, Morgan Stanley: I’ve been a little confused about this because I thought Clearinghouse has real time payments for easily a decade.

Brian Moynihan, Chairman, CEO, Bank of America: Yes. Well, I’d say that’s probably a little strong. We developed it. It’s probably been out there for four years.

Betsy Graseck, Analyst, Morgan Stanley: Okay.

Brian Moynihan, Chairman, CEO, Bank of America: And that allows if somebody wants to wire $10,000,000 out on the 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. The bigger more important thing is really that the window for the closings getting later and later because then you have multiple time zones covered in real time because the Fed buyers real time.

And also you have transactions can take place off hours. So if you want to buy a house and settle at 06:00 at night, if we can have the deed, the registry to take it, you can settle a house payment. If the person wants to buy a car at the agency at 08:00 at night instead of I just watch this happen, I bought a new car a year ago, people are handing people cash, which is because they want to buy the car that night. You’re like that’s not a thing. But I think you can so you can take away a lot of demand for it.

And so the place the cross border smaller balance e commerce type that’s where this gets or embedded in e commerce for lack of better term. Those are the places in which it’s a little more interesting. We’ll see it play out. And remember by the time we would sit if we sat here tomorrow, I would say yesterday $3,000,000,000,000 plus went out of the commercial bank, all automated overnight. Dollars 200,000,000 plus went out in cash out of the ATMs.

500,000 people walked in the branches, a lot of deposits, checks, cash, all this idea that one payment system is going to take over the world very fast. In the numbers I gave you before on a total of $700,000,000,000 only 20%, 25% is debit and credit cards. Checks are still 20% of the balances of consumer movement of money. And so it’s just it’s not as simple as people think. It takes a long time to get people change their behavior and that’s why they’re great customers.

Betsy Graseck, Analyst, Morgan Stanley: Okay. So with that, I would I think we’re done with payments. Okay. Would like to understand how we’re thinking about the other side of the operating leverage, expense side. And I think you guided twenty twenty five full year expense growth to 2% to 3%, but with positive operating 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?

Brian Moynihan, Chairman, CEO, Bank of America: So if you put the historical context around this, we are we have a little bit of an issue that we are always taking expenses down nominally. And there was a time when we were $58,000,000,000 expenses and we said we’d be at $53,000,000,000 two years out and people thought we were crazy and we actually hit 50 3,000,000,000 But then we said and this is part of 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 and etcetera.

So we go through all that and you end up with an expense base now, which is $137,000,000,000 whatever it was last year. And a lot of that was just a onetime adjustment around comp frankly and market levels generate comp too. So what we’ve been able to do now is flat the headcount then because of all the stuff and regulatory and all the stuff and investments went from about $205,000 say to $218,000 It’s now down to 212,000 exclusively interns that just came in this week. And so we’ve gotten that to manage back down. So over the last six, eight quarters, we bought it down by six seven thousand people.

And every quarter, it basically drifts off a little bit by applying technology. So we feel good about the 2% to 3%. The parts that will adjust 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 53,000 people in the branch system will still get paid at the same level.

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 2016, 17 loans and deposits faster than the market, faster than the economy. And leave aside all the rig and roll in 2020 and 2021, we’re now back to that level. And then so that you’re seeing the operating leverage kick in.

As the NII recovers, that’s what kicks the operating leverage in. So the stat I gave you before is $1,000,000,000 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.

Betsy Graseck, Analyst, Morgan Stanley: 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?

Brian Moynihan, Chairman, CEO, Bank of America: Well, 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 1,700 models or whatever it is. About 300 of them are AI models. 30 or 50 of them operating today are generative AI models.

We have proof of concepts on that many that’s why those models there about a of them are in operation now. But to make that all sounds 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 20,000,000 people used it. And it’s an AI generative AI language problem solver for you, bot assistant whatever you want to call it, 170,000,000 times, 175,000,000 times.

So it’s up in scale and operating. We took that and put it into the commercial GPS cash management business, 40% of all our customer interactions are handled by the AIRCA 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 change of passcode, break fix, I need a computer charger whatever. It’s changed the 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. And it cites it out to all of them. So it’s trained on our stuff. It’s not it brings in new 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. There’s 21 steps to start with ideation on code to implementation on code, 5% or 6% are susceptible to AI productivity enhancements. About 30%, 40% of the activities in those five steps we’re applying. We’re seeing about a of that to half of that potentially go away. And so we’re just growing that to a system.

That’s new. That’s literally over the last six months. So that 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 means is that it 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 I pull them out and do it.

That 500 of those were written in last few weeks. We just put that into the investment banking team. So the analysts and juniors as we all call them, are now using that to produce the information. It still takes people on top of it, but it’s still not perfectly accurate, still takes people checking it. But on the other hand, it gets them a step forward.

And so all these areas we really believe it. Now why do we really believe it? We had 285,000 people on 01/01/2010. We peaked at 305,000 people on probably March of twenty eleven 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. In that time, we probably spent $1,000,000,000 $1,000,000,000 in technology code a year. We now do $4,000,000,000 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.

This just gives you a place to reach that you traditionally didn’t have. So but you’ve got to be careful. You have to have your data set. Over the last ten years, we’ve probably set $3,000,000,000 on getting our data more and more perfect for all these reports. We have to file all these fees.

Have to file all that stuff. But sometimes you get you got to get a return on luck doing all that for regulatory and other reporting, some of which we would argue had great value some maybe not so much. But having that done now allows us in our sales force application which goes across all relationship businesses, all the data is scrubbed for lack of better term. Hear people say, my god, got to go scrub my data. It’s already been done for a whole another reason.

Therefore, they can pick up these new applications. So as we look across, if we have small language models operating on premises that’s Erica. We have large language access models operating at party providers that we can use and test. 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 the products.

So whether SAP or Workday or Salesforce, I’ll let them speak to what they’re doing, but we’re going to be the beneficiary of that. And so if you noodle on now 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 everybody through these proof of concepts and then we’re funding them essentially so they don’t have to get caught and all this will take too much time and we look at them every couple of weeks and implement.

Betsy Graseck, Analyst, Morgan Stanley: So tech budget goes up and headcount comes down?

Brian Moynihan, Chairman, CEO, Bank of America: Well, even in the coding area, remember what I said. 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. Point was pretty linear to get more code output, you just had to add more leave aside the products in the different code languages and stuff. You just have to add more people.

That code is broken a little bit now. But it’s a human behavior change. When you a big change is going to come when we implement basically the three sixty five package everything, but you got get the humans to use it. This is the hard thing. Are developing training programs to make sure our team knows how to use these because that’s going to be the value.

It’s not going be by just putting them on the desktop.

Betsy Graseck, Analyst, Morgan Stanley: Okay. Well, we’ve identified opportunity for growth in the various businesses the efficiencies that you’re from investment spend in addition to

Brian Moynihan, Chairman, CEO, Bank of America: said in the last expense of down 5,000,000 or $600,000,000 a quarter, which basically means taking all this stuff flat. And we’re just bumping along at this level, while we’re making massive investments in the business. That’s the dynamic which is interesting. Before we were just we were able to take out a lot of inefficient business. Now We’re pretty effective and now we’re able to for that expense base, running where it is now, you’re allowed to make major investments that are almost double what we had made five years ago.

Betsy Graseck, Analyst, Morgan Stanley: 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?

Brian Moynihan, Chairman, CEO, Bank of America: Think the Fed through various dialogues and speeches and even over the last eighteen months has made it clear Basel III will get finalized in some manner exactly how probably up to a little bit more debate now. Obviously, the GSIB indexing is important to our industry. And it was embedded in the original statue. If you look at the original provisions that footnotes talk about this ought to be indexed. The economy has doubled in size and it hadn’t been indexed at all.

And there’s 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 the correct thinking frankly and we’ll see what comes out of it. So that’s helpful. You got to

Betsy Graseck, Analyst, Morgan Stanley: What do you think would be correct?

Brian Moynihan, Chairman, CEO, Bank of America: Correct. Just 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 that we’re to index this thing consistently because what the inverse of what people were thinking about 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 that if the bigness fails, you can take care of it. The mistake in that is if you constrain their size, you’re forcing 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.

And so the idea of gating a fund withdraws is akin to gating with deposit withdraws. Think of what happened if we just said you can’t take your money out of the bank and the regional banking prices. 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 got to think that through. And then they say well we want you to be there in times like the pandemic could help and we helped in pandemic GBP 70,000,000,000.

We want you to be there in regional crisis to help. Well, you got a constraint, which is if we grow the balance sheet to support a bunch of riskless treasury trading by all these colleagues, ESLR kicks in. So they’ve got sort of the policy is flipped on its head now, which is how to allow my colleagues and I to make the economy run well. So you expect Basel III because we just got to put them behind us. Expect something on the SLR has been said.

You expect something on G sub indexing. Then the other regulations will be helpful. But what that will mean is our capital it’s not like we’re going say, oh, let’s peel off all of our capital. We will then grow let that growth organic growth eat it up. But if you think about what we do today, we earn $1 we pay out about 30% round numbers in dividends and the rest goes to support the business growth or back to the shareholders that was $4,500,000,000 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 will help the ROTCE, because right now we’re sitting on a chunk of capital.

Betsy Graseck, Analyst, Morgan Stanley: Well, and significant excess.

Brian Moynihan, Chairman, CEO, Bank of America: Yes, that’s a six excess. Right. The simple way that I try to explain it, which is if you had 10 factories to make sure it’s and I said you can only use six of them. That’s what all this adds up to be. And so we’re making as much return on tangible 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. And you’re saying, is that the right balance? Originally, that was 7.2 percent. Now it’s 6.4 And you’re saying you’ve doubled the excess unutilized capital in this industry for what? And that’s what you’re trying to say then.

You’ve got to think about this because it has broader implications.

Betsy Graseck, Analyst, Morgan Stanley: And as a result as we get these clarity on where they’re going to go, how do you think about optimizing your capital structure? Like let’s say we get a rule in the next year or two Because

Brian Moynihan, Chairman, CEO, Bank of America: of the stability of the operations, the platform and the risk of running the credit book the right way blah, blah, blah, blah. I think we’re comfortable with the 50 basis point buffer whatever the then applicable requirement is. We used to say 100, 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 you keep the dividend at the 30% level. Because then it’s really we’re the only person during certain stresses in the pandemic that actually earned a dividend every quarter. 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 on the balance sheet.

But by having that kind of flexibility and that kind of insight and working the hell on the risk side, 50 basis points looks right. So whatever the cap hopefully a smaller number it is today CCAR gets straightened out etcetera, 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 as 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.

Betsy Graseck, Analyst, Morgan Stanley: Excellent. Well, Brian, thank you so much for your thoughts and insights direction and leadership of Bank of America. Thank you so much for joining us this morning.

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