Q1 2025 Earnings Call Transcript

Good day, everyone, and welcome to today's Bank of America Q1 Earnings Results. At this time, all participants are in a listen-only mode. I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Lee McIntyre.

Good morning. Thank you. Thank you for joining the call to review our first quarter results. Our earnings release documents are available on the Investor Relations section of the bankofamerica.com website.

Those documents include the earnings presentation that we will make reference to during the call. First, our CEO, Brian Moynihan, will make some opening comments before Alastair Borthwick, our CFO, discusses the details of the quarter. Let me just remind you that we may make forward-looking statements and refer to non-GAAP financial measures during the call. Forward-looking statements are based on management's current expectations and assumptions that are subject to risks and uncertainties.

Factors that may cause our actual results to materially differ from expectations are detailed in our earnings materials as well as our SEC filings available on the website. Information about non-GAAP financial measures, including reconciliations to US GAAP, can also be found in our earnings materials on the website. With that, Brian, let's get started.

Thank you, Lee, and thank all of you too, and good morning, and thank you for joining us. Given the recent events, we want to do a couple of things at our time today. First, we want to provide a clear picture of how well the fundamentals of the company performed to produce another good quarter of earnings in the first quarter of 2025. So I'm going to talk through a little of those highlights, and I can turn it over to Alastair for details on the quarter and some forward guidance. And second, given the market volatility and concerns of potential changes in the economy and its outlook, at the end of the quarterly presentation, I'm going to give you some facts to set the context about the quality of our credit portfolios, our capital, and liquidity as we may face periods of economic change and set that in the context to how we fared prior to past periods of economic stress.

So let's get going on slide two of the discussion. This morning, Bank of America reported $7.4 billion in net income, and $0.90 in EPS for the first quarter of 2025. That's a solid start to 2025 and great work by our teams. On a year-over-year basis, we grew revenue by 6%. Grew net income at 11%, we grew earnings per share 18%, and we delivered more capital back to shareholders and we reduced shares in the aggregate by 3%.

We produced an 89 basis points return on assets, and a 14% return on tangible common equity in the first quarter. So let me hit on a few highlights that drove that performance. Net interest income grew 3% year over year and is up from quarter four to the high end of our guidance range we gave you three months ago. We grew deposits for the seventh straight quarter.

They reached nearly $2 trillion a quarter end and have now grown 8% from their mid-2023 low point. We grew commercial loans in nearly every line of business. This is the second quarter in a row they've grown across the board. Holly O'Neil and our consumer team marked the twenty-fifth straight quarter of net new checking account growth.

We saw annual flows to our consumer investments business of $22 billion over the last twelve months. Our wealth management businesses led by Eric and Lindsay and Katie Knox in the private bank together added 7,200 net new households in this quarter and saw net AUM flows of $24 billion in the quarter. Jim Demar and the team recorded a twelve straight quarter of year-over-year sales and trading revenue growth. That achieved a 16% return on allocated capital.

We generated these results working from a strong balance sheet with over $200 billion in regulatory capital nearly $1 trillion in liquidity. This allows us to provide strong support and solutions for our clients. Turning to slide three. On organic growth.

One of the keys to our earnings improvement has been our ability to consistently drive organic growth. Organic growth remains strong across the businesses as highlighted on Slide three. I will go through all the statistics and all the points on the page, but as you can see, the minimum has continued. I noted the continued growth in net new checking new households, new companies of commercial banking, and growth in our institutional markets business.

Clients continue to see the value of our capabilities and connected businesses as a company. Our digital engagement and sales continue to expand across all our business. We saw more than 14 billion logins in 2024. Erika has now surpassed 2.7 billion interactions since its inception. Our Cash Pro app for our commercial customers continued strong adoption and usage rates as you can see.

Transactions sent through Zelle at Bank of America are not only speed times the number of checks written by our Bank of America customers, but also 1.3 times the number of checks written plus the number of cash transactions taking money out of the ATMs. It's also worth noting that digitally enabled sales in our consumer product business across the board reached 65% of total sales. You can see these trends on digital in the slides we show you each quarter, on slides twenty-six, twenty-eight, and thirty in the appendix, and we commend those to you. As you go to slide four, showed you some of the highlights in economic activity.

Provide some of the current spending data by our consumers of Bank of America, there's a lot to potentially change given the uncertainty around the tariffs and other policies in the future path of the economy. And our communications with all of you, just so we've done during other stress periods, we want to relay to you those facts, which we think give you some context. But before we do that, our research team, like many research teams led by Candice Browning, does not currently believe we'll see a recession in 2025. However, they've lowered their GDP growth rates for 2025. And continue to see no rate cuts during 2025 but expect as inflation gets under control, you may see them in the future.

In I e in 2026. But going more to what our customer data shows, it shows that the money moving across all our consumer spending methods debit, credit cards, ACH, checks written, Zelle, etcetera. All that aggregate shows a group about 4.4% pace in the first quarter of 2025 compared to the first quarter of 2024. As you look in the chart and look across it, you can note that consumer spending has been consistently growing year over year but during last year, it actually slowed a bit, especially in the summer and picked back up in the fall. That resulted in the fourth quarter of 2024 over the fourth quarter of 2023 being about a 4% pace, and that pace has continued.

That pace has also continued through the first part of April. We note that some retailers may say that their sales are slower and others are picking but in the aggregate, the consumer keeps pushing money into the economy. As we look at our business side and what our business clients are telling you, in the current setting, they remain profitable liquid, and have strong results. They all look ahead and worry about the same things that you hear reflected in your conversations with them also.

So we continue to watch for signs of the environment actually changing. We thought it would be good to share with you what we're actually seeing on our customer base at this moment. So far so in summary for Bank of America for the first quarter of 2025, want to thank the team for another strong quarter. We saw good organic client activity, we saw enjoyed good growth in revenue and earnings.

We continue to invest in the future growth of our company. We manage the risk well. That drove healthy returns for you, our shareholders, and we increased the capital delivered back to our shareholders. That, I'm going to turn it over to Alastair to talk you through the

Thank you, Brian. I start on Slide five of the earnings presentation to provide a little more context on the quarter. And as Brian noted, we generated $7.4 billion in net income or $0.90 per diluted share this quarter. And that represents good growth over both last quarter and the year earlier period.

On slide six, we note some of the highlights of the quarter. Revenue of $27.5 billion on an FTE basis grew 6% from the first quarter of '24. Most revenue items showed improvement year over year. NII grew 3% Investment and brokerage fees rose 15% with both assets under management flows and market levels contributing nicely to the growth. This quarter's $5.6 billion in sales and trading revenue grew 9% from the year-ago period.

Service charges grew 8% with particular strength in our global payment solutions revenue. Card income improved 4%. And other income also improved driven by gains mostly associated with leveraged finance positions and these were positions that we disposed of during the quarter. Non-interest expense was $17.8 billion up from the fourth quarter driven by seasonally elevated payroll taxes and markets revenue-related costs of processing and incentives.

Litigation costs were also higher related to a recent decision in a long-running matter. Good operating leverage this quarter as revenue grew 300 basis points faster than expense compared to Q1 2024. Provision expense for the quarter was $1.5 billion with asset quality remaining in great shape. Preferred dividends were $125 million less than the first quarter of 2024, as we redeemed some preferreds over the past year. And used some of our excess capital to reduce our outstanding shares 4% from the first quarter of last year.

All of these things aided in EPS improving 18% year over year. Let's move to discussion of the balance sheet using Slide seven. You can see assets ended the quarter at $3.35 trillion. That's up $88 billion euros from the fourth quarter driven by higher levels of client activity in global markets.

In addition, loans grew $15 billion in the quarter supported by $24 billion in As deposit growth exceeded loan growth, we continue to add to our liquidity. Long-term debt increased $21 billion driven by funding needs to support the growth in client assets, average global excess liquidity at $942 billion remained strong and up year over year. Shareholders' equity was flat with the fourth quarter around $296 billion. And within that, we returned $6.5 billion of capital back shareholders, with $2 billion in common dividends, and the repurchase of $4.5 billion in shares.

It's worth noting that year-over-year equity is up $2 billion and a $10 billion increase in common equity was partially offset by a 28% reduction in preferred stock. Tangible book value per share of $27.12 rose 9% from the first quarter of 2024. Turning to regulatory capital on Slide eight. Our CET1 level increased to $201 billion and the CET1 ratio is 11.8%. This is down 11 basis points and remains well above our 10.7% requirement.

You can see in the waterfall, we deployed capital in a number of ways this quarter. In addition to the increased amount of share repurchases, we allocated more capital to our Global Markets business and grew both consumer and commercial loans. Within the ending loan growth, it's worth noting we bought an $8 billion portfolio of residential that's both high and quality and allows good potential to expand relationships with customers beyond those mortgage loans. And we expect these loans to add just over $100 million in NII annually.

Supplemental leverage ratio was 5.7% versus a minimum requirement of 5% leaves capacity for balance sheet growth and our $468 billion of total loss absorbing capital means our TLAC ratio remains comfortably above our requirements. As you see on Slide nine, we've now grown deposits for the seventh consecutive quarter on an average basis and we're near $2 trillion euros on an ending basis. Typically, we see some downward pressure on deposits as we move from Q4 to Q1, as commercial clients use their cash to pay bonuses and taxes. And this year, we saw commercial deposits more stable as clients remain highly liquid.

In addition, we remain disciplined on pricing as we pass through short rate declines and saw a 24 basis point decline in rate paid in global banking. We saw continued stability around our consumer non-interest bearing balances and as interest rates move lower in CDs and preferred deposits on our brokerage platform, we saw a three basis point decline in rates paid in consumer banking this quarter. To 61 basis points. Overall, rate paid moved 194 basis points in Q4 to 179 basis points this quarter and were lower in every business segment.

Let's turn to loans by looking at average balances on Slide ten. And you can see loans in Q1 of $1.09 trillion improved 4% year over year. Driven by 7% commercial loan growth. Excluding commercial real estate, that year-over-year growth was 9%.

We noted a modest increase in revolver utilization during the quarter, as clients navigate the current environment. Consumer loans grew modestly year over year with linked quarter movement reflecting seasonal credit card paydowns. And the $8 billion of residential loans we purchased this quarter and that I noted earlier. Those will come onto the balance sheet or they came onto the end of the balance sheet at the end of the quarter.

So they don't really impact averages this period and will begin to impact them next.

Let's turn our focus to NII performance on Slide eleven.

Where on a GAAP non-FTE basis, NII in Q1 was $14.4 billion. And on a fully taxable equivalent basis, NII was $14.6 billion. That's up 3% from the first quarter of last year. We finished at the higher end of our expected range.

And NII grew $75 million on a fully taxable equivalent basis over Q4 even as we incurred approximately $250 million headwind from two fewer days of interest accrual. The improvement was driven by global markets activity, as well as deposit favorability and loan growth. And fixed-rate asset repricing also benefited NII. With regard to interest rate sensitivity, on a dynamic deposit basis, we provide a twelve-month change in NII for an instantaneous shift in the curve.

That means interest rates would have to move instantaneously another 100 basis points lower than the forecasts already expected and contemplated in the April tenth curve. On that basis, a 100 basis point decline would decrease NII over the next twelve months by $2.2 billion. And if rates went up 100 basis points, again, more than the forward curve, NII would benefit by roughly $1 billion. With regard to a forward view of NII, given the uncertainty of announced tariffs, we've seen expectations for more cuts in interest rates and more variability now in the market expectations for economic growth.

So let us provide a few thoughts for you using slide twelve to illustrate. In Q4, we provided our expectation that we could exit Q4 of 2025. With NII, on a fully taxable equivalent basis in a range of $15.5 billion to $15.7 billion. And that included an acceleration of NII growth in the second half of the year. Our assumptions underlying that NII belief then included an interest rate which anticipated one rate cut in the middle of the year and modest loan and deposit growth.

And while the interest rate environment has changed a little, our current expectation for the exit rate of NII in Q4 remains unchanged. Using the first quarter 2025 as the base, the waterfall gives you some idea of our assumptions to bridge to our Q4 2025 expected exit rate. First, we pick up two additional days of interest, one in each of the next couple of quarters. Fixed-rate asset repricing also benefits our NII, it takes into account the impact of the current interest rate curve.

There are three primary buckets for that benefit. Securities, mortgage loans, and cash flow hedges. Security pay downs are running about $8 to $9 billion a quarter. Mortgage loans are another $4 to $5 billion a quarter.

And each gains a little more than 200 basis points as they're replaced. Cash flow swap repricing benefits are a little more staggered than their roll down and make up the rest of the benefit here. We assume the early April interest rate curve, which reflects four cuts, and a couple are later in the year. So that will have some negative impact near term on our expected NII growth but it improves as the funding costs more fully reflect those cuts.

Best proxy for that impact is our asset sense which even below the rates cuts currently in the curve. We provide our best estimate using the timing of those cuts. And at the same time, with lower rates, we would expect just a little more loan and deposit activity and we estimate the NII impact of that growth would offset some of the interest rate impact from lower rates. We already saw modestly better deposit growth in the first quarter than we expected.

In addition, we believe our liability-sensitive global market will also likely benefit NII more as we move through the year. And that obviously depends on the way clients choose to trade with us. Bottom line, our fourth quarter exit rate expectation for NII is unchanged to $15.5 billion to $15.7 billion from our previous expectation. And that means we're still expecting strong full-year NII improvement this year of 6% to 7%.

Okay. Let's turn to expense. And we'll use Slide thirteen for the discussion. We reported a little less than $17.8 billion in expense this quarter.

And that included roughly $500 million in seasonal elevation from payroll tax and some markets related revenue-related costs. We also had higher litigation expense to $160 million driven by a recent decision in a long-running matter. And remember, as you think about the expense increase from Q4, that quarter included a $300 million release of accruals for the FDIC special assessment. Expense compared to Q1 2024 is up a little less 3%.

Consistent with our full-year 2025 growth expectations and the increase reflects costs of higher sales and trading and wealth management fees and in the investments made to add more sales associates and to support increased technology and marketing costs. Let's move to credit and turn to Slide fourteen. Where our asset quality remains sound. Net charge-offs were $1.45 billion modestly down compared to Q4. This is the fifth consecutive quarter that net charge-offs have hovered around $1.5 billion.

The total net charge-off ratio this quarter was 54 basis points flat with Q4. Q1 provision expense was $1.5 billion and matched net charge-offs. Consumer net charge-offs were $1.1 billion consistent with the past few quarters. Now 90% of our consumer net charge-offs are driven by credit card, which highlights the importance of prudence in underwriting that portfolio as we note on Slide twenty-two. On the commercial side, we saw losses of $333 million down modestly from Q4. Near term, we don't expect much change in net charge-offs as you can see improvement in both early and late-stage delinquencies from the fourth quarter.

That tells us the net charge-offs could even be a touch lower next quarter on the consumer side. On Slide fifteen, in addition to the improvement in we note the modest changes in other stats for both our consumer and commercial portfolios. Okay. Let's move to the various lines of business and some brief comments on their results.

Starting on Slide sixteen with Consumer Banking. For clients, Consumer Banking continues to deliver strong organic growth driven by high touch and high-tech capabilities convenience and security. For shareholders through NII in particular, this business is increasingly seeing benefits fall to the bottom line for its high-quality deposit book, with only 61 basis point rate paid on nearly $950 billion of deposits. In Q1, consumer banking generated $10.5 billion in revenue, and $2.5 billion in net income.

Revenue grew 3% from the first quarter of 2024 as NII growth was complemented by fee improvement in card and service charges. Expenses rose 6% as we continued our business investment and worked through elevated compliance costs. The organic growth that Brian noted on slide three included nearly 250,000 net new checking accounts this quarter, another strong period of card openings and strong investment account growth. Investment balances grew 9% to $498 billion with full-year flows of $22 billion and market improvement.

Consumer banking deposits continued to increase from their mid-August low that was $928 billion it's now at $972 billion pounds on an ending basis. Looking at averages, deposits grew $5.2 billion from the fourth quarter to $948 billion and our rate paid declined to 61 basis points. Finally, as you can see in the appendix Slide twenty-six, digital adoption and engagement continue to improve and customer experience scores rose to record levels illustrating the appreciation of enhanced capabilities from these investments. Moving to wealth management on Slide seventeen, the business had another strong quarter.

With a continued increase in banking product usage from our investing clients, the diversification of the revenue in this business continues to grow. The number of clients that have banking products with us continues to grow also and is now approaching two-thirds of the client base. Importantly, about 30% of our revenue remains in net interest income which complements the fees earned in our advice-driven model. And those have also grown.

Net income of $1 billion rose modestly from the first quarter of 2024 a solid revenue growth was mostly offset by higher revenue-related costs, and continued investments. In Q1, we reported revenue of $6 billion growing 8% over the prior year led by 15% growth in asset management fees. Expense growth of 9% supported both cost of the increase in fees as well as investment in technology and the cost of hiring to add experienced advisors to the platform in Merrill, and the private bank. Average loans were up 6% year over year.

That was driven by growth in custom lending, securities-based lending, and a pickup in mortgage lending. Profits were relatively stable compared to Q4 and our pricing discipline resulted in a 25 basis point decline in rates paid. Both Merrill and the private bank continued to see organic growth and produced strong assets under management flows of $79 billion over the past twelve months which reflects a good mix of new client money as well as existing clients putting money to work. We also want to draw your attention to the continued digital momentum that you'll find on Slide twenty-eight.

Our new accounts continue to be predominantly open digitally. On Slide eighteen, you see the Global Banking results. And the loan and deposit gathering success of the team. In the first quarter, Global Banking produced earnings of $1.9 billion modestly lower than the year-ago quarter as lower credit costs from CRE office losses were more than offset by higher expense of investment in the business.

Revenue of $6 billion was flat to the prior year, as lower NII was offset by roughly $230 million higher other income related to leveraged finance positions. As well as higher treasury services revenue. Firm-wide investment banking fees were $1.5 billion in Q1. Similar to last year's first quarter. We maintained our number three investment banking fee position and looking forward, we've got a healthy pipeline and our clients are simply waiting on more clarity on trade policy and the regulatory environment before committing to deals.

Expense increased 6% year over year driven by continued investments in technology and operations to support clients. On the balance sheet, we saw good client activity. As I noted earlier, we saw good growth in commercial loans, mitigated by decline in CRE loans. And total average global banking deposits are up 9% year over year, where we saw strong growth across all categories from corporate and commercial clients on the larger end to business banking on the lower end.

Switching to Global Markets on Slide nineteen. I'll focus my comments on results excluding DVA as we normally do. As Brian said, we continued our streak of strong revenue and earnings performance achieved operating leverage and continued to deliver a good return on capital. In Q1, we earned $1.9 billion and that grew 8% year over year.

Revenue again ex DVA, improved 10% from the first quarter of '24, on good sales and trading results and $230 million of other income on leveraged finance positions similar to Global Banking. Focused on sales and trading ex DVA, revenue improved 9% year over year to $5.6 billion. Equities led the way this quarter growing 17% year over year while FIC grew 5%. Equities and FICC both benefited from increased client activity.

Among the market volatility. And our continued investments in the business. On slide twenty, we show all other with a loss of $4 million in Q1 and the driver of the year-over-year improvement in expense and net income is the absence of the first quarter 2024 FDIC special assessment. Our effective tax rate for the quarter was 9%, which reflects the discrete impact of share-based compensation awards.

As a reminder, our tax rate remains well below our typical corporate tax rate driven by tax credits related to investments in renewable energy and affordable housing. Looking forward, as we said last quarter, we expect the tax rate for the full year 2025 be in a range of 11% to 13% excluding unusual items. So let's shift gears to finish and we'll use Slide twenty-one. Over the last couple of weeks, investors have signaled concerns for the bank industry over potential changes in the economy.

And in light of that, we added the next few slides to illustrate how much stronger our risk profile and balance sheet are today. For whatever economic outcome we might face. And let me offer three important takeaways as you see the next three slides.

First,

we have a vastly improved risk profile from previous periods of economic dislocation. Second, at the same time, we strengthened the balance sheet by adding billions of capital and liquidity. Third, following fifteen years of operating under responsible growth, our portfolio and our balance sheet are well prepared to support our clients. In various economic outcomes.

Now the left side of Slide twenty-one highlights the shift in the loan portfolio to a more balanced mix of commercial and consumer as well as a more geographically diverse mix. Our high-quality commercial loan portfolio at this point is more than 90% investment grade or collateralized and it also includes a more diversified geographic mix as you see at the bottom of the page. At the top right, you see the improved mix toward a more secured collateralized balance of our consumer book. Bottom right illustrates the nine-quarter loss rate and how our nine-quarter, so this isn't annualized, this is nine-quarter stress loss ratios fared in the Fed models and CCAR exams.

And we compare quite favorably to peers in each of the past twelve years of exams. CCAR provides investors an annual independent view. Analyze adverse impacts in the most severe circumstances. So just to recap, if you went to the latest results from 2024, those scenarios include a drop of 6% to 8% in real GDP from peak to trough.

It includes a rapid increase in unemployment up to 10%, and significant changes in inflation. It also assumes housing prices falling 35%, it assumes short rates basically go to zero and the ten-year goes to 1%. And it assumes bond spreads widen dramatically commercial real estate prices decline 40%, and equity prices would drop by 50% together with significant weakness in international economies. It also assumes the portfolio size doesn't change from any management actions that we might take in that environment.

And we obviously do quite well in that CCAR stressed environment. That, I'm gonna stop I'll turn it back to Brian for a couple of thoughts to wrap up.

Thanks, Alastair. And I'm on slide twenty-two. On that slide, we highlight some of the key balance sheet or asset quality statistics of the company has faced important periods of economic disruption. And we compare those to the current status.

On the left side, side of the columns, you can see that the fourth quarter of 2009 illustrates what the company looked like after a couple of years in the financial crisis and after the acquisition of Merrill. Second column obviously is fourth quarter 'nineteen, which represents what we look like heading into the pandemic. And now we show you what the company looks like today. We have a multifarious loan book.

Across types of clients geographies, and various asset classes. That holds us in good stead. Total, our consumers loans are down more than $200 billion as home equity loans are down more than $125 billion and credit card loans, unsecured credit card loans are down more by more than $60 billion. This reflected a concentrated effort on us to focus on our relationship loans rather than loans as a product.

And deepen those relationships with the highest quality prime credit.

Customers.

Our wealth management business has doubled in size those consumer categories and the relative exposure to those borrowers in those loans is very secure as they're highly collateralized and the strength of the borrowers underneath the In in in the commercial in the addition to the more geographic dispersion that Alastair discussed, you could also see that the construction lending land development exposures have been greatly reduced.

At the same time, our equity is $93 billion and higher.

We At Bank of America, we remain about our strength of our balance sheet. We are well reserved for our portfolio and risk profile. On a weighted basis, including our model reserves, our imprecision reserves, and our judgmental reserves, it positions us at a six per approximately 6% unemployment rate. The current reserve allocation on card is 7.4%, for example.

It gets to charge our freight of about 4.4%. When you go to slide thirty-one, you can see some more statistics about our portfolios. Excuse me. Twenty-three, you can see some more statistics about our portfolios.

Let's take a deeper look at those. Just a couple of points. On slide twenty-three, you can see that regards to mortgage, between the first and second lien products today, we have a total of about $260 billion. On average, our borrowers have FICO scores above 770, and average debt to income ratios of 35% for the residential mortgage product and 39% for the home equity product.

Loan to values also leave us in strong equity positions being below 50%. For comparative purposes, we ended the financial crisis early 2007 and you can see the exposures were more than $400 billion with average FICO scores were fifty-six fifty to sixty points lower and higher LTVs. So $400 billion more in balances, lower credit scores, and higher LTVs. So we've significantly repositioned those portfolios across the last several years.

Moving through the other consumer loan types, you can see the high quality of the collateralized securities based asset lending and other portfolios. And on consumer credit card percent. we have about $100 billion in outstandings with a current net charge off ratio, as I said, about four The FICO score of our average borrower is 777. And thinking about exposure, borrowers are less than a current FICO score of 660, We have about 12% exposure. Art is really our only consumer unsecured exposure in the portfolio. As comparison, adding into the financial crisis in fourth quarter, we had $150 billion in credit card balance about one and a half percent.

Of one and a half times our current balance of card loans. The average FICO score was fifty FICO points lower, and the unused lines of those books were much, much higher. This strong position allows us to better serve our clients in the times of stress which may come ahead according to our projections. Bank of America stands ready to support them as never before.

Whether it's a commercial client when the when she's helped to borrow and navigate the changing economy around the world, whether it's a commercial client needs to reposition their debt structure or move money. To to help participate in the economy. We'll be there for them. If it's a wealthy client and needs advice and counsel on rocky periods or loan to get them through, we're there for them.

If consumers need to access to cash or borrowing, we're also there for them. Bottom line, operating the company in this way allows us to stand tall in time to stress. And these slides highlight the importance of having done that across the last many years. A relative importance strength of our company compared to others.

Thank you. And now we'll go to questions and answers. Q and A.

We'll take our first question from Stephen Chubach with Wolfe Research. Your line is open.

Hi. Good morning, Brian. Good morning, Alasdair. Morning.

I appreciate you guys taking my questions. Wanted to start off with one on capital management. Certainly encouraging to see the acceleration, the buyback towards that $4.5 billion level. At the same time, you're still running with more than 100 basis points of cushion I was hoping you could speak to, given the uncertainty in the environment, what level of CET1 you're currently comfortable running with in terms of the ratio, and whether this $4.5 billion buyback level is something that we expect to be sustained over the near to medium term.

Yep. So Steve, if you look at what we did this quarter, just take a look at slide eight in the earnings materials. Now here's a quarter where we ended up earning $7 billion and you know, it allowed us to step up the share buyback from $3.5 billion up to $4.5 billion in an environment where we also invested more RWAs in global markets, and into higher loan balances. So not only do we, you know, grow the loans call them organically, but we also purchased a loan portfolio this quarter.

So we're sort of growing into our capital at this point. By investing in the business and we still have some flexibility to increase the share buyback. So I don't think we have an ultimate destination in mind right now on CET one. Recognizing that we don't have full clarity yet on all the aspects of capital, and we'd like to see that before we before we determine it.

But obviously, as you point out, we've got a lot of flexibility. And we're we're more focused on just make sure that the CET one's in a good place and then grow into the capital base that we have. That's probably the best way to articulate it. It's great.

And for my follow-up, just on the outlook for loan and deposit growth. You know, you delivered better growth across both KPIs relative to peers. Somebody could speak to what drove the strength in one q beyond the portfolio purchase you alluded to earlier, And just bigger picture, the outlook for commercial loan growth as tariffs and policy uncertainty certainly raised concerns regarding weakening loan demand. Weaker CapEx, what have you.

That's a Steve. Just Steven, just on the

I'll give you the broader thing and now so you can talk about some of the specifics. Remember over the last several years, we've been investing in basically building out more commercial bankers across the world. Including build outs in Switzerland and the UK and things like that. We built more commercial loan officers in United States and our our public commercial banking business under Lendinga team.

Private bankers and more in the in the wealth management team under Merrill, what we call wealth management bankers, support those teams who've grown them. So those investments sort of, you know, kicking in on that sort of yeah, twenty twenty mile march way, just more of a more of a more of a net keeps driving it through. So that's why you're seeing us sort of do better in the competition just in linked quarter loan growth. We look forward, you know, with all the things you described, the statue changes economy, business views, people draw, in anticipation of tougher economic times.

We'll see all that play out. But the real way that the real reason that we're driving our capabilities is you have more capacity and then making that honestly, we're also making that capacity more efficient using some artificial intelligence machine learning to direct that calling capacity, and that's allowed us to take what we call new logos in the commercial business, adding new companies, The first time you're seeing that having started a couple years ago is now maturing in the balances in outstanding switch. It takes a while to bring those clients in, get them underwritten, Yep. They renew.

Once every couple years, getting the flow, etcetera. So we those investments are paying off. We expect that to continue across the board.

That's great color. Thanks so much for taking my questions.

We'll move next to John McDonald with Truist Securities. Your line is open.

Thank you. Good morning, guys. Thanks for the longer-term perspective on the credit. Just wanted to follow-up that. On terms of the loan loss reserve, what were the dynamics of the setting of the reserve this quarter in terms of any change in weighting of scenarios for the tariffs, and was it set with a three thirty-one view or early April view?

So John, we said it all the way through the close, but normally we're focused on the data that we have on three thirty-one. And then we have the ability to layer on top after we model our reserves. We have the ability to layer on imprecision and judgmental on top of that. So we did this quarter the same way that we've done in other quarters.

We went through and assessed using the blue chip economic indicators, so the consensus view of all of the various macro assumptions. That's sometimes different than others who use their own proprietary. We feel like the right answer is to use the blue chip consensus. It's more independent.

And then we've got that as our baseline. And we've got four other scenarios around that. We've got upside, and three downside. And so in this particular quarter, already the blue chip economic indicators have moved down in terms of economic growth.

So GDP lower in the baseline. And a little higher on inflation. So that's reflected in the baseline before we even get to the weightings. And then weightings this quarter, we those are unchanged for us.

And by the time we then take that modeled answer, and then layer on top of it the judgmental piece all the way through the close, we're reserved closer to an unemployment rate that's right around 6%. In twenty-five twenty-six just to give you some idea. So that should give you an idea. We feel like we're pretty well reserved to this point.

Hey, John. One of the things we've been looking a lot of sort of what happened because, obviously, CECL came in pandemic hit, sort of the buildup, and things like that. But the the you know, as Alastair said, one of the hard concepts is the baseline that we use continues has moved negative over the last couple of quarters, obviously, due to the outlook here last couple of months and will continue to reflect that. But we have a strong reserve position with that when you add it all up at the 6% implied level.

So we feel good.

Thanks. That's helpful. And then on expenses, you previously were looking for the full year expenses this year to be up 2% to 3% over last year. How are you feeling about that? Is that still kinda your current or thinking?

Yep. That's still our current thinking, John. Mean, I think we said 2% to 3% for the full year. We feel like we're on course there. It might be towards the higher end, but we just gotta see what happens with fees over the course of this year.

Got it. Thanks. We'll take our next question from Jim Mitchell with

Seaport Global Securities. Your line is open.

Great. Good morning. Maybe, Alastair, you're you're able to absorb four cuts this year. Your assumptions and maintain the four q NII target, which is which is a good thing.

But as we think about the full impact of the four cuts, felt in twenty-six and potentially a few more, does that make it a little more difficult to reach that intermediate-term target NIM of 1.3% by the end of next year, or fact that you're getting them out of the way this year is helpful just know, trying to think through that intermediate-term target. Thanks.

So Jim, first of all, that target is 2.3, not 1.3. I'm sorry. Yes. Yeah. You're letting us off the hook here.

It's easy. Yes. So we're we're aiming at 2.3%, and we still feel like over the course of the next couple years, that's the right answer. Know, for this year's NII, those rate cuts, we got four of them in there.

But a couple of them are later in the year. So it it doesn't have a tremendous impact on 2025. It'll be a little bit of a headwind in twenty-six if that in fact is the case.

Right. But, again, we got a lot of time between then and there. I feel like last year at one we thought there'd be one rate cut in the curve. Then there was six.

Then we were back to one. So we gotta see how the interest rate curve develops. But our management team's focus and and goal has not changed. Yeah.

And, Jim, one thing on the rate sensitivities, remember those are instantaneous drops. And it takes time for the, you know, the fixed our debt portfolio our debt issuance portfolio. Some of it's floating, some of it's fixed. It reprises over time.

So if they come more over time, you can't quite acquit it to the instantaneous drop type of things if you got my point at because you have other dynamics which help. So you know, remember that long term, most economists believe that with a inflation coming back towards the target rate, you'd see the Fed funds rate ultimately get down to three, three and a half type of levels, which is more of a traditional normal. It's hard to say in the world we're in now. Level.

So if that happens, you know, we feel very comfortable if you look back historically the earnings power of this company and the and the NIM percentages you've talked about. With the Fed funds rate in that range of pushing up 2.3 and beyond strong.

Okay. Yeah. It makes sense. And and just as a follow-up on just sort of the near term, April, we saw a big jump in volatility.

Just any any are you seeing across your business segments, you know, whether we've seen you've seen deposit you know, flight to safety flows or and, you know, the volatility in trading, has that been good volatility, bad volatility, just trying to get a little window into the near term? Thanks.

Well, we've seen significant pickups in customer activity in global markets. So the environment there remains constructive. We have seen, you know, I'd say continued positive sort of similar to what we would expect haven't seen anything like, you know, if you were to go back couple years around regional banking crisis, then nothing like that. It's been pretty regular way, I would say.

We just keep driving the deposits day to day.

And, Jim, you Okay. Type mentioned earlier, but just you did specific ask about, but what's interesting is you watch that that consumer money flow spending. If you take a four-week average, including up to the first twelve days of April, it's running at 5%, so it hasn't fallen off. You gotta be careful just using two weeks because of Easter fell this year versus last year and all that stuff.

But, basically, you know, it's it's maintaining that pace. So the consumers are still solidly in the game. What they'll do next different question, but right now, they're still solidly even to the first part of

Okay. Great. Thank you.

We'll move next to Glenn Shore with Evercore. Your line is open.

Hi, thanks very much. So another good trading quarter for you guys. But I'm curious, when you when you benchmark yourself, say, to the top peers, you know, there's probably about a $3 billion difference to the to the biggest platforms. I'm just curious if you see those big gaps to peers, are those gaps that you're choosing to pursue?

You you mentioned you have the SLR room. You have a great equities franchise. I'm just curious on your approach towards is it a capital thing? Is it a list thing?

I'm just curious on the high-level thoughts. Thanks.

I think yep. Starting a number of years ago, this has been a relentless climb up the ladder and and not overshooting and and having to cut off. So that, you know, three years of year-over-year growth, you know, consecutive quarters that other people don't do because there's more volatility. So Jim and the team are basically building up.

So what have we done? More capital. Probably over five or six years, we you know, $300 billion more debt balance sheet capacity even though the this quarter was sixty ish billion dollars. So we keep adding capabilities capacity.

But remember, the and we've, you know, on a relentless march, you have fourth third in this category your third, second in this category, keep moving up. And and just keep pursuing it. In some areas like, you know, physical commodities, that's not a business where heavily into. And and we made a decision about that a number of years ago versus, you know, core fixed income where we're stronger and we gain.

We've been gaining shares. So the idea is to keep gaining share but at a pace, for lack of better term of the business, which has volatility in a pace that capitalizes that you know, that volume of revenue into the business and then grows from there as opposed to grabs it and gives it back and grabs it and gives it back. It's just the way the gym and the team have driven it, and they've done a frankly, a very good job doing it. And so expect us to keep gaining share.

We'll keep closing the gaps that you mentioned, It's getting closer to the you know, third place gap. But you know, in a given quarter, other people may shoot up a little higher because of this element or that element, but our job is to just do because consistent across all the elements that we participate in. And keep driving that, and there's plenty of opportunity ahead. And it's not for lack of capital or lack of risk-taking.

They're taking more risk. And and the other major thing is the investment in systems here. Is a competitive moat, frankly, that the amount of work you have to do to get this all to work, right on a worldwide basis is very few of us can do.

I very much appreciate that. And and similar to what John said, we definitely like to drill down on the extra detail around the credit book and history guide. I'm curious on the right now when you talk about the reserving and you're you took now to give us the the further drill down on on the exposures, Is is it a traditional regular way where marching towards or closer towards our higher likelihood of recession? And Or or have you gone through and assessed the loan book from exposures to this shifting tariff and tax environment, and and that's bringing the higher attention.

I hope that the question's clear. I'm just I'm more talking about the the why now and and what's driving the increased attention.

Well, then why now? Why we put the extra disclosure is just to remind people you know, we actually if you look back, Glenn, we did a lot of this around night, you know, in twenty because of the same discussion came up. And then in twenty-two or three, there was the same discussion about we're heading to their sessions, Consumers are gonna spend down their money. The consumers quit.

Turned out not to be true, frankly, in the twenty-two, twenty-three time frame. Consumer held in. So if you look you know, we always are testing every yep, On a continuous basis in a trading book stress test, but, you know, on a quarterly basis, across the things If you think about all the different ways the economy can get knocked into recession or potential recession or lower growth. Remember, the whole world is predicting a lot lower growth this year than last year.

That's not new. That's just all the street. Our economists etcetera. So that the growth is slowing down from a 3% growth rate in the third quarter of last year.

You have to to one ish, you know, type of numbers. They're a little bit less than one this year here in the blue chip in the in the first quarter. So over two quarters, a pretty good drop. So that's all embedded in it.

But while we're trying to give you reassurances or a look at the in-depth is because it's a source of strength for us. And we've been we've been working at that hard to ensure that as we go through a crisis, and we've had a couple bumps in the road, as we go through a more traditional yep, economic downturn, we will be in great shape, and we test that every quarter. In lots of different ways. So but if sit there and say, what happens if tariffs happen?

This happens. This happens. It's gonna result in either GDP negative growth higher inflation, which may then cause GDP negative growth, higher unemployment, etcetera. All those are the factors we actually test in granular detail.

So it's not necessarily how you get there. It's the outcome of getting there. The GDP fall off, housing price fall off, unemployment levels. That's what we do.

And we wanted to make sure we were positioned at the end of the day that we could serve our clients well and not have to be, you know, pulling back. And so that's the underwriting discipline of the last decade holds you in good stead. If, in fact, we do enter a a recession in the future.

Thanks for all that, Brian.

We'll move next to Mike Mayo with Wells Fargo Securities. Your line is open.

Hey, Brian. I hearing this call, and almost sound like it could have been the fourth quarter earnings call. You know, loans are growing, deposits are growing, credit's fine. Consumer spending slowing, but still growing.

You're buying back more stock. And I'm just trying to reconcile the $7 trillion of lost stock market wealth with comments from you sounds like you're not blinking. And by the way, I don't think you're alone. It's just teams you know, more upbeat relative to what the stock market's done, and I'm trying to reconcile those two things.

So what am I missing or what are you seeing? Or at what point do you say, hey. Wait a minute. This is really might be a a bigger problem.

I think, Mike, you're laying out the difference between is and could. And might and should in in the future. Right? So, yep, what we're trying to do is make sure people see what is going on today and like you said, for the and that's why you actually split the two pieces of presentation for the first quarter.

Everything you said is true. Loans, deposits, credit's good. Charge offs went, you know, down. Delinquencies are down at the end of the quarter versus fourth quarter.

You're looking at all that and say, okay. That's that's what we did. If we look forward, you know, our our economists, your economists, I'm sure, are all predicting a slowdown in growth. And the the core question will be when all these different policies and stuff come together and response with the policies by, you know, other trading partners.

To the tariff policies by the the policies on deregulation working for that, the tax bill, which comes out. All that will mix together and come to an outcome. And our job is to have positioned the company well and take advantage of the opportunities both that outcome hasn't happened yet. And when it comes to being a good position, And that's why this latter part of this was geared towards showing you the strength of the credit portfolios and and other things.

Again, today, you you and I know that the you know, the real risk in a in a balance sheet of a bank is gonna be its credit posture heading into a general recession. Our our colleagues you our have raised their probability reception recession, lowered their growth as have the blue chips. Even if you look at the people we did it. It's a very slight recession, and yeah, we should fare well on that.

But we just don't nobody has a perfect yep, a perfect crystal ball, whatever the right word is, to the future. But, you know, we're positioning our comfort for everything, but we don't want people to lose sight of the strong performance of this company and our our team in the first quarter 2025.

Let me take the other side of that. I thought the idea was to make it easier to do business with deregulation. And I you can see the nominations people, and then you get the policies. If that narrative plays out, how do you think it'll be easier to do business at Bank of America and and with your with your customers as it relates to deregulation.

I think the new administration has made it clear that they're gonna reduce the regulatory burden along two dimensions. Dimension one is, yep, I think you know, less regulations new and getting other regulations off the book and refining based on view that the pendulum is going too far. Is that talking about bank regulations, but it's actually more broad across. The second way is actually reduce the size of the federal administration that brings, you know, the regulatory inquiries and things like that.

So we're seeing you know, some relief. We look forward to seeing more relief as as the nominees get in position and and the policy outlines can be then drilled throughout the teams. But you know, it's it's critically important that we get this rebalance. We wanna run a company that is gonna be well well well capitalized, great liquidity, fair to consumers, etcetera, Mike.

But sometimes the regulation gets in the way of that and way overshot you know, the issues. And we look forward to having it come back in the middle and, you know, just take the the debate about treasury trading. The SLR requires us to yep, hold capital at a level against riskless assets and treasuries and cap yep. Cash that doesn't make a lot of sense.

And and we've been saying that for a long time, and we expect now heard it said, that there'll be relief in that. Will help us provide liquidity to our clients. In good times and times of stress, but you know, that that you remember our cash and our you know, government guaranteed securities and government issued securities is $1.2 trillion of our balance sheet right now, Mike. You know?

So you have to think about that in terms of it and and capitalizing that under the SLR. You know, 5% or whatever it is, and that's a big number. You know. And and none of that has any risk attached to it.

You just wanna know. And so that's one thing. The second thing, we saw it again this quarter, on some of the expenses is the operational cost to deal with Yep. The regulatory push that happened that we tried to talk the last set of administrators into you're going way too far and you've gone past the substance into form, you know, is is a cost that we're gonna see come out of the system and ought to be reinvested in helping our customers and clients grow.

And short follow-up the $1.2 trillion in cash in governments where would that be kind of in a more ideal world and the operating costs How much of that could potentially be saved even if you wanna give some estimate to the industry? Just order of magnitude.

Yep. I'm not sure it would be tremendously different, you know, by hundreds of billions of dollars, but I'd I'd say a few hundred billion of its pure size that we all added to meet meet a bunch of metrics that I'm not sure as important as people may think they are. You know, and and and and that's proved out. So think of that as our long-term debt posture being up higher, etcetera.

So you know, our job is to We got $2 trillion of positive, trillion dollars of loans. We need to extract the value of that deposit. You know, our our size ought to be more generated by that question. And less about, well, we want you to just add stuff because we're not sure that the you know, treasury that the market for repo of of asset-backed securities will be available at a time of stress or even treasuries.

And so, therefore, you have to hold more capital and more term funding against the those are the things I would change. So you'd probably see it most in the our long-term debt footprint coming down relative size. And and and and our sheer size coming down, I don't know, $150 billion maybe had a Alice should probably be a good guess if we've grown really just fluffed up the balance sheet to make metrics that not that important look good.

Alright. Thank you.

We'll move next to Erika Najarian with UBS. Your line is open. Thank you. Good morning.

Understanding that there's a lot of potential moving pieces in the regulatory agenda or the regulatory agenda, I did notice that at the end of the year, your GSIBs score would indicate that if you didn't take down your exposure this year, you would have a higher GCIB surcharge by January first 2027 from what I understand, all else being equal. You know, I'm just wondering, you know, Brian Alisdair, if your plans are to, reduce this exposure or the message is look, you know, our ROTC is 13.9% and improving. And so know, crossing is not going to be a big deal because of the PPNR and return power that we see going forward.

So I think that relates back to I think it was Glenn's question about the markets business. If I remember who asked it. You know, at the end of the day, you most of what drives that change is the markets business. There are other factors, obviously, Erica, but the big factors in market's business.

And if they're out there getting market share and getting the return on that, we'll keep we'll keep growing through that. That's in fact why we have gone up. Yeah. The chunk we've gone up.

Now go back to sort of Mike's point and frankly, I think, embedding your question. Think about the facts that the G SIP calculations at the time they were set think it was off at twelve data or something like that, 2012 data, The idea, and it's right, in the rules, was that they should be indexed so that our relative position, Bank of America, relative position, to industry and the economy you've bought a we ought to be able to grow. We've had a nominal economy growth of 30% in the last since the pandemic to now just sheer size growth of which there is no adjustment in the G SIP calculations for that.

It was in the statute. It hasn't been implemented. You've heard in some of the even discussion by the the Fed that they would index a lot of the one of the proposals was from sort of now forward, which then skips all the growth, our belief is it should be indexed you know, more fairly as designed in the statute because our relative size hasn't grown even though our balance sheet grown. To the the economy or to the industry.

So why are we more GSIP sized than we were before? So I think yep, that's the two sides of trade. Yes. We'd let if the market business can get the returns and grow and do it in a way that sticks to the ribs, Jim and the team will grow, and that will probably push our g SIP.

But back up and think about the reality of it. You know, you're now looking at Bank of America and our peers circa 2014 fifteen off of 2012 date, if I remember the exact date. And think about the sheer size of the US economy, probably you know, fifty, sixty percent bigger, and we have not indexed anything for this. And, therefore, we're shrinking our banking size relative to the economy for the same yep.

Without kind of the logic behind it, and that's what we've been pushing about. Got it.

And I'll follow-up offline. I just wanted to squeeze my second question in. Follow-up on the net interest income outlook for the fourth quarter. You helped us with the exit points on both balance sheet and net interest margin in the last call.

If I recall, you know, it was flat to fourth quarter levels in thousand twenty-four, and I think a two zero five two ten net interest margin. Are those points still you know, still valid in terms of what's underneath the the surface of that four q twenty-five exit NII. Know, obviously, the balance sheet is bigger because of market in the first quarter.

Yep. I think you've captured it, Erica. You're exactly right. That's we're comfortable with that.

Okay. Thank you.

We'll take our next question from Matt O'Connor with Deutsche Bank. Your line is open.

Good morning. I just want to follow-up on the concept of growing into the capital. Slide eight here, has a really good walk on the capital and the puts and takes. And I guess I wanna hone in on the RWA growth and and just think about that going forward.

Obviously, you know, there's some increase in 1Q from seasonal soft end markets. But maybe it won't be as much going forward, and the loan growth might pick up a little bit. What I'm getting at is it's not that clear to me that you're gonna use all the capital that you're generating and the excess from organic growth. And it does feel like the buybacks at some point will will be at a pretty robust pace.

So anyway, long story. One question just to summarize, like, talk about the capital consumption in a little more detail from organic growth the airplane buyback? Thanks.

Matt, think you sort of answered your own question in the question because you could see that $16 billion RWA increase in the quarter where market tends to be bigger just because the nature of it. Yeah. Yeah. So that's on $1.7 trillion, so less than a percent.

Growth in RWA. And, you know, the earnings growth through. So we will always always, always deploy capital into the businesses at whatever they need to grow the businesses with the right returns. That that's a given.

In fact, the efficiency of our RWA deployment is something we work at all the time, and that's why you can see know, the growth in size relative to RWA, and we think we have room to go on this. Is always less than the overall growth in the in the loans and deposits. And so yeah, we'll continue to work that efficiencies, but you've got exactly right. The capital goes to deploy to support the business.

Going at a much the the business's demands for that are much lower rates than the capital accumulation and then we turn around and say, what do we do with it? Well, you have a common dividend, obviously, and then the rest goes to to buybacks. And you saw us step that up this quarter, as Alastair said earlier, to $4.5 billion. This meaning the first quarter.

Okay. And then that's helpful. And then just separately, that all other fee line on a consolidated basis, was pretty close to breakeven versus normally a loss. Of some of your tax credits.

Is that just some lumpy items like loan sale gains or marks given some of the things that we saw in the marketplace this quarter or one too?

Yeah. No. You got that mostly right. The other income line this quarter as in every quarter, it's generally most impacted by what's going on with our tax credit activity and often it depends on the timing of the completion of really long-dated projects.

Could be solar, could be wind farms, could be housing. In any given quarter, there can be some timing there where we catch up in the later quarters. But in this particular quarter, in addition to that, we've got you know, the the leverage finance positions that we refer to. We'd written those down in prior quarters.

So when we sold them, this period for a gain, that accounts for a reasonable amount of the delta. And then the only other thing you just gotta remember is, you know, we had that legal settlement pretty long-dated one, got that cleaned up. Little bit of Visa b cleaned up this quarter. So there's some one-timers that offset that, but it's probably worth about three cents this quarter just to give you some idea.

Okay. Alright. Thank you. We'll take our next question from Betsy Gray

with Morgan Stanley. Your line is open.

Hi. Good morning. How are you doing?

Great. Thanks, Betsy. How are you?

Excellent. Great quarter. I did have two quick questions. One was on, Brian, earlier in the call we talked about how some of the commercial loan growth was being generated by the investments you've been making in particular one of the areas international.

I just wanted to with this tariff overhang that we have, going forward, do you think about that investment spend in the international markets? Do you step it up? Do you pull it back? Is it an opportunity?

Is it a threat or risk? Just wanted to understand that you know, angle from you. Thank you.

So I think a lot of that's to be played out. That's that we would continue to invest where we see the opportunities and where we see opportunity outside the United States is with the teams that we have that have been in these countries Japan for since the day after World War two ended, India for sixty-five plus years. Australia for sixty plus years, European countries for many years. You know, we're deeply embedded in those countries, and the idea was we basically are coming from pure multinational largest companies in those you know, national champions and taking around the world and taking companies from outside that particular country into those countries.

Yep. We will then we're now moving down a notch in size. You know, strong, you know, family-owned businesses in the production supply chains business, we understand. And I I don't think that'll change dramatically.

The product the goods and products start to be produced, and so we'll continue to work with we're watching our clients and helping them try to figure you know, what this all means to them in terms of supply chain alignment and things like that. So I I think it's yep. It may ebb and flow. But remember, when you then take the other side of where the investment is in United States, you know, that's where it's just a larger factor in terms of the overall commercial business, meaning small business.

We're the largest small business lender in the United States. By quite a bit. And those loans are growing. Signing them as small business, meaning FDIC loans under a million, which we both have in our consumer business and our business banking area.

And then middle market largest you know, one of the largest lenders in the United States and then large corporate. So we you know, because of a diversity of our company, we'll see yep, what might not be as possible in a place due to dynamics you're describing maybe more possible in in in a in a place like you know, Georgia. So we'll keep playing this out, but the the the goal was to have relationship manager investments on a relentless pace to keep adding yep, our team that's dedicated towards handling client relationships. And then, frankly, making more efficient by the use of machine learning, now AI, you know, to make them more and more efficient and also where to call, who to call on on the prospect list we we have.

And we're seeing that take hold, and that's where you're seeing these logos just build up and new client acquisition.

Okay. Thank you. And that was my second question on the small business side. Can you help us understand what you're seeing today from small business?

I know you've you are as you mentioned, the largest small business lender and you've had significant loan growth over the past several years in small business. Way ahead appears. And so you you're the closest to these folks in our world, and I would love to understand. How are they thinking about investing in this environment with the tariff overhang.

Thanks.

Betsy, they're they're just trying to figure it out. And so they see the policies along multi-agency regulations, the tariff policy, immigration policies, etcetera, and they look at all of it and say, in tax policy, And so they they're trying to figure out how it affects their business. In the end of the day, today, they're producing the goods and the goods are going out the stream and being sold, but they're trying to figure out how how that relates to it. And there's you know, the concerns, I think, that were interesting is for a while, it was inflation, obviously, coming through last year when that was discussion.

Then it, interestingly, flipped to labor again, which was a little bit unique in that they're trying to make sure they get the call qualified employees that need to operate. But if you look about it, they're basically sanguine on the current environment. But they're worried they're worried about how this will affect their businesses. And where they should invest.

And I think that's slowing down you know, some of their decision paths right now because they're trying to figure out if my goods and services will be I'd be able to pass to the price. You know, do I need to, you know, change my business plans in terms of growth? Should I buy that piece of equipment? That's why line usage has been relatively muted still and we continue to to try to grow it.

Now there's areas which in in our small business growth, which are yep, sort of recession resistant, which is like in health care. We do we have a big business lending to docs in and veterinarians and other people involved in practice. Those things tend to have less impact by the issues at the moment because of services, business, and things like that. So I think it depends on the business, depends on location, depends on whether in services or whether in goods.

But right now, if they look at the last quarter, just like we're gonna look at, looks pretty strong, then they're gonna sit there and say, read the papers and see all the things coming out and saying, should I slow down my decisioning? That, I think, is the worry is because once they talk themselves in slowing down, it'll be a while till they get restarted. Right now, you know, I think it's more thoughts and then worries, and they've gotta see this settle in. And when it settles in, then they know how to run their business.

But right now, it's very it's very unsettling for them.

Thank you.

We'll move next to Ken Houston with Autonomous Research. Your line is open.

Good morning. Thank you again for the interest income outlook slide, the waterfall. I wanted to ask on the fixed rate asset repricing bucket, could you help us understand how much is rolling off each quarter in the HTM securities and mortgage loan books and what you're getting from that? And then also as we get closer to that second half benefit on the cash flow hedges, what type of pickups are you imagining in terms of, like, new rate versus received rate versus what's rolling off?

Thank you.

So, Ken, on hold to maturity, if you look back over the last fourteen quarters, it's sort of been around $8 billion to $9 billion a quarter. It depends a little on the seasonality as we go through the year. So $8 billion this quarter, but maybe $9 billion next quarter and normally, when those are rolling off, we're picking up 200, 225 basis points just to give you some idea. So that's that bucket.

Around residential mortgages, let's say we're originating $5 billion a quarter. Typically, we're picking up couple hundred basis points, sometimes more on those. Just depends on prevailing market rates. So think about that being $5 billion at couple hundred basis points or more.

And then the cash flow swaps, we'll talk more about those as we go into the second half. But you can think about that as being something where we're probably picking up 150 basis points or so. It just depends depends on any given quarter. So we'll give you a little more guidance as we get closer.

Okay. Great. And then second question, you guys did another great job getting deposit cost down twenty basis points for the second straight quarter. As you contemplate this growth that you're seeing and continuing how do you think about, you know, just how much you can continue to reduce rates paid relative to, you know, how you're seeing just the you know, overall cost of funding. Thanks.

Yeah. So I don't think we'll have any change in our philosophy there. Felt like when it comes to the commercial and the wealth clients in particular, where they have interest-bearing balances, we just pass through the cuts. And then as it relates to the consumer book, we've got an awful lot of non-interest bearing there, obviously.

So really, you're focused there on the piece that's in the CDs and then the preferred deposits. And there again, we tend to pass that through as it comes through. So so it's trickier, obviously, in consumer where we're paying 61 basis points on $950 billion. But even there, just because we we still have some CDs outstanding and we still have some preferred.

We're able to take that down last quarter and look to do that again in the future.

And we'll take our last question from Gerard Cassidy with RBC. Your line is open.

Hi, Brian. Hi. How are you?

Hi there.

You guys did a very good job in giving us the details about what it looked like back in 2009 versus today on slide twenty-two. And if we move up to slide twenty-one, you can see the consumer loan portfolio has obviously been derisked as you pointed out. I'd like to ask a question about is the commercial loan portfolio particularly the growth. Can you guys share with us some of the confidence you have that we're not going to see some issues here you know, particularly you look at the dark blue non-US commercial has grown very, very strongly over this time period.

And what can you share with us about the risk in this portfolio relative to maybe 2009?

Yeah. So I'll start. Gerard. I'd say we felt like over time as we've become a more global and international company than maybe we were in 2007, it was important for us to diversify the loan book outside of just the US.

And it was appropriate because we've got to support clients who are multinationals in the United States operating around the world. And multinationals around the world who also operate and sell into the United States and other places. So that's natural, I think. We kinda supported that over time.

That's been a big part of our growth over a fifteen-year period. Now in terms of commercial, if you look at the loan growth overall, I'd say you know, we're we're we're we're pretty diversified in the way we look at that. So all lines of business grew last quarter. So that's small business banking, it's business banking, it's the commercial bank, XCree.

It's the Global Corporate Investment Bank. It's Global Markets. And its wealth. Terms of their commercial exposure.

So a little bit of it is diversification in all lines of business. And then if you looked at the the book itself, for the most part, as we talked about it secured, It's investment grade. We always think about good client selection as the sort of people who can make it through any and environment. That's where we're investing and partnering.

And we've had virtually no charge-offs. So then when you turn to, like, the the global markets business, that again, very diversified, all assets, all client types across things like asset banks and mortgage warehouse and credit financing and subscriptions. So we feel like this book is in very good shape. We feel like they're the right clients.

And then, you know, for our teams, it's just about driving the relationship deepening to make sure that we're seeing benefit, not loan portfolio, but in the other things we do across the platform.

Very good. Very insightful. Thank you. And then as a follow-up, Alastair, you guys mentioned that the credit card charge off ratio, you know, was a seasonally higher number at just over 4%.

And when we go back to the first quarter of twenty-four and twenty-three, obviously, the charge off levels were lower. Can you and especially with the unemployment rate remaining as low as it has over the last couple of years, is the higher level due to some of that FICO score inflation we've heard about during the pandemic? What are you guys, like, account for the number being where it is today versus the last couple of first quarters of, you know, each of those prior years? Considering that the unemployment rate, for example, has not gone up that much?

Yeah. I think I'd I'd flip it around the other way, Gerard. That that with all the stimulus and all the that, you know, after the pandemic, you the wage growth for inflation, the stimulus that came in just sheer cash, you saw these things drop to levels that we knew wouldn't wouldn't hold. Right?

Meaning charge off rates in the card went way down. And all you've seen now is it sort of normalized around where it wasn't and a very good credit period for our company. Yep. And then, you know, 2019 pre-pandemic type of era.

So, yep, that's just normalization. I I wouldn't over read that. It's comparative period. So if you look you know, relative to 2019, 2018, you'd seeBrian Moynihan: that those charge off rates run-in three and a half ish, you know, plus or minus percent or similar to we have now.

So we feel good about it. The, you know, important thing is you know, if you look at stressing that portfolio like we do you know, you could see that the you know, the losses are projected whether it's in the CCAR process or own internal stress test. You know, if you take it take it across nine quarters, it it doesn't come it's closer to, honestly, the charge off freight we actually underwrote to prior to the financial crisis. We underwrote to, like, a five and a half percent charge our freight in normal times, and then it would go up from there.

And so it's a much more core book driven at a very strong performance through crisis. So I I think I I just I think it's just normalizing more to where you know, where where it was in the in the relatively good credit times in 2019. Rather than any significant movement. In fact, we said that as we came through last year over and over again, people kept doubting it. What you've seen is delinquency actually have fallen and it's flattened out.

In terms of you have the billion dollar charge off of loan cards.

Got it. Thank you, Brian.

Okay. Well, thank you. I think that's all our questions. I just wanted to think about the three two or three things.

One, thanks to the team for another good quarter. Thank you, and thank you all for participating in our call. Number two, as I said earlier, the story of the first quarter is a strong operating performance. Good organic client activity, growth in revenue and earnings, manage expenses well, and at period of time, we continue to make investments to position the company for the future.

On the other hand, we gave you a lot of part of this presentation to show you our multifarious loan book and how that diversity of types of clients and collateral types and geographies and all that would hold us in good stead as not only by our own internal models, but also by the comparison of stress tests. In addition, we talked about how we're well reserved heading into whatever may be in front of us. So our job is to serve our clients in all times, and that's what we plan to do. Thank you.

This does conclude today's program. Thank you for your participation. You may disconnect at any time, and have a wonderful afternoon.