Q2 2025 Earnings Call Transcript

Good day, everyone, and welcome to today's Bank of America Second Quarter Earnings Call. Please note, today's call will be recorded, and I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to Lee McEntire. Please go ahead.

Thank you, Chloe. Good morning, everyone. Thank you for joining us to review the second 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'll make reference to during the call.

Brian Moynihan, our CEO, will make some opening comments before he turns the call over to Alastair Borthwick, our CFO, to discuss more of the details. 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 and the SEC filings available on the website.

Information about our non-GAAP financial measures, including reconciliations to U.S. GAAP can also be found in our earnings materials available on our website. With that, Brian, I'll turn the call over to you.

Good morning, and thank all of you for joining us for our second quarter 2025 earnings results. First, a couple of words on environment. We continue to see a solid consumer spending data, which you can see on our Page 21 on the deck. Improving credit quality that Alastair talked about from already strong statistics, plenty of household net worth growth and the market growth and also the cap balances, again, staying strong above where they were pre-pandemic. .

We see solid commercial loan growth and we see good credit quality with the exception of CRE and office, which we'll talk about. We also see our clients continue to see clarity with the changes in trade and tariffs and now with the Tax Bill passing, we can see them start to understand the future and expect them behave accordingly. We saw improving market conditions during the quarter, and that leads our worldwide leading research team to continue to predict no recession, a modestly growing economy about 1.5% at the end of the year and continued no Fed rate cuts till next year. So with that backdrop, we talk about our second quarter.

Key points on the second quarter as follows. We produced another solid quarter of revenue growth, earnings and returns. These earnings are -- second point is these earnings are driven by strong organic growth across all the businesses. The third is we continue to drive technology innovation, both on the product side that we offer our customers but also on the operational excellence side.

We're continuing to see the benefits of our long-term investment in technology capabilities, digitization, machine learning. And now we're starting to see at the beginning at the AI practices that we develop pay off, and we're looking forward to much more. On Slide 2, we start the earnings discussion. This morning, we reported revenue of $26.6 billion on an FTE basis, net income of $7.1 billion after tax, and earnings per share of $0.89 for the second quarter.

On a year-over-year basis, we grew revenue 4% and grew earnings per share 7%. We produced a return on assets of 83 basis points and return on tangible common equity of 13.4% in the second quarter. We produced $14.8 billion NII, a record for the company, growing 7% from the second quarter in 2024. This represents the fourth quarter of NII growth in line with the guidance we've been giving you. Supporting that average deposits have now grown for 8 consecutive quarters, and we have achieved this while maintaining very disciplined deposit pricing.

That's great work by our teams. Market-related revenue gained momentum throughout the quarter. We recorded our 13th consecutive quarter of year-over-year sales and trading growth, given the [ bar ] and the team continue to do a good job there. Revenue was up 15% over the prior year quarter.

We also produced more than $1.4 billion in firm-wide investment banking fees and the better quarterly results improved as each month of the quarter progressed. We reported expense below $17.2 billion this quarter, $600 million lower than the first quarter of 2025, in line with the expectations we gave you. We report our sixth consecutive quarter of net charge-offs at around the $1.5 billion level. This is a little bit of a tale of 2 cities.

Consumer net charge-offs were lower. Offsetting that, we had elevated commercial real estate office charge-offs. We resolved a number of credits in this quarter in the second quarter. When those credits closed in the third quarter, you'll see the reduction in NPLs related there, too.

The good news is that most of those second quarter charge-offs were previously reserved so it had a modest impact on the profitability for the quarter. We provided capital in support of our customers and clients to help them grow. For example, we delivered strong commercial loan growth, as you can see. We also provided more balance sheet to our institutional clients for their financing needs.

At the same time, we also increased the capital return to our shareholders. In the second quarter, we repurchased $5.3 billion in shares and paid $2 billion in dividends. In the first half of 2025, we have returned $13.7 billion in total capital, 40% higher than the first half of '24. Tangible book value per share continued to grow this quarter. Let's move our discussion to organic growth.

You can see that on Slide 3. We added new clients and deepened relationships with our existing clients. That was across all our businesses, Consumer Wealth, Commercial and our Markets business. Our teams are winning in the marketplace by putting the client first. For example, in Consumer Banking, we continue to grow primary checking accounts.

We grew average consumer deposits for a third consecutive quarter. Balances were up year-over-year for the first time since 2022, putting the effects of the pandemic surges behind us. This quarter, we grew across the milestone of 5 million net new checking accounts over the last 6 years. We saw increases in the average consumer checking account balance of our clients for 2 consecutive quarters, and now the average balance per account is over $9,200, and 92% of the primary checking account in the household.

On the investment side, our clients carry an average funded balance of more than $130,000, strong when compared to the industry. Our home and auto originations grew on a year-over-year basis this quarter. We continue to be a leading supplier of credit to small businesses, helping the core segment economy grow. Loans were once again up year-over-year, and reflecting the commitment to add more bankers in the markets that we serve across the United States.

In Wealth and Investment Management, client balances reached $4.4 trillion. We saw strong AUM flows and loan demand as well as market appreciation. Our advisers continue to deliver comprehensive banking solutions to help our clients achieve their goals. In our Global Banking business, client activity remains solid.

Commercial clients are actively using their credit facilities, albeit at still a lower level than they used them as a percentage prior to pandemic. And our risk management approach remains very disciplined. We added more than 1,000 net new clients, most of them driven by our payments capabilities. Global markets continued to perform well with a record second quarter level of sales and trading revenue.

Institutional clients [indiscernible] funding of their warehouse of loans and other needs at an increased pace for high-quality collateral. Organic growth means that we're also investing in our own capabilities, our people and our technology, to serve our clients more effectively. Those investments have led to continued expansion in digitalization and engagement across all our lines of business. Nearly 80% of our consumer households are now fully digitally engaged, and they benefit from our award-winning platforms.

Just to give you a sense of the volumes. In the second quarter alone, 4 billion logins were made by our consumer. In the second quarter, 65% of our consumer product sales were digital. You can see all these trends in our disclosures on Slides 24, 26 and 28 in the appendix.

I commend you to review them to see how the technology application can be scaled and applied across the businesses. We also continue to invest in our teammates and are moving more money into the AI side and machine learning side. And as we think about the quarters ahead and the operating leverage you're turning in the company due to the NII growth, it's key to note we have fully absorbed the cost of the last several years of inflation and wages of -- inflation and wages and other third-party provided services. 15 years ago, to make an understanding of how much an impact technology had 15 years ago, the company had a head count of 300,000. Today, we have 212,000. We did that with a relentless application of scalable, secure, resilient technologies.

Customer behavior also changed the matched digitization, simplification of products, machine learning and models and process improvements to help us get there. Now we have a chance to capture the value that with the new enhanced capabilities of AI and machine learning. Artificial intelligence allows us to change the work across many more areas of our company effectively than prior tools allowed us. We have deep scaling experience in AI capabilities with Erica, our AI assistant, is the most recognized aspect of that.

As you can see on Slide 4, we think about the way we apply artificial intelligence and augmented intelligence in 4 different pillars. AI agents search and summarization, content generation, importantly coding and automated processes. First off, as an example, is our virtual system, Erica. This is a model we introduced back in 2018 and developed prior to that.

It was the first true banking industry virtual agent. It averages over 58 million interactions per month today, helping to make it easier for clients to bank, how they want and where they want. We also leveraged Erica capabilities for use of our commercial clients in CashPro as well as with our employees in Erica For employees. To give you a sense, 90% of our more than 210,000 teammates have now utilized Erica for Employees to complete such tests as password updates, equipment refreshes, et cetera.

In wealth management and our other relationship management banking businesses, AI is helping those relationship managers and advisers search and summarize information, preparing them to deliver personalized planning and personalize pitches to clients for their business and help with their advice. Copilot help them organize the prospecting process, and all this is implemented and going through the system. In our operations group, AI tools to help improve our process around customer satisfaction. One chat-based AI product works between markets and operations allows us to have [ 750 ] people engage with AI agents to allow them reconciled trades, which has saved many FTE already.

In addition, as you can see, we have 17,000 programmers using AI coding technology today, saving 10% to 15% in cogeneration costs, and we expect that to continue to rise. Overall, we have 1,400 AI patents and have created over 250 AI and machine learning models in the company. We're currently working through many dozens or AI proof of concepts beyond what I just spoke about. These investments are intended to help both improve the client experience and our own productivity.

So if you think about the quarter before I turn it over to Alastair, just a few points. We saw good organic client activity. We enjoyed good growth in revenue and earnings per share. We continue to invest in that growth, and are beginning to see the impacts of AI, again, aiding our efficiency.

We manage risk well, that drove healthy returns, and we kept delivering more capital back to you as our shareholders.

It was a little lower than last quarter, driven by $180 million of discrete items. And excluding those $180 million of discrete items and the tax credits related to investments in renewable energy and affordable housing, the effective tax rate would have been much closer to a normal corporate tax rate at approximately 24%. So with that, I'll stop there. Thank you, everyone.

And with that, we'll open up for Q&A. Please, Chloe.

[Operator Instructions] We'll take our first question from John McDonald with Truist Securities.

I wanted to ask about retail deposit progress. There's been a lot of talk about different ways to measure retail deposit share. And I know you may take issue with some of the methodologies out there. But Brian, taking a step back, how do you look at and measure the team's progress in growing retail deposit share?

And what's your report card and how you've done and what your ambitions are on that front?

Well, at the end of the day, if you look at the Consumer business with $950 billion in deposits operating very efficiently, the cost of deposits, meaning all the cost over the deposits run in under 146 basis points, the total rate paid 58 basis points, 58% of the balances are in checking accounts. It's a tremendous business, and we'll only get more and more profitable as NII kicks in because they're the biggest beneficiary of that. So if you think about it in terms of deposit growth, we look pre-pandemic now, our team has gone from $700 billion odd numbers to $950 billion. We've grown our deposits as a company faster than the industry grew from the pre-pandemic to now at 39% versus the industry like 37% and large banks 32%.

And obviously, we contributed to that large bank growth rate. So we feel very good about it. The key is they've grown checking accounts for 5 years now. They've grown retail deposits, which were influenced a lot because of our mass market customer base being such a big amount by the pandemic stimulus that has all gone through the system, and you're seeing the retail, the consumer deposits growth 3 quarters in a row now.

And the key is that the average checking account balance is at 9,200, that went into pandemic, about 6,000 or 7,000. So you're seeing that growth. So we feel good about that. Overall, our average deposit size per branch is $500 million versus the next best at $400 million, and the one behind that at $300 million. So I don't know all these methodologies.

You guys can look at them. It's a lot of collaborate, a lot of debate. But at the end of the day is we're growing deposits faster in the industry and 92% of core checking -- of the checking accounts, consumer satisfaction is the highest it's ever been.

Okay, Brian. Alastair, I wanted to follow up on your expense commentary. Can you elaborate on the outlook for the second half? I think your prior outlook implied some improvement in the second half. And I think you just said you may or may not see that depending on the strength of the Markets business?

Well, I think what we're trying to say is it always starts with us with head count discipline. So the head count has been pretty flattish. We've managed that pretty well all the way through the year. We don't see any change in that.

So then the only variable that's left really is going to be around revenue related. Now we've seen pretty good growth, obviously, in sales and trading, up 15% year-over-year. We've seen pretty good growth in AUM fees, up 10%. So I anticipate that any expense growth would be revenue related and that we should be pretty flattish.

Maybe we benefit in Q4 from seasonally slower activity.

We'll take our next question from Ken Usdin with Autonomous Research.

Alastair, thanks for the update on that trajectory for the second half of the year. I'm just wondering, as we move a step forward, if you can kind of just make sure we're still tracking right on the split between the loan securities and swap repricing and whether that step-up in that bucket is linear in the third and fourth? Or kind of just builds up as we get towards the end of the year?

I think I would use linear. I think that's probably the easiest way to think about it. We said to everyone that we thought that the second half had a little bit more in the way of fixed rate asset repricing and cash flow swap repricing in the first half of the year. That accounts for the growth being larger in the second half of the year, but it's not different between Q3 and Q4. So it ought to be about the same.

Okay. And then just on the -- I think we know that the securities and mortgage loans, but can you kind of just dig in a little bit on the cash flow hedges and what you're seeing in that? Are you still moving forward with the same strategy, the off and on and how much you're picking up on those?

Yes. So there's no change there at all. That's exactly what we're doing. Just as the old ones roll off with lower coupons, we're replacing them with new ones with higher coupons. No new news there.

So still in that plus 150 or so range that you said last quarter?

That will be true for some of the cash flow swaps this particular quarter, and it will change from quarter-to-quarter. So our NII bridge that you can see takes that into account. And when we update that quarter after quarter, we'll just share that with you at the time.

We'll move next to Matt O'Connor with Deutsche Bank.

I just want to follow up on the expenses. I guess if you kind of flatlined or flat to just down a little bit, that will put you up, call it, 3.5% or so on a full year basis. And I think the prior guide was up 2% to 3% or the high end of 2% to 3%. Can you just kind of circle back to the cost versus what you were thinking previously?

And maybe talk about some of the regulatory costs that I think are keeping a little bit higher.

Matt, so I think if you look year-over-year, just to give you a simple thing about the expense growth from second quarter last year, second quarter this year, [ 400 ] million of it was basically incentives in the Wealth Management business plus the -- what we call BC&E that cost of the market-based transaction activity, largely market space. So that's kind of revenue-related growth, which we all cheer for growth there because that means the bottom line has grown. If you flip that around, then the rest of the stuff grew at a really relatively modest growth rate. So on the -- if you think about it going forward, out of the orders on AML that were public and stuff, we obviously put a 1,000 to 2,000 people to work to clean up a lot of stuff.

That's now tipping over. So we feel good about that as we move into the second half of the year. And then frankly, the overall inflation rate and expenses are starting to flatten out, even though you hear a lot of talk about the inflation rate outside in general. But at the end of the day, we've got stability in terms of headcount, in terms of third-party rents and all that stuff is sort of flattening out.

So we feel good about that. And then the idea is then just to bring the head count down. So if you think about it over the last 15 years or so, we have from 300,000 people to 212,000 people. We just got to keep working that down.

We'd been able to maintain flat head count across the last 4, 5 years as we've invested heavily in the front end of the business. And you expect us now with these -- some of these new techniques, frankly, make progress a little bit more faster. So we feel good about the expense trajectory, but the key is you're not going to change some of the related stuff and you wouldn't want to. On the other stuff, you control the head count.

Okay. So it does seem like the costs are coming a little bit higher, but I appreciate the kind of higher fees. I guess, as we think about like more sustainable expense growth, like I know there's no official guidance for next year, but just kind of talk about, do you get back into that kind of just a couple of percent growth or how should we think about it?

That's an outsized sort of market growth or market-related activity growth way above what a normal absorption rate would be. If we have a model we can run the place on a couple of hundred basis points net of expense growth, which is inflationary cost of 3%, 4%, and then offsetting it by a lot of activity. As the NII kicks in, each quarter, we see it growing and then growing at a little faster rate, frankly, as Alastair talked about, that's the operating leverage kicking back in. So we had 5 years operating leverage disrupted by the pandemic up back in, and then the rates fall off, hurt us, obviously, from NII, as that now hit a record level this quarter and is going to grow off of that record level, you'll see the operating leverage overall kick back in.

And the size of that revenue stream in all the businesses is huge. And the company is obviously huge, and that all pretty much follows the bottom line.

We'll move next to Gerard Cassidy with RBC.

Brian, Alastair, you guys have had real success in having the digital adoption in your lines of businesses, and you pointed that out in the appendix slides that you referenced. What -- do you think you could ever get the efficiency ratio back down to the pre-pandemic levels of just under 60%? Or has the business changed so much since the pandemic that over time, 59%, let's call it, may be tough to achieve, not near term but over time?

So Gerard, one of the things that we talked about, I think there's a couple of hundred basis points of efficiency ratio difference due to the way the accounting treatment works for the tax incentive clean energy deals, not the housing because it won't change, but -- and so those are now changed and the statute in the room off. But if you look at '19 and now, 200 basis points of the efficiency ratio is just because we have another income loss, which hurts revenue, it's made up in the tax line. So the bottom line effect is still positive for the company. So that's 200 basis points difference because back then, we ran about $300 million a quarter of tax benefit -- negative other income due to the tax exempt deals.

Now we're running at $900. million. And so you'll see that close out, frankly, as these deals sunset. Then on top of that, the NII kicking in just because of the nature of it, and you'll see the consumer business get very, very efficient like it was back then, just because its NII piece basically all follows the bottom line. So we feel very good about that. So yes, we will move back down in low 60s, and then potentially crack through it with, obviously, just the NII lift in the operating leverage lift.

But secondly, quite frankly, the tax credit deals will start to run off just due to the change of statute.

Great, Brian. And then as a follow-up, just a broader question for you. Obviously, there's been a lot of talk about stable coins. Can you give us your view of where you see the adoption of stable coins going forward? And what that might have in terms of impact on payments revenues or deposit trends for Bank of America and possibly in the industry?

Yes. So focusing on stable coins as a transactional device, if it's a new payment rail and we have trillions of dollars we move for our clients every day, we believe that if they want to use stable coins to move part of that money, they'll move. So consider them having an account and they can send up money in U.S. dollars. They can also initiate transaction, have it go into euros, and it could have to go into stable coins and then transact on that system. So we feel both the industry and ourselves will have responses. We've done a lot of work.

We're still trying to figure out how big or small it is because of some of the places, there are not big amounts of money movement. So you'd expect us all to move, you expect our company to move on that. At the end of the day, the debate will be how big an item this will be and how much more an effective payment stream it is. And there's places like small balance transfers across border that you can see the case.

You can see it with -- you have sort of smart contracts and money movement. You can see it in digital native apps, in-app payments and stuff. But we'll be there just like we were there when we move from checks to Zelle. And you can see that when the industry puts its mind to it, if you were talking to me 6 or 7, maybe 10 years, you'd say this thing called Venmo is coming on and you guys can be left behind, and here we are.

Our Zelle payments exceed the most total volumes today and the industries are multiples. It's just because we can move money efficiently and we have to be aware of the attack on the payment system and we'll be there to defend it.

And just quickly, Brian, do you think there'll be a consortium like Zelle on stable coins where the industry defends itself and moves forward? Or will the banks go individually?

I think it will be all of the above. I think in the commercial side, there might be applications more individually, but in the broader -- you need networks to make this all work. And we will partner with some of the stable coins, we already have partnerships with some of them. And so it will be a complex array and hopefully not complex to the customer, frankly.

We'll move next to Mike Mayo with Wells Fargo Securities.

I feel like you served up a good meal here. I mean the main course, we don't lose sight of [ 2 trained ] dollars of deposits where you pay 1.76%, and that's certainly down quarter-over-quarter, year-over-year. The side dishes certainly look good with the NII going to escape velocity, I guess, from [ $14.8 billion, ] you said to [ $15.5 billion to $15.7 billion ] by the end of the year. But I'm still left hungry.

I guess I did my dessert or something. I'm just wondering why even with all that improved performance, the NII guide isn't even higher given the pace of loan growth. You certainly see the expectations, as Alastair said. Every segment of commercial lending is doing well.

You seem very optimistic about that. You're also asset sensitive, and there's less rate cuts. So I guess I'm whining for some dessert, some extra, I'm left hungry. Why not more?

Well, Mike, you got a future as a chef. Look, I think if you go to the NII bridge on Page 11 for a minute, we put this out at the beginning of the year. There's a lot can happen in a year. And I don't think any of us anticipated all the various things that have happened in the course of the past 6 months.

What's not on here, for example, is you think about international rates. They've been cut pretty significantly. That's a headwind that we don't include here. So you're absolutely right.

There are some things that we've been really happy with in terms of loan growth. There are some other places which have maybe grown a little less quickly. So I'd love -- I'd still love to see the consumer noninterest-bearing growing just a little faster. We've got some good growth, but we'd love to see a little bit more there.

But I think the balance of all of these various inputs, it all still hangs together 6 months later. We've removed a lot of risk from the equation, I think. And now we just have to see what happens with rates in the second half of this year. And then we just got to keep driving the same organic growth that we've been driving.

When we do that, NII growth for the year, 6% to 7%, hopefully, a record leaves you satisfied at the end of the year, but we'll be working on next year's course in the second half.

All right. So when I go from my next meal next year or the year after, any foreshadowing of what you're preliminarily thinking about for next year?

Well, the only thing I'll say -- I mean we'll talk more about next year when we get into the Q4 discussion 3 months from now. But I think what we're talking about, which is the organic growth Brian just talked about, driving the deposits in the loans, that should continue. The fixed rate asset repricing, we're going to continue to benefit from again next year. So we're trying to make sure that we're replicating and sustaining results over a long period of time.

We'll move next to Steven Alexopoulos from TD Cowen.

I wanted to start the conversation first. I love this AI Slide 4. I might frame it actually. But to start the conversation there, as we've spoken to the banks, there seems to be a fairly wide range of how banks are thinking about AI. Some are using it really to boost productivity, Others are more fully embracing it to leverage digital workers.

You seem to be in the second camp. I don't know if you guys saw at the JPM Investor Day where Marianne like put that slide up, looking at head count coming down about 10% or so in the consumer bank over the next 5 years. Wherever that number ends up being, how should we think about your company as you leverage these tools? Should we think about you as leading, fast follower to whatever JPMorgan does?

I'd love to hear you unpack this for us.

Well, let me just walk up the conference, Steven. But let's just step back and think about the application technology, 15 years ago, we had 100,000 people in our Consumer Business. Today, we have 53,000. The deposits, I think, at the time, we say [ 400 billion ], now they're [ 900 ] plus. The numbers of checking accounts are up 50%, transaction volume through the roof et cetera, et cetera.

And so all that is enabled by application technology on scale, with control and resiliency. And so when you're now doing 2 billion digital interactions, you have to be up all the time, and we have invested probably $2 billion in what we call never down [ hot-hot ] back up so that those systems can run all time. So you don't have to -- we have to debate the future. We don't -- you just look at what we've done.

We're down half the people in this business and it's bigger and more complex and more widespread, et cetera. So that's one. As we look forward, you take something like Erica, and it was developed when none of us knew what a large language or small language model was. It is built -- it's operating in what I described earlier is it now those 20 million consumers use it every quarter actively. They use it 60 million times a month.

This is not -- again, and every one of those would have been a phone call and stuff. So as we bring it out to a wider use case, wider things it can do and train it on, as we bring it across various parts of the company, commercial business with CashPro, Erica for Employees, et cetera, you're seeing these models that are -- the data is carefully crafted. So it works. They get the right decision, they can train them, and we're using it in more places. So we just see that going and going and going. Now meanwhile, in that consumer number, we have twice as many relationship bankers as we did at the start.

So we reinvest part of that savings to drive that checking growth on a consistent basis for 5 years. And if you start to think about 5 million net checking accounts with $9,000 of our balances and start to do some math, you start to think that we've grown a good sized bank incrementally over the last 4 or 5 years. So it enables you to do that. Well, the cost structure went down $1 billion a quarter in consumer over the time frame.

So that's what happens. They take something like this [ Optimus ] model, which is model that we've built with others, third-party models that we've fine-tuned and the ability for fixed income traders, which is relatively bespoke still. We have one common equity. We have 300 [ CUSIPs ] for fixed income to give you an example just as our company to allow them to reconcile trades all using bots and agents between operation itself instead of e-mails and shared drives and everything going up, it's pretty powerful.

And we're just starting that 750 people. This is 90 days old for implementation, and we'll see the benefits of that 5 people so far, 10 people, you'll start to see more people. And we'll just stop adding -- stop replacing head count attrition in these areas or reapply that head count somewhere else. So we think there's a lot to go here.

And now I think -- we got to be careful. It's got to be done right. The decisions we make are meaningful to people's lives, so it can't be made in a way that's not correct, meaning it comes up with the wrong decision. The customers [indiscernible], I mean their confidence will come and go if you don't handle them right.

So we have to be very careful. And that's why it's not a fast follower or a leader, it's can you apply it at scale. That's the question. And if you could apply it at scale, then you can get the benefit.

If you can't apply it at scale, meaning it isn't always up and operating, then you have problems, and that's what we're driving at. So you'll figure out in 5 years whether we are the leader or not the leader. We got the patents we showed you, we got the model. And the question is, are you actually getting the benefits and the scale we have and we will, and we expect to continue, and yet we're still in the early stages.

Okay. That's great color. For my follow-up, just going back to your response, Brian to Gerard's question on digital assets. As I study BofA, I think you were the first bank out there with a mobile app. You're the first one out there with Erica, right, the digital agent.

But it seems like the way you're thinking about stable coins is your -- it's a little wait and see, right? JPM has a tokenized deposit. Citi has a tokenized deposit. I haven't seen any announcement from you, guys.

You don't have a large cross-border business right now relative to others. So you could be the disruptor in this new ecosystem, same way you were with mobile, same way you were with digital agent. Are you just skeptical at what this could mean long term? Like why not lean in with this breakthrough technology the same way you have with these others?

Well, you're forgetting that a lot of -- if you're going to go to customer-facing activity in this area, we had to make sure we had legal clarity. And so that's still going on as we speak and to be able to apply. Look, the business cases for it, its incremental value are still to be proven, frankly. And so that's -- so on Bitcoin or as you know, on Blockchain, we have lots of patents.

We've used it in the trade area and stuff, and a lot of information has got to move and money and things like that. But we still -- at the end of the day, remember, we'll move $3 trillion or $4 trillion today and all of it will be digital or 99% of it. So other than the cash out of the ATM and the checks written by consumers, which are going down 8%, 10% year-over-year, and half the checks written that they were 4 or 5 years ago. Everything else in our company is mostly digital.

And so what's the improved process. And then there's real time, and that's also connected. So we're trying to figure that out. It's not cautious or not.

It's just what is the client demand. And when we start to see it, we have built the capabilities. We are understanding what we do and then we can roll it out.

We'll take our next question from Erika Najarian with UBS.

I wanted to just refocus the conversation and just ask, Brian, with the deregulatory momentum that seems to be taking place. How do you feel about when is the appropriate time to address that 130 basis point buffer? So granted the stress test has been quite volatile in the SCB results. But clearly, there's perform to address that.

I'm wondering if 130 basis points would still be an appropriate buffer and what you need to see to rethink that buffer?

So we believe an appropriate buffer is 50 basis points plus or minus -- yes, 50 basis points, and that's what we are running down to, pushing down before. We always want that to be utilized, for lack of a better word, by the core businesses because that's what we're here for. So we pay our dividends. We're basically using all the incremental capital to refer to shares and then letting the business use up the excess capital to grow.

And at the high point, I think we were 12%. Now we're down to 11.5%. So they're using it up. What we just did is increase the amount of which we have.

So we expect them to use that and expect us to move down to 50 basis points. Now remember we got this debate between averaging and not averaging. We'll see it happen. The SLR is really not relevant for us because frankly, other ratios would catch us before the SLR.

The G-SIB calibration is critically important because people forgetting that, that has to happen because we're effectively using 2010, '11 or '12 data on the size of the economy and our company and other companies relative to size to judge how systemically important -- it was meant to be indexed. It hasn't been -- the proposals was indexed a year ago or so from then on, that wasn't really right because it skips all the run-up in size of the pandemic. So you have to see more of this come together. Expect us to work that capital down one way or the other way.

But we're always trying to grow the company. And that's what that extra capital there is to grow the company loans, deposits -- loans, more interactions, more transactions, the balance sheet market has grown, and they've done a good job returning on it. So that's what we keep doing. So back up 50 basis points is the target buffers.

We just got a change in the last few weeks. The change is still being debated about the implementation timing. We got to get the G-SIB thing figured out because if they don't index it, we'll have an increase coming at us in another year or so. And all this, we're working on.

But at the end of the day is we just returned all the capital we earned back to the shareholders, and we'll continue to do that and more if the business can't use it to grow.

Got it. And just my follow-up question here, Brian, is are there businesses that you're prioritizing in terms of redeploying that capital to that perhaps where the profitability looks better under this regime? And the $5.3 billion of stock that you bought back this quarter, would that be indicative of your appetite for the rest of the year?

I think the answer on the size of buyback is absolutely because we just did it. So obviously, think of our appetite. Every business has an opportunity for growth. Some will have more RWA intensity.

Some will have less. If you notice, see RWAs in the industry have grown and ours have grown pretty rapidly. We need to -- all need to fine-tune that. That's part due to the models and stuff that are being pushed around behind the scenes.

So hopefully, we get more rational discussion about. But every business has the opportunity to grow. And so the most discrete decision we made was to put -- with Jim DeMare and team is to give them more capital and capacity to grow, and they've used that wisely. But if you look across our businesses, that's the lowest return on allocated capital.

So we have to be careful to get the returns. We have to make sure that the wealth management business and the consumer business, which have very high returns on capital, are also growing. So everybody can grow. If they need the capital, they'll take it down.

And we -- there's no -- the issue is always how much expense you can deploy to grow more than it is how much capital you can deploy.

We'll move next to Betsy Graseck with Morgan Stanley.

Two questions. One to follow up on what you were just talking about. I was wondering, with relation to markets RWA. I thought in the past, there had been kind of ceiling on that, that now has gone.

As long as they get the returns, and that's the key because we got the dynamics of their return on allocated capital. We got the dynamics there, their impact on net interest income. So Jim and the team have got to get the returns and return on assets has to be -- move towards 100 basis points and beyond. So there's no theoretical ceiling.

It's just the dynamics of how far they can go before they do it. We went from a $600 billion or $700 billion balance sheet to base good trillion, and that will ebb and flow based on clients' activity. The G-SIB buffer calculation. We're not worried about that.

We've gone from basically [ 2 50 to 3, ] and it will move up -- we wouldn't worry about that because as they're deploying, they're actually getting enough return, and it's absorbing the impact to the rest of the company. That's the other thing you always have to be careful of, is if markets can cause the G-SIB trigger and everybody pays for it. And so we make sure that they can actually get the return. It justifies not only what goes into their business, but what the whole company experiences.

And that's why the calibration is critical. We got to get -- these things all work together and the calibration of G-SIB is critical. And the reality is, is that you've had a basically a 20% growth in the capital requirement. So no major change in risk for most of us across the last 3 or 4 years, just by methodologies of G-SIB creep and RWA calculations behind the scenes where they're pushing us on the models and stuff like that.

But Betsy, we're not aware of any RWA ceiling. And the Global Markets business, as you've seen, it's just growing as the company grows, and we've just continued to invest there.

Okay. Great. And then follow-up question is just on the question on the -- question is on how you are approaching your wind and solar investments with the tax plan that is going through? How are you thinking about that business? And how should we be anticipating how that will roll through your P&L?

Yes. So I read your report, I think it was pretty good in terms of laying out what the issues are. What we're anticipating is there's going to be a period here where our clients are still going to want to install wind and solar. So we're obviously going to support that. Now they have to get them into production and they have to get it all -- they have to get construction started by a couple of different dates.

But you can think about it as between now and 2027, that's when you're going to see all of these things begin to slow and then stop. We happen to have, number one, an installed base of production tax credits. So that will stay with us. But those will begin to burn down over the course of the next 8 years.

That's the way I would think about that. And then the low income housing tax credits aren't impacted. So we anticipate we'll continue to be involved with those. So I would say, we're likely to be involved in deals for the next couple of years.

And then you'll start to see the portfolio come down in the course of 2028, all the way through 2033. And just burn down gradually over time, Betsy.

And then the housing. Does the housing investments increased to offset that wind and solar paid?

That's largely a question of the size of that market. So if that market sort of grows with GDP, it may not increase in terms of the size that we do as a company because we're just supporting the clients that we're working with. But if it were to grow significantly, then it could take some of that gap. But I'm not sure that will happen.

I think the housing has been a relatively constant number where the clean energy, the wind and solar, in particular, is going to be intertemporal now because of the stuff that goes on and the effects downstream, et cetera, like that. The housing is pretty consistent. It's just a question how, as Alastair said, how big the demand can be and how competitive market other people go for, too. So I would expect that to come close to absorbing.

We'll move next to Chris McGratty with KBW.

Brian, you talked a lot about this responsible growth and the credit has been tremendous over the years. In terms of the journey on the growth portion, I'm interested in your assessment of where you are versus where you desire to be? And then maybe secondarily, a little bit more comments or color on the loan growth in the quarter and the conversations that you're having with borrowers, their degree of confidence.

And we're seeing every consumer category I think grew a little bit this quarter, and we can probably push a little harder in some areas there, and the team works on that. But you got to be careful of the volatility of consumer credit when we still have unemployment predicted to go up in most of the surveys we look at. So we're being careful there, too.

Great. And then secondarily, some of your peers have talked about the willingness to look externally for uses of capital. I may have missed this in your earlier remarks. But is there any, aside from funding the balance sheet and some of your growth initiatives, is there anything within the franchise that you would be looking to perhaps allocate more capital externally?

Yes. I mean well, I think if you're talking about acquisitions in the deposit side, that's not available to us. But in technology space, we bought some companies over the last several years, but they're going to be relatively small uses. We bought one in the medical payments area, then we can bring it to our scale and work it through. And so there's possibilities in that area.

But really, it's organic growth is the reality because at the end of the day, our huge deposit share for 30 years plus, we've not been allowed to buy another depository institution. So that game is done, how we got to do its organic expansion, and that's what we did in all the markets, and we're continuing that push. The expansion markets we call them, and we're seeing success there, and we'll continue that push. But that's more of a deployment of resources.

We take them out of places and push them. So we're down overall branches year-over-year. You can see that. But the branches in these new markets have grown. So it's more of an expense redeployment question and human being redeployment questions, we get the efficiencies, then it is a capital deployment question, frankly.

We'll move next to Jim Mitchell with Seaport Global.

Alastair, I know you don't want to give a hard target for NII for next year. I appreciate that. But with the high jumping off point and then you have a little more puts and takes the most, I guess. You have potential headwinds from the [indiscernible] accretion rolling off. You got rate cuts embedded in the forward curve. But loan growth and deposit growth are picking up, cash flow hedges are rolling off, asset repricing.

How does that all -- in your mind, how does it all fit together next year? Can you grow off that 4Q jumping off point in your mind? Or just any thoughts would be great. And the answer is yes?

Yes. Look, the answer to that is yes, because the company is built, as Brian said, for organic growth. So as we continue to add clients, as we do more with the existing client base, that's when you see the loan growth and the deposit growth coming through. So there's always headwinds in any given year, but our mentality will be, when we come off of Q4, how do we grow NII sequentially each quarter from there. And we're going to benefit again from that fixed rate asset repricing again next year.

So that acts as a tailwind. The first quarter is just a little bit different because of day count. But in general, I think you should think about NII. At least our expectation is we're just going to keep growing it quarter after quarter.

Okay. That's great. And just maybe just -- you had highlighted that balance sheet mix has changed a little bit, and you're focused more on NII growth than NIM. I know you had historically or previously talked about a [ 220 to 230 ] longer-term target. Is that different now? Or how do you think about that longer-term target?

No, it's not different. I just think any given quarter can be interesting. And this quarter was interesting because, number one, we had really high volumes in active markets. So in a period like that, Global Markets clients are asking us for balance sheet, we're going to provide that, assuming it's well priced, and we felt like it was.

So we saw the Global Markets business take on more in the way of earning assets that's sometimes NIY dilutive, but it can still be NII slightly positive. So you got a little bit of that going on. And then in commercial this quarter, we just took on some -- I mentioned this in the speech, but we took on a couple of very large commercial deposits at the end of the quarter. And those are NIY dilutive but slightly NII positive.

So I think in the grand scheme, this was just an interesting quarter where the NIY came in slightly differently, but the long term remains exactly the same. We're going to drive it back to that [ 220 to 230 ] with every available opportunity.

It does appear that there are no further questions at this time. I would now like to turn it back to Brian for any additional or closing remarks.

So thank you again for spending time with us this morning. I leave you where we started. We saw, again, client activity across the board. We're now seeing the second half benefits kick in, and we'll expect to get to kick in and NII pushing operating leverage back in the business.

That will continue to be solid revenue growth and earnings per share as we look forward. And as we talked about and showed you some examples, we're now seeing the augmented intelligence, artificial intelligence capacity starting to build in the company, which will add to our efficiency efforts going forward. Thank you for your time, and we look forward to talking next time.

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