The operator introduces the Bank of America earnings announcement and explains the procedures for asking questions. Lee McIntyre, the CEO of Bank of America, then gives some opening comments and reminds listeners of the risks and uncertainties involved in forward-looking statements. He then turns the call over to Brian Moynihan, who begins by thanking everyone for joining and starts discussing the first quarter results.

In the first quarter, we reported strong results with net income of $6.7 billion and EPS of $0.76, which was lowered by $0.07 due to an additional expense accrual for the FDIC. Excluding this expense, net income was $7.2 billion and EPS was $0.83. Our fee-based business showed improvement, driven by organic growth and market conditions. Investment banking saw a 35% increase in fees, and our middle market investment banking teams have expanded significantly. Our investment and brokerage services revenue grew 11% year-over-year, and sales and trading had its eighth consecutive quarter of year-over-year revenue improvement.

Bank of America has invested heavily in building their talent and under the leadership of Jimmy DeMare, they have seen good momentum and market share improvement. Despite expecting modest loan growth and a decline in deposits, they actually saw growth in deposits of over $20 billion. This, along with their pricing discipline, led to better than expected NII performance. The company also managed expenses well, with adjusted expenses only increasing by 2% year-over-year compared to the 4% inflation rate. This was achieved through their focus on operational excellence and managing headcount.

The company's headcount decreased by 4,700 people in the first quarter of 2024, driven by digitization activity and resulting in cost savings and improved market share. The company also has a strong capital position, allowing them to support clients and return $4.4 billion to shareholders. The company's organic growth has been successful, with a focus on enhancing digital platforms and providing convenient and secure banking experiences for customers. In the consumer business, 245,000 net new checking accounts were added, contributing to strong performance in consumer deposits and driving the overall performance of the consumer franchise.

The majority of the bank's deposit balances have been with them for over 10 years and 92% of their customer checking accounts are primary accounts. Opening a new checking or savings account leads to an increase in balances and deepens relationships. The global wealth team has added 7,300 new relationships and $60 billion in total flows in the past year. The bank now manages over $5.6 trillion in client balances and has added more new relationships in the first quarter compared to last year.

The company has increased the number of solutions per relationship with existing clients and has seen good growth in customers using both physical and online capabilities. They have also reached a milestone with their virtual banking assistant, Erica, and have extended its reach to their global treasury services business. Zelle transactions have surpassed the number of checks written and cash withdrawals, showing rapid adoption and cost savings for customers. The company's digital banking progress is included in quarterly activity and demonstrates their market-leading efforts and controlled expense growth.

The company's solid earnings results for the quarter are attributed to the hard work and talent of its employees. The return on assets and tangible common equity were strong, and the efficiency ratio was 64% when adjusted for the FDIC assessment. The company's total assets increased by $94 billion, with growth in deposits and a decline in cash levels. Liquidity remains strong and shareholder equity increased by $1.9 billion.

In the first quarter, the company paid out dividends and bought back shares, aligning the interests of employees with shareholders. Their CET-1 level and ratio remained stable and above requirements. Risk-weighted assets increased slightly due to client activity. Loans and deposits remained flat or showed modest growth, with loan spreads widening. Deposits were up 35% compared to pre-pandemic levels.

In the first quarter, all lines of business at the company saw significant growth, with consumer up 32% and checking up 38%. Total average deposits remained steady at over $1.9 trillion, with a low rate paid due to a mix of low rate and high quality transactional accounts. Wealth management and global banking also saw a slowdown in rate increases and rotation out of non-interest bearing accounts. Ending deposits grew by $23 billion, exceeding loan growth for the third straight quarter. The company's excess of deposits over loans has expanded to $897 billion, nearly double pre-pandemic levels. The company's portfolio is mostly made up of cash, available-for-sale securities, and held-to-maturity securities, with a shift towards longer-term AFS securities.

The hold-to-maturity book has decreased by $96 billion and consists mainly of treasuries and mortgage-backed securities. The blended cash and securities yield has increased by 360 basis points, providing a benefit to NII. NII for the first quarter was $14.2 billion, which was higher than expected due to good deposit growth and higher yielding assets. For the second quarter, NII is expected to approach $14 billion, with a potential decline in wealth management deposits and global markets NII. The back half of 2024 is expected to see growth in NII.

The assumptions for the first quarter include expected interest rates and low single-digit loan growth. The bank remains balanced in terms of asset sensitivity. Expenses for the quarter were $17.2 billion, but adjusted for the FDIC assessment, they were $16.5 billion. The increase in expenses was due to seasonal payroll tax and higher revenue-related costs. The bank expects a decline in expenses in the second quarter.

The company expects to offset cost increases through digital engagement and operational initiatives. Provision expense was $1.3 billion in the first quarter and included reserve release due to improved economic outlook. Net charge-offs increased due to credit card seasoning and commercial real estate losses. The company remains within their risk appetite and expects to see consumer net charge-offs level out in the next quarter. Commercial net charge-offs increased due to office exposures and sales activity.

The final resolution for the quarter resulted in seven losses from expected resolutions in the next 90 days, with the rest being a result of refreshed valuations. The company uses a thorough analysis to quickly recognize impacts in the commercial real estate office space and has taken appropriate reserves and charge-offs. One-third of their office exposure is now categorized as reservable criticized, but the pace of increase has slowed. The company expects losses to decrease in the second quarter and the second half of the year. The consumer banking division earned $2.7 billion on strong organic growth, but reported earnings declined due to lower deposit balances and increased provision expense for credit card losses.

In the first quarter, customer activity for the company showed strong growth in net new checking accounts, card openings, and investment balances. Loans also grew, particularly in credit cards and small business. Despite inflation and other expenses, the company was able to keep expenses flat, thanks to the efforts of the consumer team. Digital adoption and customer satisfaction also improved. In wealth management, the company saw good results, with record revenue and net income. The business also generated positive operating leverage and improved the pre-tax margin. While overall average loans were down, custom lending and ending loans in the wealth management custom loan book saw strong growth.

The paragraph discusses the organic growth and good asset flows of both Merrill and the private bank, as well as their strong digital momentum. The global banking results show a decline in earnings due to lower net interest income and higher provision expenses, but the diversification of revenue across products and regions remains strong. The global treasury services business and investment banking fees had a strong quarter. The increase in provision expense is attributed to commercial real estate net charge-offs and a larger reserve release in the prior year period.

The company's expenses increased by 2% compared to the previous year, with a 35% increase in investment banking fees. The global markets team had a strong quarter with $1.8 billion in earnings and a 7% growth year-over-year. Excluding DVA, revenue improved by 6% and the return on average allocated capital was 16%. Sales and trading ex-DVA also had a positive performance, with a 2% increase in revenue, the highest first quarter result in over a decade. The decline in FICC revenues was offset by better mortgage trading results, while equities saw a 15% increase. The company's effective tax rate for the quarter was 8%, but would have been 9% if excluding the FDIC assessment and other discrete items. The effective tax rate would have been 26% if also excluding tax credits related to investments in renewable energy and affordable housing.

During a Q&A session, Steven Chubak asked Brian Moynihan about the bank's capital management plans and when they will return to a 100%-plus payout. Moynihan stated that they will maintain a cushion of 50-100 basis points above the requirements and any excess capital will be used to grow the company or returned to shareholders. He also mentioned that they are waiting for clarity on the finalization of new rules, but expect to continue returning capital at a strong rate. In terms of NII, Alastair stated that they are assuming modest deposit growth in the back half of the year, despite a $500 billion increase in deposits since COVID. He also mentioned the potential impact of QT-driven outflows on NII.

In the paragraph, Alastair Borthwick discusses the impact of QT on deposits and the potential for consumer stabilization in Q2. He also mentions the growth rates in different areas of the business and their impact on NII. The paragraph also mentions the efficiency of the company, specifically highlighting the success of the Erica interactions.

The speaker discusses the efficiency ratio for the company and how it has improved due to the increase in Zelle transactions. However, they are still not satisfied with the current ratio of 64% and hope to see it decrease further as NII declines and revenue growth comes from the wealth management business. They also mention that the rate paid has flattened out and the yield of assets is growing, leading to a positive outlook for the future.

The bank is focused on deploying expenses and driving down the efficiency ratio. They expect expense growth to trend down over the course of the year, with an additional $100 million per quarter if the current environment continues. The deposit mix is expected to stabilize in the back half of the year, with potential pressure on rate-seeking behavior due to higher rates for longer. The bank is planning for a mix shift from non-interest bearing to interest-bearing deposits.

In Slide 7, Brian Moynihan explains the mix of non-interest bearing and interest-bearing fees in global banking, noting that the rate of change has slowed and stabilized in recent quarters. He expects stability in deposit structure and growth in checking balances. John McDonald asks if most people have already moved on from rate-seeking behavior.

Brian Moynihan discusses the changes in consumer deposit balances since the start of the pandemic, noting that while overall balances are higher, those with higher balances have decreased due to moving their money into the market. This has stabilized overall, but there may be fluctuations in the future. Alastair Borthwick then addresses the positive inflection of the core NIM (net interest margin) and discusses potential factors that could contribute to its sustainability, such as fixed asset re-pricing and upcoming loans and swaps.

In the paragraph, the speaker discusses the net interest yield and how it benefited from NII growth in the current quarter. They mention that the denominator was inflated last year, but going forward, they expect NII improvement in Q3 and Q4 to drop into the net interest yield. This is due to factors such as loans re-pricing and reinvesting securities at higher rates. The team has also been working on re-pricing the balance sheet for loans. The questioner then asks about the NII trajectory for the second half of the year, and the speaker responds by saying it will be an improvement from the first half and that NII was down 3% year-on-year in Q1.

Betsy Graseck asks if the stable pace seen in Q1 will continue throughout the year or if it will reduce in the second half of 2024. Brian Moynihan welcomes her back and Alastair Borthwick responds, stating that they still expect Q2 to be the low point and anticipate growth in Q3 and Q4. He also mentions that the stability in pricing rotation and deposits should result in an extra couple hundred million in Q2, Q3, and Q4. Betsy also asks about the AOCI and Alastair explains that it didn't fluctuate much due to the composition of the securities book and the shift towards treasuries, reducing risk as the long end of the curve increases.

The speaker is discussing the concern of rising interest rates and how it may affect their company. They mention their strategy of hedging fixed rate securities and swapping treasuries to minimize the impact on their portfolio. They also discuss their excess deposits which allow them to put their funds to work in a favorable position. The speaker mentions that they will continue to use the same strategy as they have in the past.

The speaker discusses the balance between cash, securities, and deposits in relation to the current interest rate environment. They mention that they have a good balance of short and long term investments that should perform well regardless of rate changes. They also mention that loans and securities are re-pricing, providing some resilience. The speaker is asked about low loan growth and if there are any indicators for improvement in the near future. They respond that the economy is in a transition period and behavior is changing due to the pandemic recovery and settling rates.

The speaker discusses the current state of credit card and loan growth, attributing the slow growth to higher rates and changing borrowing patterns. They anticipate that loan growth will eventually catch up to the strong economy, but for now, the focus is on stabilizing line usage and fighting for loan growth. The overall sentiment is that people are feeling fine, but not as aggressive as economic statistics may suggest.

The speaker, Alastair Borthwick, responds to a question about net interest income and the impact of a "higher for longer" interest rate environment on the bank's performance. He explains that higher rates are generally beneficial for banks, but it depends on the reason for the increase and the state of the economy. He also mentions that the bank has a balanced sensitivity to interest rate changes.

In the past few years, the corridor of plus-100, minus-100 has become narrower as the company aims to increase NII and benefit shareholders. The IB fee line had a strong quarter, but it is uncertain if DCM was pulled forward. The company has been successful in taking market share and expects to continue growing their IB line.

The speaker believes that the company will continue to gain market share and that the current level of performance is sustainable. They expect to see growth in the middle market and international sectors. The combination of corporate and investment banking has been strong. In terms of wealth management, there is currently a high level of cash held by clients, but this could change depending on market conditions. The company is seeing a lot of cash on the sidelines and expects to see continued asset under management flows. There is currently a lot of cash in the investment area, which could support future growth. The speaker is struck by the amount of cash currently held by clients.

Gerard Cassidy from RBC asks Alastair and Brian about the significant increase in deposits shown in Slide 8. Brian explains that after the financial crisis, they had a lot of loans that were no longer considered core and were therefore run off. In 2015, they started driving responsible growth and were able to overcome this issue, leading to an increase in loans. This growth was driven by discipline and a focus on areas such as credit quality and the card, home equity, and auto loan businesses. The commercial side also saw improvements in credit quality.

The source of growth for the company has been their international loans and core checking accounts. The team has focused on customer satisfaction and organic growth, resulting in a significant increase in net new accounts and customer retention. This has led to a higher balance retention per account and overall growth in the deposit franchise.

The speaker discusses the growth of wealth management, driven by Merrill, which has increased to $300 billion despite the pandemic. They also mention the success of the GTS business and the growth of deposits over loans. The speaker is confident in the CET-1 ratios and mentions the uncertainty around the final proposal for Basel III ending.

In this paragraph, Brian Moynihan, the CEO of Bank of America, discusses the bank's capital reserves and how they are more than enough to meet the proposed changes to the Basel III rules. He also mentions that the bank's primary interest is using the capital to support their businesses, particularly the markets business, which had a strong first quarter. If loan growth remains limited, the excess capital will likely be used for buybacks.

The speaker discusses the current state of capital and expenses at Bank of America, mentioning changes in regulations and the effect of the pandemic. They also mention their focus on technology investments and the performance of their various business sectors. The team is praised for their work and the call is concluded.

This summary was generated with AI and may contain some inaccuracies.