The Bank of America Earnings Announcement call begins with an introduction from the operator, followed by opening comments from CEO Brian Moynihan and CFO Alastair Borthwick. The call may include forward-looking statements and non-GAAP financial measures, which can be found in the earnings materials on the bank's website. Moynihan also addresses the recent political events and wishes former President Trump a speedy recovery.

The second quarter results for Bank of America Corporation were successful, with a focus on diversity and responsible growth. Net income was split evenly between consumer and institutional businesses, with a 6% increase in fees and strong performances in asset management, investment banking, and sales and trading. This growth was driven by a focus on customers and a diverse operating model.

In the past quarter, we have seen significant growth in our consumer checking accounts, wealth management relationships, and commercial business clients. Our focus on personalized financial solutions and digital capabilities has attracted new customers and strengthened customer loyalty. Our digital banking app has over 47 million active users and digital sales accounted for 53% of total sales in the past quarter. Additionally, 23 million consumers are now using Zelle.

Zelle has become a dominant way for customers to move money, with more transactions taking place than customer ATM transactions, cash withdrawals, and tellers combined. In the wealth management business, more banking accounts are being opened to complement investment business, and clients are recognizing the ease of digital banking. The company continues to make core strategic investments in their businesses, including opening new financial centers and investing in their advisor development program. They are also adding teams of experienced advisors and regional bankers to better serve their commercial and corporate clients.

In the global markets business, the company is extending balance sheet and investing in technology initiatives, particularly in artificial intelligence. They are seeing organic growth and are leveraging their nationwide franchise to gain market share. The company also focuses on efficiency and operational excellence to manage expenses and achieve operating leverage.

The increase in expenses for the year is largely due to the growth of the wealth management business and the formulaic incentives that come with it. However, the company's strong capital position allows them to deliver for all stakeholders. With a CET1 ratio of 11.9%, they are well above the regulatory requirements. The second quarter is typically a heavy outflow quarter, but average deposits still grew 2% year-over-year. Deposit rates have slowed across all businesses except for wealth management, but the company expects them to stabilize and decrease in the future.

The speaker discusses the stabilization of consumer net charge-offs and delinquency trends in the credit card sector. They also mention the strong payment rates and deposit investment balances of customers with cards, indicating their continued financial health. In terms of commercial real estate, the company has seen a decrease in reservable criticized loans, non-performing loans, and net charge-offs, leading to an expectation of lower net charge-offs in the second-half of 2024 compared to the first-half.

Bank of America's second quarter performance demonstrates their ability to generate strong and sustainable growth through customer-centric strategies, innovation, and responsible risk management. They ended the quarter with strong returns and a stable balance sheet, with modest loan growth and an increase in global markets client activity. Deposits declined due to seasonal customer payments, but liquidity remained strong. Shareholders' equity and tangible book value per share also improved compared to the same quarter last year.

In the second quarter, our regulatory capital improved and our CET1 ratio remained stable at 11.9%, well above our current and future requirements. Our risk-weighted assets increased slightly due to lending activity, but our supplemental leverage ratio and TLAC remained comfortably above requirements. Average loans increased by 1%, driven by credit card and modest commercial growth. Loan spreads also widened. Excess deposits above loans remain high at $850 billion, with 52% in short-dated cash and available for sale securities.

The company's hold-to-maturity book is decreasing and they are reinvesting in higher-yielding assets. The blended yield of cash and securities has improved and is now 160 basis points above the deposit rate. The company's NII has been impacted by three interest rate cuts and their balance sheet is split between fixed-rate and variable-rate assets. $10 billion of cash is coming off the securities portfolio each quarter, resulting in a 300 basis point improvement when reinvested. Another $10 billion is coming off loans, with a slightly smaller yield improvement. This is expected to add $300 million to the company's quarterly NII by the fourth quarter.

The company hedges against down moves in rates by using cash flow swaps and expects to see a benefit of $200 million in Q4 of 2024 and a smaller benefit in Q1 of 2025. They also have received fixed cash flow hedges with a weighted average life of two years and a fixed rate of 250 basis points, which will begin to roll off in the second half of 2025 and be replaced at higher market rates. The company does not expect much movement in their liability sensitive global markets NII activity and predicts low-single-digit growth in loans and deposits with a slowing of rate paid movement through the end of 2024.

The combined impact of various factors is expected to have the most variability in terms of expense. This quarter's expenses were lower compared to the previous quarter, but higher compared to the same quarter last year due to increased incentives for improved fee revenue. The headcount decreased, but is expected to increase in the third quarter with the addition of college graduates. There were no significant changes in asset quality metrics, but there was a slight increase in provision expense due to a smaller reserve release. Net charge offs were also relatively unchanged.

In summary, the employment rate is expected to reach 5% by the end of 2025, with a net charge off ratio of 59 basis points. Consumer net charge-offs increased slightly, but 90-day-plus delinquencies decreased. Commercial net charge-offs remained flat, with lower losses in office and higher losses in other commercial loans. Consumer banking reported a decline in earnings, but saw strong organic growth in customer activity and investment balances. Loans also grew, particularly in credit card and small business. Expenses remained flat due to a balance of business investments and efforts to improve processes and increase digital transactions.

The company's digital adoption and engagement have improved, leading to high customer satisfaction. The wealth management division saw good results and strong growth in assets under management, driven by a comprehensive suite of investment and advisory services. Net income and revenue increased, with a strong growth in fee revenue. The business also saw good organic growth and strong returns on capital. The Global Banking division's earnings were down due to lower net interest income and higher provision expense.

In the second quarter, the company's revenue declined by 6% due to interest rates and deposit rotation. However, their Global Banking franchise remained strong with diversified revenue across products and regions. The GTS business saw offsetting fees for managing clients' cash, while investment banking had a strong quarter with a 29% increase in fees. Provision expense increased due to commercial real estate net charge-offs, and expenses overall increased by 3% due to continued investment in the business. In Global Markets, the team had a successful quarter with good revenue growth, operating leverage, and a solid return on capital. Excluding DVA, revenue improved by 10% compared to the second quarter of 2023. Sales and trading also saw improvement, with FICC down 1% and equities up 20% compared to the same quarter last year. FICC revenues remained strong, but were slightly lower due to weaker macro trading in FX and rates, offset by better performance in commodities and mortgage trading.

The equities division had a strong quarter due to trading results in derivatives and cash equities. Expenses were up 4% due to continued investment in the business. The "all other" category showed a loss of $0.3 billion, which was similar to the previous year. The effective tax rate for the quarter was 9%, but would have been 25% if certain items were excluded. The audio on the call was briefly interrupted, but it was discussed that net interest income in Q2 was driven by higher funding costs and the rotation of deposits seeking higher yield alternatives. However, it is expected to begin rising in Q3 and Q4, with a range of expectations provided and an estimated NII of $14.5 billion in Q4.

The speaker begins by mentioning an extra day of net interest income in Q3, providing $125 million. They also assume interest rate cuts in September, November, and December, which will impact quarterly net interest income. The discussion then moves to fixed asset repricing. The speaker then takes a question from Glenn Schorr about NII expectations, but declines to give guidance for 2025.

The speaker is reiterating their belief that Q2 will be the lowest point for the company, and they expect growth in Q3 and Q4. They mention that fixed-rate asset pricing will persist for some time, and 2024 will be a foundational year for growth. The speaker is then asked about the split between brokerage and advisory accounts in the wealth business and how they handle rate paid on cash. The speaker responds by saying that with the recent changes in the economy, their focus is on growing their deposit base faster than the economy.

The speaker discusses the impact of pricing changes on the wealth management business and deposit levels. They also mention the potential impact of rate cuts on NII and the difficulty of predicting NII for future years.

The speaker discusses the challenges of providing guidance for 2025 due to uncertainty about future rate cuts and the impact of various factors on the bank's performance. They mention that they will update investors on their assumptions and the impact of organic growth on loan and deposit growth. The speaker also touches on the recent changes in the rate structure and fiscal stimulus and the potential for growth to accelerate with rate cuts. They mention that deposit growth has bottomed and they are aiming for mid-single-digit growth in the future.

Alastair Borthwick discusses the growth and performance of the company, mentioning that they have had four consecutive quarters of growth and are confident in their deposit growth. He also mentions that loan spreads have improved due to the need to meet shareholder expectations, primarily in the commercial sector. He expects this trend to continue, but acknowledges the competitive environment. Borthwick then discusses various upcoming events, such as rate cuts and repricing of assets and loans, as well as the maturity of swaps in November.

The speaker asks about the bank's low net interest margin and if they are under-earning. They also ask what a normal NIM and return on tangible common equity would be. The speaker also asks about the bank's plans to increase their NIM and mentions their global markets business. The speaker also asks for clarification on the bank's expected net charge offs in the second half of the year.

The speaker discusses the plateauing of delinquencies and how it will impact the second-half charge off rate. They expect the rate to be around 3.80%, which is normal for the company. The speaker also mentions that commercial charge offs are expected to improve in the second-half. The next question is about optimizing higher cost funding and the potential for paying down higher cost securities. The speaker confirms that they can pay down these securities and have shorter dated debt that can be replaced or not.

The company has reduced its long-term debt and has various ways to use the reinvestment, such as paying down liabilities. They expect to make significant progress in building up their NIM through 2025. In the second half of 2025, there will be incremental benefits from swap roll-offs. The impact of the swap book on slide 10 is mainly from the BSBY piece, not cash flow swaps.

The company's cash flow swaps will not be affected by LIBOR cessation in the next 12 months, and the older, longer-dated swaps will transition to the BSBY number in the second half of 2025. The yellow box on slide 10 represents an estimate of the company's net interest income for the next two quarters, which is influenced by loan and deposit growth, rotation between non-interest bearing and interest-bearing accounts, and pricing changes. The company is aiming for the higher end of the range, but it ultimately depends on their assumptions and actions.

In this paragraph, Erika Najarian of UBS asks a question about the net interest income trajectory and the disclosure provided by the company. Alastair Borthwick explains that the asset sensitivity disclosed is static and based on the future curve, so it may not accurately predict 2025 NII. He also mentions that there are other factors that will impact the NII over time. The notional of the cash flow hedges is around $150 billion, with about $10 billion rolling off every quarter in the second half of 2025.

In the next 12 months, the impact of current coupons on the company's earnings will be minimal. However, in the second half of 2025, as lower rated coupons are rolled off, there will be some benefit. The normalized net interest margin for Q3 and Q4 is expected to be higher than the current level, but this does not necessarily mean the balance sheet will shrink. The company plans to use balance sheet efficiency to fund growth and potentially pay off higher rate, shorter-dated assets. This will keep the denominator down while the numerator continues to grow.

Alastair Borthwick explains that the $180 billion pay-fixed swaps on the AFS book are used to make treasuries look like cash equivalents and avoid regulatory capital flow. They manage this by using the excess of $850 billion in deposits to put it in loans, cash, or available for sale, with a preference for loans. There are no changes to their philosophy around available for sale, and they will continue to pay down hold to maturity.

The speaker discusses the expenses of the company and how they have remained relatively flat, with some growth due to fee increases. Headcount has also remained stable and the company is managing expenses well, with a focus on positive operating leverage.

The company experienced a slight decrease in performance due to the pandemic, but they expect to return to their previous track once things stabilize. They have excess deposits and will adjust their deposit strategies according to customer needs and market conditions. As rates decrease, they anticipate a decrease in pricing for certain types of deposits, while others will remain unchanged.

The company's deposit base is growing rapidly due to the increase in transactional primary checking accounts and maturing relationships. The company's deposit pricing will not fall to zero. The company is currently asset-sensitive, but could become more neutral or liability-sensitive if there is a significant decrease in interest rates. This could be achieved through increasing interest-bearing accounts or buying short-dated fixed-rate investments. Over time, the company has become less rate-sensitive.

Brian Moynihan discusses how the bank has narrowed the potential outcomes for interest rates and how this is abnormal compared to the past 15 years. He also mentions that a higher rate environment would allow for better management and potentially decrease sensitivity. In addition, he explains that the increase in home equity loan balances may be due to customers taking advantage of low rates and using their home equity.

The speaker discusses the decline in non-interest-bearing deposits over the past four or five years, noting that while the balances have stabilized, they are not growing. They also mention that mortgage and home equity line production has been solid. The decline in non-interest-bearing deposits has slowed, which is expected due to the seasonality of tax payments.

The speaker, Alastair Borthwick, responds to a question about Visa B derivative gains and clarifies that it will not have an impact on revenue. Another speaker, Brian Moynihan, discusses their approach to targeted capital levels and their use of excess capital to grow the business and maintain a 50 basis point management buffer. He also mentions their recent actions of buying back stocks and paying out dividends.

The speaker discusses the volatility of the market and how it can be absorbed and adjusted to. They mention the new rule and how it will affect earnings, but they feel confident that they can support the growth they are seeking. They also mention the possibility of adjusting their target in the near future, but they need to see how things play out in the industry first. They thank everyone for joining the call.

Alistair answered questions about the bank's performance, and Lee will continue to explain the key factors driving the franchise's value. Deposit and loan growth have been stable, and the bank's strong fee performance and expense control are expected to generate earnings and excess capital for shareholders. The conference call has now ended.

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