Bank of America’s (BAC) Q3 2017

Brian Moynihan – Chairman and Chief Executive Officer

Moderate economic growth projected

“We expect moderate economic growth to continue this year and we expect the US to grow a little faster next year above 2% and outside of US is growing in the mid-3s.”

Consumers are spending

“in our consumer payments we are seeing consumer activity pickup. Consumers are spending, whether it is checks written, cash taken out of the ATM’s, P2P payments, and all the debit and credit cards, 5% more through the first nine months of 2017 than they did in the first nine months of 2016. That’s up faster growth rate than it has been in prior years.”

Optimism persists

“Our commercial clients continue to perform well. They continue to remain optimistic. They continue to look forward to continue implementation of a pro-growth agenda, particularly focused on meaningful tax reform. Housing starts home prices continue to remain on positive trends. Employment is strong and employers continue to search for skilled workers. So that leads to a solid atmosphere and we see no near-term indications of any change to it.”

Paul Donofrio – Chief Financial Officer

A rate hike would be beneficial

“If we get a late 4Q hike, as expected by the market, this should mostly benefit NII in Q1 2018. With respect to asset sensitivity as of 930 [ph] an instantaneous 100 basis point parallel increase in rates is estimated to increase NII by 3.2 billion over the subsequent 12 months. This is largely unchanged from June 30 and continues to be predominantly driven by our sensitivity to short-end rates.”

Bank of America 3Q17 Earnings Call Notes

Brian Moynihan

Credit quality improvement is years in the making

That’s a multi-year discipline. This is not something that happened this quarter. This is – multi-years of changing the underwriting standards and sticking to it and not varying those standards as we move through time. 

Bank of America 2Q17 Earnings Call Notes

Paul Donofrio

Changed disclosure to headcount from FTE

“Please note that we have changed our disclosure on employees from FTE to headcount this quarter. By the way, that was the same idea from one of our associates. FTE is much more complicated to calculate and less relevant today given our shift from part time associates, as you can see the headcount is down more than 4,000 from Q2 2016.”

Consumer and investor are very bullish on America

“I think Marty across all the years since the crisis there has been ebbs and flows in customers’ views about where they want to invest and the cash portion of our balances has come up and down. But I think the consumer and the investor are very bullish on America and they continue investing in consumers through their spending and activity and investors on a personal side through their investments and you’ve seen those investments in equities and risk products continue to rise almost without fail. And then when there’s real market disruption concern you see a pullback a little bit, but basically without fail has been a steady investment and that’s why we’ve had assets under management levels of record levels at this point.”

Feel good about loan growth pipelines

“We feel good about long growth unless the economy changes significantly we wouldn’t expect much change from the past quarters. We did see a little bit of dissemination this quarter in commercial that could slow growth in the future. But having said that, we haven’t changed our medium term outlook on our ability to grow loans, we expect total long growth for the company to be a low single digit. And we expect to grow mid-single digits in our lines of business. That obviously excludes the headwind from loans and all other mortgage one-off and now U.K. card is gone.”

Bank of America at Morgan Stanley Conference

Tom Montag – Chief Operating Officer

More uncertainty in the world than there’s been in a long time

“I was thinking about the world and how there is more uncertainty in the world than there’s been in a long, long time in a lot of ways. If you think about the Middle East situation which is a completely new situation and the problems there, obviously the soft Brexit, hard Brexit and what’s going to happen there. We have our issues here. We have North Korea, which is kind gone the back burner for a while, but still firing missiles, and of course you have the Brazil situation coming back again and you have the Russia situation, there is just so much uncertainty, even highlighted maybe yesterday by the treasury paper coming out which leads to more uncertainty as to whether those things will or will not be — will not come to fruition on what we’re doing. So I think for economic growth there is just so much uncertainty in the tax rules here. What’s going to happen there? I think people are just waiting. And so although the consumer seems to be growing at a relatively good pace, the corporate side just seems to be in that uncertain phase where they want more certainty in the world before they make the next decisions.”

Getting harder to differentiate between spending on business and spending on tech

“we’re trying to use some of the mobile expertise that we’ve developed in the consumer side, now into institutional side. So we hope to be able to have a good mobile offering. Remember, we can’t trade on the mobile, but the way we get information to people to our traders to our sales people to our clients, using some of the expertise we’ve developed in mobile. Hopefully on the institutional side we will be able to do that, but I don’t think [indiscernible], I think — the thing is the technology spend and business spend is getting closer and closer together, not farther and farther apart. It’s hard to differentiate between, well, are you investing in a new branch or is it the technology in the branch? Are you investing in — with clients, or you investing in a trading system, or is it in a mobile platform. It’s almost — well, you say tech dollars, but the tech dollars basically is the business in a lot of these places.”

Bank of America’s (BAC) Q1 2017

Brian Moynihan -CEO 

On lending

“On lending activity, we’ve been in a lot of discussion regarding a slowdown and our core middle market business representing the broad base of American companies, our business loans grew 7% year-over-year and our smaller business segments business banking and small business were up 3% and small business had the best production quarter in its history.”

Banks reflect the economy

“I think at the end of day, banks reflect the economy and help make the economy happen. So, we’ve been able to grow loans 5%, 6% in the core, so the middle market segment, 7% actually year-over-year. Credit card’s been picking up a little bit, home equity’s strong and residential mortgage down. So, if you look at it overall, we’ve been able to outgrow the economy, but we’re going to be dependent upon, the economy keep growing,”


Paul Donofrio – CFO

Increased assets

“Overall, end-of-period assets increased $60 billion from Q4. The growth was fairly evenly split between two elements. First, we saw higher trading-related assets in global markets business with incremental customer activity following a seasonal slowdown at the end of Q4; secondly, we had higher cash levels, driven by seasonal deposit growth, primarily from tax refunds.”

They expect NII to continue to improve

“Based on our models and assumptions, we believe NII should continue to improve, but the improvement is expected to be much more modest than Q4 to Q1 driven by a number of factors…As of 3/31, an instantaneous 100 basis-point parallel increase in rates is estimated to increase NII by $3.3 billion over the subsequent 12 months, which is consistent with our position at year-end.”

Average deposits up

“Average deposits continued their strong growth, up $57 billion or 10% year-over-year, outpacing the industry. Importantly, 50% of these deposits are checking accounts, and we estimate that 89% of these checking accounts are the primary accounts of households. This means these are operational accounts used to pay mortgages and car payments and other bills. So, outflows chasing rates is less likely in our view.”

…while mortgage production is down

“…the sudden rise in long-term rates in late 2016 caused a noticeable decline mortgage production from Q1. While mortgage originations was down, we continue to hold more of our loans on the balance sheet.”


Bank of America 4Q16 Earnings Call Notes

Bank of America’s (BAC) CEO Brian Moynihan on Q4 2016 Results

Optimism is palpable

“This quarter, investors have a lot – asked a lot of questions that they usually asked, but importantly, questions about the incoming new Presidential administration. Their questions have ranged from corporate tax reform and what do we think about that, regulatory changes, economic growth and the impacts of these things and interest rate changes. The optimism for positive change here at Bank of America and among our customers is palpable and has driven bank stock prices higher. We will have to see how these topics play out, but that we are optimistic and we will continue – but in the interim, we will continue to operate the company by controlling and driving what we can. We are going to drive responsible growth.”

Got approval to return $4b in the first half

“Yes. John, so this morning and as part of our release, we announced that we got approval for de minimis of $1.8 billion, that’s the $2.5 billion we have for the first half of this year to bring the repurchased volume for – to $4.3 billion for the first half year. So we applied to that obviously in December and got the approval and our Board has approved it.”

Deposit growth strong driven by consumer

“Well, Marty, we – so let’s start. We saw a $50-odd billion of deposit growth year-over-year. Consumer business was the lion’s share of that. To give you a sense, fourth quarter ‘15 to fourth quarter ‘16, checking balance in the consumer business grew 12%, so the growth is strong. And as you said, we expect to maintain pricing discipline in the company, not – obviously, those are non-interest bearing, but on the interest bearing side. So – and you have seen that so far as the first couple of – the first rate happened last year. In terms of deployment economy, we made $20 billion more loans, And we will continue to drive the economy and we can will invest in mortgage backed securities and things like that, so we are able to fund easily all the loan demand that we think is responsible to take on. ”

Did see some acceleration in consumer spending coming into the fall

“What I’d reflect on is that as you came from – through the summer into the fall through the election, you saw both on the consumer side and commercial side, you saw increasing optimism. On the consumer side, you saw a bit of an acceleration in spending coming into the fall. And so just if you think about the middle-market business, as I said earlier, the revolver utilization is on the high end of where it’s been the past several years at 40% plus in a – that group, which is our middle-market business, a commercial real estate business, etcetera, at about $4 billion with loans in quarter four, so all that really relates to greater business confidence. And so I think we feel very good where businesses stand and if you get the same reports in the small business side, so they are very – as I go out and visit these clients, they are very optimistic.”

Paul Donofrio

Mobile banking now represents 19% of all deposit transactions

“I won’t go through all the details on this slide, but mobile devices now represent 19% of all deposit transactions and represent the volume of more than 880 financial centers. Sales on digital devices continued to grow and now represent 20% of total sales. ”

We need to return capital to shareholders in order to push our ROE higher

“We need to get our capital down. We are returning more capital to shareholders. That’s going to help. We need to continue to grow. So we feel really good about the progress that we have made. Our return on assets metric is tracking in the right direction. Our return on tangible common equity metrics is tracking in the right direction. So we will just have to wait and see. I think we would get there even without a rate rise eventually, but certainly rate rise is going to help.”

Bank of America (BAC) Q3 Earnings Call

Bank of America (BAC) CEO Brian Moynihan said the company is continuing to use technology to lower its expense base

“We reported earnings of $5 billion or $0.41 per diluted share and EPS improvement of 8% from the year ago quarter. We improved operating leverage across the businesses, utilizing technology to lower costs and improve our processes.”

Credit discipline remains strong

“Another question that we get asked is can credit remain this strong? And in this quarter, it’s still got better again with our charge-off ratio decline to 40 basis points this quarter at an historic low. This is driven by changes we made right after the crisis, thinking 2008 and 2009 and the long term benefits of that effort continue to come through. And by the way, sticking to our responsible growth strategy, even as times have been relatively better.”

Growing their deposit base substantially 

“Deposits are core part of what drives our franchise earnings. We have 1.2 trillion of deposits that’s proof the customers entrust us to safeguard their money. We are heavily weighted and mix those deposits towards consumers, whether they are general consumers or wealthy consumers. This in turn provides a very stable base of funding for the company and allows us to be less relied on the markets we are funding. Nearly $450 billion or 36% of our deposits are non-interest bearing, a very strong mix. Deposits on average grew $68 billion year-over-year or 6%. The teams have done tremendous work here, and this quarter wasn’t an anomaly. This is the fourth quarter consecutive quarter where we have grown deposits more than $50 billion over the previous year.”

Still finding ways to reduce expenses

“Our expenses declined 3% from the third quarter of 2015 to 2016. Our efficiency ratio improved 60% to 62% this quarter that is a 400 basis points improvement from last year’s third quarter. We continue to deliver expense reductions while continuing to invest in technology and sales teams and other matters are important for the futures franchise. After taking in to account the addition of large bank FDIC assessment at the start of this quarter, expenses are also down on linked quarter basis, even as we continue to invest and absorb all the severance, regulatory, resolution planning and other repositioning cost to continue to reduce our operating cost.”

“Expense reductions are the result of a number of initiatives. For example, mobile banking penetration helps to optimize our delivery network, while improving customer satisfaction. More chip cards help us lower fraud cost and digitization of processes and statements helps us eliminate paper and related handling cost.”

Bank of America 3Q16 Earnings Call Notes

Bank of America’s (BAC) CEO Brian Moynihan on Q3 2016 Results

Consumer health generally good

“US consumer health is generally good. Over the past few quarters, exposures in our oil and gas that were causing industry concerns for commercial losses have improved, and charge-offs have receded. Other commercial credit remains very strong”

We feel good about loan growth

“We feel good about loan growth, the economy feels good. So we are confident that we can grow. But of course there’s going to be some uncertainty, and as I said in certain sectors and certain regions around the world. I would remind you that we are focused on responsible growth.”

We have a goal to return our excess capital

“you’re little bit of a horse race between increasing earnings and increasing capital and as we return more you expect that the horse race increasing earnings would stay ahead of it. But we’ve got room to go and we’re driving at it. But if we don’t hit – the issue is that our capital continues to grow that capital is also used as investor and continues to go under our book value and so it’s not going anywhere. It’s there to be returned when we can get through the process of getting from where we are to higher percentages of capital return and ultimately returning excess capital.”

People don’t change commercial banking relationships in an afternoon

“People don’t change commercial banking relationships in an afternoon. So in our business banking and our middle market especially across America, we have been adding commercial bankers and we expect that to be down to our benefit. ”

Paul Donofrio

Shift to self serve is great for our shareholders

“I would emphasizes this shift to self-serve. We’re seeing good momentum with more than 21 million mobile banking active users and that’s growing every week, every month. 18% of our deposit transactions are now completed through mobile devices, that’s better for customers, it’s also better for our shareholders. It’s one-tenth the cost of walking into a branch”

Clients going to have a few ways to invest their IRAs

“Look, clients are going to have three ways to invest in their IRA, they’re going to do it completely, self-direct to Merrill Edge. They are going to be able to do it online, but enhance with professional portfolio managed through Merrill Edge guide and investing. And again for those clients who want one on one advice and service from their FA, they’re going to be able to do that on a fee based advisory platform.”

Bank of America at Barclays Conference Notes

Christian Meissner – Head Investment Bank

Significant improvement since beginning of the year

” the third quarter again is proving to be a better quarter from a revenue and activity perspective than the second quarter has been. So, from that perspective, a clearly difficult environment in aggregate, but I would say, a very tough start at the beginning of the year with significant improvement since then.”

Banking is a very very profitable business

“Banking is a very, very profitable business. Having said that, we also have challenges, of course, the most important one being that a higher or better rate environment would benefit our treasury business. As I mentioned, the loan markets, while growth has been okay, clearly profitability has been under pressure given the global liquidity environment and given the amount of capital that is chasing those assets and to get that we are trying to invest as well. So, we are trying to balance all these factors.”

Have been shifting from inward facing to outward facing hires

“as people have been rolling off the platform, we have been able to hire new coverage bankers, new sales people and effectively been able to shift the mix of our population of our people from a little bit more inward-facing to a little bit more outward-facing. So again, as I have mentioned before, we have been able to effectively therefore work within the parameters of a pretty tight expense environment in terms of investing in our people. ”

Rising rates are good for us

“overall, rising rates are good for us given the setup of our asset and liability mix. That’s obvious, I guess. And equally, as it relates to the bulk of the commercial loan book, given the way it’s structured, net-net, we actually don’t think that there is an incremental negative by rising debt spread.”

Momentum has picked up a little in M&A but growth has definitely slowed

” I would say the M&A environment, the M&A momentum in terms of the types of things that companies are thinking about and types of deals that are being announced. I think it’s picked up again a little bit after a lull over the summer. Some of that by the way, is also seasonal, so it’s not that surprising that the third quarter is a little bit of a low point from that perspective. So overall, I would say again, nothing really to add to what you have said. It’s a little bit of a tale of two cities. On the one hand, the underlying growth isn’t bad, but you have a couple of counterbalancing factors, the net result is that growth has definitely slowed.”

Largely through the changes in leverage lending guidelines

“Well, the leverage lending guidelines had a big impact on our business a couple of years ago when they came out. And I think it’s fair to say that it took the markets a little bit of time to adjust. It’s also fair to say that the playing field perhaps wasn’t entirely level. But I would say now, a couple of years on, we have been – we are largely through that. And I think both we and the system overall has adjusted for it. And frankly, in a positive way, taking down risk in the sector, taking down risk in the business and ultimately what I think is ironic is that the same market leaders that have the largest share pre-lending guidelines still do today, albeit the business looks very differently.”

Bank of America Q2 2016 Earnings Calls Notes

Bank of America Q2 2016 Earnings Calls Notes

Net interest income shows stable growth despite low interest rates

“in summary, adjusted for market-related changes in both last year’s second quarter and this year’s second quarter, we grew NII by 400 million or 4% year-over-year. And that took place while the 10-year Treasury yield fell 86 basis points from last year on a spot basis. Going forward in a stable interest rate environment, we believe we can maintain NII around the second quarter 2016 level based on the current loan and deposit growth we see. And if rates rise, we would expect NII to grow.” Brian Moynihan – Chairman and Chief Executive Officer


Investment banking and sales and trading segments are not in need of change

“question is often asked how we need to change this business, especially the FICC area as many of our customers have. I want to hit this head on. First of all, fixed income a good business for us here at Bank of America. It is a business which benefits not only by its core activities but by being coupled with our massive global banking franchise that has leadership positions across the globe. Combined together, they generate a pretty steady billion dollars or so of quarterly investment banking fees.” Brian Moynihan – Chairman and Chief Executive Officer


Management is focused on reducing expenses

In the trailing four quarters the total expense base was $56.3 billion. As we look out from the second – the third quarter of 2016 through the next six quarters into 2018, we believe that with our SIM efforts and the continued work we’re doing across the board on expenses, we’re targeting an annual expense number of around $53 billion in total expenses for the year 2018. Brian Moynihan – Chairman and Chief Executive Officer


And on restructuring operations

“I want to point out another important milestone for our company in quarter. This quarter we changed our reporting to eliminate the legacy assets in the servicing segment. This completes transformation.” Brian Moynihan – Chairman and Chief Executive Officer


Credit performance improves and BAC reduces exposure to energy

“the question we often get is, is credit deteriorating? As you can see, we remain very pleased with both consumer and commercial credit performance. Not only have net charge-offs not gotten worse, but they have improved in the most recent quarter moving back below $1 billion. Provision expense is and will remain roughly equivalent to net charge-offs. Even our energy portfolio we have seen lower exposures improve losses.” Paul Donofrio – Chief Financial Officer


Management believes BAC can perform in current economic conditions

While growth concerns persist in many countries, the U.S. economy continues to steadily improve, albeit at a less than optimum pace. The diversity and strength of our franchise makes us more relevant to clients and customers during times such as these, and you can see that in our results. Paul Donofrio – Chief Financial Officer