Bank Of America Corp (BAC) — Q1 2026 Earnings Call Transcript

Good morning. Thank you. Thanks for joining us to talk through our first quarter results. As always, the earnings release and presentation are posted on the Investor Relations section of bankofamerica.com and we'll reference those materials during the call. Brian will start us off with a few opening thoughts, and then Alastair will walk through the quarter and provide more detail on the results. Before we begin, a quick reminder that during the call, we may make forward-looking statements and refer to non-GAAP financial measures. Those reflect management's current views and are subject to risks and uncertainties, which are outlined along with the relevant GAAP reconciliations in our earnings material and the SEC filings on our website. With that, Brian, over to you.

Good morning, and thank you for joining us for our earnings report for the first quarter of 2026. Bank of America achieved strong results in this quarter, with revenue growing 7% year-over-year to $30.3 billion and earnings per share increasing 25% year-over-year to $1.11. This performance stemmed from balanced results across our businesses, ongoing operational efficiency, robust client activity, and stable to slightly improved asset quality. We also experienced solid year-over-year growth in both loans and deposits. Our capital and liquidity positions remain strong, well above regulatory requirements. In terms of our operating metrics, we delivered an operating leverage of 290 basis points this quarter. Our efficiency ratio improved by 170 basis points year-over-year to 61%, and we achieved a return on tangible common equity of 16%. Looking at Slide 3, you can see that every segment of our company contributed to year-over-year growth, with increases in revenue, earnings, average deposits, and loans, all driving strong returns. Moving to Slide 4, I’ll highlight some key drivers of our results before turning over to Alastair for more details. First, net interest income exceeded expectations, totaling $15.9 billion on an FTE basis, which is a 9% year-over-year increase. Second, our fee-based market-facing businesses, including markets, wealth, and investment banking, performed well with healthy client activity and revenue growth in double-digit percentages compared to the first quarter of 2025. Third, we effectively managed our expenses; our reported non-interest expense for the first quarter was $18.5 million, inline with the approximately 4% year-over-year increase that we mentioned in our last call. I want to emphasize how we approach expenses in relation to delivering growth and returns for our shareholders. Our focus remains on achieving sustainable earnings and returns. Expense discipline is an integral part of our operations. This approach has enabled us to leverage scale, productivity, and favorable market conditions over time. In the first quarter, our expenses reflected our strategic choices. We continued to invest in revenue-generating capabilities, such as hiring relationship managers, opening new branches, advancing technology, and enhancing our products—all of which support client activity, market share growth, and long-term earnings potential. These investments are driven by return on investment considerations. We also offset these investments through efficiency and simplification. The ongoing digitization of client and internal operations and the application of artificial intelligence in process improvements help reduce manual work, lower unit costs, and limit increases in our overall cost structure. Hence, despite our investments, we delivered positive operating leverage, with revenue growth outpacing expense growth. Moreover, we maintain strict discipline over non-strategic spending, avoiding complexity, additional layers, or fixed costs that do not align with client needs. This discipline is a part of our responsible growth culture that has been in place for many years. Regarding headcount, we have reduced our workforce by about 1,070 employees since the end of 2025 through attrition, and we will continue to pursue this strategy. We focus on extending our franchise, deepening client relationships, and providing attractive terms, all while managing FTEs effectively amidst inflationary pressures. On the topic of asset quality, we observed improvements compared to last year. Net charge-offs, card delinquencies, reservable criticized assets, and nonperforming loans all decreased from the first quarter of 2025. Our provision expense was $1.3 billion, down from $1.5 billion last year, reflecting continued favorable credit results. Capital generation also remains robust, as we deploy excess capital to support risk-weighted asset growth across all business lines while returning capital to shareholders through dividends and share repurchases. We concluded the quarter with a solid capital position, holding over $200 billion in CET1 capital. We benefit from many quarters of organic growth across our businesses, which is displayed in detail in our materials. Overall, these results highlight the strength of our diversified earnings stream and the growth across all our businesses in various economic conditions. I want to commend our team for an excellent quarter at Bank of America. Before handing over to Alastair to provide further observations about the quarter, I’d like to share insights into the economy. Our forecasts are informed by our strong research team and complemented by our internal consumer data. We view the economy as resilient, with core activities continuing despite prevalent uncertainties. We anticipate GDP growth rates in the U.S. around 2%, with even higher rates globally. In terms of inflation, projections indicate it will remain elevated through 2026 and into 2027 both in the U.S. and globally. However, consumer resilience is evident, as spending at Bank of America reached $4.5 trillion a year, reflecting a 5% growth from 2024, a trend that continued in the first quarter of 2026. During this time, our customers moved over $1 trillion in the economy, with debit and credit card spending up 6% year-over-year. Cautiously, we acknowledge the risks in the environment, such as ongoing conflicts in the Middle East and their implications for energy markets, inflation, and growth. We closely monitor global trade flows and broader financial conditions, but so far, these impacts have been manageable for economies worldwide. Looking forward, our research team forecasts moderate growth in both the U.S. and globally, supported by our data. When assessing capital markets activity, it is clear that we are experiencing improved breadth in our global businesses, rather than just episodic results influenced by volatility. Trading revenue has shown consistent year-over-year growth over the past 15 quarters, and investment banking pipelines are strengthening, with increased client engagement across all products. Our corporation clients remain active, contributing to a favorable fee environment. Despite the existing risks, our diversified business model positions us well to navigate a range of economic scenarios. With that context, I will now turn it over to Alastair for more details.

Thanks, Brian. I'm going to begin with the balance sheet, starting on Slide 6. You can see total assets ended the quarter at approximately $3.5 trillion, up 2% linked quarter, reflecting loan growth, deposit growth and balance sheet to support our clients' increased activity in global markets. Deposits increased to more than $2 trillion, driven by continued strength in both commercial and consumer client engagement. Common shareholders' equity was approximately $276 billion and relatively stable quarter-over-quarter as earnings generation was more than offset by the capital we returned to shareholders through dividends and share repurchases. This quarter, we paid $2 billion in common dividends and we bought back $7.2 billion of common shares. From a regulatory perspective, the CET1 capital ratio declined 14 basis points to 11.2%, and that decline primarily reflects the capital return to shareholders above earnings generation as well as balance sheet growth and mix change in support of our clients, and our ratio remains well above regulatory requirements. Looking ahead, we don't have any meaningful updates to report on the recently proposed Basel III Endgame or G-SIB capital changes. As proposed, Basel III would result in modestly higher capital requirements. However, the proposed changes to the G-SIB surcharge are expected to offset the Basel III end game impact for U.S. G-SIBs. Taken together, if Basel III Endgame and G-SIB frameworks are adopted as proposed, we believe Bank of America is likely to see some reduction in overall capital requirements relative to the current regime in future periods, and the public comment period concludes in mid-June, and we look forward to the finalization of the rules. Liquidity remains strong with global liquidity sources of more than $960 billion, well above regulatory requirements. And now as we go a little deeper on the balance sheet, we'll focus on loans and deposits. So I start with deposits on Slide 7, where our franchise continues to demonstrate strength, stability and discipline. Average deposits remained solid during the quarter, increasing approximately $59 billion year-over-year or 3%, reflecting the depth of our client relationships and the value customers place on safety, liquidity, and convenience, particularly in an environment where rates and market conditions remain dynamic. It's notable that both interest-bearing and noninterest-bearing deposits grew 3%. Growth was led by commercial clients, while Consumer Banking grew more modestly, marking its fourth consecutive quarter now of year-over-year growth. The composition of our deposits remains a key differentiator. We benefit from a high-quality mix with a meaningful portion in low-cost operational balances and strong engagement across consumer, wealth, and commercial clients. That mix has continued to benefit our funding costs even as pricing competition persists across the industry. The total rate paid on our deposits declined 16 basis points to 1.47%, and this allows us to maintain one of the lowest-cost funding profiles among the large U.S. banks. Turning to loans on Slide 8. Average balances grew nearly 9% year-over-year driven primarily by client demand in our commercial portfolios. That growth was broad-based, and it reflects good core operating client activity. And as always, we remain disciplined in how we deploy our capital, prioritizing returns, credit quality, and relationship depth over volume. Consumer loan balances were up about 4% year-over-year, including 3% credit card growth. Wealth Management contributed nicely to consumer loan growth through strong securities-based lending. And across both consumer and commercial portfolios, the credit performance remained consistent with our expectations, and we've not changed our risk posture. We remain highly liquid. We're focused on protecting our margin and preserving flexibility while continuing to support our clients. Let's turn to net interest income on Slide 9. In the first quarter, net interest income on a fully taxable equivalent basis was $15.9 billion. On a year-over-year basis, NII increased by $1.3 billion or 9% driven by growth in average loans and deposits, the ongoing benefit of fixed-rate asset repricing and higher global markets client-related activity, and those tailwinds were partially offset by the impact of lower average rates in the quarter. Compared to Q4, NII was materially flat and reflected similar underlying benefits that were nearly enough to offset the negative impact of two fewer days of interest accrual in Q1. Net interest yield for the quarter was 2.07%, up 8 basis points year-over-year, reflecting disciplined balance sheet management, funding optimization and the continued benefit of repricing dynamics even as rates declined across the curve. Regarding interest rate sensitivity, we continue to provide a 12-month dynamic deposit-based sensitivity relative to the forward curve. And on that basis, an additional 100 basis point decline in rates beyond the forward curve would reduce NII over the next 12 months by $2 billion, while a 100 basis point increase would benefit NII by a little less than $500 million. Looking ahead, while the rate environment remains dynamic, we continue to see multiple levers supporting NII, including balanced growth, funding optimization, and ongoing roll-off of lower-yielding assets. Given our outperformance against expectations of NII in Q1 and based on the most recent interest rate curve, which has now shifted from expecting two rate cuts to having none currently, we're raising our full year NII growth guidance range for 2026 versus 2025 to be up 6% to 8%, and that outlook continues to assume moderate deposit and loan growth. Turning to expenses on Slide 10. In the first quarter, noninterest expense was $18.5 billion. That was up 4% and consistent with the guidance we provided on our Q4 earnings call. We generated 290 basis points of operating leverage, and that translated into measurable improvement in both our efficiency ratio from 63% to 61% and an increase in ROTCE to 16%. We continue to manage our cost base with discipline while investing selectively to support client activity and long-term growth. The year-over-year increase in expense largely reflects double-digit revenue growth in Investment Banking, asset management fees, and sales and trading and the associated higher revenue-related incentives and transaction expenses. Stepping back, our approach here remains unchanged. And we maintain focus on where returns are clear. We tightly manage discretionary spending, and we keep our sharp focus on operating leverage, including expanding our use of technology and AI to improve operational efficiency and sales effectiveness. Looking ahead, we continue to expect more than 200 basis points of positive operating leverage for the year, consistent with our prior guidance. And we also have levers that preserve our flexibility to help navigate changing market conditions as required. Let's turn to Slide 11 for a discussion of asset quality. Credit performance remained stable and consistent with our expectations. Net charge-offs were approximately $1.4 billion with a net loss rate of 48 basis points. Both of those were down from Q1 '25 and modestly up from Q4, primarily reflecting the normal seasonality in our card portfolio with continued stability across the commercial portfolio and improved results in CRE office loans. Provision expense was approximately $1.3 billion, including a modest net reserve release driven by improvements in card and commercial real estate and partially offset by growth-related and targeted builds supporting corporate and commercial lending portfolios. Overall, as you can see, our credit results remain benign, and we continue to feel good about the quality of our portfolio. Turning to Slide 12 for some other credit metrics and a couple of comments here. Commercial reservable criticized exposure declined to roughly $24 billion, while nonperforming loans were flat quarter-over-quarter. It's also worth noting that this was the first quarter in more than three years with no new inflows of nonperforming assets into office exposures, which is another sign of improvement in that portfolio. For perspective, we've now been in a benign credit environment for some time, and our performance reflects the benefit of decades-long underwriting practices and a responsible growth culture. We expect that approach to serve us well across a range of potential economic cycles. We've updated the more detailed credit disclosures in the appendix beginning on Slide 19. In addition, on Slides 24 and 25, we've chosen to include updated disclosures around our Global Markets loan portfolio. Let me start by saying we've not experienced any material losses in Global Markets loans, and we feel good about the underwriting and the secured positions that we have here. We acknowledge the potential for underwriting dispersion in the portion that's considered the private credit market, particularly in the faster growth vintages, and we know that that risk sits first with sponsor equity and fund investors. Bank of America's exposure has structural insulation from those first-loss positions. For losses to reach us, we believe operating company equity and a substantial portion of fund investor capital would need to be impaired before we would experience losses. We don't rely on sponsor marks. We re-underwrite collateral continuously for borrowing base purposes, and our exposure is governed by independently determined borrowing basis with ongoing performance tests. So that means where credits deteriorate, the borrowing base contracts before losses migrate. We see the market activity as largely a repricing of liquidity. Growth expectations for alternative asset managers, not evidence of systemic credit impairment. We continue to monitor the market closely. We're comfortable with our positioning. We're also glad to see the return of more traditional C&I loan growth in the first quarter. Turning to Slide 13. Let's shift our focus to the lines of business, and we'll start with consumer, where you can see Consumer Banking delivered a strong first quarter as customers continue to place their trust in Bank of America for their personal finances. Net income was $3.1 billion, up 21% year-over-year, driven by higher net interest income that led to 5% revenue growth, and we managed expenses well. That resulted in over 500 basis points of operating leverage and a 53% efficiency ratio. We saw our fourth consecutive quarter of year-over-year deposit growth, with average deposits of $951 billion, while maintaining a high-quality mix with over half of balances in low and no-interest checking. Client engagement remained a clear strength. We ended the quarter with a record 38.5 million consumer checking accounts, adding over 100,000 net new checking accounts this quarter. More than 90% of these relationships remain primary. Digital adoption remains strong with 79% of households digitally active and 71% of sales coming through the digital channels compared to 65% a year ago. Finally, credit performance in consumer remains solid and in line with expectations. On Slide 14, we turn to Global Wealth and Investment Management, which also delivered a strong first quarter, benefiting from solid flows over the past four quarters, favorable market conditions, and disciplined expense management, which together drove margin improvement and valuable operating leverage. Net income was $1.3 billion, up 32% year-over-year on record first quarter revenue of $6.7 billion, driven by higher asset management fees and solid client flows. Pretax margin was 26%, reflecting the operating leverage achieved through disciplined expense management. Client balances increased to $4.6 trillion, up 10% year-over-year supported by favorable market conditions and net client flows during the quarter. Asset Management flows remained solid at $20 billion, and lending momentum continued with average loans up 13% year-over-year led by custom lending and securities-based lending. We remain focused on pricing discipline, adviser productivity, and long-term client relationships. We're driving productivity higher on both newer and existing members of our financial advisers team, and we continue to attract talent across both new and experienced advisers. Now we move to commercial and corporate client-facing businesses and Global Banking on Slide 15, where Global Banking delivered solid results in the first quarter, reflecting strong client activity and continued balance sheet growth. Revenues were $6.3 billion, up 5% year-over-year, driven by higher net interest income and improved noninterest income. When combined with well-controlled expenses, which rose only 1%, the business generated more than 350 basis points of operating leverage. Net income was $2.1 billion, up 8% from last year as the higher revenue was partially offset by continued investment in the business and a higher provision for credit losses through builds of reserves that were primarily for loan growth. Investment banking fees of $1.8 billion were up 21% year-over-year and were a clear positive in the quarter. Investment banking fees, strong momentum was led by M&A with equity capital markets also up very nicely in the quarter. The year-over-year investment banking performance is particularly notable given our prior year first quarter included gains related to leveraged finance positions that didn't repeat this year. Balance sheet growth remained a strength. Average loans increased 5% year-over-year with all lines of business contributing. Deposits increased 13% year-over-year, reflecting continued client engagement across the franchise, and rates paid were down linked quarter and year-over-year. Returns remained strong with a return on capital of 16%, which was higher year-over-year. Turning to Global Markets on Slide 16. I'll focus my remarks as usual excluding DVA. Global Markets had a strong first quarter driven by robust client activity and disciplined risk management in a volatile trading environment heightened by geopolitical uncertainty. Revenues excluding DVA were $7 billion, up 7% year-over-year, where Sales & Trading had its strongest performance in a decade increasing 12% to $6.3 billion, led primarily by equities performance. And despite the noted volatility, we had no trading loss days during the quarter. Equities had their best quarter ever with revenues up 30% year-over-year, reflecting increased client activity and capital extended to the business for growth. The increase was driven by client financing activity, particularly in Asia, as well as strong trading performance in derivatives. FICC results remained strong and were modestly higher with strength in commodities, partially offset by lower revenue in FX and interest rate products. Net income was $2 billion, which was up modestly from strong results in Q1 '25 that also included roughly $230 million in gains related to leveraged finance positions. Higher revenues were offset by increased expenses on higher activity levels, increased people costs and our continued investment in this business. Average assets grew 14% year-over-year to $1.1 trillion, reflecting higher inventory levels and strong client balances. Returns remain solid with a 15% return on capital. Overall, Global Markets continues to deliver for our clients producing consistent profitability, continued revenue momentum and it reinforces the durability of the franchise across different and challenging market environments. On Slide 17, all other shows a modest profit of roughly $100 million in Q1 with very little to cover here. So as I wrap up, I'll just note the Q1 effective tax rate was 17.5%, that was seasonally lower, reflecting the annual vesting of employee share-based awards. As a reminder, for the full year 2026, we expect an effective tax rate of just a little more than 20%. So in closing, first quarter of '26 reflected continued revenue momentum, disciplined execution, and improved efficiency and returns. Our diversified business model, strong balance sheet and prudent risk management position us well for the remainder of the year. And with that, we'll open up the line for questions, please, Leo.

First up, just on the expense side, the stronger NII guidance was great to see, and you're keeping expense guidance, but you're also keeping the operating leverage guidance. I know there's some level of rounding here, but how do you think about dropping the benefit of the better NII to the bottom line?

Manan, thanks for the question. We did this quarter, and we expect that the NII will drop to the bottom line. If it goes up, you'd expect us to see a higher end of the operating leverage range like we did this quarter.

Got it. Perfect. And then maybe on the ROTCE side. So I guess you've already delivered on a 16% within the 16% to 18% target. How do you think about staying within that range in the near term as you deliver on the operating leverage? And are there any one-timers or anything else we should be considering for this quarter?

So Manan, I don't think there's any one-timers to consider here. We provided that guidance of a medium-term range for ROTCE over the course of the medium term. Look, every quarter is going to be different. We're obviously gratified with 16% based on the strong operating leverage performance. But the key for us as a management team is just keep moving up the ladder. A couple of years ago, it was 13%, then 14%. Every quarter will be different. We just have to keep making progress towards our goal, and that remains our focus as a management team.

Maybe an easy high of one on the consumer. I think your spending is so good. Employment and wages have been strong. So the easy question is why do you think loan and deposit growth in the consumer side is slow, sluggish? It's not like you're not opening new checking accounts, new credit card accounts. Just curious on the high level there.

Well, Glenn, if we look back over time, particularly on the deposit side, we mentioned a few years ago that after deposits began seeking higher yields, consumer deposits would find a floor. Currently, we are observing four consecutive quarters of year-over-year deposit growth, indicating that we've reached that floor and are beginning to grow again. Additionally, there's been an uptick in noninterest-bearing deposits this quarter compared to the previous one. While there are factors, like the interest rate environment and spending, that may challenge deposits, it seems the consumer side, which is very strong, is starting to turn and show early signs of acceleration. In terms of lending, the current environment reflects good unemployment, strong home prices, healthy asset values, and high savings rates. Lending is fairly broad-based in the consumer sector, showing about 3% to 4% growth. We might see more growth over time, but for now, we feel confident about the consumer's performance. Lastly, we've emphasized the importance of our balance sheet efficiency. We've allowed some retail and institutional CDs to mature, so we don't need to chase CDs at this point, allowing us to be disciplined with the interest rates paid. While we could generate more deposit growth if we chose to, we're currently focused on maximizing core operating client account activity. That's our priority.

I think it's working, and I appreciate that. You mentioned that headcount is down over 1,000 this year. Looking back over the last five years, it's been relatively flat, but there's a lot happening behind the scenes. You're adding staff in growth areas while reducing in others. I believe your attrition rate is around 7%. Could you discuss the areas where you're expanding and where you're reducing? Also, how might AI impact this situation? Where do you stand in your AI journey, and will it lead to a larger headcount reduction or affect your ability to replace attrition moving forward?

Well, in the long arc, if you look at 2007 before we bought Merrill and Countrywide to give you a sense, we had more employees at Bank of America than we have today. The application of technology, the process and the customer utilization of our technology has led us basically to run the company 19 years later on fewer people. This is not a new trend. What you're seeing now is the continuation of those trends, and you're right. So if you as we showed you at Investor Day, we showed a shorter term, we showed headcount down to 8,000. We showed it at 50,000 out the consumer set of businesses at 25,000 out of ops. What we're seeing now — and during that time, we made massive investments in technologists and cybersecurity from a few hundred people or 3,000 people, etc. New branches. We continue to shift investment that went on again this quarter, where you saw headcount drift down out of operational process and managers and things like that. And that investment goes into developing more headcount in the relationship manager businesses across the board. We'll continue to do that to support the growth of the business. We're doing it through attrition. Each month, we have to hire 1,300 people, round numbers to stay neutral in the company. You can adjust headcount by just being careful on hiring and let attrition be your friend as we call it, and that's how we got down 1,000 people, but it comes from eliminating work and applying technology and consumer and commercial customers using those technologies and AI gives us pieces to go; we haven't gone. We've got 90 installations working; all 200,000 teammates have access to AI or can use it every day. Erica is more understood out there, but it's been brought across lots of platforms that the models. We're still in the early stages of what all this will do, but we're seeing real benefits out of it today.

In terms of capital, with the peak at the new proposals, how are you thinking about a capital target as you strive towards your ROTCE goals? Just kind of wondering if you have some more incremental comfort in narrowing that management buffer that you have today, which is over 100 basis points to the reg minimums?

Thanks, John. Well, I think as we're getting more clarity, you've seen us take advantage of that by just allowing the capital ratios to drift down. We'll wait ultimately to see what the final rules all look like, but it's pretty clear to us at the point that, yes, Basel III Endgame RWAs will be a little higher. Yes, it appears that G-SIB inflation indexing is going to give us some relief, particularly as we move forward into future periods. So that's allowed us to do a little bit more buyback, it's allowed us to put out a little bit more balance sheet. We're gaining a little more confidence. But at the end of the day, we're in a good place right now. We have plenty of capital, plenty of flexibility. We're earning well. Now we just have to wait for the fine rules.

John, I think your point about operating closer to the minimum does drive everything else I've talked about and the shifts across time, the new rules, the old rules, and the transition. The reality is as we have studied this, the volatility in our earnings stream under all the stress scenarios that we run every quarter is how we start to think about the cushion we have to maintain, and that's — that cushion could be tighter to the reg minimum without having the same threats because of stability in the earnings streams and the capabilities of the company. We brought it from a broader range to a narrow range; expect us to keep it in the 50 basis points that we said. If the underlying requirement goes down, the whole number goes down, etc., so let it play out a little bit. But there's no philosophical change needed in maintaining a decent cushion, but not an overly big cushion, but our fine-tuning of that across the last 3 or 4 years really is based on the earnings — capabilities of this company to earn through different things like COVID and the regional bank crisis, etc., you can see that the volatility is just not there.

Right. So what you're saying, Brian, is the 50 basis point kind of management buffer is over time, what you'd expect to gravitate to?

Yes. And we were moving there. But we're taking all earned capital out, right, to dividends and buybacks. That then leaves the nominal amount the same, and we're growing the company into it. Then we got all these rules and how they'll be implemented. Remember, there's step-ups and downside, and that kind of sort of see play out here. But you've got it right. I just think of the long term, 50 basis points over the minimum is more of what we're shooting for.

So we're not really changing anything in terms of the loan and deposit growth. We've been pretty encouraged with the way that started out the year. So it's more a continuation of what we've seen. But we've seen pretty good organic growth, so that's been good. The rotation is slowing from noninterest-bearing into interest-bearing. In fact, noninterest-bearing picked up a little bit this quarter, so we're happy to see that. For as long as the loan growth stays there, deposit growth looks good, whatever last a couple of rate cuts. Those might have hurt us at the back end of the year. They're not going to hurt us in the same way. So all those things, you add them up, it's a little bit of all of them, but a little bit more balance sheet into global markets. So added up all that feels good. Final thing, John, is if you take a look at the loan growth disclosure that we put out, I think it's on Page 8 of our release, you'll see pretty broad-based now from each of the lines of business. Pretty broad-based by each of the products. So we're not reliant on any one thing, and that gives us a little more confidence around durability.

Alastair, can you expand on the funding optimization point a little bit? It seems like you had a significant drop in rates paid on non-U.S. deposits. Overall, how much can you do on that funding optimization point? And how do we think about balance sheet growth in that context?

Yes, this is something we've discussed in previous earnings calls, Jim. There hasn't been a change in our thinking over the past couple of years. We had some excess on our balance sheet related to longer-term certificates of deposit and certain repo activities. As time goes by, we believe we can let these decrease, which is beneficial for our net interest yield. This may not significantly impact net interest income, but it allows us to support core growth for our clients while reducing some of the balance sheet excess. We're gradually seeing the certificates of deposit decline over time and quietly decreasing some of the repo, all while providing more balance sheet capacity for our clients' business.

Yes. No, absolutely. And on the C&I side, Alastair, you mentioned that more traditional C&I growth has picked up. Is that an early read on taking some share from private credit, given disruptions there? Is it simply just broadly improving demand and an improvement in credit line utilization?

It's mostly credit line utilization this quarter. At the end of Q4, we saw a little bit of revolver pay down, which probably took our loan balances down. We still grew loans in Q4, but the growth wasn't quite as high because the revolver utilization came down. It just came back in a little bit more in Q1. We probably picked up $5 billion to $10 billion of loan growth just for revolver draws. It's sort of core middle market activity, building working capital across corporate America and internationally. That's where we saw the growth.

What a difference a quarter makes. I think what I hear you saying is that you feel better about the short term and you can correct that. But you got the 16% ROTCE. You're guiding NII higher. You have 29 basis points of year-over-year operating leverage. The short-term better, but since the last earnings report, there have been concerns about the long term, right? The AI agents will come and take your deposits. The AI bad actors will commit cybercrime against you, the AI spend will not bear fruit. I know you guys have Erica and CashPro and GenAI and over 4,000 patents. As you brought up less employees since 2007 and also some other advantages there. As you think about that debate, the long-term debate AI, you being a victim or a beneficiary, why is Bank of America and AI beneficiary? If you could just frame it somewhere I know that the question was asked already, but revenues per employee, how much would you expect that to increase or something around that?

Mike, I think in your question, you gave the answer, which is we are a beneficiary of the impacts of all technology, including AI. We've applied it and we'll continue to apply our team's job, and we've got catalyst efforts going on, on a corporate-wide basis to bring all the ideas to bear. Our team's job is to benefit from the technology. It creates issues about cybersecurity and things like that that you're reading about in the paper, and we take those extremely seriously and invest heavily to do it. We work with our industry colleagues and colleagues in other industries to ensure the safety and security of our architecture. There will always be positive pressure on earnings due to the application of technology and AI gives us a lot of efforts there. There's nothing new and different about the ability to move deposits that we can move them in our company instantaneously to other off balance sheet, on balance sheet, right? The question is, what are deposits for? I think like it's lost in all the discussions a little bit the reflection of the earlier discussion on the deposit rate paid is we have the deposits because people buy their transaction accounts with us here moving money. The CD and the market deposit practice in our company is a small part of what we do to drive the economic value. Our job is to stay with our customers to be the core depository institution and transactional bank with them as well as our lending bank. We feel very strongly that we will not only take advantage of AI but will help us drive greater market share and capabilities in the future.

I guess as a follow-up to, I guess, you remind me like the primary checking account, I think, is what you're saying is very sticky. How to use AI to improve the trust of customers, whether it's with a cybersecurity risk. I'm not sure if you were one of the CEOs who went down to DC or just trust with data and identity and the relationships?

I believe trust in our institution is at an all-time high among customers, who recognize how we handle data and information. One of the barriers to adopting some of these technologies is our commitment to protecting customer data, something that others may not prioritize. We consistently avoid including customer data in our models while still leveraging incoming data without compromising customer privacy—this is our obligation to our customers. We are confident in our trustworthy position, having invested significant time, effort, and resources to achieve a level of reliability we refer to as "never down." We also implement reliable backup systems that support each other. Our collaboration with the industry ensures these standards extend to other platforms and FMUs. When asked, our customers express that our digital and technological capabilities and their trust in us have never been higher and continue to grow month after month. We are optimistic about this progress.

And then last follow-up, just in 5 years from now, when we look back, say, okay, AI, tech, where should we see the benefits? Is it just the stickiness of the relationship? Or is it efficiency or where should that show up?

If you think about just on the consumer side, Mike, because two things. One, you said the core deposit account. There's a core deposit account is a core investment account. It's a core corporate transactional account. It's a core borrowing home. Each of these cores is what you're seeking, not just growth overall. I just want to make sure it's broader. If you say 5 years from now and think about it, you should continue to see more and more digital or AI-generated interfaces with the client. AI really helps us internally just to make it straightforward. 99% round numbers of all the interactions we have with our consumers are digital already. So there's no person involved. As you start to think about that, the inverse, where the cost of that 1% is a pretty high number, and we're working on that with all this technology, and we're working on the efficiency even of the 99% in-house delivered. The example of that is Erica versus Alerts. Alerts are basically instead of doing prompts and asking questions, we're using the same technology delivered to a constant flow of information. That saves the interface on the prompts and things and also allows it to be more interactive with the customers. AI intelligence technology intelligence is not different. We'll be more of it. If you think about from '07 until now the same number of people, we'll be plowing into the front end, where relationship managers matter, the high-touch piece, which is critically important delivery. You'll see us keep adding there and you’ll see us keep taking out of the activities that are not directly facing the customer. Even on the customer-facing side with 90,000 sales force moving to agent force and AI, we'll get more efficient on that too. I'm not going to give you exactly because you know that's hard because it never quite works out that way, but the trends will be more technology, more intimacy with the customers more agentic versus prompt more built into the process rather than just delivered by teammates doing something, it's part of the process, more customers doing more with us, and expense will be — and the operating leverage will be there.

Just two quick follow-up questions from me. First, on the net interest income outlook. As we think about the possibility of no rate cuts, how should we think about how BofA is going to handle deposit costs in that scenario? Could deposit costs be contained particularly given sort of the loan growth in the market's balance sheet if the Fed doesn't cut?

I think that if the rates remain stable, there isn't much reason for us to change what we're paying on interest-bearing accounts. It will mainly depend on which of the two categories—interest-bearing and noninterest-bearing—grows faster. Currently, we're seeing some growth in both, which is encouraging. We’ll need to keep an eye on that throughout the year. Even with two rate cuts expected, the impact in the latter half of the year isn't significant since you’re essentially looking at one cut for six months and another for three months based on previous expectations. We may see a slight benefit from that, but the main driver is the organic growth of the company.

Got it. And just a very technical question on some of the capital reform proposals. This sort of came to everyone's attention when one of your peers reported yesterday. I fully appreciate that the regulators are trying to address retrospective inflation with the coefficient changes. But companies like Bank of America in theory, based on your 2025 G-SIB score are set to go up by January 1, 2028. Clearly, a lot of that growth was related to the economy and your risk density continues to go down. As you think about the comment period, is that something you would address? There's a lot of dialogue, I'm sure, going on between the industry. I thought that was particularly notable in terms of that 2025 score potentially bringing your G-SIB up by January 2028, despite the positive revision on the surcharge.

Yes, there are two worlds right now, Erika, there's the current rule and there's proposed rules. We don't have the proposed rules finalized yet. I'd just say the main thing you're talking about, which is G-SIB numbers going higher over time, the new proposal addresses that because there's inflation indexing. What might look like a raise in the future may not be a rise in the G-SIB. We believe in the course of this. That's one of the most important things done here. We expect to be a beneficiary of that because we're an organic growth company as well all the large G-SIBs, one would think.

Erika, one thing to think about is in the words of the old song, you can't always get what you want, but you can get what you need. At the end of the day, we needed a concept of indexing because it was just — it was in the original rule after 2012 data — 2012 data that it was supposed to be indexed. We needed that in there. What we would have wanted was a longer-term perspective than we are getting on it, but at least in the concept and we baked in a rule and we can go work on how that impacts because it was just — we and the industry are not going to get everything who we want these proposals because at the end of the day, there's — it's hard there's some negotiation going on. But at the same time, we needed to get moving along here so we can get this implemented and then fine-tune the models around.

Got it. And Brian, fantastic job on addressing the efficiency questions very clearly earlier in the call.

Just one follow-up with a great start on the 9% growth in NII, and you took up the range to 6% to 8%. I'm wondering, Alastair, just as you look through the year, like why couldn't the first year growth rate stay there? Are there any either comp things or shifts in kind of the expectations around markets-related NII from NII to fees given the higher for longer? Or any other points that we should just be mindful of? Or is it just — we'll see because it's early in the year, and there's a lot that could still play out.

It's a little bit of that. It's early in the year; we'll see how it plays out, but it's also a little bit of recognition that last year, we had a bigger second half just because of the shape of the fixed rate asset rebasing that took place. We just got a little bit less of fixed rate asset repricing taking place in the second half of this year. So it's really a year-over-year comp thing that we're looking at. By the way, the organic growth continues to pick up. Can we do better? Of course, but that's why we give you as much guidance as we can in each quarter based on what we actually see.

That's fair. And then on Brian's point about the great start to operating leverage, 290, same kind of question, like you did great in holding the line on cost, and I know you're trying to not focus on a cost side per se, but is the demonstration of that flexibility going to be the ultimate driver of the incremental to get you from one side of the 200 to potentially the higher side? I wonder if you can keep this range reasonably tight on the expense growth trajectory?

Yes. We provided guidance on operating leverage looking forward over a 3- to 5-year period and said we're aiming for 200 to 300 basis points. If we can do more, we will. Every quarter will look different because your comparable versus last year will look different. The growth will look different. We just recognize we have to have a range because it's not going to be the same every single quarter. The main thing that we have to do on the expense side is just to be really disciplined on headcount because that remains 60% to 70% of the cost base when you really think about it. You're going to look at the headcount; that's going to give you a pretty good idea of whether or not we're really focused on the core operating expense being disciplined there. You've got revenue-related expense, many of those are good expenses. We don't want to have to apologize for that. That's why we focus on operating leverage because when assets under management fees are going up 15%, with investment banking is going up 20%, when the sales and trading is going up 12%, those are good things, and with them come good costs. That's what we're managing on the operating leverage. We had a good quarter this quarter. We run to the next. We're figuring out how we can do 200 and higher this next quarter.

I'm interested in the wealth strategy relative to the M&A targets laid out in November. Any recruiting or retention commentary would be great.

I believe we will update those targets, but not every quarter, since they are longer-term, medium-term, and long-term targets regarding net new growth. The team is performing well in recruiting, and we are bringing in about double the number of advisers in the first quarter this year compared to last year. Additionally, the attrition rate among advisers has decreased significantly, resulting in a net benefit. We feel confident that Lindsay, Eric, Katy, and the rest of the team are making great progress towards these metrics. The business showed strong operating profit, which is expected when markets improve year-over-year. The margin has also improved significantly, increasing by a couple of hundred basis points. They have done an excellent job. You can also see on the growth pages that there are details about checking accounts and enhancing relationships, and the loan growth in Wealth Management has been very robust over the past year. We are quite optimistic about it. We will provide further updates in a more general company update, and we feel positive about our direction.

Great. And then the popular question this quarter has been durability of trading revenues. I'm interested in how you see the potential of the firm to grow trading revenues and the mix within trading over the next near to medium term?

We still feel good about it. This is another quarter where we allocated a little bit more in terms of resources to the team. They delivered with another 15% return on allocated capital. At the end of the day, we've got a big global diversified set of businesses in global markets. Equities did very well this quarter. Commodities did well this quarter. Our international businesses came through this quarter. This is what you have when you've got a nice portfolio of businesses, activity can move from one to another, still end up with 12%, sales and trading increases year-over-year. We've obviously invested a lot, and we'll continue to invest in this business. Client activity remains robust. There's a lot going on in the world and people have to think about their financing and their risk management and repositioning. We've clearly been a beneficiary of our client activity as well, but we feel good about the business, and we'll keep investing.

Alastair, you talked about the loan growth and how the utilization rates have come up a bit, also mentioned about the consumer growth in the quarter or maybe Brian, at about 4%. The question I have is, we're starting to hear from a few banks that the underwriting standards might be getting stretched. I know you guys emphasized you're sticking to your discipline on underwriting standards, but are you guys seeing that in any areas, particularly in the global markets lending area? Are people pushing it, and you guys are just walking away from stuff maybe more often today than maybe 12 months ago?

We've not seen any of that here, and we haven't detected that elsewhere at this stage.

Very good. And then as a follow-up, Brian, you talked about the growth of the consumer. You talked about the debit card growth and credit growth. I think it was Slide 5. We often hear about this cash recovery of the lower end struggling with inflation, and the higher end is better off because of the affluence. Are there any — what are the risks that may crop up for the higher end 6 or 12 months from now?

At the end of the day, whether you're talking about credit quality or the ability to spend money, it's always going to come back to for the broad base of the American population that's critical to the economy, they're working. Unemployment level staying in the 4.5 range, etc.? Is wage growth there? I think wage growth has been solid among all the different parts of the earnings spectrum. The question will be, will wage growth continue? Both of those things have held up to the quarter; you're saying spending has grown among all those parts of the economy just at a faster rate in the — if we look at 1/3, 1/3, 1/3, 1/3 in the lower-income strata, middle income, and high. If you look at it, it's growing everywhere at a faster rate in the middle and high segments, but the wage growth has been solid across all those populations. The spending ought to be there. I would just keep watching the unemployment; new claims are up around 200,000 change, continuing claims 1.8, they're levels that were on a bigger workforce than they were in the prepandemic period. Until those move, I don't see anything that interrupts the actual spending capability of all the consumers.

Very good. I assume you guys are watching the tax refunds, which are coming in better than expected, which obviously will bolster consumer spending as well. Appreciate Brian and Alastair.

Follow-up on loan pipelines and borrower sentiment on the commercial side. Are you observing any change in borrower behavior given the Middle East tensions? Were the line utilization drawdowns defensive or normal course of business type of drawdowns?

These were not panic draws. This has generally been BAU working capital type of activity at this stage.

David, I think when you talk to commercial customers and think about where they were last year with Liberation Day in the middle of that, you come a year forward and a lot of things have been figured out with trade tariff policy immigration policy. Tax reform was in and deregulation was coming, the major principles of the new — of the Trump administration were flowing through some. Obviously, the Middle East and the trade tariff and all that stuff, it's got them thinking but they're still seeing solid demand. They're trying to figure out what happens next. Borrowings right now are because they see opportunities. We'll see what happens with the resolution of the Middle East conflict and other things and what the terms are, what the duration of the inflation is, and that could impact them, but you're not seeing that now.

Great to hear. And then shift over to asset repricing. That's been a nice tailwind for you guys. At what point does the repricing tailwind begin to moderate? And if you happen to have at your fingertips, the dollar volume of fixed assets that are expected to reprice in the coming quarters?

When we got together at Investor Day, we laid out, number one, the magnitude. Number two, the time period. You can think about it, David, is five years. It's not going to be one quarter. It's going to be every quarter for the course of the next five years, assuming rates stay where they are. We laid out pretty good disclosure there. I would encourage you just to take a look at that. One see is we put it in three different buckets. One was the residential mortgage, the auto loans that come through our balance sheet with clients every quarter and new ones that come on. We laid it out in terms of treasuries and mortgage-backed securities in our securities portfolio that will mature, and we reprice every quarter, and then we laid it out in terms of the cash flow swaps and the hedging activities we do. There’s pretty good disclosure there. It’s a five-year thing. It’s a little bit longer than that, but the vast majority is — the vast majority is in the next five years. We laid out the numbers; it might be helpful.

I want to ask about reserving. I was a little bit surprised that you saw the slight reserve release this quarter given the macro uncertainties. So I guess, how are you factoring in macro volatility, downside case scenarios into reserving? It does seem like you take a different approach to reserving some of your peers. I fully agree that your track record on credit is comparatively strong. Loss content has been lower than your peers. You see that in the stress test that you guys have highlighted a number of times. If I look at your reserve ratios by segment, but also things like reserve coverage of charge-offs, reserve coverage of delinquent loans, it tends to be lower than your peers. So I guess, why not be a little bit more conservative in your reserving? I'm curious if you agree or disagree with my assessment that maybe you're — I don't want to call it more aggressive in reserving, but maybe more realistic in your reserving than some of your peers. I'm curious just philosophically, your approach here on reserving? And why not be a little bit more conservative in terms of your reserving?

I don't think we have any difference in the way we think about reserving relative to anyone else. We all will be under the same CECL methodology. We all operate in the same way. Second, I'd say, in terms of whether we have lower reserves or allowance, it tends to be reflective of the quality of their lending portfolio, the risk they take and their client selection. When we show you on slides 20, 21, and 22, how we have transformed the company over the course of the past 15 years, we have a very different risk profile of our lending than many of our peers. When you look at, for example, on Page 20 of the earnings, we've got a lot less of consumer unsecured. A lot less of credit card, a lot less of home equity lines. We have a lot more of wealth loans. When you look at the Federal Reserve stress test loss rate, we've been the lowest 13 of the last 14 years, which would tell you we probably should have a lower reserve because we have a more conservative approach to our client selection and the type of risk that we take. We don't think we're any different from other people. We just think we've got a higher quality client base and a higher quality loan portfolio. The final thing to say is, in any given quarter, you might take, for example, this quarter, we took five percent out of the upside case. We put it in the baseline. We're pretty heavily skewed at this point towards a downside case plus baseline. The only thing that happened to offset that was we had some release from the continued improvement in CRE office, where we had built reserve pretty significantly. As that portfolio has gotten smaller, as we've got less and less in the way of NPLs, as we’ve been able to take some of the reserve back out. So that's all that's going on in this particular quarter.

Okay. No, that' s helpful. Maybe just a follow-up then on NII, obviously encouraging to see the guidance increase. NII ex markets up about 5% year-on-year, which is a good number, obviously lower than 9%, but a good number. How should we think about what the 6% to 8% means for growth in NII ex markets? Should we be thinking that global markets NII kind of stabilizes at current levels given that it's benefited from lower rates? If we see the Fed on hold here, maybe it kind of sticks around these levels? And also just remind us what proportion of Global Markets NII is revenue earnings neutral? Because my understanding is that some part of it is not, but it does flow to the bottom line. But is it predominantly offset by higher Global Markets NII offset by lower global markets noninterest revenue? So just any color you can give there, that would be helpful.

So the Global Markets business NII has benefited over the course of the past couple of years from, number one, rates coming lower. And number two, continued balance sheet growth. If rates don't go lower, that engine for global markets NII growth wouldn't be there. You can almost think that going forward, more and more of the NII growth is going to come from global banking, consumer, and global wealth, and less of it is probably coming from global markets. In terms of the NII, there will be quarters where a little bit of the NII is offset in MSA. Last quarter happened to be one where I noted we got about $100 million or so of NII benefit that was offset in MSA. I don't anticipate that being a big story for us going forward. We've talked about the fact that the NII that we're generating is going to drop to the bottom line; that continues to be our position.

Okay. And that's true in markets as well.

Yes. Generally speaking, it just depends on the client activity in markets because sometimes they can change from on balance sheet to off balance sheet at sometimes is the NII composition. But if it ever came up where it was a large impact, I would share that.

Okay. Got it. That's really helpful.

Thank you for joining us. It was a good quarter at Bank of America, the first quarter of 2026, strong NII growth, strong overall revenue growth, great operating leverage, and good returns. We look forward to delivering that in the future. Thank you.