Bank of America Corp Q2 2024 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Glenn Schorr - Evercore ISI - Analyst : Hi, thanks very much. Hello there. And definitely appreciate slide 10 a lot. I know you would have given us the 2025 NII guide if you wanted to give us one. So feel free to give that if you want, but that's not my question. My question is, given all the pieces of the puzzle that you gave us, expectations for modest loan and deposit growth and slowing deposit-seeking behavior. If you get that 4% pickup from 2Q to 4Q this year that you're expecting, right now or at least recently, consensus had NII looking flattish with that fourth quarter number and that doesn't make a lot of sense given all the pieces. So maybe if you can just comment without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 16, 2024 / 12:30PM, BAC.N - Q2 2024 Bank of America Corp Earnings Call directionally if you don't want to give the number of, does it make sense to you that we'd collectively be expecting flat NII with your higher fourth quarter number?

Question: Glenn Schorr - Evercore ISI - Analyst : Maybe I could just ask a follow-up on deposits within the wealth business. You have $4 trillion of client assets. I'm curious if you break out the split between brokerage and advisory accounts. Do you hear me okay? I'm hearing tons of feedback. Sorry. Okay.

Question: Glenn Schorr - Evercore ISI - Analyst : Okay so $4 trillion in client assets -- great, $4 trillion in client asset in wealth. I'm curious if you can give us the split between brokerage and advisory. And the reason I'm asking is, I'm curious how you've been handling rate paid on cash and advisory accounts and whether we should expect any behavioral changes following the recent wealth news. Thanks a lot. Sorry for the feedback.

Question: Glenn Schorr - Evercore ISI - Analyst : Okay. (technical difficulty) on advisory. Thanks.

Question: Jim Mitchell - Seaport Global Securities LLC - Analyst : Hey, good morning. Maybe just a quick follow up, and I don't need to beat a dead horse on NII. But can you just help us think through the puts and takes on -- you have rate cuts at the end of the year. Forward curve implies more next year. As that cumulative impact starts to hit next year. I guess, what gives you confidence that this is sort of a trough? What are all the puts and takes that we should think about in how we model the NII for next year when we think about the forward curve and that impact?

Question: Jim Mitchell - Seaport Global Securities LLC - Analyst : Okay, that's all fair. And maybe just on the growth piece, maybe deposits, seem to have bottomed for you guys in the second quarter of last year, you've had good growth, I think Brian pointed out, even with the tax headwind this quarter, you grew sequentially. So good performance, but still pretty modest. How are you thinking about the growth trajectory from here, I guess, as we think about -- does it accelerate with rate cuts in your view? What are the dynamics are you thinking about that's returning to the historical kind of mid single-digit deposit growth within BofA and the industry?

Question: Jim Mitchell - Seaport Global Securities LLC - Analyst : Okay, thanks for taking my questions.

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : Hi, I'll start with a simple question. You mentioned loan spreads have improved. Why is that? Where's that? Do you expect that to continue?

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : Okay. You gave us slide 10. A lot of details there. You talked about September rate cuts, the fixed asset repricing, securities repricing, loans repricing, mortgage and auto, swaps maturing, November, we see fixed cash swaps and whole litany of stuff. But I think when without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 16, 2024 / 12:30PM, BAC.N - Q2 2024 Bank of America Corp Earnings Call you put it all together, what it's led to is a net interest margin of only 1.93%. In fact, I think your yield on your assets is below Fed funds right now. So would you agree that you're under-earning with that NIM of 1.93%? And I know I've asked this question before, but you always have to mark to market. What is a normal NIM? I mean, you were 2.5% in 2017, you were 3% in 2004. And I know the composition has changed and everything, but what's a normal NIM? And what do you think is a normal return on tangible common equity through the cycle? Thanks.

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : Okay. It wasn't clear. You said net charge off in second half should be less than the first half, and I wasn't sure if that -- if it is related to cards or I wasn't sure what you meant by charge off.

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : Okay, so credit card charge off should flatten or decline in the second-half relative to the first half?

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : All right, thank you. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 16, 2024 / 12:30PM, BAC.N - Q2 2024 Bank of America Corp Earnings Call

Question: Steven Chubak - Wolfe Research, LLC - Analyst : Hi, good morning.

Question: Steven Chubak - Wolfe Research, LLC - Analyst : Good morning, guys. So I wanted to ask just on -- just building on some of the NIM questions from earlier. A lot of that's been focused on asset repricing, both loans and securities. I was hoping you could speak to the opportunity to potentially optimize some of your higher cost funding. And just given multiple sources of NIM improvement, looking beyond `24, how should we think about the pace of NIM build as we -- I know it's a longer timeline to get to the 2.30 to 2.40, but just how to think about the expectations around the NIM trajectory beyond `24?

Question: Steven Chubak - Wolfe Research, LLC - Analyst : It's really about the NIM trajectory beyond `24?

Question: Steven Chubak - Wolfe Research, LLC - Analyst : Great, thanks for taking my questions. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 16, 2024 / 12:30PM, BAC.N - Q2 2024 Bank of America Corp Earnings Call

Question: Betsy Graseck - Morgan Stanley & Co LLC. - Analyst : Hi good morning.

Question: Betsy Graseck - Morgan Stanley & Co LLC. - Analyst : So, yes, another question on NII. Alastair, I did, I think, hear you correctly when you said that as you go into the second-half of `25, there's going to be incremental benefits coming from swap roll-offs. Did I hear that right?

Question: Betsy Graseck - Morgan Stanley & Co LLC. - Analyst : Yeah, for sure. But I'm just wondering is there anything have -- I guess what I just would like to understand a little better is how the swath book is impacting slide 10? And then is it gradual into the second half of '25 or is it a switch on in 3Q? Just understanding how the swap book is playing into this thing.

Question: Betsy Graseck - Morgan Stanley & Co LLC. - Analyst : Okay, got it. And then on the far right-hand side of slide 10, you've got the yellow box, $50 million to $200 million. Could you just give us a sense as to what's the inputs to the $50 million versus the $200 million, just so we can be able to track it as we go through the rest of the next two quarters? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 16, 2024 / 12:30PM, BAC.N - Q2 2024 Bank of America Corp Earnings Call

Question: Betsy Graseck - Morgan Stanley & Co LLC. - Analyst : Thank you so much for the color.

Question: Erika Najarian - UBS Securities LLC. - Analyst : Hi, good morning. Just my first question is trying to square, what you're telling us on the net interest income trajectory in the setup versus your disclosure. So, Alastair, you told us about -- as a response to Glenn's question, the benefit from fixed asset repricing, cash flow hedges repricing in the second half of '25. And when I look at table 40 from your queue, in both a parallel shift and a steepener scenario, down 100 is negative to net interest income? Is it because this is a 12-month look and like you pointed out, in the second half of '25, you have underwater cash flow hedges that are rolling off? In other words, as we go through 2025, do you get less asset-sensitive? And additionally, what is the notional on those cash flow hedges that you're talking about?

Question: Erika Najarian - UBS Securities LLC. - Analyst : And just what's the notional of the cash flow hedges that you're referring to? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 16, 2024 / 12:30PM, BAC.N - Q2 2024 Bank of America Corp Earnings Call

Question: Erika Najarian - UBS Securities LLC. - Analyst : And how much of that starts rolling off in the second half of 2025?

Question: Erika Najarian - UBS Securities LLC. - Analyst : Got it. And if I could just slide in one more question on the normalized NIM, Q3 and Q4 clearly is much higher than where you are now. Alastair, you mentioned we should assume a flattish balance sheet, but I think I had conversations with the company before. In that, half of that path between [19-ish to 2.3 to 2.4] has to do with balance sheet efficiency. And I'm wondering if you could carry out the balance sheet efficiency with and keep your balance sheet flattish? In other words, you know, obviously what the market is going to do is take your earning assets today and you know, apply two, three, five and say, okay, over time, whether it's `26 or `27, this is what BofA can earn under a normalized curve? I'm wondering if that's the right math to do, or should we expect some shrinkage of the balance sheet if you can -- that's part of the path (technical difficulty) for?

Question: Erika Najarian - UBS Securities LLC. - Analyst : Okay, thank you.

Question: Ken Usdin - Jefferies & Company, Inc. - Analyst : Hey, thanks. Good morning. Hey, Alastair, I just wanted to ask you a little bit more on the securities portfolio side because you also have $180 billion or so of pay-fixed swaps on the AFS book. And so, we know about the HFS -- HTM maturity schedule. But how do without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 16, 2024 / 12:30PM, BAC.N - Q2 2024 Bank of America Corp Earnings Call you look at that AFS book and how much are those pay-fixed swaps currently in the money and kind of like how you're just thinking about that side of the portfolio as well? Thanks.

Question: Ken Usdin - Jefferies & Company, Inc. - Analyst : Okay. And then just how do you manage that going forward with regards to, like the rate forecasts? Do those come off as the securities book matures or?

Question: Ken Usdin - Jefferies & Company, Inc. - Analyst : Okay. And a quick one on expenses. I believe you said that costs are kind of hang in here at around the $16.3 that was reported. And so just kind of any color on puts and takes here, just is that better kind of revenue-related comp against your ongoing efficiencies? And just how do you think about longer-term expense growth again? Thank you.

Question: Ken Usdin - Jefferies & Company, Inc. - Analyst : Thanks, Brian.

Question: Gerard Cassidy - RBC Capital Markets Wealth Management - Analyst : Hi, Brian. Hi, Alastair.

Question: Gerard Cassidy - RBC Capital Markets Wealth Management - Analyst : Brian, you talked -- and Alastair, both of you talked about the excess deposits. I think it was slide 22 you pointed to. Can you share with us as you go forward and assuming the Federal Reserve does cut interest rates, I know you put, I think, free Fed fund rate cuts in your slide 10. But as we go out into the end of '25, the forward curve is calling for obviously more rate cuts. Could you tell us how you expect to price your deposits as rates continue to follow? With this excess deposit level, can you be more aggressive in lowering your deposit costs?

Question: Gerard Cassidy - RBC Capital Markets Wealth Management - Analyst : Right. No doubt. And those are the golden deposits. And one other question on slide 10 and also, I think if I recall your first quarter queue, you guys indicated you were asset sensitive. I would assume that this slide 10 also shows that with the three rate cuts. Alastair, what would it take to move to a more neutral position on the balance sheet or even a liability-sensitive position should the Fed really get into a rate-cutting environment?

Question: Gerard Cassidy - RBC Capital Markets Wealth Management - Analyst : Yes. No, it does. Thank you. And just Brian or Alastair, one last quick question. I noticed in slide 25, your home equity loan balance has actually increased. I think that's the first time in maybe over two years or three years. Was there a new program or what are you seeing that drives that? And that, and should that or can that continue as we go forward into '25? Thank you.

Question: Gerard Cassidy - RBC Capital Markets Wealth Management - Analyst : Great. Thank you, again, Brian.

Question: Vivek Juneja - JPMorgan Securities LLC - Analyst : Hi, thanks for the questions. Just a little color on non-interest-bearing deposits. When you look at an average basis, the decline has clearly slowed sharply. Period end was down at a faster rate. Is that just the noise around end of 1Q? Or what are you seeing as you look sort of month by month? Is that truly slowing? And talk to it a little bit by customer segment, if you can, please?

Question: Vivek Juneja - JPMorgan Securities LLC - Analyst : A quick one, Visa B derivative gains, did you have anything in your equity derivatives trading revenue this quarter?

Question: Vivek Juneja - JPMorgan Securities LLC - Analyst : Thank you.

Question: Matt O'Connor - Deutsche Bank AG - Analyst : Good morning. How are you guys thinking about kind of targeted capital levels going forward? Obviously, we're still waiting for final rules. Maybe there's a little more volatility in your SCB than you would have thought, but you still got a nice buffer? And then I guess one last piece I was thinking is the remixing of the balance sheet that's been commented kind of throughout this call over time probably causes a little creep in RWAs, right, like loans higher than, say, securities. So lots of excess capital, but some puts and takes and how are you thinking about it between now and when we get final guidelines?

Question: Matt O'Connor - Deutsche Bank AG - Analyst : Okay. And then just to summarize that, I mean, do you think about bringing down the 11.9% to 11.2% kind of in the near term or to make it obvious, like, wait -- that's a little bit more theoretical and wait for the capital rules to play out?

Question: Matt O'Connor - Deutsche Bank AG - Analyst : Okay. Thank you.