Speaker 1: Bank of America Traders posted a record second quarter as
Speaker 1: the company reaped the benefits of volatile markets and net
Speaker 1: interest income top analyst estimates. For more, we sent things
Speaker 1: on over to David Weston. He's standing by with Bank
Speaker 1: of America Chair and CEO Brian moynahan.
Speaker 2: Hey, David, thanks so much Tim for our Bloomberg is worldwide.
Speaker 2: This is Bloomberg. I'm David Weston, and this is Brian
Speaker 2: moyhan who's the chair CEO of Bank of America. Brian,
Speaker 2: thank you so much for being back with this, really
Speaker 2: appreciating this busy day for you.
Speaker 3: That's great to be here. David, good to see you again.
Speaker 2: So let me start with one of the favorite questions
Speaker 2: I have for you. Because you, at Bank of America
Speaker 2: have a window into so much of America, consumers and
Speaker 2: businesses of all sizes, you sort of have a sense
Speaker 2: of where the pulse of America is. There's been a
Speaker 2: lot of changes announced and talked about in Washington. Do
Speaker 2: you see from your customers much reaction to that, either
Speaker 2: to the tak of tariffs, to the one big beautiful
Speaker 2: bill to consumers or business Are they changing their plans
Speaker 2: because of that?
Speaker 4: So if you look on the consumer side, in our
Speaker 4: seventy million consumers who engage with the economy every day
Speaker 4: and they send through their accounts and their and spend
Speaker 4: the cash and everything about four trillion, five trillion dollars
Speaker 4: a year. That grew up four percent plus the second
Speaker 4: quarter twenty five or the second course of twenty four.
Speaker 4: So they because they're employed and because wage growth, and
Speaker 4: that's not every single consumer, it's but in the in
Speaker 4: the large, in the main, they are continuing to grow
Speaker 4: and spend more and that helps the economy.
Speaker 3: And so you're seeing in some.
Speaker 4: Of the modern income households there's a little bit of
Speaker 4: chef moving around to different things. You're seeing people trade
Speaker 4: for one thing another, less planes, more cruises earlier, that's
Speaker 4: leveling out now, a lot more going to movies because
Speaker 4: the movies are good.
Speaker 3: But the end of the day, they're spending.
Speaker 4: Discretion necessary about the same percentage they traditionally spent. They've
Speaker 4: got money in their accounts, they're employed, and the wage
Speaker 4: growth has been relatively strong, and you know, so they're
Speaker 4: pretty good shape. The credit quality is good, they have
Speaker 4: equity in their homes. They're rate financing, and the mortgage
Speaker 4: so it was pretty good. When you go to small businesses,
Speaker 4: that's more of the question small medium sized businesses because
Speaker 4: the interest rate environment hits them harder because they borrow
Speaker 4: on lines of credit short term for a lot of
Speaker 4: their activities, and that rate went up substantially. And anythink
Speaker 4: about the if I'm a one hundred million dollar company,
Speaker 4: a fifty million dollar company here in North Carolina, and
Speaker 4: I'm engaging in the world finance, I'm importing goods and
Speaker 4: manufacturing them, further manufacturer, I'm selling them. You know, it
Speaker 4: got pretty interesting here trying to figure out all the
Speaker 4: trade and tariffs. So I think certainly on the tax
Speaker 4: rate helps them, meaning the big beautiful bill passing and
Speaker 4: the tax rate that's a very good thing. The alternative
Speaker 4: would have not been good if their tax rates would change.
Speaker 4: A satisfactory resolution to the trade so that they could
Speaker 4: learn the rules of the road over the next thirty
Speaker 4: sixty ninety days and get their plans for next year
Speaker 4: put together. And I think ultimately they're gonna we've got
Speaker 4: the satisfactory resolution on immigration and population growth because the
Speaker 4: end of the day, when I'm hearing more from the
Speaker 4: construction companies, farming companies and travel entertainment type companies. Is
Speaker 4: I'm starting to worry about I'm starting to struggle with
Speaker 4: labor availability at any price, and that's that we got
Speaker 4: to make sure they have the workers because they will
Speaker 4: supply great service.
Speaker 3: Economy continue to grow.
Speaker 2: One of the things you reported today was net interest income,
Speaker 2: which is really important to all banks, but particularly Bank
Speaker 2: of America and just steady growth that you're showing in
Speaker 2: that how sensitive are you to the rates set by
Speaker 2: the Fed? If that comes down substantially, does that affect
Speaker 2: Bank of America.
Speaker 4: Much so embedded in our estimates. So we've told the
Speaker 4: world that this quarter we had fourteen point eight billion
Speaker 4: dollars in net interest income, and that is the fourth
Speaker 4: straight quarter of growth and came off the floor last year.
Speaker 4: This quarter, when I was talking to was the lowest
Speaker 4: it's been. This quarter was a record in the company's history,
Speaker 4: and we're saying we're going to grow from that record
Speaker 4: to fifteen five to fifteen seven and two more quarters
Speaker 4: the third quarter and the fourth quarter. That embeds in
Speaker 4: it the rate cuts in the market that are expected
Speaker 4: by market. We don't we only show it that one
Speaker 4: if you have rate cuts over above that that would
Speaker 4: hurt that number, but it would still grow frankly and
Speaker 4: so and that the good thing about that is because
Speaker 4: a great loan of Positi growth seven percent loan growth
Speaker 4: four percent to Posit growth over the last year. That's
Speaker 4: in the system that's capitalized it.
Speaker 3: I mean, that's here. It doesn't go away.
Speaker 4: And as that continues to stay and we add to it,
Speaker 4: what you're starting to see is that sets us up
Speaker 4: great for next year for further ANII growth and further
Speaker 4: EPs growth. So this quarter was the trickiest quarter to
Speaker 4: get through because you every year we finally got some
Speaker 4: MENI growth, but you every year the market's business doing
Speaker 4: strong expense growth is a little more robust. That'll get
Speaker 4: lined and then you'll see NI dropped the bottom line
Speaker 4: and it will set up for twenty twenty six we
Speaker 4: do the more growth.
Speaker 2: When you talk about twenty twenty six, one of the
Speaker 2: things we're going to have is at all likely a
Speaker 2: new FED chair. There's been a lot of talk even
Speaker 2: today in Washington by the FED chair, and you said
Speaker 2: you believe in an independent FED. But if in fact
Speaker 2: President Trump gets his wish, as is his right under law,
Speaker 2: to appoint a new chair who will be more in line.
Speaker 3: With his views.
Speaker 2: He said he thinks the interest rate really at one
Speaker 2: percent or even below that, is that good for Bank
Speaker 2: of America? Is that good for the economy.
Speaker 4: Well, let me make two things. One is you're absolutely
Speaker 4: right and may have next year. The term the curve
Speaker 4: FED chair ends after being reappointed, and it's the right
Speaker 4: of the elected president to appoint the next successor and
Speaker 4: go through Congress. And I think in that dialogue around
Speaker 4: that there will be a lot of dialogue about, Okay,
Speaker 4: how do you set interestrates? What do you think about
Speaker 4: interest rates? Because the FED is an independent agency and
Speaker 4: they're they're meant to be outside the purview of the
Speaker 4: executive and Congress. They are called a task and are
Speaker 4: monitored and they're reviewed and.
Speaker 3: All the things.
Speaker 4: But the really reality was set up to be independent
Speaker 4: so that our Central Bank.
Speaker 3: Of America was independent.
Speaker 4: So I think no matter who gets in, they're going
Speaker 4: to look at it and have to look at the
Speaker 4: facts and make a decision because if you drop rates
Speaker 4: too far, inflation you may kickup and then you're gonna
Speaker 4: have to raise them back quickly. On the other hand,
Speaker 4: if you think the prior FED has been slow to
Speaker 4: the lower rates you might lower and faster. Our team
Speaker 4: believes that the Fed will lower rates in a second
Speaker 4: half of next year by one hundred basis points. No
Speaker 4: change until then because inflation is still going through the system.
Speaker 4: That brings the FED funds rate down closer to three,
Speaker 4: which they think is probably more of a long term
Speaker 4: rate and frankly, is more similar to what we had
Speaker 4: for most of American history. What's been unusual is the
Speaker 4: period after global financial crisis, a very low interest rate structure.
Speaker 4: That is really not a good place to be. Honestly,
Speaker 4: we'd rather have a higher interest rate structure, a little
Speaker 4: more inflation, a little more robust economic growth. So I
Speaker 4: think everybody asks me a little careful about keeping that
Speaker 4: engine going, because if this engine fails, a whole world fails.
Speaker 2: You also reported increased loans from Bank of America, which
Speaker 2: is good news for you, and tell us about your
Speaker 2: competition for that. We now have private credit really coming
Speaker 2: into that area substantially. There's talk that maybe that would
Speaker 2: be peaking. Is that the way you see it?
Speaker 4: Well, I think that. So if you think about all
Speaker 4: our loans, a trillion and one of loans, say half
Speaker 4: from the consumer and so there's that competition's always been there.
Speaker 4: Half of what goes on for consumer lending goes on
Speaker 4: outside the regulated bank industry. That's been true for a
Speaker 4: long period of time. We saw growth across all the segments.
Speaker 4: We feel very good about that. We go to commercial,
Speaker 4: the private credit effects sort of the leverage finance and
Speaker 4: some of the areas, and it's been an effective competitor.
Speaker 3: It's grown.
Speaker 4: I think we in the industry and we in the
Speaker 4: company back of America have come back with a way
Speaker 4: of operating we think is consistent with our credit quality,
Speaker 4: consistent with who are customers, and will also deliver a
Speaker 4: competitive product. Then we grew commercial loans leave us side
Speaker 4: the market based business.
Speaker 3: We grew commercial loans.
Speaker 4: I think seventy eight percent excluding the Cree office that
Speaker 4: we are running down still in the middle market, which
Speaker 4: is as strong as anybody.
Speaker 3: And we feel very good about the.
Speaker 4: Credit quality of those loans, but more importantly feel good
Speaker 4: about the thirty fifty seventy year corporate relationships we have
Speaker 4: and if they want a different kind of financing, we'll
Speaker 4: bring it and take it to the market form like
Speaker 4: we've always done.
Speaker 2: You also had a great quarter in terms of trading,
Speaker 2: give us a sense about where you're going with your
Speaker 2: trading activities and your investment bank. In the past, you've
Speaker 2: added more balance sheet strength to that. You've come up
Speaker 2: in that. Do you plan to keep doing more of that?
Speaker 3: Yeah?
Speaker 4: And so Jim Damar and the global markets business, which
Speaker 4: is a trading business as you call it, they are
Speaker 4: up fifteen percent year every year. Both fixed income and
Speaker 4: equities were up, and he has had thirteenth straight quarters
Speaker 4: like it is of year over year quarter of comparison growth.
Speaker 4: And so there's some d and flows in that business.
Speaker 4: But this quarter started off a little interesting with Liberation
Speaker 4: Day and I think the first four of the biggest
Speaker 4: days ever and equity stock trading occurred in the first
Speaker 4: week of April or something like that.
Speaker 3: So it was a pretty wild time.
Speaker 4: But over the course of the quarter it got more
Speaker 4: stable and they made it. We have given him more
Speaker 4: capital and more balancing, hit him in the team more importantly,
Speaker 4: and that team, under his guidance, has has delivered on
Speaker 4: it is getting a good return on it, and we
Speaker 4: have lots of capital. If he can put it to work,
Speaker 4: there'll be more of it. The trick is he's also
Speaker 4: got to use it efficiently and get that return on
Speaker 4: table common equity, return to allocated capital straight when you
Speaker 4: go to investment banking. Look, April was kind of quiet,
Speaker 4: especially on the M and A side. For us, it
Speaker 4: came back and you saw us. You know, it was
Speaker 4: recently a three or four weeks ago we thought we
Speaker 4: do one point two billion. We did one point four billion,
Speaker 4: and with pipelines full, Matthew Coder and team are out
Speaker 4: there driving at it.
Speaker 3: We did. We lost some deals to other people in
Speaker 3: the M and A. We were on the wrong side of
Speaker 3: the trade. That happens.
Speaker 4: But the reality is what really changed over the course
Speaker 4: of the months was a financing side kicked in and
Speaker 4: that you know, that's three quarters of our revenue, and
Speaker 4: that that was good and that's why the revenue came up,
Speaker 4: and that team does a good job and there's lots
Speaker 4: of places to grow. That is going to be much
Speaker 4: more dependent upon the IPO markets being open, the M
Speaker 4: and A markets, the M and A taking place, and
Speaker 4: I think was stability again back to the tax bill,
Speaker 4: some trade stability, and then frankly deregulation.
Speaker 3: You're going to see.
Speaker 4: I think that activity keep kicking in as we moved
Speaker 4: through twenty twenty five into twenty six, which will be
Speaker 4: good for the economy because it creates a lot of activity,
Speaker 4: investment changes in businesses, and all those things that we
Speaker 4: expect to.
Speaker 2: See you It took time out from your earnings announcement
Speaker 2: to really focus on artificial intelligence, something you have been
Speaker 2: talking about for quite some time and adopting, for example
Speaker 2: with Erica that you have. Give us a sense of
Speaker 2: how that's changing the business at Bank of America, for example,
Speaker 2: on the expense side, does it really lead to saving
Speaker 2: some costs?
Speaker 4: So at the end of the day, the artificial intelligence,
Speaker 4: as we know is an extension of a series of
Speaker 4: technology capabilities that allow us to take work and have
Speaker 4: machines do the work and people and enhance the people's
Speaker 4: ability to do more work and do more things and
Speaker 4: spend more time on things that aren't capable of going
Speaker 4: through that. It just gives you a different sort of
Speaker 4: a different attack surface for lack of better term. In
Speaker 4: the past, we had three hundred thousand people fifteen years
Speaker 4: ago in our company. Today we have two hundred twelve
Speaker 4: thousand people. The companies bigger, complex, more transactions from that time,
Speaker 4: our digital logins were probably I don't know, ten twenty
Speaker 4: million a quarter and we felt good about it. They
Speaker 4: were several billion or billion a month. Just to get
Speaker 4: your sense, think of all the investment to do that.
Speaker 4: But that digitization was customers doing things on their own
Speaker 4: at ten o'clock at night and seven o'clock in the morning,
Speaker 4: and that allowed us to save our time for our
Speaker 4: people to go out and help customers solve difficult problems.
Speaker 3: What AI.
Speaker 4: The place that we think AI has real help is
Speaker 4: in the preparation of our relationship management force and our
Speaker 4: small business bankers, our business bankers, our commercial bankers, our
Speaker 4: wealth management, our investment bankers. Allows them to be much
Speaker 4: more prepared. So we're using those tools to prepare the information,
Speaker 4: pull it together because it could take text and manipulate
Speaker 4: it and put it into the forums and the capabilities.
Speaker 4: So that's a big thing in front of us. We've
Speaker 4: done five or seven hundred pitches so far, and that
Speaker 4: cranking up. We see it in employee self help. If
Speaker 4: you had a computer that went down at Bank of America,
Speaker 4: you can click on Erica from employees and a chatbot
Speaker 4: will take you all the way through the replacement of
Speaker 4: your computer process and evolve no people and you'll get
Speaker 4: the computer delivered to you. So you know, that's how
Speaker 4: we took that save Erica model that for you know,
Speaker 4: twenty million consumers use two hundred million times a quarter.
Speaker 3: Turn it internal and so there's all.
Speaker 4: These applications and we think it has high application for
Speaker 4: the services business that Bank of America's in and the
Speaker 4: ability to keep doing work. And in the end of
Speaker 4: the day, we'll have teammates who will harness it and
Speaker 4: take it and use it to their advantage to make
Speaker 4: themselves even more successful.
Speaker 3: So you know, we talk to teammates, we say.
Speaker 4: Embrace this, let's drive it, and then let's figure out
Speaker 4: you know, what jobs are, what job you're going to do,
Speaker 4: but you're going to need this to be able to
Speaker 4: do any job in this company.
Speaker 2: As you move forward with our visual intelligence, is it
Speaker 2: changing what you're looking for and the people coming in
Speaker 2: the door, the entry level people.
Speaker 4: Now we're just in the process of bringing in our
Speaker 4: two thousand plus kids.
Speaker 3: New hires that just started Hick this week. So think
Speaker 3: about that.
Speaker 4: Two thousand kids arrive one percent of applications and less
Speaker 4: than one percent we're accepted. So weet one hundred and
Speaker 4: tinety thousand applications and a lesson and around two thousand
Speaker 4: people coming in. So we're getting the best of the brightest.
Speaker 4: We love them, they're coming in. The point I'm making
Speaker 4: is there is a group that has to use computer
Speaker 4: skills and data skills, and that that's once, I think,
Speaker 4: but everybody has to be able to use AI to
Speaker 4: help them be a better employee at Bank of America.
Speaker 4: So as you think about that, you know every teammate
Speaker 4: and I have high confidence kids coming out of colleges
Speaker 4: are going to be a lot better AI than you
Speaker 4: and I might be, David, but we'll catch up to
Speaker 4: them someday.
Speaker 2: One last question, Brian, you've said that you're moving towards
Speaker 2: stable coin, as some other banks are as well. You
Speaker 2: saw mister Bailey, who's the Government Bank of England, really
Speaker 2: said that might have systemic risks because they take some
Speaker 2: of the money out of the banking system. You're better
Speaker 2: off going in a different direction. Are you worried about
Speaker 2: systemic risks from stable coin?
Speaker 4: So one of the questions, and I think what mister
Speaker 4: Bailey was talking about is a question. I think the
Speaker 4: banking system the United States, a policy makers have to
Speaker 4: think about, which is think about the money market mutual fund.
Speaker 4: About six trillion dollars of deposit banks moved to money
Speaker 4: market mutual funds, and their utility was to invest in
Speaker 4: short term you know, deposits, treasury bonds, et cetera, commercial paper.
Speaker 4: They can't invest long term, so their ability to help
Speaker 4: the economy is really a limited amount. That six trillion
Speaker 4: is outside the system. If you said we're going to
Speaker 4: take the eighteen trillion or whatever is the banking syst today,
Speaker 4: another six trillion out, you have to think through the
Speaker 4: pol cerifications because to keep it stable you have to
Speaker 4: have it invested in a very narrow place. And I
Speaker 4: think that's what mister Bailey was talking about.
Speaker 3: I think that dialogue is going on now.
Speaker 4: There's another side of this, which means those deposits will
Speaker 4: come back in the system if we hold the deposit's
Speaker 4: effectively an escrow custody for our customers who are out
Speaker 4: engaging stable coins. So I think there's a lot of
Speaker 4: turns in the track between where we are today and
Speaker 4: where we might be on this. Our view is pretty simple.
Speaker 4: Ten years ago you would have said the clients don't
Speaker 4: need a thing called zel and now they use it,
Speaker 4: you know, twice as much as they use checks, and
Speaker 4: it is used more times than the amount of checks
Speaker 4: written by our consumers in amount of cash transactions, taking
Speaker 4: the cash.
Speaker 3: All of the ms.
Speaker 4: So it's become the dominant payment network for consumers outside
Speaker 4: of card that didn't exist ten years ago. So we've
Speaker 4: got to have the consumers adopt us. If they want it,
Speaker 4: we'll build it and they'll use it. And if it's
Speaker 4: a way to transact, we'll be there to help them transact.
Speaker 4: We think, you know, small bounce, cross border transfers in
Speaker 4: app sort of patient purchases, all these types of things
Speaker 4: and applications for but the end of the day, it's
Speaker 4: our customer who needs to say, I want to move money,
Speaker 4: I want to move money into euro euros, I want
Speaker 4: to move money into stable coin.
Speaker 3: So we've got to be able to do both.
Speaker 2: For Brian, great pleasure to talk to you, Thanks again
Speaker 2: on a busy day for joining us. That is Brian moynan.
Speaker 2: He is Chairman and CEO of Bank of America.
Speaker 1: And now back to you, thanks so much. That of
Speaker 1: course is David Weston of Bloomberg Wall Street. We catch
Speaker 1: new episodes every Friday at six pm Wall Street Time
Speaker 1: on Bloomberg Radio and television. Also a big thank you,
Speaker 1: of course, to Brian moynihan for joining us there as well.