Bank of America - Earnings Call - Q3 2025

Executive Summary

• BAC delivered a strong quarter: EPS of $1.06 and net income of $8.5B, with revenue up 11% YoY to $28.1B and record net interest income; operating leverage improved and the efficiency ratio fell to 61.7%.
• EPS beat Wall Street consensus by ~$0.11 ($1.06 vs. $0.95*) and revenue exceeded consensus by ~$0.6B ($28.1B vs. $27.46B*); strength came from NII growth, investment banking fees, and sales & trading (14th consecutive YoY growth).
• Management guided Q4 NII to the high end of its range (“$15.6B+” FTE), expects Q4 expenses to be flattish vs. Q3, and signaled deposit rate paid should decline with cuts flowing through wealth/global banking pricing.
• Capital and credit remained solid: CET1 11.6% (Standardized) and net charge-offs fell sequentially; common dividend raised to $0.28 for Q4 2025.

Values with * are from S&P Global.

What Went Well and What Went Wrong

What Went Well

• Record NII and strong operating leverage: NII rose to $15.2B (GAAP) / $15.4B (FTE), driving 11% YoY revenue growth and an efficiency ratio of 61.7%.
• Market-facing businesses performed: investment banking fees topped $2.0B (+43% YoY) and sales & trading revenue grew again YoY (FICC +5%, Equities +14% excl. DVA).
• Clear forward guideposts from management: “We believe fourth quarter NII will be at the higher end of the range ($15.6B+ FTE)” and “expenses flattish in Q4,” reinforcing momentum into year-end.

What Went Wrong

• Expense growth continued: noninterest expense rose 5% YoY to $17.3B, reflecting revenue-related incentives and investments in people/technology (though operating leverage offset).
• Global Banking NII remains pressured: management noted lower NII in banking offset by fee strength; deposit rate paid dynamics require disciplined pass-through in rate-cut environment.
• Commercial real estate remains a headwind: while improving, CRE still contributed to losses earlier in the year; management addressed ongoing resolution of office exposures and careful credit posture.

Transcript

Operator (participant)

Good day, everyone, and welcome to today's Q3 Bank of America Earnings Call. At this time, I would like to turn the program over to Lee McIntyre. Please go ahead.

Lee McIntyre (Head of Investor Relations)

Good morning. Thank you. Thank you for joining us to review our third-quarter results. Our earnings release documents are available on the Investor Relations section of the bankofamerica.com website. Those documents include the earnings presentation that we'll make reference to during the call. Brian Moynihan will make some brief comments before turning the call over to Alastair Borthwick, our CFO, to discuss more of the details in the quarter. Let me just remind you that we may make forward-looking statements and refer to non-GAAP financial measures during the call. The forward-looking statements are based on management's current expectations and assumptions, and those are subject to risk uncertainties laid out. Factors that may cause our actual results to materially differ from expectations are detailed in the earnings material and available in the SEC filings on the website. Information about non-GAAP financial measures, including reconciliations to U.S.

GAAP, can also be found in our earnings materials and are also available on the website. With that, Brian, over to you.

Brian Moynihan (Chair and CEO)

Thank you, Lee, and good morning, and thank you all for joining us. Bank of America delivered a strong third quarter with good growth both in the top-line revenue and bottom-line EPS, all driven by strong operating leverage. Our ROTCE improved to 15.4%. This quarter's results provide good momentum as we finish 2025 and head into 2026. We have been demonstrating consistent organic growth for many quarters. This quarter's results highlight the continued organic strength of our world-class deposit and lending capabilities. Our results also underscore the benefits of a diversified business model with top-tier positions not only in lending and deposits but also across the market-driven businesses in wealth management, global markets, and global banking. Before I turn it over to Alastair, I'm going to hit a few highlights here. We reported revenue of $28 billion, up 11% year-over-year. EPS was $1.06, up 31% year-over-year.

We drove operating leverage of 560 basis points in the quarter. The efficiency ratio fell below 62%. The return on assets reached 98 basis points. During the quarter, we returned to our shareholders $7.4 billion through dividends and share repurchases. Net interest income on an FTE basis reached a record of $15.4 billion. That was supported by strong commercial loan and deposit growth along with continued balance sheet positioning. Investment banking fees exceeded $2 billion, up 43% year-over-year. Our team in sales and trading grew revenue 8%, marking our 14th consecutive quarter of year-over-year revenue growth. Our asset management fees increased 12% compared to last year. All the business segments contributed to earnings improvement and had growth in earnings. Two stood out this quarter. Our consumer banking team delivered $3.4 billion in after-tax earnings, up 28% year-over-year with 600 basis points of operating leverage.

This reflects strong revenue growth and disciplined expense management. This business is driven off the core operating accounts of our consumer customers, and we gained more of them this quarter. These accounts have strong balances per account. The customers give us great customer scores, and we operate them at lower costs with more primacy in the account and lower attrition compared to anyone in the industry. That is a winning combination. Our Global Wealth and Investment Management teams posted net income of nearly $1.3 billion, up 19%. That was driven by the strong Maryland private bank advisor productivity and the concomitant continued growth in fee-based assets. Lending in this business was particularly strong with $12 billion in loan growth in this quarter. G1 also opened another 32,000 banking accounts and grew deposits $3 billion from quarter two.

As we look ahead, we believe this quarter's performance continues to reflect the impact of the investments we have made on a continuous basis for many years in technology, talent, and client experience. These continue to translate into strong financial results. We have been growing loans with the right risk and deposits as we continue to gain market share through organic growth. That translated into continuous NII improvements and complementary growth in our fee-based businesses this quarter. I also, as usual, commend you to look at the digital slides in the appendix on slides 20, 22, and 24. They show the continued progression across all the businesses of applied technology. With lots of discussions going on about technology and AI and other things, we give you the stats. What you'll see in these slides is the customer-facing activities of Erika, for example.

There are many other applications of AI going on in this company, but this one has been handling successful interactions for years with scale, and that application has now been applied across other businesses and even across our employee base. We're confident in our trajectory of our results, and we're excited about the opportunities ahead. We look forward to, I look forward to talking to you at Investor Day in November. I'm going to turn it over to Alastair to walk through the financials in more detail.

Alastair Borthwick (CFO)

Thank you, Brian. I'm going to start with slide three to begin our discussion. I just have three things on the income statement that I want to add to Brian's comments. First, we're pleased with the continued demonstration of expense discipline across our businesses. In the third quarter, we delivered 11% year-over-year revenue growth, significantly outpacing 5% expense growth and resulting in that strong 6% operating leverage. Of the $28.2 billion in total revenue, an aggregated amount of $11.3 billion came from our sales and trading, investment banking, and asset management fees, three of our more highly compensable market-facing areas. Those areas grew 15% year-over-year in the aggregate, and we're excited to continue our investments given their strategic importance and attractive returns. When coupled with investment spending and inflation, this revenue growth helps frame the 5% expense growth even better.

Importantly, expense growth versus the second quarter was held to under 1%, while those same compensable revenue streams grew 8% sequentially, further reinforcing our ability to scale efficiently and invest where it matters most. Second, provision expense improved this quarter with net charge-offs declining 10%, and we had a modest reserve release as a result of both credit card and commercial real estate improvement. The strong asset quality reflects the continued strength of our credit portfolio, years of disciplined risk management, and higher growth of the portfolio than other banks with good credit results. Lastly, our average diluted share count declined by 24 million shares from the second quarter, and this quarter included the dilution we've highlighted before in our filings, and that comes from our 2008-issued convertible preferred Series L stock. On slide four, you'll note the various earnings highlights Brian and I have talked about.

I don't have much to add here and would instead spend just a moment on our continued organic growth, which is powering our loan and deposit activity. We added new clients, and we deepened relationships with existing clients. Across consumer, wealth, commercial, and institutional businesses, our teams are winning in the marketplace by putting our clients first. As always, we highlight the continued organic growth across each of our businesses, driven by client engagement, disciplined execution, and strategic investment. You can see the results there on slide five. Consumer Banking continued to show strong momentum. We grew another 212,000 net new checking accounts, extending our string of consecutive growth to 27 quarters. This includes the fourth consecutive quarter of increased average non-interest-bearing deposits. Those are important because they are the primary operating account for a relationship, and they're quite beneficial as a low-cost funding source.

Additionally, card, home, and auto loan balances grew year-over-year, reflecting healthy consumer demand. We believe those further cement the relationship beyond just the operating account alone. In Small Business, we continued our string of lending growth, and we remain the number one leading provider of credit to small business in the United States. Global Wealth and Investment Management saw client balances climb to more than $4.6 trillion, driven by strong AUM flows of $84 billion in the past year, strong loan originations, and market appreciation. Our advisors continue to deliver comprehensive solutions to help clients achieve their financial goals. In Global Banking, we saw a nice pickup in client activity in investment banking, resulting in market share gains, leadership rankings across many products, and the highest non-pandemic fee quarter in our firm's history.

Commercial client activity showed a continuation in the demand for loans and cash management needs as Treasury service fees increased 12% year-over-year alongside deposit growth of 15%. Global Markets continued to deliver on their string of year-over-year revenue growth and also continued to grow loans from healthy demand of our clients. Let's transfer to a discussion of the balance sheet using slide six, where you can see total assets ended the quarter at $3.4 trillion. That's down $38 billion from the second quarter as good loan growth was offset by lower Global Markets assets and wholesale funding reductions as part of our plan to continue to tighten the balance sheet. Importantly, this balance sheet tightening will continue to benefit the net interest yield, NII. Deposits ended just over $2 trillion, and were up $72 billion from the year-ago period with growth in both interest-bearing and non-interest-bearing deposits.

Average global liquidity sources of $961 billion remain strong, and shareholders' equity of $304 billion was up $4.6 billion from last quarter as we issued $2.5 billion of preferred stock. Otherwise, a $2 billion increase in tangible common equity to $208 billion included a modest capital build as net income was slightly more than capital distributions, and we saw some improvement in AOCI. We returned $7.4 billion of capital back to shareholders with $2.1 billion in common dividends paid and $5.3 billion of shares repurchased. Tangible book value per share of $28.39 rose 8% from the third quarter of 2024. Looking at regulatory capital, our CET1 level increased modestly to $203 billion, while the risk-weighted assets were relatively flat, and that drove our CET1 ratio higher to 11.6%. This is well above our October 1st 10% regulatory minimum.

Our supplemental leverage ratio was 5.8% versus a minimum requirement of 5%, which leaves capacity for balance sheet growth, and our $473 billion of total loss-absorbing capital means our TLAC ratio remains comfortably above our requirements. On slide seven, we show a 10-quarter trend of average deposits to illustrate the extension of consecutive growth across those periods. Average deposits were up $71 billion or 3.7% from the third quarter of 2024. Average consumer deposits were up 1% year-over-year, while global banking deposits grew 15% compared to a year ago. Our global capabilities, digital solutions, and relationship managers continue to win clients in the marketplace. In addition, we remain disciplined on pricing to achieve that growth. Overall, rate paid on total deposits declined 32 basis points year-over-year, reflecting both lower rates and disciplined actions in our global banking and wealth management businesses.

Rate paid on the roughly $950 billion of consumer deposits remained low at 58 basis points in Q3, driven by the operating nature of that account and client base. Compared to the second quarter, total deposit rate paid rose two basis points due to makeshift into interest-bearing, and we expect improvement next quarter driven by repricing after the Fed funds rate cut in late September. Let's turn to loans by looking at average balances on slide eight. You can see loan balances in Q3 of $1.15 trillion improved 9% year-over-year, driven by 13% commercial loan growth. Consumer loans grew at a slower pace and, importantly, were up across every loan type. For the second consecutive quarter, every business segment recorded higher average loans on both a year-over-year basis and on a linked quarter basis.

Focusing on commercial loans in Global Markets, we continue to take advantage of the strong financing demand in the marketplace from institutional borrowers, where we lend against diverse collateral pools. Small business is benefiting from our newly combined local market-based coverage model for Small Business and Business Banking, and that's creating more capacity for client expansion. Lastly, note the 9% improvement in Wealth Management as affluent clients borrowed for investments in assets like sports and arts and businesses. All of that balance sheet activity across deposits and loans results in net interest income. Let's turn our focus to NII on slide number nine. On a GAAP non-fully taxable equivalent basis, NII in Q3 was $15.2 billion. On a fully taxable equivalent basis, NII was a little less than $15.4 billion. As I said earlier, that's up 9% from the third quarter of 2024.

NII grew $1.3 billion year-over-year and $572 million on an FTE basis over the second quarter, driven by higher loan and deposit balances and benefits from fixed-rate asset repricing. Versus Q2, we also gained an extra day of interest. The net interest yield improved seven basis points from the second quarter, reflecting the growth in NII, while the earning asset balance modestly declined as loan growth replaced lower-yielding securities and Global Markets balances declined modestly. As I said, we reduced expense of wholesale funding and cash. Regarding interest rate sensitivity, on a dynamic deposit basis, we provide a 12-month change in NII for an instantaneous shift in the curve. That means interest rates would have to instantaneously move another 100 basis points lower than the expected cuts that are already contemplated in the curve.

If you think about that, 100 basis points below what the curve implies, more simply put, that would mean, for instance, on the short end, the July Fed funds rate next year would be getting down to 2.25%. On that basis, a 100 basis point decline would decrease NII over the next 12 months by $2.2 billion. If rates went up 100 basis points, NII would benefit approximately $1 billion. With regard to a forward view of NII, let me give you a few thoughts. In January and again in April, we provided our expectation that we could exit Q4 of 2025 with NII on a fully taxable equivalent basis in a range of $15.5 billion-$15.7 billion. We also noted our expectation for that growth to accelerate in the second half of 2025.

Despite all the uncertainties we've experienced around tariffs and rates, we've seen good performance against our expectations. Even with the third quarter late quarter interest rate cut and with the curve anticipating two more cuts in October and December, we believe fourth quarter NII will be in the higher end of that range of expectations. Think of that as being $15.6 billion plus on a fully taxable equivalent basis. That would represent approximately 8% growth from the fourth quarter of 2024. Thinking a bit more generally, we just note for the full year of 2026, our expectations about the drivers of growth are largely aligned with 2025 performance. We expect good core NII performance driven by core loan and deposit growth a little bit above GDP, which will additionally benefit from sizable fixed-rate asset repricing.

In 2026, we expect to see roughly $10 billion-$15 billion in combined quarterly mortgage-backed securities and mortgage loans. Those will roll off, and they'll be replaced with new assets at 150 to 200 basis points higher yield. That should result in full-year NII growth somewhat similar to 2025 performance over 2024. Think of that as something like 5%-7% growth. Let's turn to expense, and we'll use slide 10 for the discussion. First, I just want to highlight the strong operating leverage, which we expect again in Q4. We reported $17.3 billion in expense this quarter, and that was up modestly compared to the second quarter and up 5% year-over-year. As I noted earlier, the year-over-year increase was primarily driven by incentives tied to growth, especially in our market-facing businesses as well as ongoing investments across the enterprise.

Looking ahead to Q4, we expect expenses to remain roughly in line with Q3. As you know, headcount's the key driver of expense from compensation and benefits to occupancy costs and technology. We manage this closely, not just in total numbers but also in organizational structure, ensuring we're striking the right balance of managers and teams. The good news is we continue to manage headcount well. Looking at the past three years, we've been able to lower our headcount from a peak of 217,000 to 213,000 now. More recently, since the third quarter of last year, we're down 500, which includes the addition last quarter of nearly 2,000+ college grads. It is this disciplined approach that supports both efficiency and growth. Let's now move to credit and turn to slide 11. You can see asset quality remains sound with improvements in several key indicators.

Net charge-offs were $1.4 billion, down about 10% from the second quarter, with the improvements split pretty evenly between credit card and commercial real estate. The total net charge-off ratio this quarter was 47 basis points, down 8 basis points from Q2. Q3 provision expense was $1.3 billion and mostly matched net charge-offs. We had a modest reserve release associated with improved outlooks for both credit card and commercial real estate. Focusing on total net charge-offs again and looking forward, in the near term, we would not expect much change in total net charge-offs given the steady consumer delinquency trends, stability of CNI, and reductions in CRE exposures. On slide 12, in addition to the improvement in consumer losses, note the reductions in both reservable criticized and non-performing loan metrics commercial portfolios.

Non-performing loans are down 19% from Q2, and reservable criticized exposure in commercial real estate is now down nearly 25% from the third quarter of 2024, as we dealt with the more problematic exposures across the year. Let's turn to the performance across our lines of business, beginning with Consumer Banking on slide 13. Consumer Banking delivered strong results, generating $11.2 billion in revenue, up 7% year-over-year, and $3.4 billion in net income, or 28% growth. Return on allocated capital rose to 31%. These results reflect the value of our deposit franchise, underscoring both the breadth of our platform and the success of our organic growth strategy and digital banking capabilities. Innovations such as Family Banking, our high-value cash-back credit cards, and our industry-leading Preferred Rewards program are delivering differentiated value to clients and value we believe is unmatched elsewhere.

This client value proposition, combined with disciplined pricing, helped drive a 9% year-over-year increase in net interest income. Another strong highlight this quarter was expense management, which enabled us to deliver more than 600 basis points of operating leverage. Continued innovation and the deployment of advanced technology and tools helped us to hold expense growth to just 1% year-over-year while revenue grew significantly. As a result, our efficiency ratio improved, falling below 50% for the quarter. We continue to invest in high tech, which drove higher digital engagement, and we continue to invest in high touch. We continued our march into new markets, filled out more of previously expanded markets, and supported our brand in those communities.

For example, we just opened four new financial centers in Idaho over the past six months, expanding our presence and complementing our existing Merrill team in the local market to better serve clients in that region. Consumer investment balances grew 17% to $580 billion, supported by market appreciation and $19 billion in full-year client flows. Third quarter average balance per new account of $110,000 is up 6% from last year. The investment platform serves as a great catch basin for first-time investors and for more affluent investors looking to manage some element of their own money. As mentioned earlier, consumer net charge-offs improved on a linked quarter basis following a decline in delinquencies. The largest component of consumer losses is credit card, and our loss rate decreased from 3.82% to 3.4% linked quarter. This contributed to an improved risk-adjusted margin on credit card, approaching 7.5%.

Finally, as shown on appendix slide 20, strong digital adoption and Erika engagement continues, and customer experience scores remain elevated, reflecting the impact of our ongoing investments in digital capabilities. Turning to wealth management on slide 14, the business delivered a strong quarter marked by improved profitability. Net income grew 19% year-over-year to nearly $1.3 billion, driven by new household growth, strong AUM flows, loan growth, and disciplined expense management that produced meaningful operating leverage and a 26% return on allocated capital. We achieved 300 basis points of operating leverage, which contributed to a 27% pre-tax margin and improvement of over 200 basis points. Together, Merrill and the private bank managed $4.6 trillion in client balances and continued to generate organic growth with $84 billion in AUM flows over the past year. This reflects a healthy mix of new client assets and existing clients putting more capital to work.

During this past quarter, Merrill and the private bank added 5,400 net new relationships, with the average size of new relationships continuing to grow across both businesses. Importantly, we're not just adding relationships. We're deepening the ones we enjoy already. Reflecting the strength of our integrated model and our product offering, the percentage of clients with banking products continued to rise, and it's now at 63%. In the third quarter, Global Wealth and Investment Management reported record revenue of $6.3 billion, up 10% year-over-year, led by a 12% increase in asset management fees. Loan growth remains strong, and we saw a notable pickup in custom lending with both volume and loan size increasing. That drove a 9% year-over-year increase in average loans. Finally, I'd highlight the continued digital momentum as shown on slide 22.

New accounts are increasingly being opened digitally, underscoring the effectiveness of our digital investments and the evolving preferences of our clients. On slide 15, you see the results for global banking, which benefited from improved investment banking activity, significant deposit growth, and solid loan performance. In Q3, global banking delivered net income of $2.1 billion, up 12% year-over-year, supported by 500 basis points of operating leverage and a 17% return on allocated capital. The standout driver of performance was a 43% year-over-year increase in firm-wide investment banking fees, which fueled 7% overall revenue growth. Firm-wide, investment banking fees rose across the solution set. Advisory was up 51%, debt underwriting increased 42%, and equity underwriting grew 34%. We maintained our number three position year to date, and we also gained market share during the quarter.

Notably, we participated in several of the industry's largest transactions, a clear testament to the value clients place on our financial advice and solutions. Non-interest expense grew compared to last year as we continued to invest in the future. Average deposits grew 15% year-over-year, contributing to a 6% increase in global transaction services revenue. Importantly, disciplined pricing coupled with lower rates led to a 47 basis point decline in rate paid compared to a year ago. Switching to global markets on slide 16, I'll focus my comments on results, excluding DVA, as we typically do. As Brian mentioned, we extended our streak of strong revenue and earnings performance and once again achieved a solid 13% return on allocated capital. In the third quarter, global markets generated net income of $1.6 billion, up modestly year-over-year and consistent with the prior quarter.

Revenue, excluding DVA, grew 10% year-over-year, driven by strong sales and trading performance and the benefit of higher investment banking revenue shared with Global Banking. Focusing on sales and trading, revenue ex-DVA rose 8% year-over-year to $5.3 billion. Fixed revenue grew 5%, driven by improved performance in credit products. Equities trading led the improvement with 14% revenue growth, supported by increased financing activity in Asia. Expense growth year-over-year reflects both the revenue increase and higher trading-related costs in certain Asian markets. Those costs are passed through to clients and therefore appear in both the revenue line and the expense line. As noted earlier, we continue to benefit from lending opportunities tied to highly collateralized pools of high-quality assets. Clients value our expertise and the liquidity we provide in delivering these solutions.

On slide 17, all other shows a loss of $6 million in the third quarter, with very little to talk about here. Our third quarter effective tax rate was 10.4%. Excluding the tax credits related to investments in renewable energy and affordable housing and a small amount of discrete items, the effective tax rate would have been much closer to a normal corporate tax rate at approximately 23%. Thank you. With that, we'll jump into the Q&A.

Operator (participant)

At this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may withdraw yourself from the queue at any time by pressing star two. We'll take our first question from Glenn Schorr with Evercore. Your line is open.

Lee McIntyre (Head of Investor Relations)

Hey, Glenn.

Glenn Schorr (Senior Managing Director and Senior Research Analyst)

Hi, thanks.

Lee McIntyre (Head of Investor Relations)

Hey, Glenn.

Glenn Schorr (Senior Managing Director and Senior Research Analyst)

Hello.

Lee McIntyre (Head of Investor Relations)

Glenn, before you start, let me just say it seems like one of the phone lines may have cut out at some point during the call, but the webcast was working throughout. Just a reminder that the website will have the replay of the call in case you were on one of the lines that might have had a break in it. Glen, go ahead.

Glenn Schorr (Senior Managing Director and Senior Research Analyst)

No problem, no problem. Alastair, I heard your question, your comments on the expense message for the fourth quarter. I appreciate that. I guess I have a bigger picture AI question of, okay, you big banks still are, you're ahead of the curve in terms of digitizing the whole franchise, but with the infusion of AI throughout the organization, and you still have big manual functions throughout the firm, why aren't you and others talking about AI as a huge efficiency driver of better margins in the years to come? Is it just a little too far off? Am I a little too optimistic? I'm just curious on that front. I think your operating leverage is great. I'm not talking about that. I'm just talking about AI's potential in general.

Brian Moynihan (Chair and CEO)

I think, Glen, it's Brian. Good to hear your voice. We believe applied technology, which is a range of outcomes from the digitization that we show on those pages in 2022 and 2024, over the period of time, and the customer adoption of technologies in interfacing with our company and technology, always provides that. If we had 285,000 people 15 years ago, we have 213,000 people. Three years ago, we had 217,000 people after the pandemic and all the manual stuff we had to build up. We've worked that back down. We believe strongly that all technologies help drive that. This technology and artificial intelligence allow you to do things that you heretofore haven't done. I think the question is just, to put it in place, you have to have your data appropriately arrayed. You have to make sure the models are going to give the right answer.

It has to be in a controlled environment because in a regulated institution like ourselves, we don't get an excuse saying the model said it. Sorry. It has to be right. If we turned down a mortgage loan under automated underwriting, we're liable for the outcome irrespective of how we did it. We're seeing it go everywhere, and the volumes of activity in the company have gone up huge since that period of time where the headcount has come down by a lot. We continue to apply it. What I'd look at carefully on those pages is things like, on the consumer page, you'll see Erika interactions building up and Erika users building up. We've gone from 210 questions that could be answered to 700.

Just to put that in context, in the last 24 hours, there were 2 million interfaces where a consumer got an answer from Erika in our company. That same technology is applied in the institutional basis. I think you can see that on page 22 if I'm right, or maybe 24. You can see that Erika in the institutional, a lot smaller number of customers but rising very fast. That's just one model. We have models all over the company. We believe strongly that this will have an impact. We will continue to manage it. The implementation, these are not proofs of concept and things like that. They're past tense things happening. 2 million customer interfaces yesterday. This isn't something to come. We've been at it a while.

I think the idea of it providing constant leverage and constant reinvestment, and with the same expense base is really what we're after. Then grow the revenue faster, continue to take market share. Its impact on expenses is felt. We are reinvesting some of that to actually grow faster, and you're seeing the results of that.

Glenn Schorr (Senior Managing Director and Senior Research Analyst)

Okay. That more revenue and same expenses would still bring us better margins in the future. That's really where I'm going. Sounds like you agree, but you don't want me to pin you down on a point in time.

Brian Moynihan (Chair and CEO)

Yes. I think, to say this will happen next week or the week after, you have to be a little careful because we have to get it right. That model took us years to perfect. It's not something you can snap your fingers at and make happen. It's a human being change too. Stay tuned. We'll give you more of that broader. I've allowed the experts to talk to you in early November. It's here. It's working. I'm proud of the team for taking it to implementation across the board. It allows us to continue to manage this company with, you know, just in the last five years, we have 20% more core checking holders and consumers than we did five years ago. Think about that. In consumer checking, balances are up by 50% in that time. Think about the leverage in that.

That's why the consumer kicking in as the NII kicks in. You're seeing them have such good year-over-year results.

Glenn Schorr (Senior Managing Director and Senior Research Analyst)

Okay, I appreciate that. Thank you.

Operator (participant)

We'll move next to John McDonald with Truist Securities. Your line is open.

John McDonald (Senior Research Analyst)

Hi, good morning. You guys had good results across all your capital markets businesses, you know, sales and trading, IB, wealth. It's always hard to have an outlook here, but just wondering broadly how you're feeling about the environment, pipelines, and investments made in those businesses against what's usually a, you know, seasonally slower fourth quarter and coming off such a strong Q3, Q2.

Alastair Borthwick (CFO)

Thanks, John. I'll start with investment banking. We've obviously seen a pickup in activity here in the third quarter. We were happy to see that. As we've seen more certainty now around trade and tariffs, and around taxes as well, it's allowed our client base to make longer-term decisions, and that's reflected in our investment banking activity. In terms of the pipelines, they're up this quarter, up over double digits. We feel good about the pipeline and the way it's developing. We'll need to see how the transactions execute in Q4, but it feels like a good environment in terms of, for example, M&A at this point. Around the global markets business, we've obviously invested significantly there, just as we have in investment banking. I should go back to investment banking and the investments we've made there.

We've always profiled the investment we've made in middle markets and in international and in earlier stage, faster growing economies. That's been a big part of our investment banking growth in the course of the past year or so. When we get to sales and trading, we've invested a lot there in terms of technology and people and balance sheet. Normally, Q4, you see a seasonal impact from client activity slowing as you move into the fourth quarter. That would be pretty normal. The constructive environment for the sales and trading business remains as investor clients continue to reposition based on rates and policies as they develop around the world. It feels like a continued constructive environment for the global market sales and trading business.

John McDonald (Senior Research Analyst)

Great. Thanks, Alastair. You mentioned deposit beta. What are you expecting for deposit beta across your various businesses if we continue to see the Fed moving rates down?

Alastair Borthwick (CFO)

I think you'll see us do the same thing we've been doing. In the wealth business, obviously, we tend to move with money market rates. Those tend to be a full pass-through. In the wealth business, I'd expect us to fully pass through rate cuts from this point forward. Around global banking, while we always do it on a client-by-client basis, particularly around interest bearing, we'd expect to pass through as the rate cuts develop as well. I'd expect you to see us with the same discipline pricing on the way down as we offered on the way back up. The only thing I think you would just have to remember is because the September rate cut came so late, you won't see that in our Q3 numbers, but you will see it in our Q4 numbers.

John McDonald (Senior Research Analyst)

Got it. Okay. Thank you.

Operator (participant)

We'll take our next question from Jim Mitchell with Seaport Global Securities. Your line is open.

Jim Mitchell (Senior Analyst)

Good morning. Alastair, you noted you took down more expensive wholesale funding on the liability side, which kept the balance sheet relatively flat, which seems more NIM accretive than NII accretive. The question, I guess, is how many quarters of that do you expect, and what sort of earning asset growth should we expect over the next year or so?

Alastair Borthwick (CFO)

Yeah. We've talked about that being a focus for us over time. When people ask us about net interest yield, we try to explain it's going to improve over time based on two things. First is net interest income is going to continue to increase. The second is the balance sheet we don't think will grow quite as fast as the loans and deposits grow. That's because there's still some more wholesale funding that we can pay down. As you point out, it doesn't cost us anything in terms of NII, but it is net interest yield accretive. We've got a little bit more of that to do. It won't be the major part of our NII, net interest yield accretion, but I think you can almost think about it being kind of like, you know, 1% slower maybe, over the course of the next year or so.

Jim Mitchell (Senior Analyst)

Okay. That's helpful. Maybe pivoting to capital, you guys, as you noted, you're well above your 10% minimum. It seems like we have GSIP surcharges likely coming down and other reforms. Why not, you know, how do you think about the buffer where it is today, and what prevents you from taking that down a little bit? If you have a longer-term target, that'd be great.

Brian Moynihan (Chair and CEO)

Our target will be, as we said before, Jim, sort of 50 basis points over the regulatory minimums. You should expect us to keep working that down. Interestingly enough, the ratios are flat this quarter because of the extra earnings and stuff. We took $7.3 billion of capital and put it back in there. You'd expect us to continue at a good rate, and then through the good organic growth, which is what we use the capital for, we use up some of it, and then we'll continue to work it down if that organic growth isn't sufficient to use up the capital over the near term. We got to get these rules finalized so we make sure all the different, you know, is it 10%? Is it 10.2% on the averaging? This is all flopping out there.

You'd expect in the first half of next year, the intent is there. The outlines of rules are there. The adoption of the actual rules is what we want to make sure it gets through, and then we'll adjust. Our hope would be to grow our way through it because then you'd see a lot more earnings, but if not, we'll just keep peeling down the capital.

Jim Mitchell (Senior Analyst)

Okay. Fair enough. Thanks.

Operator (participant)

We'll move next to Erika Najarian with UBS. Your line is open.

Erika Najarian (Managing Director, Equity Research Analyst)

Hi. Good morning. You reported clearly a standout quarter with a ROTCE of 15.4%. I know I'm probably jumping ahead of what you plan to say on November 5th, Brian, but one of your closest peers, Wells Fargo, did put out a medium-term target of 17%-18%. JP Morgan has had a 17% ROTCE target through the cycle for a long time. Given that you've hit this target now, should we presume that this is something that you could sustain over the near term and perhaps continue to work upwards or closer to those peer targets?

Alastair Borthwick (CFO)

Erika, I think you should expect us to continue to walk our return on tangible common equity north from here. We plan to take you through that at Investor Day. I think if you take the kind of NII growth that we anticipate, you compound that over several years. When you think about the organic growth that the platform delivers, and then you think about the boost we get from fixed-rate asset repricing, and you combine that with the fee growth, it gets pretty interesting over time. We will walk you through that when we get together in November.

Erika Najarian (Managing Director, Equity Research Analyst)

Great. On the efficiency ratio, one of your peers talked about a natural inflation rate just in labor of 3%-4%. Clearly, you're delivering operating leverage this quarter and what you're implying for the fourth quarter as well. I guess this is a two-part question. As we think about how you're framing that ROTCE walk and 2026, do you sort of plan to move away from the 1%-2% expense growth, and talk about efficiency instead? Is there sort of enough still identifiable, inefficient expenses in the franchise that you could recycle, and perhaps can continue on this lower sort of expense rate target?

Brian Moynihan (Chair and CEO)

I think, Erika, there's a lot of pieces of that, but the expenses in our company are driven by the numbers of teammates and then what we pay them. Our job is to keep using the technology, as I discussed earlier, that continues to allow us to do more with the same amount of people or less people, and then to pay those people more in relation to the productivity of the company. Yes, there's an embedded cost of teammates that grow, and we want it to grow because FA compensation grows, PCA, private client, bank, private bankers' client compensation grows, investment bankers' because that grows more directly in line with revenue. Think about it in a broad context.

If we keep the headcount basically running flattish, the volumes across it, the NII across it higher, and the growth that's coming is through some of the markets-related businesses and then managing headcount appropriately around in the back office and other types of things, that's good. What AI does is gives us a chance to manage some of the expense base a little differently going forward than we had in the past, which will be helpful. We feel good about that. Whether the idea is to grow revenue as fast or faster than expenses and create operating leverage is a simple way to think about it, but it's complex. The actual efficiency ratio, remember, this gets down to comparisons between companies or business mix. Our wealth management efficiency ratio inherently is 74% at a 26% pre-tax margin. Consumer is at 50%. Banking is down below 50%.

It really, you got to see how much your revenue is coming through the various pieces will determine the aggregate efficiency ratio. Our job is just to continue to improve it.

Erika Najarian (Managing Director, Equity Research Analyst)

Improve from the 62%?

Brian Moynihan (Chair and CEO)

Yeah.

Got it. Thank you so much.

Operator (participant)

We'll take our next question from Mike Mayo with Wells Fargo Securities. Your line is open.

Mike Mayo (Managing Director and Head of U.S. Large-Cap Bank Research)

Brian, you left me hanging with that last answer when you talked about the efficiency ratio. You expect to improve, it was 65% last year, last quarter, and 62% and improve the efficiency ratio to what? Do we have to wait to November 5th, or is that something that is kind of a guide to, or, you know, also in terms of I'm just looking for some more meat on the bones, so to speak. I mean, I guess year-over-year, headcount's down 500 and revenues are up $3 billion. I think that's kind of what you're talking about. Where does that eventually take you to, given your business mix?

Brian Moynihan (Chair and CEO)

Look, the question is where's the revenue coming from for the next four quarters? NII is obviously much more efficient in the sense of cost because same loan balances, the same people producing additional credit relationships, the embedded cost of production and consumer for the million cards we do, new cards we do a quarter. The number one small business lender in the country and producing good growth there, that all falls to the bottom line. The expense base is built to have that kind of activity growth. We feel good about it. We'll give you more guidance. In the end, it'll be a result of, you know, where the revenue is coming from, especially in the markets business, and, you know, how much that impacts it. You should be very confident, Mike, we manage expenses well in this company and the headcount well. We'll continue to do that.

Mike Mayo (Managing Director and Head of U.S. Large-Cap Bank Research)

Could you just give us a little bit more on AI? I mean, you're ranked top 10 globally as far as a bank in using AI, with your patents and everything else. It's getting back to that first question on this call. How much savings do you have from AI? How do you measure those savings? What are some of the best initiatives you think you have? Just help us frame how that could transform the company a little bit more if you could.

Brian Moynihan (Chair and CEO)

As I said, with a little bit more time to dedicate to that discussion, we'll have a panel of the experts show you the work we're doing. I'd make three or four points about AI. Our view of AI is it's enhanced intelligence, that the teammates are going to be critical delivering the services, and therefore, it's an enhanced intelligence, not an artificial intelligence. The second is it's not something to think about. It's something that happened. As I said yesterday, 2 million customer interactions were handled through the Erika platform just on the consumer side alone. The third thing is, we think the paybacks are coming in there, but what's interesting is that the places we can apply it are different than some of the other technologies we've had in the past. We'll take you through that. We feel good about it.

It ought to help with the overall efficiency of the company, with the human costs being 60% to 70% of our costs, but it comes with higher technology costs, higher work. Just in the coding area, we've saved about 10% of the aggregate amount of coders we have working, but we're dedicating that to drive more efficiency. We'll take you through all that. It's exciting. It's not a theoretical question at Bank of America. It's an applied question at Bank of America. You do have to be careful about extrapolating things that have to be done right in order to work. The $3 billion we spent on data in 2014 to 2019 to get the data perfect in this company, or as perfect as we could—perfect is beyond reach. That kind of number has to be spent by competitors.

We've spent it, admittedly for potentially a little bit different reason, but it takes that much work.

Mike Mayo (Managing Director and Head of U.S. Large-Cap Bank Research)

All right. I'll take that as a teaser for November 5th. Thank you.

Brian Moynihan (Chair and CEO)

Thanks.

Operator (participant)

We'll move next to Chris McGratty with KBW. Your line is open.

Chris McGratty (Managing Director, Head of U.S. Bank Research)

Oh, great. Good morning. On credit, overall really strong results. If we go a level deep, is there anything that's given you a little bit of pause today versus maybe three to six months ago, and anywhere that you're not leaning into with the balance sheet with the growth picking up, anywhere you're avoiding? Thank you.

Alastair Borthwick (CFO)

The broad outline is not yet, and no, meaning not yet we haven't decided to change anything. No, we're not really observing anything other than continued strong performance in the credit portfolios. The results we reported today, you can see consumer charge-offs came down again, and commercial charge-offs came down again. Now, those commercial charge-offs are at a really, really low level. Credit remains in a good place. We built this responsible growth strategy to do two things. First, to have a risk appetite that we're proud of through the cycle. Second, to deliver loan growth that exceeds the industry. We feel like we're succeeding on both of those right now. You know, when you see headlines, do you immediately do a look across on everything? Yes. If something changes overnight, do we spend time as a team considering is there anything we should be changing? Yes.

Right now, the broad message we need to send to people right now is the credit portfolios are performing very well at this point.

Brian Moynihan (Chair and CEO)

Chris, welcome to coverage of our company. A core like this is salubrious in that it shows you can both grow and do it the right way and have great, great credit results. If you look beyond that, remember, our industry, the regulated part of our industry, the 30 banks or so go through a CCAR test that you get to see the results on. They go through tremendous shared national credit depth of examinations you see. I think if you look at the statistics by our industry and our peers, they are in strong shape. The comparisons to 2019 are interesting because that was like a 50-year low, the best year in 50 years in our company's credit history. We're comparing it to one of the best years. We feel very good about it. We can both grow and do it with the right risk. Alastair talked about that.

We're comfortable and we're pushing forward.

Chris McGratty (Managing Director, Head of U.S. Bank Research)

All right. Great. Brian, Alastair, thank you so much.

Alastair Borthwick (CFO)

Thank you.

Operator (participant)

We'll take our next question from Ken Usdin with Bernstein Autonomous Research. Your line is open.

Ken Usdin (Managing Director)

Hi. Good morning. Thanks. Just a follow-on on the loan growth side. A lot of the loan growth you've been putting on in the commercial side looks like it's been in the market segment. I'm just wondering how much capacity you have to continue to build that part of the book, how much demand you're still seeing for it, and how you think about the spreads and returns on that part of the business versus the banking book growth.

Alastair Borthwick (CFO)

Yeah. In terms of capacity, we've got a lot. I say that because obviously at $2 trillion of deposits and $1.15 trillion of loans, we've got substantial excess that we can provide for clients in the economy over time. We've got a lot of capacity. In terms of demand, I'd say it's been reasonably robust over the course of the past couple of years. We happen to be in a good place to capitalize on that because when you talk about the world's leading asset managers, we have great relationships with them in our Global Markets business and in investment banking. We're in a position where we're not loaned up, so we have the ability to provide the lending capital. You have to structure it the right way, and we obviously have that capability. Those sorts of things put us in a good position to see that demand.

Spreads have been attractive. A big part of the Global Markets story of improving returns over time has been growing their loan book with attractive returns. You've seen them consistently improve return on capital. We've been happy there. The only other thing I would just remind you is because these are often so well collateralized and structured, they're typically investment grade. They typically have better risk ratings than some of the lending that we do in other places. Our res crit and our net charge-offs in this area have been close to zero. We've had terrific empirical performance from this portfolio over a long period of time.

Ken Usdin (Managing Director)

Got it. Okay. On the retail side, on the consumer side, looks like consumer deposits on average were down a little bit sequentially. Just wanted to see what you're thinking about. I know that's been something that you've been looking for to get that mix going more towards retail deposit growth, and it's been a little bit more wholesale in the last couple of quarters. What are you seeing just in terms of when you expect that to inflect? Is it just people are putting money elsewhere, whether it's back in the markets or other places? Just your thoughts on retail deposit growth from here. Thanks.

Alastair Borthwick (CFO)

Yeah. Look, we're encouraged. If you look back to last year's third quarter, we're up, and we were up second quarter to second quarter. A little bit of this is second to third quarter seasonality. We feel like we have inflected on consumer. We're up 1% year-over-year. I think you're detecting from me, you know, would we love to see more growth in consumer? Would we like to be back to the 4%+ that we typically enjoy? Yes, we would. Remember, we're coming off of a period where consumer deposits really had to normalize after the pandemic. It was important for us to get to the third quarter of 2024 where it looks like we kind of bottomed out. Now we're a year further in, and we're growing the core. You can see our non-interest bearing was up 1%.

At this point, we're not chasing CDs, broadly speaking. That's not where the growth is coming from. We're trying to make sure these are high-quality operating deposits with the clients that really stick with us for the next 20 or 30 or 40 years. That remains the strategy.

Brian Moynihan (Chair and CEO)

Yeah. Alastair, I just said, if you look at page 19, lower left, you'll see that the growth, as Alastair said, the 1%, $9 billion from third quarter last year, this year was all in the low interest and non-interest category, which is the more beneficial part of it. Go back to that 220,000 units of new checking primacy, that you have new checking accounts that are all primary, that we focus on the primary account in the household. Think of that compounding over the last few years, three-quarters of a million new checking accounts per year that are 90+% primary in the household, are the core transactional account. That's where we see that compounding in. You're against that was sort of a build-up of some of the rate-seeking activity and a run down to that.

Secondly, against that, frankly, was the higher-end consumers moving their money out of inner lower-end stuff as rates rose that we're behind. If you look in the core bracket of consumer, they're actually growing with the deposits in that business, and those customers continue to grow.

Ken Usdin (Managing Director)

Okay. Got it. Thanks, guys.

Operator (participant)

We'll move next to Matt O'Connor with Deutsche Bank. Your line is open.

Matt O'Connor (Managing Director, U.S. Banks Equity Research)

Hi. Good morning. Can you talk about how sensitive you are to lower, medium, and long-term rates? We've obviously seen a decent drop here, just kind of in the context of the benefits from fixed-rate asset repricing and the 2.3% NIM that you've talked about looking at a couple of years.

Alastair Borthwick (CFO)

Matt, I don't have a great deal to add to what I covered earlier. When we talk about that asset sensitivity of an instantaneous drop in 100 basis points at both the long end and the short end, it has an impact of $2.2 billion of net interest income. That obviously requires, number one, it happens tomorrow. Number two, it exists all year. Number three, it happens at the short end and the long end all at the same time. I don't know how you would assign a probability to that, but it's obviously on the lower end. We provide it so you get a general sense for asset sensitivity. On the short end, you'd end up seeing probably 80% or so, because so much of the company's balance sheet just reprices daily.

The longer end is probably 20% of the sensitivity, and that tends to be the fixed-rate asset repricing. The question becomes, if you've got fixed-rate asset repricing over many, many years, it can impact positively or negatively depending on where rates go and bounce around over that period of time. We'll have plenty of time to guide you, I think, each quarter as we go through, and we can share with you what's actually happened with rates and then what that means looking forward.

Matt O'Connor (Managing Director, U.S. Banks Equity Research)

Okay. Just on this kind of more medium-term NIM outlook that you've talked about, you know, 2.2%, sometimes it's 2.2%, sometimes it's maybe a little bit higher depending on the mix of earning assets and growth. Just any updates on that as you think about the medium-term NIM outlook? Thank you.

Alastair Borthwick (CFO)

No update other than we're one further quarter into that march. We added 7 basis points this quarter. We're up over 2%. The team and I know what we need to do. We just have to keep going.

Matt O'Connor (Managing Director, U.S. Banks Equity Research)

Okay. Thank you.

Operator (participant)

We'll take our next question from Betsy Graseck with Morgan Stanley. Your line is open.

Betsy Graseck (Global Head of Banks and Diversified Finance Research)

Hi. Good morning.

Brian Moynihan (Chair and CEO)

Morning.

Alastair Borthwick (CFO)

Morning, Betsy.

Betsy Graseck (Global Head of Banks and Diversified Finance Research)

Alastair and Brian, I wanted to make sure I got the guidance right here. First off, on the NII, as you're thinking about 2026, highlighting that the inputs are similar to this year, and you indicated 5%-7% up NII 2026 over 2025. Is that right?

Alastair Borthwick (CFO)

The background there, Betsy, just so you know, is we're obviously going to get pretty good core growth from, you know, just the organic behavior of the clients and adding some over time. Think about that, like 4 to 5%, and then you get a little bit of boost from fixed-rate asset repricing. You got a little bit of rate cuts in the future, but when you add all that together, we feel like it's probably something like 5%-7%.

Betsy Graseck (Global Head of Banks and Diversified Finance Research)

Okay. Great. That was what I was wondering, if it's just NIM or is that NIM plus volume, and it's all in holistic. Okay.

Alastair Borthwick (CFO)

Yeah. You know, here we are, it's whatever it is, October 15th. As we go through time, we'll be able to update you more. I think we'll give you a sense also at Investor Day of how that plays out over the course of multiple years because obviously, we're going to get this asset repricing over multiple years, and we're going to benefit from that.

Betsy Graseck (Global Head of Banks and Diversified Finance Research)

Yes, of course. There was a comment you made about expenses being flat in next quarter versus this quarter.

Alastair Borthwick (CFO)

Yeah. I said I think I said we thought they'd be flattish because we anticipate the headcount is going to be flattish, and then it's just a question of what happens with the revenue side.

Betsy Graseck (Global Head of Banks and Diversified Finance Research)

The headcount would be flattish. Okay, I wanted to get a sense as to are you thinking about how you're thinking about NII and fees on the back of that? Because, you know, the question that's coming up is, hey, you're guiding down for next quarter on expenses coming in flattish, not coming down. I'm wondering, what's your expectation for capital markets and other compensatory revenues? I think we would like to hear the whole picture, not just one piece of the income statement outlook.

Alastair Borthwick (CFO)

Let me try to reframe. On the expense side, what I'm trying to communicate is the overall expense base for the company we expect to be kind of flattish for the fourth quarter because the headcount's flattish. We can just see that. It's just that's where it is, and that's the biggest part of the expense base of the company. Now, obviously, we have to watch and see what happens with revenue in the fourth quarter. We don't know that yet. We have no reason to believe anything other than sort of flattish kind of expense at this point for the fourth quarter. In terms of the net interest income, I think we tried to make sure we were clear. We'd earlier in the year thought $15.5 billion to $15.7 billion. We were making that projection a long time ago. That was a year ago.

Now that we're three quarters through and now that the third quarter is probably a little ahead of where we hoped, we kind of feel like it's $15.6 billion or higher. It's going to be the higher end of the range is what we're trying to communicate.

Betsy Graseck (Global Head of Banks and Diversified Finance Research)

Okay. The capital markets backlog, how's that shaping up and what does that look like for next quarter?

Alastair Borthwick (CFO)

In terms of the investment banking outlook, I talked about that earlier. The pipeline looks good. It's just a question of what we can execute in Q4, but it feels to us like this is a more constructive environment for investment banking than it was earlier in the year. In terms of the sales and trading business, obviously, we have to think about the normal Q4 seasonality when you think about it relative to Q3. But it is.

I'd say it remains a very constructive environment for the sales and trading business in particular. We feel good about that. We're off to a good start this quarter, but it will obviously depend on what happens with the markets overall. Just taking a big zoom out, always the key for us is just we got to manage those businesses for the long term. We're looking forward to talking about that when we get together in November for Investor Day.

Betsy Graseck (Global Head of Banks and Diversified Finance Research)

Sounds great. Thanks so much. Appreciate it.

Operator (participant)

We'll take our next question from Gerard Cassidy with RBC. Your line is open.

Gerard Cassidy (Managing Director, Head of U.S. Bank Equity Strategy and Large Cap Bank Analyst)

Hi, Alastair. Hi, Brian.

Brian Moynihan (Chair and CEO)

Hi there.

Gerard Cassidy (Managing Director, Head of U.S. Bank Equity Strategy and Large Cap Bank Analyst)

Alastair, you guys were talking about your consumer deposits, and when you look at your consumer deposits back in the fourth quarter of 2019 and compare it to today, obviously they're higher. The Fed shows the entire industry's consumer deposits, household checking account deposits, are significantly higher from pre-pandemic. That pandemic surge hasn't left the banking system. Do you guys have any color on what you're seeing from that behavior from pre-pandemic to today? I know you're taking market share and you're growing while yours are growing, but any color on why we still have such elevated levels of deposits?

Brian Moynihan (Chair and CEO)

Gerard, if you remember back in 2021, we were all trying to, you know, have the great debate about where all this cash that was put into the economy was going to flow right back out, et cetera. If you drew a line of the growth rate leading up to 2019 over a long period of time and then saw a bubble above it, it was working its way back down in the aggregate amount of deposits in relative synchrony to the long-term growth rate. The size of the economy's bigger, the notional economy's bigger. We can get economists in our company, and I'm sure in your company, that will have a great debate about notional and real economy sizes and stuff. It's just the economy's bigger, the amount of cash in circulation's bigger, so therefore you expect it.

Now, the most important thing is that we've gained share during that time in terms of core transactional. We're 20%, 30% more core deposit transaction accounts in our consumer business. That's numbers of customers who are carrying instead of $6,000, $7,000 on average, $9,000 on average. At the same time, we've probably reduced the numbers of branches because of more digitization, automation, the numbers of teammates in consumer dedicated to service, et cetera. It's a great operating leverage. Even though the economy grew and everything else, the fact of the matter is those deposits that are core and the all-in cost of all consumer deposits, 58 basis points against the current rate environment, is a big profit improvement in that consumer business. In just the last year, you saw a 30% increase.

It's still gaining the efficiency, not from cost reduction as much, but cost levels against the net interest improvement. As the net interest comes in the company, they are a big beneficiary of that amount. I'd say I think you're now seeing deposits grow in the industry now at our company for many quarters. I think it was the middle of almost two years, a year and a half to two years ago, where we bottomed out and have been growing since then. You ought to grow with the economic growth, and if you take share, you grow a little faster. That's the gig. We don't see any dynamic that, even as they continue to adjust interest rates and stuff, that you see a lot of money flowing back out of the banking system. It's kind of already happened, frankly.

Gerard Cassidy (Managing Director, Head of U.S. Bank Equity Strategy and Large Cap Bank Analyst)

Got it. Okay. Thank you.

Operator (participant)

We'll move next to Saul Martinez with HSBC. Your line is open.

Saul Martinez (Head of U.S. Financials Research)

Hi. Good morning. Thanks for taking my question. You know, obviously, you've had pretty impressive growth in commercial loans and markets lending up 36%. Just look at overall U.S. commercial or overall commercial loan growth, well into the double digits. You obviously have a very good track record versus your peers in terms of credit and underwriting. I guess the question is what should give us confidence that you're not compromising on risk to get the kind of growth that you're seeing? What's allowing you to take share and grow in an outsized way versus your peers without any changes to pricing or risk assessment?

Alastair Borthwick (CFO)

Yep. Remember, this is not new for us, and this is all focused on our clients. That's a core part of responsible growth. It's got to be focused on clients. The clients that we're talking about here are typically the top asset managers or the top financial institutions in the world. That's who we're interested in working with here. Beyond that, we're looking for collateral pools. We want high quality. We want diversified. We're looking for structures that have security, credit enhancement, performance triggers, mark-to-market. They typically tend to be shorter duration. You know, we don't put all our eggs in one basket. We're diversified across multiple sectors. That can be mortgage, or it can be asset-based. It can be business lending or private equity. It can be consumer assets or subscription facilities. When you add all that up, you end up with a diversified book that's typically investment grade.

It's lower risk. The loss content, if you look at our res cred, is less than a basis point. If you look at our NCLs, it's less than 0.1%. By the time you have those great clients, you have good collateral, you have good structures, generally speaking, you tend to have low losses. The asset test ultimately shows up in returns for the Global Markets business because any losses they absorb.

Over time, they've done a good job of deploying capital while increasing ROA and return on capital. We feel like that business has worked well. The final thing I'll just say is, I feel like we have differentiated capability here in that we tend to have very strong relationships with these Global Markets clients that we talked about. We have the structuring and the underwriting, and we've got the excess in the form of lots of deposits and less loans where we can actually make loans to those clients to satisfy the demand. It's just a question of, are we getting the return for the risk? We believe that we are.

Saul Martinez (Head of U.S. Financials Research)

Okay. That's helpful. I guess a related question. I'd love to get your perspective on the sustainability of the results of your capital markets businesses. I'm not just, you know, the markets business, but investment banking as well. I mean, is this quarter investment banking, these are at levels you haven't seen since 2021? It feels like we really are in a sweet spot where we're seeing resurgent investment banking activity, a lot of optimism that this has legs. This is also occurring in an environment where the markets businesses are performing well, not just for you guys, but for a lot of folks. I'm just curious if, you know, if an environment where we do see investment banking continuing to grow over a multi-year period, is that consistent? Is that an environment where the markets businesses can continue to stay at current levels in terms of revenues?

Those are businesses that do generally benefit from more volatile economic and market backdrops. I'm curious if you have a view on sort of the interplay between those two and whether the markets businesses can continue to do well in an environment that is a little bit more stable, that is more suited to investment banking continuing to grow.

Brian Moynihan (Chair and CEO)

I think let's sort that. One of the reasons why we started a long time ago disclosing Global Markets separately as a separate operating unit is because it supports the whole company, including the Wealth Management business and the Consumer business for excess FX transactions. We disclosed it separately to show its breadth in the company, but also to show it's less volatile than people assume it is when you're running it the way that Jim and the team have run it. Fourteen quarters in a row of year-over-year revenue growth is a pretty sustainable record. There might be some day that's broken. It has been broken for 3+ years. That's good. The profitability, i.e., the returns of the business, continue to go up. That has a lot to do with how they conduct the business and how they, you know, it's a moving business, not a storage business.

It's not holding a lot of risk on a given day. On the lending, it's high-quality assets underneath them, no subprime, et cetera, et cetera. We feel that it's sustainable. Yes, it does benefit, especially on the equity side, when markets are moving around and people are trading more. Sure, you saw that this quarter, but overall, it just keeps grinding its way forward. Now, when you look on the investment banking, $2 billion in fees coming in the quarter, everybody expected it to be less than that. It came. You're seeing the activity spread out geographically. You're seeing a lot of activity in the mid-size market in the U.S., which we are capturing through the combination of our investment banking teammates and our commercial banking teammates to cover all the markets and are out there in our middle market franchise and capturing strong market share from those customers.

I think one of the things you need to think about is that business. We run a global corporate investment banking business as a consolidated business. That goes into Global Banking along with our middle market and our business banking business. Why that's important to think about is with our relationship for these customers, we have their credit relationship, their transaction services relationship, and the fees for that anchor 12% year-over-year, and their investment banking, and their hedging and other types of things on top of that in the markets. By doing all that, you actually have a more stable revenue stream attached to that business. Whether investment banking goes up or down by $100 million, if you look at the Global Banking results, the volume of revenue is coming from the lending side and the deposit side.

It's great to see Matthew and the team have a good quarter, but Matthew himself would tell you it's also great that the loans grew, or the deposits grew year-over-year, the loans are solid, and then if working with the middle market and the loan growth we're seeing there, it's a holistic view of the customer. I think that's sustainable.

Saul Martinez (Head of U.S. Financials Research)

Great. That's very helpful. Thank you.

Operator (participant)

It does appear that there are no further questions at this time. I would now like to return the call to Brian.

Brian Moynihan (Chair and CEO)

Thank you, operator. First, I wanna thank our team here at Bank of America. A quarter like this is a salubrious setting for us to finish up 2025 and head to 2026. It's a great amount of work done by a talented team, and I wanna thank them for doing that. Next, I think for you as shareholders, you also saw a good quarter, good returns, good operating leverage, good growth in the core businesses, some extra kick from investment banking and else. I think as we started, just focus on all the businesses grew their earnings, all the businesses have strong returns, and they all created operating leverage, by and large, by and large. We feel very good about that as we turn to 2026. We look forward to seeing you in a few weeks at Investor Day, and thank you for your time and attention.

Operator (participant)

This does conclude today's program. Thank you for your participation. You may disconnect at any time and have a wonderful afternoon.