BANK OF AMERICA CORP /DE/ Q4 FY2024 earnings call

• Brian expressed concern for communities impacted by California wildfires and mentioned relief efforts like activating Client Assistance Program and donating $1 million to disaster relief. • Bank of America reported $6.7 billion in net income for Q4, $0.82 in EPS. Revenue grew 15% year-over-year in Q4 2024. • Saw good loan and deposit growth; loans grew $20 billion in Q4, deposits grew $35 billion. • Wealth Management added 24,000 new households in 2024, with $6 trillion in total client balances managed. • Sales and trading had 11th straight quarter of year-over-year revenue growth, achieving a new full-year record of nearly $19 billion in revenue. • Managed to create operating leverage in Q4 despite increased spending in brand, people, and technology. • Credit quality stabilized with net charge-offs declining modestly from the third quarter.

Consumer Banking: Made nearly $11 billion or 40% of the company's earnings in 2024. In Q4, generated $10.6 billion in revenue and $2.8 billion in net income. Had strong organic growth, including over 200,000 net new checking accounts. Deposits in Consumer Banking bottomed in mid-August 2024 and ended the year at $952 billion. Wealth Management: Had a very profitable year, generating $4.2 billion in earnings from nearly $23 billion in revenue. Added 24,000 net new relationships in 2024. Revenue grew 15% in Q4 2024, led by 23% growth in asset management fees. Global Banking: Generated $8.1 billion or 30% of the company's earnings in 2024. Investment banking fees grew 44% in Q4 2024. Loans in Global Banking were up 2%, and deposits grew 10% year-over-year. Global Markets: Achieved record sales and trading results of nearly $19 billion in 2024, growing 7% from 2023. In Q4 2024, earnings grew 30% year-over-year, with revenue ex DVA improving 15% from Q4 2023.

• NII expected to grow 6% to 7% in 2025, starting modestly higher in Q1 with NII expected to be $15.5 billion to $15.7 billion on a fully taxable equivalent basis by year-end. • Expense guidance is 2% to 3% growth in 2025. • CET1 level improved to $201 billion and CET1 ratio rose to 11.9%, remaining well above the new 10.7% requirement. • Expect net charge-off ratio to be in the range of 50 to 60 basis points of loans for 2025.

• Wars, trade wars, and resource availability issues that could impact the economy. • Leverage in the system at higher levels than traditional, which could reverberate into the banking system. • Federal debt levels and potential pinch from state and federal spending that could slow growth.

Q: Unpack drivers of NII growth in 2025, including loan growth vs rate/repricing tailwinds A: Alastair mentioned deposit growth is a key driver as deposits found their floor, and loan growth has picked up with more client activity. Also, fixed asset repricing and cash flow swaps roll off contribute.

Q: Confidence in delivering 200 bps of sustainable operating leverage A: Brian stated they've done it before, with revenue growth in businesses like Wealth Management and market-based businesses, and expense base flattening out.

Q: Deposit growth and paying down more expensive funding A: Alastair said deposit growth allows paying down higher cost liabilities, like institutional CDs coming down, and deposit growth helps with net interest yield.

Q: Thinking on CET1 target and buybacks A: Brian said they'll continue buybacks, with CET1 at 11.9% and a buffer in mind, and changes in capital rules could affect this.

Q: Risks in capital markets business and trading A: Brian mentioned the sales and trading team has 11 straight quarters of growth, with less volatility compared to some peers.

Q: Reserves and unemployment expectations A: Brian said reserves are weighted based on GDP and unemployment assumptions, with core assumption of GDP growth in low 2s and unemployment between 4.1% and 4.3%.

Q: Path to normalized net interest margin A: Brian said if the Fed funds rate stays higher, they'll get to normalized NIM faster, with factors like deposit dynamics and nominal rate environment playing a role.

Q: Sensitivity of NII to yield curve steepness A: Alastair stated short term drives most NII sensitivity, with deposit growth and loan growth being key drivers.

Q: Bank regulation and CET1 ratio A: Brian discussed industry advocacy for reducing volatility in CCAR and accounting changes increasing capital requirements, suggesting potential 100 basis points reduction if issues addressed.

Q: Consumer deposit growth and new accounts A: Brian credited brand, customer service, account structures, and digital capabilities for strong consumer deposit growth and net new checking accounts.

Q: Expense growth guidance and deceleration A: Brian mentioned markets-related business growth, completed remediation, and head count management as factors in decelerating expense growth.

Q: Incentive comp and BSBY hedges in 2025 A: Brian said incentive comp grows with markets, and BSBY hedges accrete back into P&L, with a couple hundred million benefit in Q4 and most taking place in 2025.

Q: Capital buffer and buybacks plan A: Brian said they want a 50 basis-point buffer, and wouldn't assume immediate reduction in CET1 ratio, but would adjust buybacks based on capital rules.

Q: Areas to lean into with extra capital A: Brian said none of the businesses are constrained by capital, and growth would continue based on risk balance and client demand.

Q: Credit quality and benign credit cycle A: Alastair said credit quality has been benign due to stable underwriting, strong consumer balance sheets, and stable commercial side.

Q: Risks to watch out for A: Brian mentioned wars, trade issues, resource availability, and leverage in the system as risks to watch.

Q: Small business optimism and C&I demand A: Brian said small business optimism is up, but translating that into activity and loan growth is key, with focus on regulation and ease of doing business affecting small businesses.