Good morning. I guess we'll go ahead and get started. I would like to welcome you all to Bank of America's 32nd Annual Financial Services Conference. I'm Ebrahim Poonawala. I head North American Banks Research for BofA. This is the second year of a revamped financial services conference that brings under one roof, banks, asset managers, exchanges, insurers, and card companies. And by the looks of it, corporates and buy side seems to be liking it. Corporate attendance this year up 20% year-over-year. We are hosting approximately 300 institutional investors across U.S., Canada, U.K., E.U. And we are also hosting some must-attend thematic panels to discuss the latest on the regulatory outlook, evolving risks tied to the commercial real estate market, and multiple tech-focused panels.
I would like to thank my colleagues in research, Craig Siegenthaler and Josh Shanker, for all the hard work in putting together a great event. I would also like to acknowledge Candace Browning, Head of Global Research for BofA. She's in the room. Under Candace's leadership, BofA's equity research was ranked number one in last year's II rankings, not just in the Americas, but also globally. So Candace, thanks for joining us today, and thanks for your stewardship. Without further ado, I would like to welcome our keynote speaker for the day, Brian Moynihan, Chair and CEO of Bank of America. My big boss. Brian, thanks for being here.
It's with great risk, Ebrahim, so...
Well, it can't get more high stakes than me.
Yeah.
We might have a new bank analyst tomorrow at BofA. So, first of all, thanks a lot for joining us, and I think, I guess this has been a theme over the last year in terms of just the prevailing macro uncertainty for bank investors. Maybe give us a sense around what your expectations, where things stand today, are on the macro outlook. The research team obviously expects a soft landing. Do you buy into it? Maybe if you can kick it off there.
So, one, thanks all of you for coming and supporting the conference and all the work that come together to different sectors of the financial services industry is important. Your presence is important, so thank you for joining us, and thank you for all the business that you do with the company. So Candace and her team not only number one last year, but are one or two for many, many years, and they basically had predicted a soft landing, but they came to that a little reluctantly, I'd say. As if you think about at the end of 2022, when rates were going up and you saw - there's a moth here. You saw the rates move quickly. Everybody thought that that would have to cause a recession, right?
So they always had a mild recession, mild recession, and it kept moving out, you know, through the course of 2023, from mid-2023, the end of 2023, then at early 2024, and finally they took it off the table. And that's really due to the factors that you're all familiar with. The strength of American consumer is still there. The ability for the American consumer to borrow is still there. The activity levels are high. So we will stay in a 500+ basis point rise in rates, unprecedented level of movement. It's a 20+ multiple of rates. I mean, it's, it's... That people forget that impact, and yet they predict basically 1%, like, plus or minus growth this quarter, next quarter, and then it starts to move back to trend as we go through it.
The other key thing I'd say, Ebrahim, that you know, I'd look at all the Blue Chip economists, and over the course of the last year and a half, the thing that was hard to square was the idea that unemployment would only go into the mid to high fours, and you were gonna have a recession. Because I've yet to figure out an economist to explain to me an unemploymentless recession.
And so that was kind of the... And when people employed this band, and so I think, you know, Candace and team have been extremely good at this, and they basically have put this sort of slowdown. Now, the key that, and never forget, from a 4% growth rate in the third quarter, 4% plus almost 5% in the third quarter of 2023 to 1% in the first quarter of this year, 1.5, is a slowdown. And people are forgetting that... You know, if we went from +2 to -2, oh, hell, we'd be breaking loose, right? So people are forgetting. That is a lot of economic activity, that the drag of the monetary drag is really creating at this point.
Got it. I guess, just as you talk to customers, what are you hearing from clients just around confidence towards investments, M&A, et cetera?
So if you look at the different types of customers, on the consumer side, you know, we have the database where we can see every week what consumers are doing, and so far, year to date, the amount of money moving out of their accounts in the economy, that's through a credit card charge, debit card charge, an ACH payment, a wire, a Zelle payment, a check, cash out of the ATMs and over the counter at the branches, all going into the economy, is up about 4%-5% versus last year at this time. That growth rate was double digits last year, i.e., in 2022 compared to 2021, so it slowed down in 2023. That 4%-5% is, you know, there'll be 4.5, 4.2, 4.5, so it's bounced around each week.
When you look at it, that, that is very similar to the 17, 18 when rates were raised, when economy slowed down. You know, the economy was sitting with a 2% inflation, around 2% growth, and so that's kind of the inbuilt rate of the consumer spending. When you look within that, and Candace and the team through the institute, published sort of where they spend, you'll see different patterns for different generations, and who's spending more on, you know, restaurants and things like that.
But the, the good news is, it's relatively consistent. When you go to the commercial side, it's interesting. Commercial customers' line usage, and you'll hear this from more of my colleagues, is, is basically flattened out again. So before pandemics, you know, mid-sized clients and clients would have draw... Large clients never really draw on the lines, but mid-sized clients would draw up, like, 40%.
It dropped to 30% during the pandemic, moved out back up to 36% or so, 37%. We thought it was gonna normalize back to the 40-ish% level. It just hasn't done it. It's starting to flatten out, and that's why loan growth is a dogfight right now. We're we saw a little bit in the fourth quarter, but it's we're just constantly working it. Because line usage, of each point of line usage is a lot of loan growth. And so and why aren't people using the lines? Well, the commercial customer is a little more conservative and, you know, between geopolitics, wars, supply chain normalizing and then getting disrupted, and then normalizing and getting disrupted. The worry about final demand, you know, they're being relatively conservative, but they have lots of capacity. Then we go to investors.
The investors, you know, continue to all of you continue to move it around and, and are investing, and the classic sort of year, fourth quarter, first quarter lift, and things are going on. But and Jim and the team have done a great job in, in the business, and we're record levels of revenue last year, $17 billion. But when you think about it, those investors feel pretty confident. That's what you're seeing in the market translation, but everybody's looking for the same thing. What will be the stability factor out there?
Okay.
That right now, Fed rates, other central bank rates, and then secondly, some resolution without an escalation of the issues of kinetic war.
Got it. I think, Brian, over the last couple of years, you've cited excess consumer deposits.
Yeah.
I'm just wondering, how much has that receded over the last year, and do you see a divergence between higher income versus lower income consumers?
Yeah, I think. So if you look at pure deposit side behavior in the consumer business, we've tracked a set of customers fairly carefully since we always track them. But pre-pandemic, we went and said, "Let's watch these customers over time," because something very different was going on. So, and if you look across those customers, the customers in the higher end are actually down deposits where they were pre-pandemic. When I mean higher end, I mean people have an average of $1 million in their consumer checking account and deposit accounts. They're down 20%. Why? Because that was excess cash moved in the market.
When you come down from that and get to sort of people who were between $5,000 and $10,000 before the pandemic, they went up to, you know, multiples of that. They averaged $7,000, went up to $21,000, and basically, they're flat and bouncing around right now. So year-over-year, they're a one percentage point difference. Month-to-month, they're up a little bit because IRS returns come in this month and next month. So, you know, so they're fine. And if you go below that, to the next cohort, $2,000-$5,000, they were $3,400 pre-pandemic. They peaked at $13,400. They're sitting at $12,700, $12,800, and again, bouncing around flattish. So there's money in those accounts.
Now, there's a whole cohort of people who became wage earners and adults in 2021, 2022, 2023 that had different experience because they didn't get the stimulus as much, and things like that. So you have, there's other people, and what you're seeing is a little bit of dichotomy between median coming down, having more stress out there, which we don't see in our customer base, especially our mature customer base, at all.
Maybe, just going off script here, but I think if you don't mind, we have global investors. In terms of just talking about the difference between what you're seeing in the U.S., I mean, I think there's something to be said about the underlying economic strength in the U.S. and how that translates to growth for a bank like ours.
Yeah, I think, so, you know, if you look... If you talk, you know, outside the United States and just, you know, Davos at the end of January, we're all there and listening to the people, the United States is a premier place to invest right now, for two reasons. One is you can get the returns, and the classic reasons, returns, rule of law, labor force, et cetera. Yeah, has been proven, and huge final demand. That's, you know, people forget the U.S. consumer economy is about as big as the Chinese economy, so huge final demand, and so, you know, for types of product, cars or whatever. When you go, the unique thing that's happened is, if you think about the legislation passed between infrastructure, CHIPS, IRA, et cetera, that's also huge benefits to people who make the investment.
So whether it's in, you know, clean energy, whether it's in, you know, roads and building, bridges, whether it's in, chip foundries and stuff-
Yeah
... which are just starting to come on stream, that is another reason why, you know, Candace and the team and your economists have to be careful because there's a huge stimulus still coming through the economy. None of that money's really been spent. You know, the IRA came in at the end of, what? 2022? 2022... Yeah, and, and if I got it right, 2022, whatever. And, you know, none of those projects- It takes seven years to get a project permitted, so nothing going on today is attributable to the IRA other than research dollars and stuff-
Yeah
... which are critically important. It is coming on, and so that's so there's a push, and that's why outside the country, they look here and see, you know, U.S. growth rate, you know, going from, you know, 3%-4% down to 1% and move back up to 2% on the size of this economy with some of the incentives and stuff available. It's pretty interesting.
Got it. I guess maybe just moving to our businesses.
Yeah
... I want to spend some time there, starting with maybe Wealth Management. Like, it's an industry which is viewed as secular growth, a lot of changes. Just give us a sense of how it has evolved and what your outlook is for the business, for the industry over the next few years.
For Wealth Management?
For Wealth Management, yeah.
So when, over the years, we historically, you had this issue that you had, banks did well with general consumers and had Private Banks that were strong.
Yeah
... and so you didn't have the middle. And so we all created bank brokerages, and all the work we did, we bought Quick & Reilly, and they did all this. Since 2009, when we closed the Merrill deal, you've had this continuum bet, and so when we think about Wealth Management, we think about it from Merrill Edge all the way through the Private Bank.
Yeah.
And so if you look across that business, the components are all doing well. So what is Merrill Edge? Merrill Edge is $450 billion-$500 billion investment assets, grew its account base by 10% year-over-year. Average account opening, $60,000-$70,000, not $3,000 that you see there. It gets all the awards and drives, but it's also really the first catchment basin for the new investor. And so we're putting a lot of effort and, and time behind that. And with the FSA teams, the branches, financial services advisors, the branches, they help feed people into those products.
MEGI, which is a automated, you know- rebalancing account, a guided, make it a Merrill Edge Guided Investing , it's grown exponentially. So that's one piece, and, and then you then you move into Merrill and, in the Private Bank, and they, they added 40,000+ new customers last year, $84 billion of flows, $8 billion in AUM flows in the fourth quarter. You know, they're sitting around $290 billion of deposits, 250 billion of loans, if I remember right. You know, profit margin 26%.
You know, it's, it's good, but it's a relationship management business driven by the financial advisors, and therefore, you know, the challenge is how do you scale it even further-
Yeah
... when you're already huge scale, $3.8 trillion, and, and customer assets and things like that. And, and how you're gonna do that is really through process improvement and capabilities. But as we look at the future, it's that continuum that gives us a competitive advantage. When people come in, we get their deposits, and then as they be-
Right
... whatever happens to them over time, we can stay with them. And then, you, then the second thing is then just continuing to use the platform we have, like the digital platform, which is now standardized across all the products again. Meaning all the capabilities again is really a massive advantage, 'cause that scale allows us to have, you know, 90% of the Private Bank customers use digital interface to their, to their advisors and stuff like that. I think in '80s in Merrill and et c.
When I talk to the Merrill FAs, I think what stands out to me is just the strength of the cross-sell opportunity and the stickiness that brings.
Yeah.
Do you think that's humming along in terms of the bank speaking to the broker, just the journey you mentioned?
Each person that handles the customer has a responsibility to deliver the brand of customer experience to that customer, which means everything we do.
If we don't do that, I think we fail the customer, 'cause our capabilities are better than anybody else's.
Right.
The minute you have any customer has anything else anywhere, you know, if you have a Merrill or Private Bank customer has a self-directed, yep, account, that should be a Merrill Edge account, not someone else, 'cause we can give them better insight and information and capabilities. If they have a bank account somewhere, if they have a credit card, they have mortgage—you pick all, a commercial loan, you know. That capability continues to improve. We've been at it a long time. It's not as easy as people think. But last year-
Yeah
... 150,000 Wealth Management clients opened banking accounts-
... with us and banking relationships out of the 3 million plus there. So there's a lot of... There's infinite room to go, grow that. The team does a great job today, but as I say, it's a nice start.
Got it. I guess the other theme around Wealth Management is just the interest in alternative investments.
Yeah.
If you can just talk to what we are doing, what's the demand from clients for these products?
It's an area where we, Nancy Fahmy and Chris Hyzy in the team and across the platform, advise themselves. You know, it's an area where we have lots of potential growth because if you just look at the pure asset allocation advice we give people, the amount of alternatives we have to offer them doesn't equal that quite yet. So we are adding more and more capabilities from a lot of these firms. And, you know, it takes a bit to get up on our platform 'cause we will not do something we can't do a great job with.
Yeah.
In other words, really get it out to the whole team and make it available. But those that get up, you know, see a good job, and we think that, you know, it's a lot of growth ahead of us. You know, at the end of the day, we made a decision, you know, I don't know, 15 years, 12, 13 years ago, whenever it was, to get out of the pure asset management business, you know, with Columbia, and we, we sold that.
Yeah.
And so, you know, our job is to mix all these great firms' capabilities to our customer base, including their alternative capabilities.
Just last one on Wealth Management. When you think about the margin in that business.
Yeah.
Do you see efficiency opportunities as an efficiency player?
You do, but you know, if you think about it, we already are very profitable with what... The presentation of Wealth Management has, you know, the way the comp goes through, you know, you take $1, you get $0.50 of it, and we make, you know, $0.25-$0.30 of the $0.50-
... that's left after comp. It's a pretty efficient business right now. The issue is just, if you count that as core revenue, you'd sit there and say, "Oh, my gosh." So the reality is just the methodology. So the comp system is what is the system we have, and that is how the financial advisors and private client advisors and the Private Bank run. The question is, the way you're going to increase profitability is really increasing, you know, the capabilities of scaling it more and more and more, and having the advisors make more money, and the company make the shareholder make more money. And that means continuing to digitize capabilities to allow the advisors and the teams to do more and serve more customers the way, in a great way, and then have more of that drop to bottom line while they make more money. And that's, that's the interesting question. That's where Merrill Edge is important, because-
... for smaller balance and accounts, we can serve them completely automatedly. That's where the centralized capabilities we have for home lending or other things, a lot, a lot of incremental volume without much expense. And so we got to keep doing that. But there's, it's still too paper intensive, still too document intensive, you know, and then we got to keep adding advisors, and we've been pumping, you know, growing advisor accounts slowly, but in the markets, especially those markets where, you know, that are, for lack of a better term, standalone away from the banking area or places we're putting the bank up in, into the market, you know, we've got to make sure we're growing that advisor base. We have tremendous capabilities to do that, but we've got to grow advisors who understand the system.
Yeah.
That's where the big training program came together last last couple of years. We have a combined training and access program for the team and the preferred business and retail, and consumer, and the Merrill business and the Private Bank, so teammates can come in and go all the way through the system. That allows us to grow the advisors and give them places to grow, so he or she will be able to move through the system, develop a client base. There's referrals, but there's also movement of people-
Right
... which is also critical.
... Got it. You mentioned markets, I guess maybe switching gears towards international investments. Like, I see it when I'm traveling, meeting investors outside of the United States. Just talk to us in terms of where the investment focus has been, and if we've actually realized any wins over the last 5-10 years. Yeah.
Yeah, I, so I think the care we take is not to talk about international, we talk about global. And so the reason why we do businesses in Global Markets and Global Corporate Investment Banking , and some in Global Commercial Banking and Middle Market , is because this business is global. And so our job is to serve, you know, the world's companies that participate in the supply chains and commerce on a global basis. That's the company side. And then on the investor side, investors are global. So whether it's the research team or whether it's the execution capabilities in all the major markets around the world, that combination is critical because you can't understand financial services now unless you understand all, you know-
Right
... the global tack. You can't understand the auto business unless you understand the global, you know, parameters. You can't understand technology of various sorts. And so, so we built this business to be global business. So it, when you define international, you know, people forget that this is all about how we serve a 2,500 or so large multinationals in the corporate business, and the largest investors in the world, across the world, and so we've invested a lot. And so where's the- where are the places to grow there? You know, the markets teams, you know, have been in the relevant markets for the research, and things ebb and flow, and Jim and, and Bernie, you know, make decisions. But if you go to like GTS, and Mark Monaco's doing some things here.
Yeah.
You know, the need to invest and continue to invest in GTS to provide companies the ability to operate around the world is high. And so, real-time payments in India, we just, you know, are finishing up.
Right.
You know, that's a requirement in order to be able to do what we want to do for customers, whether they're European companies operating in India, or Indian companies or US companies operating in India, and vice versa. You want to be able to build that out. That's not cheap, $80-$100 million investment to-
Yeah
... bring that up. So our GTS capabilities around the world, CashPro around the world, the investment banking coverage of Matthew and the team, around the world, we just keep developing. So we're about 20-odd%. Our international loans outstanding went from $20 billion to $100 billion across the last 10-15 years. It's a big part of what we do, but, you know, and we're making investments in GTS, we're making investments in talent across the world. We're making investments in building out Europe the rest of the way, now that we've been settled there for 5-6 years after Brexit. You know, there's a lot of stuff going on in the Middle East and continuing to invest there. But the reality is, it's all consistent with the strategy, which is large companies need us to serve them everywhere.
And frankly, mid-sized companies in the U.S. or large companies on a global basis, and play in a worldwide supply chain.
Yeah.
There's only a couple of us can do that, you know, that actually can handle a company that's making auto parts as they go out and meet the world in FX, and sales, and trade finance, and all those things they have to deal with, and advice. You know, a lot of these clients are going into places they don't know, and our job, you know, using India as example, you know, Kaku and the team, there's many, many companies that have had them have a discussion with them what it's like to do business in India.
Because it's, you know, it's different.
It's fun.
Yeah.
And different.
Yeah.
Just on that investments, I think there's a lot of folks look at Bank of America in terms of the expense discipline that you've had throughout your tenure, but I think we spent north of, like, $11 billion on technology investments.
Yeah.
Just talk through in terms of if you had to bucket them into keeping up the systems, cybersecurity, and then investments-
Yeah
... in new innovation kind of stuff.
Yeah. I think the way to think about it is, you know, what do we invest in sort of new initiatives? And so from 2019, we were running around $3.32 billion, and now we're running $3.8 billion a year.
... you know, that just, that's just a new code going in. So this past weekend, you know, a major implementation, the biggest one so far this year, several million lines of code, touching a lot of systems and pushing it out. So we're constantly investing in those. And if you think about how that breaks down, a lot of it's around digital, a lot of it around GTS capabilities, a lot around markets capabilities. You know, what do you think it'd be? And, you know, everyone wants to always, you know, spend even more. The question is, can you get it done and get it done right? Which is one of the tricks when you're making such massive scale change.
You know, over the course of time here, we run the company today on about the same amount of dollars of expense that we ran it on in 2015, technically, with 30,000 less people. We have, you know, deposits then would've been probably, I don't know, $1.1 trillion or something like that, and now $1.9 trillion. The numbers of checking accounts went from around probably 27 million to 37 million. The numbers of market transactions went up by multiple folds. The numbers of loans are up, you know, dramatically. Core loans. We had loans that were running off back then. And so all that's been done through this digital implementation, and that's what leads the way. So most of the technology investment is literally just continuing to apply more and more capabilities in digital across the board.
And so, you know, in that timeframe, you know, something like Erica has come on. So Erica has 18 million-19 million users today. This is an artificial intelligence, natural language processing, you know, generates an answer off your question. Had to be carefully crafted because in the financial services arena, the language wasn't consistent. So if you Googled "What's my balance?" 10 years ago, you could have gotten a yoga instructor. Okay, and so you had to, we had, we went to Stanford, I think, and said, "Develop a language about financial services," and we applied it internally. And so you hear a lot about this applied to AI tools into your own data sets you control, and that's what Erica was. Now, were we lucky or smart? No, but that's why we built it. So almost 200 million times last quarter...
A client used Erica to get an answer, which would've been, what? 5 years ago, before Erica was there, it would've been a phone call, an email, you know, a text or whatever. 200 million times a quarter is a lot. You know, and that's extravagant. It took 4-5 years for Erica to get to the first billion interfaces. It took 1 year to get the second billion, and that's the exponential growth. So that kind of technology application or Zelle, which, you know, only came together. ClearXchange existed. That was Zelle's old name. We rebranded it as an industry. But now, the Zelle transactions sent are twice the amount as the checks written. So back to the point of how can you manage this-
Right
... down? One of the most costly, but one of the most prevalent, and, you know, not a lot of value added to cash a check at a branch, if we think about it. What's the customer experience? They get the check cashed. That's not exactly something you're gonna wow them with. We're down from 16 to now by half. We're under 100 million checks deposited a branch a quarter now. That was a big breakthrough. It took us years to get there.
And it goes down about 10%-15% a year. That's because checks written are going down, and checks written are going down, why? Because Zelle transactions are twice as big as checks written now. And so, and so when you have this big enclosed customer base like we have, the check written turns out to be a check deposited, and the check deposited can either go through the mobile check deposit or at the branch. We've gotten to the point where basically, ATMs and mobile take away 86% of the deposits of checks, and that was a lot of work over time. But on the other hand, what Zelle do is eliminating the writing of checks.
And the math of that is tenfold and tenfold in terms of cost, and so that's how you manage it down. That's why you need less branches because you're not taking as many checks over the transom and stuff like that. So it all, and then you take those branches and dedicate them to sales, the sales and services and relationship building, as opposed to, "Here's a piece of paper.
Got it. And just since you mentioned AI and language models-
Yeah
... obviously, big debate on AI, hype versus reality. I'm sure Silicon Valley, a lot of folks-
Yeah
... pitch you AI tools. How different is AI and the language models in terms of their ability to boost productivity versus technology's always done that over the last 30 years in banking?
Well, in the end of the day, we know it works because that's what Erica is, and it's probably on a scale of ten of what, you know, ChatGPT-5 will be able to do.
Right.
you know, because, one, Erica doesn't access the whole internet, for example and stuff like that. It's probably, you know, a 2 on a scale of 10, but it's very effective and very controlled and very-
Right.
So we know it works. Now, the question is: how do you apply it, when do you apply it, and what do? So the places we're using it now are obviously in that area, in other customer support areas, in multiple ways, again, controlled on our data. We're using in computer programming, and, you know, we're seeing some benefits. When you have 30-odd thousand programmers programming every day for you, you know, 5, 10, 15, 20% lift is pretty nice. And so we've seen that, but we're piloting and we're building up more and more confidence in it, although there's some pluses and minuses of how that works, and in the industry, we'll work through that. You're seeing it in some of the write-ups and things like that, that we can do.
So there's 5 or 6 areas we know that we're running pilots slash implementations, but it's all carefully crafted, 'cause the end of the day, you can't do this unless your data is really understood-
That's right
... and the logic that you're using is understood. And so you know, so one of the interesting things that's happening as this stuff goes is, you know, we all go interface to a publicly available model, and, you know, it can come out with answers plus or minus, et cetera. The technology's getting better on that side. The models are learning how to correct themselves, and the answers are getting better and et cetera. But on the other side is the ability to bring that and apply it in-house, and so that's what you're seeing, a massive push for people saying: "Wait a second, we can take these models and train them on your data inside your walls.
Right.
Therefore, you don't have to worry about all the, all these other risks, other than, you know, does the model give a good answer?
Right.
And that you can check if you know the data and know how it would come out and run comparisons. Well, you can—it's harder when you put it out in the public domain because you don't know exactly what's going on, and the exfiltration risk and all that other stuff goes on. But so we, we think there's high hope here, and it's just that... And we're seeing the application. Now, the question is: how do we do it in the way of a severe—a heavily regulated industry can-
Right
... do?
Got it. I guess we talked about just global investments. We've also been investing a lot in the markets locally in the United States-
Yeah
... through the local markets organization.
Yeah.
Just talk to us in terms of where that focus, I guess, in the Middle Market s was from a geography product standpoint.
Well, so think about a couple things. One is when you take stock of what happened in banking since, you know, I got involved in it in the early, mid-1980s. So you had interstate banking come through, and it sounds like a banking nerd response, but I remember exactly where I was standing when the Northeast Bancorp case was decided that said interstate banking could happen. I mean, literally, I was standing in the Sullivan & Cromwell conference room. I remember looking at the heating system and saying: "Oh, my God, it's here," right? And then we all went in a race, acquiring companies, putting together this thing, because we've been disallowed by law to have global national banking.
And so that took off, and then that led to, you know, you know, the Fleet Boston forming Northeast, the NationsBank forming the Southeast, the Bank of America, et cetera, et cetera. And then you have all that come together, and, and yet when you get to the end of that, and then you went through non-bank acquisitions, and over the course of, 2004 to 2009, what you end up with is something really interesting, which is those continuums from consumers all the way through, you know, a 15-year-old to the wealthiest person in the world, companies from small business to large companies on a global basis, and investors, from personal investors to things. That's the franchise. But when you actually look at the math, you're not in Ohio.
You're not in Pittsburgh, you're not in Louisville, you're not in Denver, you're not in Minneapolis. So we had to sit there and say, "How do we go drive that presence across?" So we started building out, and so in the, you know, 9 markets we started with a while back, to give you a sense, there's 130-140 branches built today that have been open more than a year. There's more branches now, but the ones that. They average $200 million a branch now.
Wow!
So you know, to 180 is the average. You know, that's in those new markets, starting from a goose egg.
Yeah.
You know, using all the assets we had, which we had commercial banking in some of these markets. Take Denver, we had Merrill Lynch in these markets, we had the Private Bank in some of these markets, and then using that to materialize more and more customer flows and our digital capabilities, fully built. You're building out and quickly. So, you know, we continue to fill that out, but it all stems from this fact that you just weren't in these markets. I mean, not by choice. You weren't there by just complete historical accident. So in the top 30 markets at the time, I think we weren't in 10 of them or something like that. Now, we're in all of them, and now we're...
You know, the market share, I think we're number 1 in 11, and, you know, top three-
Yeah
... and have 17, 20 or something like that. It is all out there, but, you know, we continue to drive that, and that's what we're doing. But the value of that is how we work together in local markets. So before we went into Pittsburgh, I think we had 10,000 customers sign up, before we actually opened a branch.
Mm, okay.
And that was through the digital presence and also, Merrill teammates starting to say, "Hey, we're coming. Get your accounts open because now you're going to have a branch system underneath it." In Columbus, we're up to 20-odd branches, the same type of thing. In Cleveland and Cincinnati, and now Dayton's going up, and then Indianapolis. And, you know, so using all the capabilities of the teammates in those new markets has been important. Then if you go to old markets, the issue was, as you took the corporate, you know, headquarters out of all these predecessor banks and left behind, you know, the lines of business, you had a bit of a sucking sound on punch in the market. And so what we did starting... I started on this 30 years ago, yeah, 30 years.
Yeah, really saying, "Wait a second, we can do this better." And then late '90s really went after it, and we've been improving it all through the Bank of America and Co. So we have that; those teams work together. So in a market like Miami here, Gene Schaefer's the head of the market. He brings the team together. They refer business back and forth. They operate as a team. They present a unified front, and that's very beneficial. But part of that's putting the, you know, the work we did. We had a dinner at the Bass Museum last night. We support museums in each market. We support other institutions, but having a local team drive all that is critically important-
Yeah
... because it gives that, Gene's the CEO of this market. You know, he can drive the market, and we hold them accountable for delivering business to each other, delivering teammate scores, delivering development among the teammates, delivering political outreach, delivering, you know, community outreach.
Right.
They have to do everything that the whole company does in that market, and it's been effective. And so two things: One is you're filling out the franchise. Still, we have a lot of room to go there, but we're doing it very disciplined, build out a market fully and get to top, you know, a couple market share positions and drive it up. And then secondly, even the markets you thought you had good stuff, you can look and say, and-
Sure
... there's just a lot of capacity to grow.
I guess one of the other businesses that's benefited from investments is the Global Markets business.
Yeah.
Just talk to us in terms of what the thought process has been there, and just are there additional opportunities, investment-led, that can drive more growth?
Yeah, we often get asked by people, you know, "Where would you put more capital? Where would you put more, things?" But, you know, at the end of the day, capital is, you know, if you get the returns, it's infinite. You know, we are generating earnings, we can put it to work, et cetera.
Right.
So when Jim and the team, and Tom, when Tom Montag was here, they said, "You know, we need to start to move to a different place here." The research team was, you know, very strong and fully built out. The, you know, the investment banking team was covering the world, and the question is, could we move markets to another place, and, you know, financing opportunities and other things, but do it with our risk view and our-
Right
... capabilities view. They started doing that. We increased the balance sheet by $200 billion. The capital allocation went up, obviously, along with that. Last year they did $17 billion in revenue, and at the time we did it, they were probably doing $12-$13 billion a year. It's been a massive step change, and they've gotten into the top three position generally in most of the products. There's places we still are not playing as hard as for on purpose, in a lot of other places.
Right.
We have a lot of room to grow, and it's. And Jim's done a great job, and you can see that just, you know, the materialization of, you know, the market's up 5%, we're up higher than that. The market's down 3%, we're flat. You know, we're always sort of making a little bit of ground, but it's a grind to keep doing that. And, you know, and that's, that's significant. And so, you know, they're making about $1 billion. They make about 16% of the earnings of the company. You know, you- it's- it and Wealth Management are, like, 16% and 15%, and, you know, Global Banking and Consumer are going to be the big businesses. But this business has a lot, a lot of growth ahead of it-
Right
... and we keep investing in it, and Jim and the team have done a great job.
Got it. I know we have a few minutes. I just wanted to open up and see if there were any questions in the audience. Go ahead.
Do I get a mic or?
Yes, I think there's a mic that's on you. Not that you need one.
Brian, thank you for joining us. My question is: As you speak to shareholders and investors, what do you think is most unappreciated with the story today on Bank of America? Is it the synergies between all these leading businesses? Is it the ability to use AI and technology to make us more efficient and drive incremental margins? What do you think?
I think it's all the above, plus it's just pure organic growth. Because you're so big, you know, this goes on, that goes on, the COVID goes on, you know. Think about it, but if you think about the last four years, we've had COVID, the recovery from COVID, the stimulus, over stimulus, monetary response, two wars, etc., and we've averaged $25 billion in after-tax earnings in four years. That's the power of this franchise, but most importantly, that we've gone. We're probably 10% bigger in core consumer checking accounts, all primary checking accounts. We've added, you know, tens of thousands of Wealth Management customers. So, in the Global Banking and Markets last year, markets have moved from a $12-$13 billion revenue base to a $17 billion revenue base.
Investment banking, it has gained share even though the market's down. You know, so the idea that we think about is just making sure people understand, that when we grow, outgrow the market from pre-pandemic to now in deposits, the percentages, but the difference is the sheer dollar amount in customer flows are just huge. And that's what we just keep having to make sure people see, because there's always 8,000 things going on about, you know, worries about credit risk, worries about this, but you, you see this underlying engine that, you know, during the times and when the market, you know, when the world was bouncing around us, you know, we'd earned $17 billion, $20 billion. Now we're in, you know, $25 billion-$30 billion, and, and so you've moved the earnings up through the efficiency and effectiveness.
So it's this organic growth engine. It's hard to fathom when you start to think about, oh, yeah, you grew, you know, consumer customers from, you know, 34 million to, you know, $37-$38 billion. That growth in primary household checking customers is equal to most banks.
Thank you. There's another question. Maybe we have time for one more.
Thanks. Thanks, Brian. Can you talk about the growth of private credit?
Yeah.
Do you see them as a competitor, a potential partner, you know, chances to work together?
Yeah.
And then separately from how you think about them versus us and our peers, how do you think about private credit in terms of systemic risk in financial services?
So taking the last part first, you, we, as a company, and frankly, we as the major players, I was always believed that if you do something, you should be held to the same standards. If we believe it's important that you can't over-lend to a consumer or over-lend to a company, why do you let it go on outside from a systemic market impact type of question? And the answer could be: Well, those are big players. They can lose money. You say, "Well, that's not good for the economy." The companies still go through a rework and stuff. So, you know, so we've always been, whether you're in mortgage banking in the regulated banking industry, you have to do it the same way. Cards, mortgages, commercial banking, payments, all ought to be regulated the same way. We're not there.
Let's just be honest about it. They never gotten it done. It was the goal of the post-financial crisis regulation, because, you know, what people forget about is... Most of the companies that had the real problems were actually outside the banking system prior to the, you know, umbrella being thrown over, you know, Merrill and, and, and Goldman and Morgan Stanley on that side, and then also some of the non-bank companies on the other side. So, so one, we got to get that. So that, that's the base. Private credit is all the things you said. You know, we work with people on to distribute stuff to them. You know, we work with people in partnership to finance these companies. We can do it on our own if they meet our credit standards.
So, it's a complex relationship, and we have $1 trillion of commercial credit commitments out there. You know, the $10-$20 billion fund sounds big from forming for that group and the management fees and what they do, but in the context of the commercial exposure we have, it's a relatively modest thing. So then the question is, where do we compete and how do we compete against them? And the answer is, if the credit's worth doing, we're still... If the credit's worth doing, that's one question. The credit is not something we can do, that's another question. And there's a fair amount of it that's in that category, which is fine. You know, it goes on and stuff. If the credit we can do, the question comes down to really companies like us, ourselves in particular.
We were built on a distributed risk model of high order. So we would do a $20 billion LBO financing and end up with $25 million of exposure. It was just the way we thought. And when you think about it, you may have to rethink some of that, and with a capital base twice as big as it was before the financial crisis, with the geographic distribution, you know, both globally, and domestically, with the industry distribution we have, you know, you can do that. So Geoff and Bruce and Matthew and Jimmy have to think about, well, can we take higher hold positions when we're pushing them off to the credits we want? That provides a competitive advantage that's more similar.
The duration they'll take and things like that, when you're just doing a net asset value type yield versus a, you know, an NIM type yield to the equity, those are two different thought processes, so they'll be there. And so, you know, we're working on all that stuff. So, your friends, competitors, credits we'd do, credits we wouldn't do, hold positions , not, you know, let it go, use them as distribution arms to actually spread risk, which is a good thing. And so there's, there's some pluses and minuses in all this, but it's, it's, it's something we pay attention to and look at.
Yeah. With that, we are out of time. So, Brian, again, thank you so much for being here. Thanks very much.