Good morning and welcome to our annual meeting. I want to thank everyone for being here today, including those on our webcast. I hope all of you got a chance to go see the Tech Expo. It will be open a half hour after the meeting, a chance to see what your investment in this company continues to generate. When you came in, you should have received a when you registered, you should have received the agenda and the meeting rules, which are now in effect.
And so, I'd like to call the meeting to order. First, I'd like to introduce your Board of Directors. I'd ask them please stand. Could the Board of Directors please stand? I'd also like to note that our newest Director, Tom Woods, who will join us after the meeting today is here.
I'd also like to recognize the retirement of Chad Gifford as the Board recognized him last night. And with that, that, we'll get rolling today. I want to introduce Jack Baubender, your Lead Independent Director, who will make some opening remarks. Jack?
Thank you, Brian. Good morning to everyone here. It's good to be back in my home state. Don't get here very often except when it's basketball season and Duke is playing. So sorry to all you Carolina fans about that.
I want to thank you for coming to our annual meeting. And on behalf of the independent directors, I also want to thank you for choosing to invest in Bank of America. Throughout 2015 early 2016, I and members of our senior management have had the pleasure of meeting with many shareholders, so too did other independent directors. In the past year, we've met with investors owning approximately 37% of the outstanding shares of the company. Hearing directly from shareholders gives us important insights into their thoughts and their approaches to good governance practices and what they expect from independent directors.
It also provides an opportunity for dialogue on global, economic, political, social and environmental issues that affect our ongoing strategic planning for Bank of America. Given the value we have found in this, the independent directors will continue these meetings with our shareholders throughout the coming year. Our independent directors also meet with company regulators on a consistent basis, usually as a part of our Board of Directors meetings. In addition, as Lead Independent Director, I talk by telephone with these same regulators once a month. As with the shareholders, we discussed the Board's role in providing active independent oversight of the management of the company.
Our governance practices are strong. I encourage you to review them as they are laid out in the proxy statement. Based upon my past experience as the Chairman and CEO of a Fortune 100 company, as well as a Director or Trustee of Other Enterprises. I can say without reservation that you have an extraordinarily strong and capable Board, all of whose members are committed to devoting the time and effort to fulfilling their responsibilities to you. This board has a broad diversity of background, experience and perspective, which is crucial to our ability to provide the guidance and oversight you expect from us.
Today, you will hear from Brian and other company leaders about the strategy and progress of the company. You should know that Brian pulls us as independent directors in the process of developing this strategy and reviewing its success. We regularly evaluate the company's strategy, the operating environment and the progress your company is making on profitability, risk, governance and meeting our return goals. We routinely assess our operating model and focus on ensuring the company is best positioned to deliver for customers and our shareholders. In addition to this year round work, each fall, the Board does a deep dive into the company's multi year strategy.
We look at how the company performed against the prior year's plan and how well the businesses are delivering results. We evaluate the company's plans around managing risk, reducing expenses and growing shareholder value. Obviously, all of the above represents a substantial workload, a heavy lift, if you will. But I can assure you this board is committed to doing all we need to do to assure the ongoing future success of Bank of America. Again, thank you for investing in Bank of America and for coming today to discuss our progress.
Thank you.
Thanks, Jack. Thank you, Jack. And now I'd like to ask Ross Jeffries, our Corporate Secretary to review the meeting rules and present the Corporate Secretary's report. Ross?
Thank you, Brian. Good morning. There are 4 items that we'll consider today for shareholder vote. After all of these items are presented, you'll have a chance to comment on them. When that portion of the meeting is completed, we will tabulate the votes.
While we wait for those results, there will be a management presentation. Following that presentation, we will announce the preliminary results and then there will be a general question and answer period for any issues not related to the proposals. Most of you have already submitted your proxy to vote on these matters and you do not need to vote again. If you want a ballot to cast your vote, please raise your hand now. Let me remind you of a few housekeeping items.
Stockholders presenting a proxy statement proposal will have up to 4 minutes to discuss their proposal. Stockholders wishing to comment on the proposals will be limited to 2 minutes. You don't need to form a line to ask questions, just simply raise the numbered card that was in your admission package. Once Brian recognizes you, please move to the end of the aisle, where a Bank of America team member will be holding a microphone. Please then state your name and the proposal about which you wish to speak.
In order to give all stockholders who wish to speak the opportunity to do so, please limit your remarks to 2 minutes. A chime will sound to remind you when your time is up. If your remarks concern an item that will be voted on today, let us hear from you during that first question and answer session so that your remarks may be considered during the voting process. All other questions should be held until the second Q and A session, which will occur after the official business of the meeting is complete. If you have personal financial matters to discuss, we have customer service representatives available at the back of the room to assist you with those matters.
Anyone not following the rules of conduct will be asked to leave the meeting. David Leach, our General Counsel, has joined us today to assist with the clarification of the rules if necessary. I'll now present the Corporate Secretary's report. Notice of today's meeting and the related proxy materials or notice of Internet availability of these materials were mailed beginning March 17, 2016 to all stockholders of record as of March 2, 2016. Proof of the mailing will be filed with the records of this meeting.
Rebecca Fincher of Computershare Trust Company has been appointed Inspector of Election. She has advised me that holders of shares representing approximately 82% of the shares entitled to vote are present in person or represented by proxy, which constitutes a quorum.
Thank you, Ross. Thank you for all your work on the meeting. I now declare that a quorum is present and the meeting has now officially convened. First, I want to recognize our teammates from Bank of America who are serving as proxies and ask them to stand. They are Karen Fang.
Karen? Karen is the Head of America's Fixed Income, Currencies and Commodities Sales team in New York City. Thank you, Karen. And then Andy Sieg. Andy is one of our key leaders in our Wealth Management business running our Global Wealth and Retirement Solutions business.
Thank you, Andy. We're now ready to consider the 4 items that are up for stockholder vote as listed in the proxy statement. The management proposals are proposal number 1, to elect our director nominees proposal number 2, to adopt an advisory vote to prove executive compensation and proposal 3, to ratify the appointment of PricewaterhouseCoopers as the company's registered independent public accounting firm for 2016. There is also one stockholder proposal that was included in our proxy statement and will now be presented. The proposal relates to clawback policies and was submitted by Mr.
Kenneth Steiner. Mr. Davitt is here to present the proposal on Mr. Steiner's behalf. Mr.
Davitt?
Thank you. Be it resolved, shareholders urge our Board of Directors to amend the general clawback policy to provide that a substantial portion of the annual total compensation of the executive officers identified by the Board shall be deferred and forfeited in part or in whole at the discretion of the Board to help satisfy any monetary penalty associated with the violations of law regardless of any determined responsibility by any individual officer and that this annual deferred compensation be paid to the officers no sooner than 10 years after the absence of any monetary penalty and any forfeiture in relevant circumstances be reported to shareholders. These amendments should operate prospectively and be implemented in a way that does not violate any contract compensation law or regulation. President William Daley of the New York Federal Reserve outlined the utility of what he called a performance bond, And I quote, in the case of a large fine and senior management, would forfeit their performance bond. Each individual's ability to realize their deferred debt compensation would depend not only on their own behavior, but also the behavior of their colleagues.
This would create a strong incentive for individuals to monitor the actions of their colleagues and to call attention to any issues. Importantly, individuals would not be able to opt out of the firm as a way of escaping the problem. If a person knew that something is amiss and decided to leave the firm, their debt compensation would be at risk. The statute of limitations under the Financial Institutions Reform, Recovery and Enforcement Act is 10 years, meaning that annual deferral period should be 10 years. Please vote to protect shareholder value, clawback amendment proposal 4.
Thank you, Mr. Javed. So we're now going to take questions and comments on these four proposals. And just as Ross said earlier, please hold up your number card. We recognize you have 2 minutes to make your comment.
In this session, if we keep our comments to the proposal being voted on, then we're going to have a general Q and A session later in the meeting. So, please raise your card here.
With respect to the vote on the directors, before that vote, I'm seeking clarification from Ms. Allen, Chair of the Audit Committee, with respect to correspondence sent April 5, 2016, to her and the other members of the Audit Committee relative to their fiduciary responsibilities to shareholders and stakeholders. I won't read the entire letter, but I quote in pertinent part. As you are aware, as other members of the Board have refused to provide the information requested in my letter of May 8, 2015. In the interest of transparency to shareholders and stakeholders, the urgency of receiving this information has been compounded by the fact that I have recently become aware of an apparent severe conflict of interest of Mr.
Charles L. Rosati. Mr. Rosati, while serving as Chairman of the Audit Committee of Bank of America, was also Senior Advisor to the Carlyle Group, whose Clarion Rhodes hedge funds unit was busily betting on mortgages, while to date such activities as articulated in my past correspondence have cost Bank of America's shareholders over $200,000,000,000 in equity. Shareholders and stakeholders worldwide want and are entitled to know that the Board will forthwith take up and address this apparent conflict of interest in accordance with the mandates of Sarbanes Oxley and all subsequent law and settlement agreements and report the outcome to shareholders at this year's meeting.
Besides Mrs. Allen's clarification, I also ask each member of the audit committee to personally state their individual course of action on the record here and now.
Thank you, Mr. Davitt. Ms. Allen, do you want to confirm that we have you have Mr. Davitt's letter?
Yes. We do have the letter and have the direct to the call.
Thank you. Next question, 350, please.
Hi, I'm Mike Mayo. I'm here as a proxy for ownership of stock of Wall Street analyst. First, I'd like to say, I'm against proposal number 4. You have a very strong balance sheet, strong franchise, record capital, record liquidity. You go through the living will process to have additional compensation restrictions to make you safer.
You're already safe and that's the spirit behind it. In that event, 10 year callbacks seems excessive. On the other hand, appreciate that he was a Fortune 100 CEO, appreciate him leading off the annual report and this meeting today and that he and other independent directors met with 37% of the shareholders. But my issue is that the lead director and the independent directors are not holding you, Brian, and the other management team accountable enough. Number 1, there's no time frame for any key financial target.
Based on consensus Wall Street expectations, the returns at Bank of America will be below the cost of capital in 2016 2017. If so, that will be a decade of continuous value destruction. The second thing, it kind of relates to proposal 2, but it's also here as it relates to compensation. The proxy says that all key businesses exceeded the cost of capital, but that wasn't true for the firm as a whole. And the third thing also relating to proposal 2, the PRSUs, the performance restricted stock units, go in the money starting at 50 basis point return on assets and they go completely in the money at 80 basis points return on assets, which is at a level for value destruction.
So I don't see why the proxy as overseen by the lead director would allow management to get off so easily. In other words, giving extra pay for management for destroying perhaps less value than in the past. I'd like to see more oversight by the Board of Management. Thank you, Mr. Meyer.
Any other questions or comments from
our shareholders on the proposals? 205,
please.
My name is Zoe Postol. And I was wondering after so many years of being partnered with Bank of America, can BWC still like be an independent auditor?
There are I think it was you asked if PWC could still be an independent auditor. Yes, there are very serious rules that have been in place to define what a dependence means and they meet the standard of independence as set forth in the proxy and have Sharon, anything to add there? So they meet the standards of independence and there's a series of rules and series of determinations that require that to be made. So if you look at the proxy, you'll see how that comes together in the disclosure. Okay?
Thank you. Other comments or questions on the proposals? 137.
Yes. With respect to my earlier question, Ms. Allen, the clarification that I was seeking is that the issues taken up with Mr. Rosati will be in accordance with the mandates of Sarbanes Oxley and there's a protocol to be followed. And that protocol is that it'd be taken up at the formal meetings and that it be addressed and the disposition of that inquiry and investigation be put into the minutes and so all shareholders could see.
And it's that confirmation that I'm seeking. We will follow the procedures that are required. Thank you.
Thanks. Any other comments on the proposals? All right. Let's conclude the comments on the period for the proposals. I'd now declare the polls open for each item's business.
Does anybody have a ballot? Did anybody get a ballot? If you're we can collect the ballots now. Any other ballots? There's one back there.
All right. With that ballot, we are going to close the polls. And while we are waiting for the results, we are going to take you through a little bit of the progress on the company's efforts, as Jack mentioned earlier, and then we'll come back and report the results. We're going to do this in 3 parts. First, I'm going to talk a little bit like we did last year about the progress we've made and how we're doing to build a strong foundation.
2nd, we're going to have Paul D'Onofrio, our CFO, look at the Q1 and the progress there. And then 3rd, we're going to have Dean Athanasi and Tom Guin talk about the progress we're making in our retail business and importantly talking about how the technology you have seen earlier helps drive that business. So we start our company with a set of principles we laid out in the annual report to you and that's what we call responsible growth. The discussion that the shareholders had before about the hits we took in a crisis was a serious amount of hits that we just won't repeat. And to do that, we have to grow, but grow responsibly.
It has four elements. First, we have to grow in the market, no excuses. 2nd, we have to stay focused on a direct customer strategy. 3rd, we have to stay within a risk framework, a detailed risk framework from the board all the way through the operating units. And then we have to grow in a sustainable manner.
Sustainability has many elements, including how we govern ourselves, how we invest in the future and how we continue to grow our employee base and help develop them to be stronger and strong employees every year. So we go to market in a straightforward fashion. We have 8 lines of business and you can see them here. Those businesses serve different groups of customers because customers are different have different needs, was mass market and retail banking or wealth management business or our small, medium and large sized businesses or our markets business. Together, these businesses represent the 5th largest most valuable bank in the world on the planet.
They drive these businesses and have great positions and you can see on the next slide, you can see these industry leading positions they have. They have segment leadership positions in each of the businesses. If you look from the consumer banking side through the wealth management side through the banking side to the market side. Merrill Lynch and U. S.
Trust are 2 of the biggest brands in wealth management. And then to serve the needs of the real economy, we have a small business practice, a business banking practice, a middle market practice, a large corporate practice. They help drive and invest in companies and help them employ people and drive the real economy. We go to our institutional investors that are served by our global markets firm. We take the insight we get from having the number one research platform in the world for 5 years in a row and we serve that to investors to help them make investment decisions.
All that provides a strong foundation for responsible growth. We are a financial services company and we rely on a strong foundation, as Mike said earlier, our balance sheet to help us get the foundation so we can grow. So, if you look at our balance sheet, we started coming out of the crisis with about $2,300,000,000,000 in assets. It's down about $100,000,000,000 or you can see here about 6%. But importantly, within that balance sheet, how we changed the balance sheet and how we grew liquidity and cash is important.
So, you can see here the cash and cash equivalents are up. The debt securities, which are all government guaranteed or government issued securities are up. The loan and leases are down, getting rid of some of the legacy assets and you can see importantly, our deposits have grown by $225,000,000,000 which all is organic, no acquisitions and standalone would be the 10th largest bank in the country. We've all but eliminated short term market funding, which is one of the issues that came up in a crisis and the equities continue to grow dramatically. Importantly, within our loan book, we have repositioned our company.
Coming out of the crisis, we were 2 thirds consumer and a lot of that was unsecured and now we're fifty-fifty. That has shown up in the consumer asset quality and the commercial asset quality improving across the periods of time. You can see that those credit costs have come down in every period. Now you don't have to assess it off a history. We also, since the crisis, perform a stress test every quarter in our company under various scenarios.
That stress test is also performed once a year as part of the regulatory framework, so called CCAR process. This is a 3rd party's assessment of our losses in our loan portfolios across time and you can see in each of the years they've come down to about $24,000,000,000 or 35%. That shares were positioned to withstand an immediate crisis without warning and the losses across 9 quarters, 2.25 years cumulatively added up together have dropped by that much. One of the issues we face as a financial institution is a low United States especially because we're a lot in the United States, a low growth rate not only here in the United States, but around the world in a low rate environment as the fiscal policy and monetary policy tries to drive growth. This is our revenue across the last 5 years and you can see that it has come down.
But when you look at the core revenue adjusting for the interest rate marks we took like we did in the Q1 and Paul will talk about that, you can see it's more stable. When you adjust it for the credit risk, our revenue minus charge offs, because especially in the consumer business, effectively one of your ways that you have expenses, a charge off rate. You can see that the revenue has stabilized and grown. Low interest rates continue to affect our company. Why?
Because we have a $500,000,000,000 of non interest bearing deposits, which are worth more in rate the rate structure is higher. You can see here that impact across the last 5 years. Importantly, two things to keep of note. First, with 100 basis points increase in rates from the current place, the 10 year being when this was calculated about 1.75, you would have a $6,000,000,000 per annum pre tax increase in profits. The second thing to note is that we continue to drive this by adding more core deposits and more core loans and help drive the business and the core NII even if rates don't rise and Paul will show you some of that.
What do you do when you're faced with that environment? You drive down expenses. We've made a lot of progress. In the fall of 2011, we announced new BAC and we were able to eliminate $8,000,000,000 in annualized cost of a $77,000,000,000 expense base that was continuing to rise. You can see these costs have come down largely and you can see this includes litigation, but if you take out litigation, you see more of a relentless drive down.
Core costs are down $15,000,000,000 or 21% across the 5 year period. We continue to drive that cost structure down through simplify and improve to make our company less bureaucratic, save money and plow back in the business. During the time we took out this much cost and we'll continue to do so, we've invested $3,000,000,000 per year in technology development, some of which you saw if you walked around the room today. When you put that all together, you have the income recovering as costs legacy costs were out of the system, revenue stable, expenses coming down, credit costs coming down and your income has recovered. With that income, we return capital to U.
S. Shareholders. How do we do it? It's pretty straightforward, 2 ways. 1st, our dividends, and you can see this as dividends paid over the last 5 years.
And as we start to get the approval to pay more dividends, you can see that rising. And secondly, through share repurchases. The last 3 years, that added together $11,000,000,000 of capital return and our goal is to continue to return more and more capital now that we've achieved the 2019 capital levels. Importantly, one of the things we measured is your investment in the company, the tangible book value per share. And as you can see here, it's grown every year.
It is a record for our company in history. It's grown 43% across the last set of periods and we did that as we absorbed $200,000,000,000 in legacy cost or $12 a share. How did the stock price reform? So that's your investment company going up. This is how the stock price performed during those years.
1st couple of years, when the issues were coming out of the crisis, our stock lagged. Then we started to pick up as the recovery of capital and the business model was more assured. So, with that, I'm going to turn it over to Paul D'Onofrio to take you through the Q1. Paul?
Thank you, Brian. I want to start by thanking all of you for being shareholders of Bank of America. As Brian said, I'm going to cover the Q1. If I had to summarize Q1, I would say that market volatility and low long term interest rates challenged our ability to grow. However, we compensated with strong expense management as well as solid loan and deposit growth.
Net income was $2,700,000,000 or $0.21 per share on revenue of $19,700,000,000 That's down from $3,100,000,000 or $0.25 a share in the quarter a year ago. So what happened? Let me start by pointing out that our customer segments, Consumer Banking, Global Wealth and Investment Management, Global Banking, Global Markets and LAS, they earned net income of $4,500,000,000 in the Q1, up 16% year over year. So that doesn't sound so bad. So again, what happened?
Well, we had 2 adjustments in the quarter, which together lowered net income by nearly $1,300,000,000 The first adjustment relates to how we account for annual incentive compensation expense for employees who are eligible for retirement. Every year in Q1, a portion of the incentives we award to employees who are eligible for retirement, we must expense today, even though those teammates earn those awards over 3 years just like everybody else in the company. That expense in Q1 totaled $527,000,000 after tax. The second adjustment of $730,000,000 after tax is a little bit harder to explain. Simply put, as long term interest rates change each quarter, we need to adjust the net interest income we derive from mortgage backed securities in our investment portfolio.
Generally, when long term interest rates decline, as they did in Q1, that adjustment is negative. But when they rise, that adjustment is positive. We've used this accounting treatment for many years and normally it doesn't have as much of an impact on our earnings because long term rates are generally or relatively stable. However, over the past few quarters, interest rates have been volatile. So the impact has been more pronounced.
So together, these two adjustments, the incentive expense for employees who are retirement eligible and the change in net interest income because interest rates changed, together these two adjustments lowered net income by $1,300,000,000 or $0.12 a share. Importantly, the aggregate impact of these two items a year ago in the Q1 was $0.08 a share. So if you similarly adjust both periods, EPS in the Q1 is comparatively flat at $0.33 despite the increase in market volatility this year. Now since interest rates have such an impact on the company's financial performance, I thought I would provide an historical perspective on their levels. As you can see on this chart, the yield on 10 year treasuries has been cut nearly in half over the last 5 years, falling from 3.4 percent to 1.8%.
Shorter term rates also are at low levels. These declines impacted significantly our net interest income, which accounts for approximately half of the company's total revenue. As depicted on the chart, net interest income, or NII, has declined approximately $3,000,000,000 per quarter over the last 5 years. So I want to make 3 points about interest rates. First, we obviously cannot control them.
They affect the company's performance, but all we can do is react and compensate when they change. 2nd, we expect to benefit when they rise to more normal levels. And 3rd, despite the expected benefit, we are not waiting around for them to rise. Instead, we're focused on the things that we can control and drive, like growing deposits and loans, like delivering for customers and clients and like managing expenses. So how did we do in the Q1 with respect to the things that we can control and drive?
The answer is we drove good growth and good performance. Total loan balances increased $28,000,000,000 or 3% year over year. And loans in our primary lending segments, they were up $78,000,000,000 or 11%. As you can see on this chart, we've seen steady increases in loans every quarter as we continue to deepen and focus on our customer and client relationships. Turning to deposits, total deposits were up $64,000,000,000 or 6 percent to $1,200,000,000,000 To put this in perspective, our increase in deposits year over year is equivalent to the total deposits of the typical midsized U.
S. Bank. Within our lines of business, consumer increased deposits by 8%, wealth management by 7% and global banking by 3%. Expenses is also another area within our control. And as Brian mentioned, we've made significant progress over the past 5 years and that trend continued in the Q1.
Year over year, total non interest expense declined by $1,000,000,000 or 6% to 14,800,000,000 dollars Progress was in nearly every major category across the company from personnel expense to data processing, from marketing to equipment costs, as we continue to focus on streamlining and simplifying Bank of America. So that brings me back to our Q1 financial performance. Starting on the right, in the all over category, you can see the impact of the 2 items I mentioned earlier, the incentive expense for employees who are retirement eligible and the adjustment to NII. But notice our customer facing segments, where our teams control and drive the things that I've just talked about. Here on a combined basis, our 5 business segments delivered for customers and clients in a very challenging market environment and earned in the process net income of $4,500,000,000 which was up 16% year over year.
Consumer Banking earned $1,800,000,000 up 22%. Wealth Management earned $740,000,000 up 13%. Global Banking earned $1,100,000,000 down 22% as we build reserves for energy. And global markets earned nearly $1,000,000,000 up 45% in a very volatile trading environment, while legacy assets and servicing trimmed losses to $40,000,000 At the bottom of the slide, you can see the returns and efficiency ratios for each segment. Except in LAS, we earned more than our cost of capital in each one.
And before I wrap up, let me briefly comment on recent volatility in our stock, in our stock price and in that of our peers. Bank stock declined sharply in the 1st 6 weeks of the quarter. This was caused by slumping oil prices and a slowdown in China, which heightened recession fears at home and put in question when the Fed was going to raise interest rates. Due to the sensitivity of our financial performance to interest rates, this impacted our stock price performance more than some of our peers. However, recession fears abated, interest rates rose a little in the second half of the quarter, plus investors reacted well to our progress in Q1.
They reacted well to the things that we can control and drive And they appreciated a little bit more, I think, that we are not waiting around for interest rates to rise. So since mid February, our stock price has recovered, rising more than our peers and more than the overall market. Okay. So to sum it up, if one adjusts for a couple of items, we had a solid first quarter in a very difficult environment. Despite challenging markets, despite low interest rates, we stayed focused on the things we can control and drive.
We grew loans, we grew deposits, we maintained a strong foundation in liquidity and in capital. And we continue to invest in our future by hiring sales professionals and investing in new technologies. And we did all of this while we lowered expenses. Thank you very much. And with that, I'll turn it back to Brian.
Thanks, Paul.
Thank you, Paul. Thank you. So before I turn it over to Iain Tom to talk about our consumer business, I want to touch
just a
minute on what we call responsible growth and sustainability. Sustainability, as I said earlier, has lots of elements to it. It's about how we manage expenses. So, expenses are coming down, we're investing in future, more technology, more salespeople, new branches, etcetera. It's also how we support our communities.
So if you look here, you can talk about what we do in our communities. It's what we do through better money habits that you should have seen in the other room. That helps millions of individuals and families learn how to manage their finances well. If you go to our mobile banking, it's right at a tile right on the front and you can go in and see the content. It It helps people figure out what to do, buy or lease a car, own or rent a home, whatever the issue is.
We've also helped the military. Last year, we hired 2,000 veterans into our company and we've donated over 2,000 homes to military veterans returning from service. Those homes not only are donated to them, but we make them we make the house a home by the volunteer time our teammates put in to clean up the house, plant the gardens, buy furniture and other things to make it a house, a home. It's what we do in our environmental work. We have $125,000,000,000 environmental commitment, one of the largest commitments to finance the new energy sources.
And finally, every year, your company contributes in all the markets we serve over $180,000,000 in philanthropic investments. And on top of that, each year, your employees donate 2,000,000 hours of volunteer service to help nonprofits around the world. And not many companies that do this and I'm very proud and honored to represent this company that does it. Another way we think about our company is one of our values in the company is realize the power of our teammates or people. We're in a people business.
It's what we do and we work hard to be a great place to work for all those teammates. We have a diverse and inclusive workforce that reflects diversity inclusion of all the communities and countries we serve. Through our recruitment programs and our partnerships, we're investing to bring kids out of school that are the best and brightest to come to work at our company, over 1200 new hires a year out of school. We continue to make changes to our benefit plans, offering wellness offerings that have over 90,000 teammates measuring the steps to help drive the wellness of them and their families. And this also includes our recent announcements to move our parental leave benefits from 12 weeks to 16 weeks.
As we think about all the ways we pursue sustainability, we use our size and scale, but our localness in our communities to create opportunity for customers and to grow our company responsibly.
One of the
ways we do that is our consumer business. That business earned $1,800,000,000 or $1,900,000,000 after tax last quarter.
But I'm going
to ask Dean Athanasia and Tong Gwynn to come up here and talk about the progress they've made in that. Just for you to note, it's Tong's birthday today, so treat him nicely, okay. Dean and Tong.
Good morning, everyone, and thank you for the opportunity to present to you today as our shareholders. As Brian mentioned, we have the leading consumer franchise in the country. We're going to spend some time to talk about that, but it took us some work to get here. So coming out of the financial crisis, we faced many challenges. The new regulations, CARTA Act, Reg E, Durban had a negative impact of $7,000,000,000 on our revenue.
Those regulations also increased the operational complexity, mostly to manage heightened standards of risk and compliance, which then result in higher cost of doing business. Again, we need to strengthen our compliance and risk management processes and we also needed to increase our technology spend to automate some manual processes. And unfortunately, while we were doing all that, our client experience declined. And also, and this is both a challenge and opportunity, we had to keep up with emerging technologies and changing customer behavior such as the increased use of mobile and social media. So Dean will talk about how
we tackle and address those challenges. Thanks, Tong. And given the environment, we knew we had to change our business. So, we did three things. We simplified the business to make it easier for clients to interact with us.
We reduced cost to make ourselves more efficient and we invested in the business, as Tong said, deploying new technologies, product capabilities and client managers to work with our clients in the field. The chart to the right highlights our transition from where we were in 2,009 when we started and Tom talked about that to where we are today. If you look at the top two box, in order to get ourselves more efficient, we reduced financial centers, we reduced headcounts by 23% 37%, respectively. In terms of products, we were very complex. We had over 1500 individual consumer products.
Think of the complexity around that. We streamlined that and we're now down to 67 core products for our clients and we put all of our money behind those products to make sure they're the best in the industry. And then in terms of transactions, this is very important for us. We have automated over 2 thirds of our transactions and the reason it's important is because we interact with our clients over 600,000,000 times each month. So, this is again produces great efficiency and speed and execution for our clients as well.
And as Tong said, the client satisfaction dip, but then we came back up. We are now at 55% at the highest ever in our history. And what that I'll give you a little bit of what that means because Tong is going to hit on later. That means 55% of our clients are rating us a 9 or a 10 on a 10 point scale. If I included 8%, 8%, 9% or 10%, that number is closer to 80%.
So we have improved client satisfaction a great deal. We stay focused on it and we have to keep going and keep improving on that in the future. And the reason that's important is because when clients are satisfied with us, they deepen their relationship with us, they bring us more of their assets and use more of our solutions. As you can see on and that's the story on deposits, Our clients added over $166,000,000,000 in deposits over this time period. That's up over 41%.
We're the number one retail deposit share in the U. S. And we're also the lowest cost provider showing and our costs have come down by over 34% over this time period as we've gotten more efficient showing that we can get efficient and grow at the same time. We see the same thing in our investments. Clients are bringing us more of their investment assets to our platform called Merrill Edge.
Those are up over $74,000,000,000 in the same time period or up 139%. Merrill Edge is a 4 star rated by Barron's investment in online platform. So it's a great platform for us. And as of today, less than 15% of our clients are on this platform. So it's a newer platform, so it can continue to grow over the years ahead.
Then I'll touch on our loan portfolio because this is where we did the most of our work, as you heard Brian talk about and Paul talk about a little bit. From the time of the crisis in the 1st 3 years, we worked in our consumer portfolio, reducing low performing assets and exiting non core businesses that didn't have anything to do with our clients. And then in 2013, we started to overcome that. So you can see since then we have grown in over $20,000,000,000 in loans and that's up over 10%. But most importantly, the quality has improved of our overall portfolios and you can see our losses have declined by over 95 basis points all the way down to 141 basis points.
So, we can grow and we can do it with the top end and the top quality clients throughout our books and we can continue to do this as we move forward. Now, as we mentioned, during this whole period, we are always investing in the business. 1 of the big investments we made was in technology and Tom is going to talk
to you about somehow some
of those investments that did for us and the impact they had on
our business. Great. Thanks, Dean. And as Brian mentioned, a big part of the $3,000,000,000 invest each year in technology goes to digital. So for instance, mobile is particularly important because it provides a better customer experience.
It costs less for us to process and therefore allows us to reduce the infrastructure that you have seen so far. Today, we have almost 20,000,000 mobile users and that's 5x the number in 2,009. In the Q1 alone, we added 900,000 new users. Mobile deposits, for instance, represented in the red bars here, are up 10x in the last 4 years. That's equivalent to 700 branches of medium sized regional bank.
That has allowed us to reduce our expenses as mobile transaction is about 10x cheaper than the transactions through the tellers. Another example of the shift to additional is in the credit and debit card spending. So while spending at a point of sales and the red bars have been up about 2%, 3% per year, the online spending, which is 20% of total spend in gray here has been increasing close to 15% per year and mobile payments and digital wallets represented in blue such as Apple Pay, Samsung Pay, Android Pay are starting to emerge. So as we grew our business and improve our efficiency, we have also improved our client satisfaction. As Dean mentioned, we are now at an all time high, even higher than the pre crisis level.
And we increased our client experience at every touch point in the financial centers, in digital, contact centers, and we continue to improve these numbers every month. So all this work has positioned us very, very well into the leading consumer franchise that we talked about in the opening.
Thanks, Tom. That leads us to where we are today. We now and you have the top consumer franchise in the country today. We have the best client base in a top market position. We have
the best products with the
best in banking from Bank of America and the best in investing from Merrill Lynch. So we have an incredible platform to offer to our clients. We're the innovation leader with our digital and mobile capabilities and we'll continue to invest there and we have an incredible coast to coast reach with over 4,700 Financial Centers, 16,000 ATMs and 23,000 client managers out in the field providing advice to our clients. So this is the franchise where we're starting, where we're going to invest in the future and we're always looking at what's the next step, where are we going, where are we going to make investments and Tong is going to talk to you about a few things that we're seeing and where we're going to start to look for growth in
the future. Great. So as you can imagine, we're spending a lot of time thinking a lot more about our future than the past, how our customer behavior is changing, what do we need to do to stay ahead of the curve with technology and capabilities that are important to our customers. So part of the sustainable growth that Brian talked about is to create efficiency so we can invest in both new technologies, but also in deploying resources and financial centers to help our clients. On the technology front, we're investing in biometrics for customer authentication.
So think of fingerprint recognition on your mobile phone. That makes the experience seamless, but also safer for our clients. We use artificial intelligence for customer service, think of Siri, advice such as global investing and we have rolled out contactless interactions at the ATMs and point of sales, so you can pay or withdraw money from your phones, again, safer. And we help our clients financial lives with conversations around their life priorities, what's important to them, such as education, retirement or leisure. And we're also engaging with our clients through social media.
For instance, we just announced a partnership with Facebook to communicate with our clients, such as sending them low balance alerts. And we have invested very heavily in our digital platform. For instance, this year, we have tripled our investments in digital to make it the best in class and easier and safer for our clients. So today, you can do all your banking with the thumb on your cell phone. You can open an account in 4 easy steps.
You can make deposits. Our clients make 260,000 deposits per day. You can withdraw money from ATM, which is safer than plastics. You can invest with our Merrill Edge platform. You can get connected to a person with an expert in a financial center or a customer service representative in a contact center, you can pay a friend to the cell phone number and you can pay with your mobile phone at the point sales with Apple Pay, Samsung Pay and Android Pay that we talked about.
But with all the technology, we also need to educate our customers. So to that end, we have deployed digital ambassadors in our financial centers to help them and the adoption rate has really gone up. But while we have this great technology to make things simple for our clients, we also need to invest in financial experts to help our clients in our financial centers. So, Dean will take you through that.
Yes. And just a reminder, everything that Todd talked about out there is next door in the expo. So, you can go actually take a look at it and use some of the capabilities. So given all the work that's going on in digital and transactions moving that way, we knew we had to change the role of the financial center it moves forward in the future and we're doing that now. It's going to change from a destination where people went before to do a transaction and walking in and doing transactions to now where they are going for advice and guidance.
And that's going to be advice on how to save for their retirement, their kids' education, advice on how to buy a home or
an auto or advice on how
to start or grow a business. It's we are going to set it up and we are going to put the client professionals in the financial centers to help our clients do that. We are renovating over 1500 centers. We have some centers that look like this, but renovating another 1500. We will open 250 new centers in the years ahead in markets where we think we are under penetrated, but they are going to follow this model here on the left hand side and I am going to show you a little bit more detail of that.
But the most important thing that we are doing is we are setting up our financial centers for all of our clients. Certainly, the consumer clients between Tong and me, but also for our Merrill Lynch clients, our U. S. Trust clients, our commercial banking clients and our corporate clients. They're going to have the professionals staffed in them to handle the eight lines of business that Brian talked about at the outset here and that's how they are going to be going forward.
Now, the picture is very hard to see the future of where we're going. So, we set up a little hopefully a rendition video for you just to kind of take you through in a little bit of a three sixty way, so you can see what these are going to look like. And by the way, these are modeled after centers we already have in Boston and New York and San Francisco and some other places. I don't know if Ku
will roll the video. All right.
So Financial Center of the Future, I'm going to narrate. You come in, you can see the branding on the side, showing everything that's inside. You walk in, you don't see the teller, you see a greeter who's going to help you find the right place to go. You're going to see displays, our digital bars with all of our latest technologies and experts to help you get you signed up on that, our specialist Merrill Edge, business center set up for our business clients, service area for our business clients and plenty of meeting space across
the board.
You'll see digital you'll see the latest technology and the latest capabilities. Our service areas, we'll still have teles, we call them client service areas now. They're towards in the back. And so we're going to provide great service and we'll set it up specifically for clients, but that is not the feature of the center. Advice is the feature of the center.
Plenty of digital capabilities to give you the latest marketing and what's new at Bank of America and the best value for you all the way through and we can change things easily. You can see one of our specialists, Emeril Edge. If you're a client who's a Merrill Lynch client, a U. S. Trust, we'll take you upstairs.
We have our U. S. Trust reps up there working closely in proximity with our Merrill Lynch reps as well. So if you're an affluent client, we take you right upstairs and we have that continuity. And of course, we'll still have the greatest technology in all of our latest ATMs, cardless ATMs and whatever the latest is set up in our center to help you out.
And that's the vision of our center going forward. Okay. That's it. Thank you. So, just a little rendition, we use that actually with our team just to show them where we're going, where the future is going to be and how we want them to interact with our clients.
So, just to sum this up, up, we have the best market position in a leading coast to coast franchise. We have the top array of products whether that's on the banking side or the investment side. We are a top rated lender, but we are going to be focused on the upper end and high quality lending and portfolio. And as Tom showed, we have the best digital platform to serve our clients and again, you can go look, touch and feel everything that we have coming and now. So, we are well positioned in the market and we can continue to grow responsibly for you.
Thank you for your time today. I'll turn it back to Brian. Thank you.
Thank you. So, you can see that tangible results are simplifying, strengthening and transforming a company and you can see it very clearly in the retail as we made the move not only to preserve what makes this core to us that advice and guidance of branch, but also bring on automation at a high level and with a velocity and a capability that no one else can match. So before we open the question and answer, I'd like Ross to report the preliminary results
of both. Ross?
Our Inspector of Election reports the following preliminary results. All of the management proposals received the required majority support and have been approved. For these proposals, all 13 director nominees have been duly elected to the Board of Directors with a vote of at least 94%. The advisory vote on executive compensation has been approved with approximately 93% of votes cast in favor and the appointment of PricewaterhouseCoopers has been ratified by 98%. Stockholder proposals did not receive the required majority support as only 6% voted in favor and 94% against.
Final voting results will be reported on a Form 8 ks filing with the Securities and Exchange Commission within 4 days of today's meeting.
Thank you, Ross. Now let me open up to general Q and A. As a reminder, the rules are still in effect. Please raise your card. You have 2 minutes and we'll recognize you.
206 in the back please.
Good morning. My name is Nicholas. And in regards with House Bill 2, I was wondering what the company's position was and what they're doing in the community to have the bill repealed?
Well, our position has been clear. We've been steadfast in let's start off with what we do as a company. We are steadfast in our commitment to non discrimination in everything we do in the company. We've been a leader in LGBT practices going back to the mid-90s when we first adopted practices that a lot of people didn't adopt till the recent past. We've been we continue to support that this bill ought to be repealed.
We've made it clear. We're hopeful that the recent efforts by the governor and dialogue will result in progress, but we are clear and of the record that we believe the bill should be repealed. Thank you. Other questions? 104, sir.
Gary Burgess. I think Stephen Hawkins would disagree with us being the 5th largest bank in the world. But on a secondary note, as CEO, you have some responsibilities and I can think of 3 of them and I think there's 4 major ones is you have fiduciary responsibility to the stockholders, you have the responsibility to keep us informed and you have the responsibility to surround yourself by the proper support staff. Without answering these gentlemen's questions, I don't think you are complying with the law and you'd gain my respect if you'd answer their question or respond to them.
Okay. If they ask the question, we'll answer it, sir. But Mr. Davitt asked the question. He sent us a letter.
The audit committee has it. They'll look at it in ordinary course like we have with the letter he has sent every year for the last 15 or 20 years. And with Mr. Mayo's question, his question was, are the ROA targets too low? I think that's at the heart of it.
And so, I actually had somebody look at this today because I was as Mr. May would ask the same question he asked on continues. The ROA targets, just so we understand it, were designed to say that for a year, you're awarded amount of compensation. And then what it says is, make sure you didn't do anything during that year to earn that, that will affect the earnings in the future. And we have to get a 3 year average with no adjustments of 80 basis points to get the money that the management team earned for 2015.
So 2016, 2017, 2018, no adjustments had to come true. Of the large peers in our industry, only one company the 2 companies have made above 80 basis points in 3 year average periods. 1 as well as which is a little bit different business model and JP has barely made it with an average between 80 3 basis points and 80 basis points. All the other peers have never made it 3 years in a row. And if you look at our proxy statement, you'll see that the 1st 3 year periods are now rolling through In one of the cases was 90 odd percent 93%, I think it was.
The other case it was 42%, no adjustments. And if you take the Street estimates for the rest of the year, we'll see similar discounts to the awards that will terminate this year. And so there's accountability. I take all my compensation, as does the management team take most of our compensation in equity. We don't sell shares.
I have to hold the shares I get. Half of them after I pay tax, I have to hold until after I retire. I've never sold shares and I think we're completely aligned. So those are not easy tests. Just in but to crystallize it, for the next 3 years, we have to earn $50,000,000,000 after tax for those divest.
Okay. Thank you. Next question. 1,119.
Bob Cabot from Lake Lorne, North Carolina. Good morning. How are you doing? Let me I like what I heard today and last year as well. I still have some concern about the share price and the dividend rate of return.
I bought 5,000 shares of BA stock before the crash at primarily because the dividend was best in the business 3% to 4% range. And I know that's ancient history, but another 5,000 shares of 17 on the way down. And here we are today at pretty much stuck in the teens and dividend rate of return at 1 0.5%. Contrast that to your competition wells and JPMorgan Chase who are paying 3% dividend. I'm suggesting serious consideration to an increase in the dividend.
That's a win win for shareholders and some right now cash and I think a bump in stock price as you get closer to that 3% range. Appreciate your comments on that. Sure.
If you see the dividend chart, so we have to go through the CCAR process. And if you think if you look at the think of the slide where you show the earnings, those earnings obviously have been recovering because of legacy issues and getting that behind us. And so to get that sustainable earnings that then supports the dividend. The dividend has gone $0.04 a year to $0.12 a year to $0.20 a year and we'll continue to move it up through the process that we have to go through as we get not only our confidence in earning stream, but we have to be able to convince other people that earning streams will be solid in the context of a deep, deep recession worse than 2,008. And so that's what we are working towards.
I understand you, sir. On the other hand, the share price below the tangible book value, it increases your investment in the company at a faster rate if we also buy back shares and we've been clear that you should expect over time that we'll pay out about somewhere less than around 30% in dividends and 70% will be used for share buybacks until the price of stock gets well above book. Other questions? 215.
Good morning, Mr. Moynihan. My name is Natalie Clark. I addressed you last year regarding the gender gap and appreciated your response, which introduced us to your executive and management team. Before I address my concern this year, I wanted to circle back and continue that challenge.
I ask for all the women at Bank of America, not just your leadership, who I'm sure are being compensated very fairly. I also ask as a future employee of yours. So I remain interested in your continued response. This year, I want to adjust the stock price. In the past 3 years that I've been attending this meeting, I've watched and listened to countless people get up and share their story about how much money they've lost, but I've never really considered what it meant to me until now.
Now that I'm looking at colleges, it really matters. My stock was given to me by my great grandmother when I was an infant, when I was at least 2 thirds higher than it is now. Now it's at $14 and what was and would have covered a great deal of my undergrad expenses will now cover maybe my 1st semester. Okay. I swear I'm not pandering here, but as an Irish girl, I'm looking at Notre Dame.
I know you know what I'm on the hook for. So all the way around, you and I are both looking at some pretty bad numbers. While I've heard many talk about their perception of the drop in stock price compared to your compensation, I've never really heard anybody ask why. Why does this bank consistently have an extremely high efficiency ratio? I'm only in high but I feel pretty certain that even my civics and economics class could figure this out.
Even with a detailed financial presentation this morning, this bank still has an extremely high efficiency ratio compared to other financial institutions. As a shareholder who depends on you and your management team who hold a great deal of my financial future in your hands, I just have to ask, what's the plan?
Sure. Let me so your Q1 last year to Q1 this year, I think we improved a couple of 100 basis points in efficiency ratio when you adjust the interest rate mark that Paul talked about. And we continue to improve that ratio. We're probably running, I think, fairly steady at 67% or something like that. We'll run it down to 60s.
We'll always be a little higher because we have a big wealth management business, which we have the highest pre tax margins in that business and it's a 75% efficiency ratio to make it equivalent. And that's the highest of anybody in the industry by a lot. And so the question our Neos competitor has like 21. And so that will always be a governor because it's $14,000,000,000 of the expense base goes to that business. It's just the nature of it, but we should run better and we'll continue to take up expenses as we do that.
On your question on female employees, where's Sherry? Yes. Sherry Bronstein is our Head of Human Resources. And I think what you said is, how do we think about this not only a representation of women, which were over 50% women in the company, but also pay and how we go about it. So Sherry, why don't you?
Sure. Thank you. And we do continue to make great progress. This year's entry level class, so soon you'll be going to college and our entry level class this year is the highest we've had in history with just about 40% women joining. So we're excited about that and we'll continue to make progress there.
On the topic of pay, we have had for a long period of time both internal practices and that and runs analytics and tests all of those processes. So we feel very comfortable that we pay fairly and equitably and as I said have both internal and external processes in place to ensure that's happening. Thank you.
And if you on the stock price question, obviously, we feel the stock price should be higher, but with $1,400,000,000 stock to buyback this quarter, we'll take advantage of the price and buy a lot back. If you think about it year over year, since last time we stood here, we're down about 4%. Our peers are down 10%. You get other measures, we're down more than they are. And so the ebb and flow that Paul explained with the interest rate environment will affect us, but we've got to drive what we can control.
Thank you. Good luck in getting into Notre Dame. It's very difficult these years. Mike?
To follow-up on Natalie, I've been doing this job almost 30 years now. I can't figure out why you are less efficient. Your consumer business line looks fine. Your wholesale business line looks fine. But the other category with $2,000,000,000 of expenses, I can't figure out where the inefficiency is coming from, if you can identify that.
And then for the Lead Director especially, he's been in the position for 1 year. He's net with shareholders. If you could have him respond to my second question here. I talked to the same shareholders and there's 3 issues pretty much across the board. Number 1, the stock price was at this level 2 decades ago.
Number 2, returns below the cost of capital, what looks like will be a decade soon and you're doing better, but destroying less value doesn't cut it. And 3 is lack of an adequate plan B. There's a perception that you guys shine your shoes, go to work and wait for rates to increase. Now the CFO, Paul, said that you're not waiting. So the question for Lead Director, when will you stop waiting to hold management accountable to generate returns above the cost of capital?
And your peers today, Wells Fargo, JPMorgan, get that goal. So I think the job of the Lead Director and the Board is to hire a CEO and monitor the progress and hold them accountable. So my question very clearly, when will returns what year will returns at Bank of America exceed the cost of capital without hedging for rates or anything else? And if you can't do it based on your current plan, what is the plan B? Go ahead and restructure, sell assets, break up, get the required returns for shareholders.
You guys have a great franchise, it's just not optimized whether it relates to efficiency, Natalie's question, or the returns above the cost of capital.
Sure. So, if you look at our cost of capital, which is in what would you say, down like 9%, what no, that's the cost of capital calculated based on the interest rate environment today and we're running about that last year. Now as rates rise up, that cost of capital rise and more and more money. Now the efficiency question, just to make it clear to you, is we still have $500,000,000 more LAS costs than we should have and we're clear on that. We're taking that out.
And we have other costs we continue to take out. But let me give you a snapshot for the people in Charlotte to think When you go outside this place today, look around at every single office building you see. The total space in this town is 20 odd 1000000 square feet of real estate for commercial use. We've gotten rid of twice that in 6, 7 years. It is hard to move that much space and it takes us some time and that's what we continue to do.
We're from 285,000 teammates to 213,000 and we continue to reposition that, down 6,000 Q1 to Q1, not pleasant, but we need to continue to do that. So we continue to drive at that. But most of the efficiency ratio difference is 2 elements. One is the LAS cost and second is the yield on our portfolio is lower and our net adjusted margin is 50 basis points behind what we'll get to as we reposition that portfolio. Jack, do you want to add anything on the structure?
Mr. Mayo, if I understand your question correctly, it has to do with, are we doing our job as independent directors? Am I doing my job as the lead independent director? And you've already stated you really don't have confidence in me or our independent directors to do that job. But so I don't think I'm going to try to convince you that I'm other than what I really am or our lead independent directors are other than what we really are.
But it does give me an opportunity to say a few words about to the rest of the audience about the way we as independent directors working with management are thinking about the environment we're in. And one of the things I learned as a CEO in past years is that you manage to the environment as it is, not the environment as you wish it to be. So let's think about the environment we're in now. Paul mentioned and Brian has mentioned low interest rates. We are in a declining economic growth situation, not just here in this country, although we're doing better than the rest of the world, but all over the world, particularly in China.
And China affects a lot of things, including the use of energy and the use of metals and mining. And that has a direct impact even if you're not directly invested a lot in China and significant political turmoil all over the world. So in an environment like this driven by low interest rates, when you're a financial institution and you think about what you're going to do to produce value for the shareholder, one of the temptations is to, if I can use the expression, go a little bit rogue, meaning that what you're going to do is you're going to push the margins in a riskier situation and scenario than you otherwise would. What does that mean? On the consumer side, it means going for lower FICO scores.
It means relative to political situations around the world, making investments in commercial enterprises in countries that are not as stable as we are or Western Europe or other developed countries. It means investing in more speculative commodities such as oil or metals with companies that don't have the depth and the breadth and the diversity with inside their industry to be able to stand things like the recently reduced oil prices and so forth. So that's one way to look at it. The other way to look at it is to take a longer term view and a safer view balancing your risk along with your reward. And that's the position that we at Bank of America have taken.
That's what the phrase responsible growth means. That means taking a longer term view. It doesn't mean that you give up growing the company, but you do the things like Brian and his team have done to reduce expenses, to use mobile devices and other technology to drive costs down and serve the customer better, to build deeper, longer relationships with your customers and your consumers, so that as interest rates rise and they will, even the Federal Reserve can't repeal the laws of gravity in this kind of situation. So interest rates will rise. And so we've done the things inside this company that when it does, we've created significant operating leverage that will rebound to the benefit of our shareholders.
But at the same time, we believe we're creating an environment because we're not going for lower FICO scores. We're balancing our investment in industries and countries so that we're not exposed as some of our competitors are exposed, so that we don't get ourselves into a situation that repeats some of the worst things that we saw during the financial crisis. One of the things, as I've said, the benefit of going out and talking to shareholders, a lot of the shareholders I talked to are pension plans. And the things about the thing about pension plans is, as they say, I'm talking to CalPERS and CalSTRS that they will always own our stock. Now what does that mean for them?
That means that they're interested in growth, but they're interested in the long term stability of that growth and viability of that growth. They're also incredibly interested that we preserve the corpus of the investment that they've made, so that we don't wake up having to take significant reserves because we've overreached ourselves and driven the quality of the assets below what they should be. So I'll stop, I talk too much. Thank you.
Next question please. 3.38.
Good morning. My name is James Breedlove and I'm a long term shareholder of Bank of America. One of the things that's been apparent today is the carrying theme around a desire on the part of shareholders to see clearer accountability around when the operating metrics, keep operating metrics, internal equity, internal assets, issue C ratio, etcetera, will be increased to the levels of leading bank and peers. And I think that's we'd like to see much more clarity around that. In the annual report, you referred to long term operating goals, without giving any sense of what long term means.
It leaves us as shareholders kind of in the dark as to what that means. So I think Mr. Mayo raised some very relevant questions that hopefully you and the Board will find a way to come forward with more clarity around those operating metrics. But I want to speak a little bit about another accountability issue. My understanding is that since you came on as CEO, you've maintained your personal residence in Boston.
And that's a matter of concern to myself and a number of other shareholders, largely because as far as I can tell, no other CEO of a major bank has a personal residence that's not in the same area as the corporate headquarters or at least in a major area like New York where you have a lot of operations. I've worked at one time as the senior officer of a Fortune 300 company and I have seen firsthand that it makes a lot of difference if the CEO is in the same area as the corporate headquarters. It energizes the team more, it gives a greater sense of bonding with the team and what have you. My question is, are you prepared to make a commitment that you will change your personal residence to Charlotte or New York?
No, sir. I would tell you that my team is in multiple locations because that's where our business operations are. We have 15,000 people in Charlotte. We have about the same in New York. We have a ton in San Francisco.
We have a ton in we have 700 people in Tokyo. So we are on the road a lot to go out and meet the clients and teammates. And so I don't think it's relevant to if you question whether I can if I work hard enough, I think the people here would tell you that I do. And if you question about our ability to have communication with our team, I'd say to you that with the investment we've made in technology and the ability that we have, the discipline how we meet together, as far as when I talk to my peers, I see we have our team meetings in the same rational way that they do. Thank you.
137.
Richard Davitt. Probably the most important ingredient to good corporate governance is an independent director. And the directors are the only things that protect the shareholder interest relevant to their fiduciary responsibilities of good faith dealing and the rest of their responsibilities. I've had to ask now for the 3rd time that the issues that I brought up in meeting, private meeting with the Board of the Audit Committee, Mrs. Allen last year and then again with an earlier letter this month to follow-up with that.
And that's what's wrong with this. You can't get a firm answer. I want a firm answer as to whether or not this issue will be taken up pursuant to Sarbanes Oxley and that each member of the audit committee assure. We're not interested in hearing your response. We're interested in the I'm reporting the mischief of management.
I'm interested in hearing from the board members. Ms. Allen, do you want to?
Mr. Davich, we have received your letter. I did meet with you, as you know, last year. And we take your comments seriously, and we are fulfilling our responsibility as a committee and as the chair of the committee to take those into consideration. We have dealt with your letters in the past and responded to you fully and we will also uptake this information, which we have already looked at and report back on it as it is required.
Thank you. And that's an affirmative.
In accordance with Sarbanes Oxley, correct?
Yes,
sir. Thank you. Next question, 107 please.
Thank you, Mr. Chairman. My name is Julian Martinez. I represent Sarah Jops for Progress National. Sarah is a national nonprofit community based organization, serving more than 1,000,000 people a year by assisting them with their employment and educational needs.
SERA National and many in the Hispanic community would like to thank you for the many community programs sponsored by Bank of America and help people all across our great country. The diversity of your Board of Directors, staff and procurement program is outstanding. You are truly a great example of corporate responsibility. The American dream is alive and well. Hispanics born in this country are more highly educated and earn higher incomes than their immigrant parents.
Hispanics outpace all other Americans in forming their own businesses. They will represent fully 1 third of the U. S. Population in 45 years and be an economic force of great consequence. Latino owned businesses increased 46.9% from 2,007 to 2,002.
In 2012, 3,300,000 Latino businesses had receipts totaling over 5 $17,000,000,000 making up 12% of total businesses. Female Latino business owners were 44.4% of Latino firms as compared to 35.3 percent for non Latino firms. Hispanics are the youngest racial or ethnic group in the United States. About 1 third or 17,900,000 of the Latino population is younger than 18. About a quarter or 14,600,000 are millennials.
Bank of America has positioned itself well to capture Latino business. Again, we would like to commend you for your positive efforts relating to our community. Thank you,
sir, for your comments. 145, please.
Hi. My name is Sean Garrett. I'm the Executive Director of the United Way here in Charlotte. I just want to commend and thank you all for 2 areas really. 1, your community support and then 2, your civic leadership.
On the community support side, I think you are well aware that Charlotte was ranked recently as 50th out of 50 on economic mobility and why that's something that I don't think any of us here are proud of or want to
be a part of. One of
the things I am very proud of has been the reaction of this community and in particular the leadership of this company. You all have been incredible from your thought leadership, from your volunteerism and then your philanthropic support on every key effort that we are trying to enact in this community and really encourage and appreciate everything that you've continued to do on that. On the civic leadership side, you described the parental leave piece as a benefit. And while it certainly is as a parent of young children myself, it's had a big impact on people around the community. The number of other companies that have followed your lead on this issue has been significant.
And what that means for young children born in our community today and the time they get to spend with parents and loved ones in the most critical developmental time is a significant issue for our community and really wanted to again commend you for what you all have done to take the leadership on that issue as both a benefit to your employees, but also a benefit to our community as a whole. And so on behalf of the 1800 Unityways around this world, I want to say thank you for everything that you're doing on
our behalf. Thank you. And the group of CEOs here in Charlotte that get together periodically, we received that report and it has been impactful in terms of the report of this 50th on mobility. It's been impactful in terms of their commitment to try to help anyway we can and the group of us are trying to do what we can. Other questions?
1 to 4.
Gary Burgess, again. A couple of things, much of the world feels that if you have directors that have been with you 10 years, they're no longer independent. And most of the world, obviously not all, say when you have the CEO on the Board, you are no longer independent. We made several comments that we have an independent Board, much or most of the world would disagree with that. Can we get to a truly independent Board?
And one of the things is, I've been to a dozen plus annual meetings and some of them are fun. Warren's meeting is certainly fun. Nucor DeMarco or whatever, he makes it fun. Yes, excuse me. But one of the things is we heard that one of our problems with our low stock prices is a condition of the world, But basically, big banks got us in the problem.
It's kind of like Obama blaming Bush. So, I think what we really need is to see more sensitivity out of the leadership to the stockholders and I mean, hey, don't try to fool us, just speak from the heart.
Well, sir, we have done we have absolute sensitivity because all the directors are invested in this company and all the management team is. And we continue to drive everything we control and that isn't meant to be insensitive. That's meant to be take care of what we can take care of and try to drive the simple thing of good core loan growth, good core deposit growth, will ebb and flow with a market based activity on a given quarter. This quarter we made $700,000,000 to $800,000,000 in markets and other people didn't make. Most of our other peers made much less than that business and you're seeing the foreign banks now.
So we're driving what we can control and we have absolute sensitivity. My entire net worth is in this company. And so that's what we invest in every day. You asked about tenure, 3 things on that. 1 is, if you actually look at our tenure of Board, it's way below the average tenure.
And I don't know, 70% of the Board, I think, came on the last 5 or 7 years after the crisis. This Board inherited a company which you've had to restructure its board and restructure the company and has done a great job of taking us through that. And I think if you think of the vote results, the shareholders have voted 94% plus for the directors again this year with 80% of the people voting. And so there is not a the people have presumably said this Board is independent, is capable of doing what Jack talked about and they are doing it. We are dealing with the final stages of stuff that we had to put behind us and we tried to do it in a way that was sensible for America, because of America in terms of taking 1,600,000 delinquent loans through, we had to do it.
And so we that earning stream is coming back, the dividend stream is coming back, the share repurchase is coming back and we'll continue to drive that forward. We're not waiting around. 1 or 2, please.
Good morning. Francois Swanepoel, I reside in Charlotte. I have a question related to Gary's question about Board independence. Is our board open to share the nominee for representation on our board? I know we have proxy access available in our company, if 3% or more nominates a person to serve on our Board.
But what would happen if someone, one of us nominate a Director to serve on our board with the proxy statement state that your board of directors recommends a vote against this person Or would the proxy statement state that your Board of Directors recommends a vote for this nominee? Because if the Board of Directors nominate if the statement says that your Board of Directors nominates a vote against this nominee, then the pension funds would probably vote against the nominee. So would the Board of Directors
be for a nominee coming from the shareholders' perspective? The proxy access we have is what shareholders has been received well by the shareholders that Jack talked about and there's a process there and the Board would make a decision based on the circumstances at the time. Jack, I think it's you asked a hypothetical question. So, we have a proxy access and that's the way that people can nominate directors when they have the 3% for 3 years. Next question, 350.
First, I want to say, I was having fun at the Tech Expo. So and I love the cardless ATM.
I can't wait to see those. If you have a thumb, then you can use it.
So what is the ROE or ROA target for 2016 or 2017? And I'd like to clear up something. Mr. Bovender, I'm not prejudging your performance after 1 year. I'm just wondering how you can do your job if there's no time frame for any key financial target.
How can you hold management adequately accountable? And as Mr. Breedlove said, how do you define long term? And that could be a long time. So what is your financial target for 2016 or even 2017?
We do not give earnings projections and nobody in our industry does. I mean, just I mean, the other firms do give clear financials. They might miss it, but at least we know when they
miss it. But our guidance is we are moving as fast as possible to return of 12% return on equity, 1% return on assets. That's what we said. It is not a target for next quarter, it's a target that we're moving to as fast as possible. We've said it over and over, Mike.
It's the same thing everybody else has. Nobody gives you earnings guidance for 2016. You can ask you have the chance to ask all these calls on your earnings calls and listen to the hour and a half that we had 2 or 3 weeks ago. And I think you'll hear this. That's what
we've said over and over again. Well, one last follow-up. What are your goals for 2016? So when we come back at next year's annual meeting, we know whether you met them or not as an outsider?
Sure. The job of this company is to drive customer growth, customer satisfaction growth, you heard talking and Dean across all the businesses and to continue to turn that into good earnings. And depending on the economic scenario that plays out for the rest of the year and we'll do that. So I think we Q1, we earned $0.20 fairly steady 30s low 30s and our job is to keep driving that forward. And we will obviously not have the charge for the employee costs in the first quarter.
Quarter. Yes.
On the CCAR process, now that the bank has substantially strengthened its capital and liquidity, it's a much stronger balance sheet. What is your expectation around the degree to which the Fed will permit Bank of America to significantly increase its dividend and repurchases in light of those particular circumstances?
Well, I think the process is going on as we speak and there's not much upside in talking about it. Well, it's in the middle of it for sure. As you know, last year, we were granted the right to pay dividends and buy back stock, which we've been doing and then we resubmitted and got that approved in the late fall. And so you should rest assured as we've now crossed the 10% hurdle and tangible common equity ratio, which was a measure we needed to have by 'nineteen and now we cross this quarter that we'll continue to ask for more and more capital return. It's part of the operating dynamics of the company.
I really don't think it's in the best interest of shareholders to have this discussion other than with our regulator and get through the process. Yes, sir.
If you're traveling to Charlotte twice a week, I sense you're spending 15 hours in travel and albeit you can work while you're on the plane and things like that. How much better would we be if you're in Charlotte not traveling? Last week, I went to Tokyo and Korea, which I think in
the space of a week, so I travel a lot of other places than Charlotte and New York. Thank you. Other questions or comments? Seeing none, that's the conclusion of the question and answer. The official meeting is now adjourned.
On behalf of our Board of Directors and the management team, thank you for