Thanks, e verybody. Thanks again for joining us today at this conference. It is my great, great pleasure to introduce Brian Moynihan, Chairman and CEO of Bank of America. And you guys are all going to talk about BofA, but I'd like to say that as a member of the banking industry, we've been extraordinarily fortunate. Just as BofA has been fortunate to have had him as CEO for the last 14 years, we've been extraordinarily fortunate to have had him as a leader of this industry for this period. Not just in the way in which he runs an important financial institution and shows us how you do it well. Also his leadership in the economy, broadly speaking, not just in the U.S. and globally, and importantly, his leadership in sustainability and climate.
And you know, Brian is the chair of the SMI, the Sustainable Markets Initiative by the what was the former Prince of Wales and now the King, and brings together a lot of banks and does a lot of really good work, really quietly. Now, the important thing is, of course, to hear what Brian has to say about his company and about the world and the economy, and I'll leave that to Jason. Brian, thank you again.
Thank you. Thank you. Thank you.
Brian, thanks for returning to this conference. I think the first time you spoke at this conference was 2008, on the two days before the bankruptcy of Lehman Brothers. The world has certainly changed a lot since then.
Let's hope we improve this weekend from that weekend.
How about that?
That's right.
Maybe the best place to start is big picture and maybe focus on the consumer. You know, Bank of America serves over almost 70 million consumer small business clients. Obviously, we're a very robust Wealth Management practice. Maybe kind of dig deeper into the health of the consumer, kind of any recent changes in behavior, other observations you want to make in light of a potentially deteriorating unemployment picture.
I think, thanks, Jason, for hosting this and the importance of this conference to our industry, and you continue to do it, doing a great job. So, as you think about it and come through the COVID recovery, first the revenge buying, then the revenge travel type of things. The spending was increasing double digits early 2023, over 2022. As you came through 2023, it went down and worked its way down to 6%, and this is across $4 trillion plus of money moving out of consumers' accounts into the economy. Then you got the early part of this year, and it kind of moved into the 5%/4%, and in the summer, it drifted even lower to 3%, and that's when you started getting worried. The good news is it stabilized around 4%.
To give you the context, that would be where it was in 2017, 2018, 2019. When the Fed had raised rates, the economy was bumping along with low inflation, somewhere around 2%, it was below 2% at the time. Growth was around 2%. And so it stabilized at that level. And I think that the key when you think of that, both from their spending patterns across the $4 trillion at that level, they're getting a benefit from lower gasoline prices. They went to more hotels. They actually didn't spend more nominal dollars on hotels because the inflation, the pricing got tighter this year versus last year. They traveled to Europe a lot. You read all about that. But again, the overall spending is locked in a good level. So the employment is fairly stable, even though unemployment's ticked up a point or two.
The spending is fine, and you'd say, "Well, does that mean it's too good?" No. I worry more that if the Fed doesn't start to meet the expectations they read about in the paper, Fed cuts, they could actually disappear the consumer. So the consumer stabilized and came up a little bit, I think, in anticipation that there'd be rate cuts. So now the danger starts to get to the other side, and so we feel very good. Now, credit quality stuff we talk about later, which is all fine, but when you look at it, and the money in their accounts is stabilized. So year- over- year, for the lower people who were here during the pandemic, who are still here, that had $10,000 under average balance accounts, it's actually flattish up a little bit year- over-y ear.
When you get into the higher end consumer, it's lower. That's because they moved the excess money into the rate. People had $500,000 in balance in their consumer account. That moved in a rate. It's kind of bouncing along, but the lower end consumer is actually starting to grow slightly over year- over -year in terms of deposit, average deposits collected in accounts, which is again, good. They're kind of okay.
Interesting observation. I guess maybe sticking to the bigger picture, turning to the corporate side of the house, you know. I mean, what are you seeing there?
On the corporate side of the house, in general corporate, personal, Small Business and Business Banking, which is under $50 million revenue companies for us, we're seeing stability in the loan balances. We're seeing a little more growth in the small business, which is good. The credit quality is strong, but they're only using the lines at a rate that's still below the pre-pandemic level. It went down a lot, came back up, and now it's flattened out. That's because it costs more. Then when you go to middle market, you see the same phenomenon. Just to use big, round numbers, let's say it was a 40% average draw rate before the pandemic for all sort of middle market and Small Business and Business Banking clients. Dropped to 30%, got back up to 37%, 36%, is now running 36%.
That, again, is they're a little more hesitant. The rate to borrow went up a lot. They're not employing more people. They've slowed down their investments. Again, they're sort of waiting for the rate structure to move and the economy to clarify and the final demand to clarify for the products and services. I think they're fine. The credit quality is fine, but they're probably a little more nervous. And again, that's where we need to keep them in the game too. And you hear a lot about delayed purchases because of election. That has more to do with, frankly, the final demand is still settling in to make sure that they really can sell the products and get the price and things going.
One of the things we like about Bank of America, just how balanced you are across businesses. If you look at kind of the first half of the year results, you know, income almost evenly split between kind of servicing people with, you know, the Consumer Bank and, Wealth Management, and then kind of companies, institutions with the Global Banking and Markets unit. Maybe just talk about the importance of this diversity and how you just manage this balance so far as capital allocation and investments?
Yeah, it's not like we sat down and said it for this much, this much, and this much, and the different businesses were fine. They all return above their cost of capital. We have capital to grow them. It's a question of the opportunities and risks they can take to do it. But the idea of balance is good because, you know, at any given moment, you know, things go right, things go not so right out in the world. So you might have a slowdown in capital markets, transactions, investment banking revenues are slow. But on the other hand, you know, the commercial side of the balance sheet, the loans are, you know, solid, and the GPS, the transaction services business is growing.
So we like to have the balance, and also the balance not only in sort of sheer income, but the nature of how we get a lot of fees in the Wealth Management businesses, the size, a lot of, you know, deposits drive the business and consumer fees, you know, Wealth Management fees and deposits drive it in, in Wealth Management. Then we get to commercial, you know, loan balances, but really driven also by the deposit balance of $500 billion, plus they drive a lot of the economic value. And then Jimmy, in the trading business, you know, has the ability to see all those flows and that middle market customer hedging, which provides, frankly, a strong feeling.
We like to balance between the businesses and, you know, in the end, they blend together, and it's why we can optimize capital a little differently than some peers, because we're not leaning in any one direction and, and also why the risks sort of balance it out.
And then maybe when you kind of, you know, you touch on a lot of different areas, but maybe where do you see the biggest growth opportunities for Bank of America over time? And just, you know, how are you investing today to drive that growth?
We still have, you know, in serving people in both Wealth Management, Consumer Banking customers. We still have, and we're the leading market share in retail, in consumer banking deposits, but we still have, you know, 14% or whatever it is. The idea of growing that is just, you know, easy, and because we can come from 10% to 14% in that area. So we've grown it. We've grown it year after year. That is deploying in new markets, that is, optimizing other markets. That's the huge digital capabilities we've had, and the mobile capabilities, digital capabilities, the Erica, all these things do that. So there's a big opportunity to just continue to grow that core business. We're adding a million new checking accounts a year, net new checking accounts a year.
Those are the customers of the future, you know, if we're adding those in 2021, 2022, 2023 to 2024, what happens in 2026, 2027, 2028, is some of those customers who were in college are now out and working, and so they start to mature into great customers. So what we really think is a lot of room in consumer Wealth Management, we're mid-single digits market share, again, expanding markets, adding financial advisors, building the training program. Then the cement between a person who is just starting working and you, who's a wealthy analyst, you know, the cement between us to have-
Just because my picture's on the screen, doesn't make me wealthy.
The cement is to be able to serve them from the day they've opened their first account all the way through. So Merrill Edge provides a bridge from, with $450-$500 billion in assets in it, drives a bridge from the first investment they make to Merrill Lynch and the Private Bank, and so that's the value. Likewise, the commercial business, same thing. Largest small business lender in the country, but still, you have probably 10-12% share, 30% representation, middle market clients. But overall share, you know, of loans, stable around 5-6% commercial loans in America, with their 8-9%, whatever it is, you have plenty of room. So all the businesses have a lot of room to grow organically.
And then outside the United States, we continue to complete the franchise, and there's a fair amount we can do there, too.
You know, you mentioned outside the United States, at our London conference this year, we had Bernie Mensah present on just a, you know, for those in the audience, he's president of International for Bank of America, and he kind of just talked about, you know, the international growth opportunities. It does seem to be an area of maybe increased investment of late. Maybe just talk about kind of what distinguishes your international model from others and just, you know, a lot of time you talk about responsible growth. How does that kind of play into this international opportunity?
We do three businesses outside the United States, commercial banking, including both loans and transaction services, investment banking and capital markets. We have a lot of opportunity, and we've taken advantage of that opportunity. If you look at our loan balances in commercial, and you would have gone back a decade or so ago, we've probably gone fivefold increase in loans outstanding outside the United States from, say, $20 billion-$100 billion, around numbers, type of numbers. That was building out to continue to build the franchise so we could both have balance sheet, treasury services and investment banking capabilities and markets for hedging and FX and those things. We feel very strong about it.
What we've seen of late, and we started executing on, is in the countries we've been at it for a long time. So we're the first company to make a loan in Japan after World War II. So we've been there for a long time. We've been in Argentina since nineteen fourteen, Brazil since fifty-four, I think it was. You go to India over sixty-five years, I think this year. So the idea is we're in these countries for a long period of time, and so we've been able to keep maturing the franchise along those dimensions.
But there's still opportunity, and that's where Matthew and the team have looked to take to go a little deeper in the client base, to you know, privately owned businesses of size that are consistent with the businesses we operate on a global basis or involve the global supply chain. And that presents another opportunity for us. There's only so many large companies around the world, and then you have three thousand type of coverage that expands, and we feel good about that in places like Germany, France, Switzerland, UK, a little bit in India, and trying to help those companies be more prosperous and other countries to follow behind, and that's where Bernie's been putting his effort.
One of the things that we've heard, I guess, a lot of companies talk about, and you have as well, is just kind of, you know, the importance of integration and whether it's across the different business lines, across kind of distribution channels, whether it's physical or digital. Yes, maybe talk to how Bank of America is approaching this. You know, does this provide a competitive advantage? And, you know, is there kind of more you could do on that front?
It starts from a basic principle that we want to be, you know, the best global competitor with products and services and capabilities that nobody has. But at the same time, you bring it to every market at that market. And so we have 100 markets in the United States, and we have about 30 markets outside the United States, or defined markets. We have teammates to lead those markets across all the businesses. We measure all the referrals from business to business. We keep track of it all. They work together to deliver those. You know, we bring them in twice a year, those teammates, and we reward the teammates that do the best at it.
And that's helped us in things like, you know, classic sort of business banking customers, $50 million, $40 million revenue companies, to the Wealth Management business and vice versa. But also, one of the big pushes we made in Matthew's area was to add middle-market investment banking. You know, the smaller transactions under $1 billion, and, you know, notional size of that, et cetera. And I forgot, Matthew has a fellow, a couple of people that run that for him. They've done a good job. We went from 50 people to 200 people. We continue to take that up. That is now about a third of Matthew's revenue comes off of that middle-market franchise and growing at, you know, strong double digits.
So even while there's been struggles in some of the big deals and things going on, that kind of activity is strong, and that's comes to life by a commercial banker in, you know, Kansas City, working with their clients and understanding there's opportunity and distributed investment banking talent. The market is driving. It makes us unique, I think, because we can do that across the businesses. Even when we enter Columbus, we enter with a position of strength because we had Wealth Management teammates there already. We built our first branch. I think we're up to 15 now. You can see that as you move up the rank in terms of market share, it's driven off the interconnectivity of that franchise, and then you pick up the business side at a faster pace because of the connectivity.
We've been at it for thirty years, working on this, twenty years working on this, and since the Merrill transaction in 2009, you know, this is something we've done and we've done well, and you can't leave it to chance. It's interesting to watch it as it matures and teammates do it. We think it's a major competitive advantage. It then fits the business proposition of small business to large business growth. You have a high school kid to an entrepreneur, or to a professional, or to just working the rest of their life at any job. I think cementing these relationships deep on and then referring them back and forth and getting them deeper, and there's a big opportunity. You know, the line just cross-sell for years, but believe me, we count it.
It happens several million times a year, and so it's one of the reasons why our fundamental growth rate outstrips the industry.
Got it. Maybe we could shift gears and turn to the financials, just starting with loan growth. It's clearly been kind of sluggish across the industry. B of A are up 1% year-over-year in the second quarter, despite card up 5%, which seems to be the kind of loan bright spot, although loan spreads appear to have widened. Can you just talk to what you're currently seeing, and then, you know, what do you think, borrowers need to see to get reengaged, whether it's rate cuts, getting to the election, getting, you know, confirmation we had back in the consensus soft landing? Any perspectives you have.
So far this quarter, it's consistent with what we thought back at earnings, which is sort of growing at 0.75%, a little better in the household data, which is good because it's a big base. But it's a combination of some demand for transactions and some demand in winning some new clients and things like that, against the borrowing rate on lines just sort of sitting there. So I'd say that the loan demand is okay. It's not falling, but they're not aggressive. And what the catalyst there, I think, has to be, just like I said earlier, the election clearly will at least get policy set.
But importantly, as the Fed starts bringing down rates, a lot of those borrowers borrow on a short-term basis at a spread of a LIBOR, a spread over SOFR now. You have 250 basis points, 235 basis points, and we've been inching up those spreads, but that's a basis point or two a quarter. But the reality is the sheer cost of that when you add it to five, you know, 5.5% versus 50 basis points is a big difference. And so they're a lot more careful on deployment. And you see that going on in businesses saying, "Wait a second, I do I really need that piece of equipment? Yeah, but maybe not this quarter.
I'll do it next quarter," just to save the borrowing cost before they'll buy it and then put it up on a line if they want. So, we think, commercial side, overall, you know, sort of 0.75%. Commercial side, probably stronger in the mid-sized companies, and smaller companies. On the consumer side, card is still growing a little bit, which is good. The rest of it's kind of run to stay in place, mortgage loans, autos, and stuff like that.
And then on the deposit front, you know, average deposits were slightly higher in the second quarter, you know, slowing in the increase in the rate paid. We have seen some pressure on wealth deposit rates. You know, maybe just talk to how balances are progressing this quarter and kind of maybe segment out non-wealth and wealth.
Yeah, we look at it sort of. You have three dimensions, consumer business, wealth business, and the banking, and the commercial banking business. And so, if you go back, we hit the low point in May of last year in terms of deposits, and it's been growing since up, I think, $80-$100 billion off that low point. As you said, last quarter, modestly up quarter-over-quarter. Ended the quarter, I think, at $1,910 billion, if I remember right. Right now, it's running $1,920 billion or so. So it has grown. But the interesting thing in that is we're paying down sort of market-based deposits, this quarter, $10-$15 billion, and building back more core. So you're seeing the plateauing of the increase in rates now happen.
The only impact when you go across the businesses in rate structure quarter to quarter is really where people are adding deposits in the banking business. You know, $550 billion or more. You know, so they don't add non-interest bearing. They add at the margin more interest bearing. That it's not a mix. It results in a mixed change, but it's not people taking money out and moving. It's more just where the money growth comes from. Same in the Wealth Management business. We ended the quarter at $280 billion versus, I think, $278 billion, $280 billion, or something like that. We're sitting right at the same number. All our pricing that everybody's talked about all went through in the second quarter. So it's. There's been no change in methodology, there intensity, the thought process since then.
And then consumer, we had in the last quarter, probably $950 billion, or bounced around $935 billion-$940 billion. And that literally is the very high-end consumer still peeling a little bit off, and the rest of it fairly stable. And the non-interest bearing balances are kind of bouncing, non-interest bearing checking is bouncing around the same levels and down a little bit, but, you know, plus or minus $5 billion, and that moves $15 billion on a Friday to a Monday. So it's not moving averages. So it's solid. And overall we're, you know, we're up, and we'll be up. We're doing better in the household data we see out there. But importantly, we're ...
for the velocity of the balance sheet, you're starting to tighten down and get rid of a lot of the liquidity that was built by us and others in the industry. You can now run off and replace some good core stuff, which will help the yield, the NIM yield and stuff.
Helpful. Maybe, tying loans and deposits together. You know, you previously talked to this, you know, 2Q net interest income trough, with growth in 3Q, then growth again in 4Q, with maybe a 4Q number in the $14.5 billion area. I know the rate environment has certainly shifted since you've said that. So maybe just talk to, you know, how you feel about that, what kind of the impact of an evolving rate environment is, and maybe what causes you to do better or worse than those figures?
So from an input standpoint, the deposits and loans are doing probably on deposits a little bit better than we thought back then. Basically, what we thought in loans, kind of consistent with a low single digit type of, you know, really three quarters of a percent type growth. So we feel good about that. If you look about it, when we made the earnings, we had three rate cuts in. We literally had three, because on Monday it flipped over, and we just follow the market. We don't say what we think is going to happen. And now there's four rate cuts. And so the third quarter is $14 billion, which is a little bit of growth off the second quarter. The trough did occur in the second quarter. We grow in the third quarter. The fourth quarter, $14.5 billion had three cuts.
At four cuts, it'd be fourteen three and change. So you guys can tell me what you think the cuts are, and that'll tell you what the math is. But it's all the fundamentals that happen the same way. And so remember, part of that pickup is a day count, part of that pickup is FASB kicks in, a portion of it, then kicks in more next year, that amortization we have. And so we feel pretty strong about that. And so we're off the floor and growing. And I think if it happens, if all that takes place, you'll see the growth, year-over-year growth in NII starts to take place as we move into this year, out of this year into next year. And that is important for the operating leverage of the company.
You know, so we peaked at 14.8. I think the trough was 13.9, and now we're moving it back through it, and then you go beyond that, because the size of the balance sheet and the spread is even better, depending on where rate structures go ultimately.
Got it. That's helpful. And then on, you know, the maybe capital markets, you know, we've seen core fee income in general, but we've seen pretty strong fee income performance, Wealth Management, investment banking, trading, global payments. You know, maybe kind of talk about what you're seeing, for each of these key drivers. And I got to ask you about the IB story, you know, third quarter trading and investment banking fee update.
So overall, as you sort of stated, the Wealth Management business, because the market levels, despite the last couple of days, have been stronger, we feel good about that. That creates some compensation pressure. We can talk about that when we get to expenses, but that's good. GPS, the transaction services business is fine. You know, income from all the changes in the consumer business and overdraft stuff all went through many, you know, a few quarters ago and a year ago. So we are starting to see a little bit of growth and recurring fees in that area, but you know, bouncing around. So all that's good. And you go to investment banking, last year, we were at 1.18, I think it was.
This year, we think we'll be at one two, and that is, that's basically flattish, this third quarter last year versus third quarter this year, and down from the second quarter. We've moved up and moved it strong, and Matthew and the team have done a good job. The mix of transactions is not as favorable to us, and so we'll be fine, but it's going to fall off this quarter. The counter to that is Jimmy in the sales and trading line. We'll be up low single digits year over year based on our estimates through, you know, seven, eight trading days, whatever it's been this month, six, seven trading days. So we'll be up low single digits year over year and kind of flat to the second quarter. Now, why is that important?
It's about five, six, seven years ago, we started investing in that business, and you've fundamentally moved it up. So this is the tenth quarter, if this comes out, if the rest of the quarter fares the same way we thought it would. You will have a tenth quarter in a row of year-over-year revenue growth in that business, and that's a very strong performance and is starting to reflect the investments we made a few years ago in the capabilities across both fixed income. Fixed income are very strong, building back up the equities business and getting our fair share there, some of the lending business and stuff. So we feel good about that, and Jimmy's done a good job. So that'll be up low single digits in flat quarter over quarter, which seems to be, rowing against the tide a little bit.
Got it. And then maybe any other areas of kind of fee income you'd want to highlight, beyond?
Credit. Credit, we've said we're right at 1.5% deviation last year, last quarter. It'll be plus or minus that this quarter. We're seeing delinquencies flatten on the consumer side, which is good news. And then we saw charge-offs flatten out as it goes through the months. And so we're still cleaning up the end. The real estate charge-offs will be down quarter over quarter, and we'll get through the rest of that as we go through the next quarters, as we said, our earnings. Everything else is kind of, yep, autos are fine. Everything's kind of bumping along at the same level. So we feel good that we've sort of normalized the charge-off level back to where, you know, you were pre-pandemic, and it's sitting around, you know, a charge-off level, absent the commercial real estate, which is coming down each quarter.
That is consistent with, you know, 3.50%-3.60% charge-off rate, which drives the, you know, drives the charge-off number. The rest of it's kind of not very much, honestly.
I guess we had a company earlier today kind of talk down kind of auto loans or talk up auto loans expectations. That's not something you're seeing flow through?
It's basically been flat month over month, you know, sort of bouncing around at the same level. So we are seeing that. We're -- if you go look at the way we put an earnings deck and you see it there, yep. I think our auto originations in the second quarter were 850 FICO. So we only play in a very high-end business in auto because it's, you know, it's a very customer convenience business to our dealer clients and to our consumer clients. Yet, it's not -- and so it, the best news about that, as it rolls off, it helps them then build up because we're rolling off fixed rate assets that reprice up, and but the credit risk is always managed tightly because it's, it's not meant to be a credit taking.
It's not meant to be a real risky business for us.
Got it. And then we kind of skipped over expenses. You kind of maybe touched on some comp pressure, potentially, just given, you know, seeing year-over-year growth in trading revenues and investment banking fees, maybe flattish. But, can you kind of talk to maybe some near-term expectations and then, you know, just how you think about this potential return to operating leverage?
Yeah. So if you go back, you know, in the early part of 2023, coming off all the inflation and headcount and all those stuff that was going on, we said we had to start managing expenses more consistent with how we manage them traditionally. And so we absorbed all that inflation and started bringing them down. You know, what's happened since then? Basically, year-over-year headcount's down about 800 at the end of August. And so there's headcount investments and financial advisors and headcount investments and new branches open up, and headcount deletions and operational process improvements. But the, I know that if we can keep that headcount, yep, at that level, pre-pandemic, we're about 204, 205, and a chunk of that is growth.
A chunk of that is also just just dealing with all the pandemic stuff still going through the system and all the controls and environment and California unemployment, all the stuff we're finally putting behind us. So we continue that. We have 16.3 last quarter. We think it's closer to 16.5, and a chunk of that will be, is really FA and other related compensation to markets businesses, which outperformed. And then the other chunk was just getting the environment right. But the good news is the headcount stabilized, where then I can project then we as a team can basically project out where it's going, and that's, that was the key, and we saw that. So we absorbed 2,000 new kids this summer, and basically, headcount stayed flat. And so that means the engineering of the system.
We're investing heavily in the data and controls in the company to continue to improve that, to really position us for the next big round, which is how do you use even more digitization, whether it's augmented intelligence, artificial intelligence, whatever words people want to use. But even more digitization requires that data environment, that control environment, understanding it to be absolutely perfect to make the decisions off it. So we already do big things off of it, but as we come to other parts of the company, we're investing heavily in getting that, continuing to improve that, to keep us positioned so we can push even harder. You know, if we started 2010, then think this is my fifteenth year, I think, if I got the math right.
But, you know, we started at 285,000 people and went up to 305, and we run the company at 212, which is nominally as low as it was in 2018. And, you know, nominal expenses where it was in, say, 2016. So we've absorbed all the stuff through that engineering and through customer change of behavior or branch transformation, all the stuff we everybody talks about, and we did kind of see that going on. So investing in the future of that is also important. So simple answer is, you have a little inflation expenses this quarter, as best we can tell.
Now, last quarter, I thought that, they told me that this time next quarter came out being where we thought it would be, but we'll see what comes out, but just to make sure that people, you know, we're watching it carefully and spend it the right way.
I guess, given your kind of commentary with the kind of net interest income dropping in the second quarter, growing in 3Q into 4Q, and you kind of touched on potentially next year and, you know, it feels like we should expect this return of positive operating leverage.
Yes, you should. As NII kicks in, that pretty much all flows to the bottom line because a big chunk of that comes from the consumer deposit value and and doesn't increase expenses. So that's so as we turn, you know, we got to get the year-over-year comparisons and expense growth are tricky because it drove down so much last year. We went $16 billion to $15.8 billion and $15.6 billion, I think, and then with inflation and everything going on, we're, you know, sitting at $16.3 billion. So we got to get that sort of normalized, then we're out the other side. But our job is just to grow revenue, you know, faster than the economy, keep the expenses, you know, growing a little bit less fast than the economy.
And that operating leverage, which we did for five years in a row, you know, is powerful, but it does take the ability to get value out of loan and deposit growth because our balance sheet, you know, that drives so much of our revenue that and has a lot less expense base attached to it on a given day. And that's what the stabilization deposit balances, especially in the consumer business, also in the Wealth Management business, and then the stabilization pricing, which you've seen this quarter. So the deposit rate paid, you know, moves a little bit, but not at all. And now you can work it out from there, and as rates fall, that all pass through the system.
... And then you touched on, you know, AI, and, you know, we kind of view Bank of America as you've kind of been kind of leading, I think, the industry in terms of technology and investments in products and services for your customers. Just maybe just expand upon in terms of how, how you see that.
We continue to invest in innovation heavily. So in 2019, we probably had about $3 billion in technology initiatives a year. Now we're probably $4.2 billion this year, and we'll push that up for next year. And a lot of that is around, you know, automation, digitization, the capabilities. And so it, it's so we just believe that. Our team is innovative, and I heard a story from our colleague, Aditya Bhasin, who runs all technology, of a person that came through a special program we had in India the other day, who just got her first patent as an innovator. So they came from a farming environment to our company. We trained her. We put her through the education, and now is a strong enough inventor to get a patent, which is pretty remarkable.
And so the team would say that we have the most patents, of all financial services companies in the United States, and we do. Yep, I think in financial services and I think we were one in ten or one in five, maybe, AI patents in the last year, granted and stuff. So we spend a lot. The question is, that's all interesting, but how do you make it work? And so when people talk about what could happen with AI, you know, if you look at Erica, what Erica was is a natural language processing model that was built in combination with Stanford, some other people, ten years ago, probably now we start on it.
To answer straightforward questions based on our data and our information, and we believe Erica runs 22 million customers through it on a given day now, at a given month. The active users are up to that. It still grows 10% of those. The transaction volume is growing, the expansion of it. So we have it in CashPro now. We have it in for employees now. That straightforward model, when you hear about the difference between large language models and tailored models, that was a tailored model. People at the time wouldn't have recognized that, thought, you know, it wouldn't put the terms in there. So as we look ahead, there's going to be opportunities to keep applying these specialized models in areas and drive it. There's opportunities to...
What will really happen, I believe, is the software providers now embedding an AI in what they do. So your customer relationship management software, if you listen to Marc Benioff at Salesforce, they're driving through AI into that. Since we have that already deployed, we'll be able to take advantage of that. Likewise in Microsoft other major providers. So there'll be all that, and then there'll be these large language models which have application, but then there'll be a lot of people in that business are coming to us saying, "I can build a model to help you, but what I'm not going to do is put it in the public domain so you have all the risk of hallucination, leak of data, and all that stuff.
But I can do it for you much more, much faster and much less expensive than you can do it to solve certain tasks." And so, you know, I heard it, a couple of panelists, I can't take credit for it. You know, basically, where AI is going to be beneficial is think of any task any of you do every day that involves text and text, which is your stock and trade, I hate to tell you. Yeah, is that it's to take information and reformat it, think about it, and put it back out there. That's what you do, is, you know, and expensive people do those tasks. That's where you can really change the dynamic fast. And so if you think of a plot of, you know, cost per person and susceptible to AI, you've got to be looking where it can do it.
Everybody focuses on our processing teammates. You know, we have 25,000 processing teammates in the company now. We probably had twice that in 2010, so we've already optimized a lot of that. So the real value is how that aids people in commercial relationship management, how more efficient they can be. And that's financial advisors, private bankers. That's what's going to be interesting thing here. That takes it really embedded in their day-to-day work tools, and that's what we're working on.
Hopefully, maybe shift gears to capital, and I'm not going to quiz you on Barr's speech today because I'm sure you were busy during it, and I'm sure we'll get like, I think, 450 pages next week. But at the headlines, you know, it looks like what was close to be a 20% increase to capital on the original proposal is now maybe a 10% increase to capital. I know the industry was told before all this that there'd be no increase to capital. I guess kind of maybe what are your just thoughts on this whole process?
So we originally said that we had the capital to meet the 20% list, so we don't—the Basel III with our $200 billion of CET1 capital, no matter how many times you mix up the apples and oranges and play with it and count it, it's enough dollar volume to do what they had. And now they've said they could, on average, just cut that back by half. So that means we're fine and we can continue to buy back stock out of the, you know, all the current earnings. The extent that business don't need it, we have excess capital, and we got to wait for this proposal to really get out there. So that's good news. Now, on the other hand, we go back to you had successive...
You know, the industry's point of view originally was you've had successive chairs of the Federal Reserve Board and people in that, in the supervision, saying the capital is right in this industry, and suddenly we needed, as we combined, it went to the Basel Endgame, we suddenly need more capital. And that was what was confusing the industry, and that's what caused the reaction. Because at the end of the day, if our capital goes up by 10%, it stops us from making $160 billion loans we could otherwise make. And those loans would have gone to small businesses and middle-market companies at competitive rates, of which they could then compete in the global economy, because everybody competes in the global economy today. And so it's that, and if you do that across the industry, take those numbers.
We're saying that, you know, why are we doing this? The theory was, well, we had to normalize Basel III. We're saying, yeah, but we're normalizing it against an advanced standard outside our country without gold plating, without G-SIB buffers. You're normalizing it against something that is not equivalent. If you look at companies outside the United States, companies, you know, they're carrying less capital and stuff. We sort of sense of why we're doing that. The industry, you know, made our points, and I think we were heard, and so now we've, you know, they've come out with a proposal. We don't know; we'll have to look at that proposal. They've also said that they're going to index the G-SIB, which was in the original statute and, you know, had been forgotten about.
But that, that's important to a lot of us, because the economy from 2012 or 2013, when that data is based on to now, even before the, you know, financial crisis, is almost twice as big, so whatever the math is. And so we feel good about it. But I, I'd say there's an old phrase: "You know, show them death, and they'll take the fever." I sometimes feel that that's what we just got. They showed us twenty, and they, you know, they're saying, "Take ten." You're saying, "Wait a second, let's think about the logic in that." So we'll have to see where it shakes out, and we'll see what the reaction is to the industry and stuff. But, you know, it's, it just kind of boggles my mind sometimes.
We were starting from a place that our capital levels in the United States were so strong. We've weathered storms, the economy has grown, we've been successful, and it's kind of ironic that this comes out on the day after you have former PM Draghi, former ECB head, Draghi, saying Europe has a competitive problem, has a vibrancy problem, has a capital markets formation problem. You're saying, "So why would we follow that trail?" Their economy is effectively the same place it was in two thousand and seven to now, and that was known by everybody. Now people are just pointing it out. They're saying: Why would we follow that trail for a whole host of reasons, not only in our industry, in other industries, but I, we'll see it play out.
But, you know, at the end of the day, you have to go all the way back to even before Bank of America. This was always absorbable, manageable, will continue to be, but doesn't mean it's right just because we can absorb it.
Helpful. You know, one of the questions I've gotten a lot lately is, Berkshire Hathaway selling stock. I did call him last week.
You called him?
I did.
Okay.
He didn't call me back.
Okay.
I emailed Debbie, his assistant, still waiting. But I mean, you know, your largest shareholder-
Yes
... has been selling stock it seems like every time it's above $39. Just any, have you, maybe he's returned your calls, but any thoughts you have around that?
You might assume that I can't call him about it, so, because it's... Look, he's been a great shareholder. So he made two investments in our company. The first was at, you know, the depths of the post-financial crisis and all the mortgage mess and everything. He put $5 billion in for 700 million shares, and that was the first piece. The second piece he did, he bought was, that put him over the 10%, et cetera, was in the 2018 to 2019 timeframe. And so he bought another 300 million. And so he sold, you know, a chunk, but he's still above, he's about 11%. And so I don't know what exactly he's doing because frankly, we can't ask, and we wouldn't ask.
But on the other hand, the market's absorbing the stock, and it's, you know, a portion of the volume every day, and we're buying the stock, a portion of the stock, and so life will go on. But he's been a great investor for our company and stabilized our company when we needed it at the time. I will tell you that if you actually make a calculation, he bought common the same day, he would have been able to buy it for $5. I think it was $5.50, and he would have fared as well as he would. He just had to have the guts to do it in a big way, and he did, and it, and it's been a fabulous return for him. We're happy that he gets it.
That's fair. Maybe we can kind of, you know, bring together a lot of the stuff we've talked about. But, you know, you've talked about, you know, 15% ROTCE, you know, for the company as a whole. You know, just given kind of all the progress you made under your tenure, you know, we talked about NII normalizing, return of positive operating leverage. You know, Brian, if Basel's ultimately getting finalized, it's something less than initially feared. You know, is that the right number, and just how do you kind of think about overall returns?
I think this, some of the, Somebody reminded me the other day, and I used to remember having these discussions, you know, 10, 12 years ago, that when we said we'd get to 13 or 14, they thought we were crazy, and we blew through it relatively quickly and held it there. Is it, is it 15 better? It, it, you know, 15 is good now in an environment with a rate compression going on, as rates expand, you know, from 200 basis points to, let's say, 230 and then spread, you know, yield, you should see expansion in that. During that time, that we've been able to do this, the capital we've had has probably gone from $120 billion to $200 billion in tangible common equity.
So we've been putting the returns up on bigger and bigger. Now, if we finally get Endg ame, means Endg ame, that you're actually done, then we can start to optimize back down and figure out. So we feel good about that. It's well above the cost of capital, but it doesn't mean we sit there and say 15 is perfect and 14 is not. It's, we keep pushing all the business to do the best they can with the capital they get, and our pricing models actually have higher returns on capital. But when you mix it all together with some of the other things we deal with, and the size of balance sheets grossed up a little bit on fairly low-yielding stuff, just because after the crisis in other companies last year, you had to build a lot of equity.
Now we're fine-tuning it. So we feel that's a good number, and we've done it, and we
should always strive to do more.
Helpful. We have about three minutes on the clock. I'm not sure if there's any quick questions from the audience that they may have. I guess, Brian, you mentioned G-SIB surcharge not being recalibrated. I think this goes back over a decade. You know, as you talk to, you know, regulators, any kind of acceptance, or do you think that's something eventually they will revisit?
I mean, in the speech today, he said they're going to revisit that. What exactly they do, we'll find out better here in, I guess it's, a week or so, 10 days, or whatever it is. And so, it just- there's a reference in it that they will in a paragraph, which, you know, as I flip through a speech, you see, so with no definition of how. Obviously, the economy's gone from, you know, x to 1 point, probably in that timeframe, 1.45x, you know, and we just held the relative position. And think about the deposit industry. In 2019 there, we had $1.7 trillion of bonds, we have $1.9 trillion plus. So we're up 35%, the industry is up 30%.
That was all just, you know, the economy getting flooded with cash and the gross up of the economy because of inflation, and net economy growth was different. You know, why suddenly, you know, does our G-SIB go up from then to now? It's a hundred basis points. You know, and we didn't outgrow the economy by a lot. We just grew with it. Our risk really didn't change relative to other people. So that, that hopefully will come out in the wash. I just don't know, yep, I don't know how they're going to adjust the calculation, but it's needed because otherwise, you actually have a constraint on the size of these very important institutions relatively.
You know, they have to get smaller relative to the economy in some ways to keep the G-SIB constant or keep adding more capital for the same risk, even though the nominal dollars are higher in, you know, in a relative basis. So I, I think we get into this, it just gets a little bit sort of stack on stack. And, and, you know, there's our nominal stock price is one of the factors. And you kind of say, that's kind of interesting. What's that got to do with your... But it was in there. And so it, I mean, it's not, it's a per share price. It's not, you know, market cap or weighted market cap or market cap against...
And so these are sort of hard to understand things except for they just got in there, and now we got to figure out in the debate about the rule and, you know, what they say about it, you know, how they're doing it. We'll see. But any adjustment on this would be good for our industry.
Great. So we're out of time. Please join me in thanking Brian for his time today.