Are we good to go? Yeah, cool. Fantastic. Good afternoon, everyone. Thank you for being with us today. Jim DeMare will be with us today, this afternoon. Thank you for coming to London.
Thank you.
You're Co-President of Bank of America, part of the member of the company executive management team.
Yes.
Well, thank you for the conference first. This is yours.
Great turnout.
I hope you're-
Thanks, everybody, for attending. Beautiful hotel.
Great hotel, lots of clients, amazing corporates today with us, so thank you for that. Well, thank you everyone. We'll go through a couple of questions if that's okay.
Sure.
If we have time at the end, we'll open for Q&A in the room. Let's start maybe with the macro backdrop.
Sure.
We have 70 million clients globally. We have a unique perspective on what customers do, businesses, investors.
Sure.
What are you seeing from those clients today, and what is that telling you about the health of course, the U.S. economy but also the global one?
Sure. I think in addition to maybe the level set, because we have a lot of folks here that aren't in the U.S. and maybe don't have as much of a perspective on what our franchise, you mentioned a couple of the stats. We have 46,000 banking clients broadly defined. We have 4.2 million clients that are, which, if we get the opportunity to talk about wealth, we'll talk about that a little bit more, but 4.2 million consumer investment customers, if you will, that are part of the bank, but also, not only using our traditional banking, you think about it, but using us for their investing future as well. When you combine that with we do about $500 trillion in payments a year. So thinking about that number and money circulating through the global economy, we do have the benefit of seeing a lot.
Not a plug for the Institute, but if you don't get the information from the Bank of America Institute, I would suggest that you give it a look. To that point on strength, interestingly, a few of these things are more well-known today, but I think it's worthwhile. Yes, there's the high-level numbers of earnings growth, nominal GDP in the U.S., which is pushing 7%, close to 7%. Below the surface, I think the numbers are even more supportive of what we've been seeing and give some comfort, in the near term anyway, for continued growth. There was a lot of talk last year or even coming into the spring about a K-shaped economy in the U.S. For those not familiar with it, just thinking more that the upper end was doing better than the lower end. We think about it in terciles.
If you look at that data that we have on those groups, there are a lot of supportive information that show the growth in the economy is more diversified throughout the economy than it was perhaps a year ago. What do I mean by that? Take a look at the wage growth numbers that we show. If you look at wage growth on a three-month rolling average, that lowest tercile is now at a rate that's above, in terms of growth, above the higher two- sections. In addition to that, if you look at spending, which we just had some numbers out recently that we talked about, and that's through our debit card and our credit card information, data that we see, discretionary spending across those wage groupings are also all growing. They have been predominantly throughout the year.
The last thing I would say on that front, if you look at deposit balances for all those clients, they are elevated to what we've seen historically. I think from a consumer perspective, you can see very supportive of a good environment. If you take a look at one of the other ones that's probably not as familiar, because I wasn't until recently when I was looking at something else. People don't know that the largest employer in the U.S. is small businesses, of which there's like 3.9 million. We touch about 3.4 million of them. Their hiring, their desire to hire is at one of the highest levels that it's been, in the near term, and the optimism there is strong as well. I think that gives you a little bit more depth beyond some of the government data that's available and some of the other information.
You don't see any change in that macroeconomic backdrop?
We're not seeing it. We're not seeing any deterioration. It's continued strength. It may not be at the highest level that it's been over the last 12 months, but we do see continued strength.
What about outside America?
Outside America, our information is obviously considerably more corporate and commercial. We're seeing varying growth throughout. I think everybody here is a little bit more familiar with where we're seeing higher areas of growth, lower areas of growth. The other thing that I would say is that obviously with this rebuild of various supply chains as the world is taking a new form relative to where it was five years ago, great deal of interest in being able to move that money around, which obviously we think is very supportive of our global payments business and our global banking franchise.
Shall we move to the more the short term? Last week, our CEO, Brian, provided guidance at another conference. Wondering if you had any thoughts about the quarter.
Sure. I would say a couple things. I think when Brian was the first to speak, or he was the first to speak, I think expectations were high just based on the markets. When we talk about global markets, but the markets environment that we had in the first half of the year, particularly the second quarter. I think the enthusiasm kind of waned throughout that conference as more people spoke, and it was clear it is not going to be as robust as it was in the second quarter of 2026, which was-
Exceptional.
a lights out quarter, I think, by any measure. I think it is important to take a step back and think about not all those businesses are alike across the street, much like we all do the analysis of how we are doing relative to peers. If you take a look at those, the markets, this business is in particular, there are a lot of factors that drive different performance in a quarter, and we do see, in most quarters, variation. What do I mean by that? Different products. Some firms are better in equities, some firms better in FIC. Within FIC, you have macro products thinking rates and FX. In commodities, you think micro, you have mortgages, you have munis and other products. Sometimes not every firm is even in those products.
Then you get into the geographic dispersity or diversity, and it is a little bit more complicated. In terms of the quarter-to-quarter analysis, I think the way we have always looked at it is obviously we are striving to deliver the most for clients and for shareholders. At the same time, quarter to quarter, you are going to have the noise. Take a look at where you are on a year-over-year basis. I left the markets business a year ago, but when I took it over in the summer of 2020, we started our, I would say, our growth plan, if you will.
My motto at the time was to deliver growth regardless of what the market conditions were, because we had room for market share growth, and we grew over 10% each year, and we watch every quarter, but we are also looking at trends that are longer than a quarter. Similarly, with investment banking, deal timing, things move around within a quarter based on economic conditions, regulatory conditions, and other. We had a bit of movement there. You also have to consider, again, sectors. We have talked about our desire to improve our tech banking team, and to make investments in investment banking overall. I think the most recent stats, to give you an idea, I think we have hired, I think it is 34 or 35 MDs so far this year.
If you take a look at that dispersion within that, we have got 10 or 12 that are in industry groups. In the U.S., it is 10 to 12 that we have hired internationally, predominantly here in London. We focused on M&A as well. We have a handful of hires from there, and obviously that does not add up to 34 or 35, but those are the key highlights there. We are focused on growing those businesses. We remain as optimistic about the environment. We still find it to be a heavy investment environment, a heavy activity environment, in the markets. We remain constructive on that front.
We will talk about our international franchise in a minute. Let us move away maybe from macro and discuss strategic direction for Bank of America.
Sure.
Can you talk about where you see the biggest opportunities for growth?
Yeah. There's a few, and maybe I'll focus on, we brought it up in our investor conference last year, Investor Day last year. At times, it was worded specifically, at other times it was more implied. But if you take a look at the opportunity set we have in broadening and deepening relationships is a big part of what we're focused on. Obviously, there's always new customers and new clients, and you think about that as your potential inputs for growth for your business. But if you look at growth opportunities we have within businesses and growth opportunities across businesses, I think we've always been focused on it. I think it's a higher priority today. As far as things that Dean and I, in our role, and Brian are asking us to take oversight of the businesses on a day-to-day basis, is to help drive those synergies across.
What do I mean by that? I think that some of the easier ones to think about are within businesses if we stick with the consumer for a second, I think we have 70% of our traditional banking clients have credit cards. So obviously, there's room, we can grow credit cards there. If you take a look at, it's pretty much across the board, you can look and for each of the businesses that we're in, there are opportunities to do more with those clients and things that we're already, or customers that we're already executing on. If I flip it over and go to markets, we talked about it extensively on Investor Day, we have opportunities to do more with the clients that we have relationships with today, and it could be in specific products within markets.
Just as like I highlighted one for consumer, you can go across commercial banking, you can go across each sector, and you'll find that we're really good, but we can be better, and those are the opportunities that we think are going to drive better client value and are going to help drive shareholder value as well. The cross business is another one that it seems obvious, or it may not for some of you, but we turn around and look at it and say, okay, I mentioned that number on consumer investments, which is a very unique business. Not every firm has it, if we think about our peers across the board globally.
The penetration of those clients that we have traditional consumer bank relationships with, that we also have this consumer investment with, I think we have nine million, I think is the number that we have that are using us for investments as well. As you talked about, we had 70 million relationships. To give you an idea of the scale of what the opportunity set is, that is one. You can go literally across every business that we have, and you can turn around and find similar things. Business banking, typically a lot of what you think about in traditional banking services, that is another funnel for wealth, broadly defined in the wealth platform.
You can go on and on and on, and each of these businesses that we have, where we have capabilities and strengths domestically and internationally that you will find to be very favorable for the users or our clients and customers, and that also just continue to drive value. We kind of talk about it as an ecosystem, a flywheel. You can use whatever term you want. If we have a good relationship with you, and we can demonstrate that there are other products and services that we can deliver that make you better, whether it is your personal life, or whether it is your company operate better, that is what we are focused on.
From your position, do you find those revenue synergies across more difficult to generate than the ones inside a business line?
Is that a trick question? I think like everything, it is all about execution. You need to set up your KPIs. You need to let people know that it is a priority. I think people want to do the best that they can, and they usually have their set of objectives that they are focused on. Dean and I are trying to help expand that a little bit and show that this is as important as many other things that you as a business owner may be focused on. In fact, it is not an acquisition of a client in that way.
Right.
There's already a good experience. There's already business being done. You don't have to go sell a whole new experience. It's just more about, hey, we have these other capabilities. These two or three seem they could align with some of your objectives, and let me tell you how we can do it.
Yeah. And they know us.
Yes.
Since we're in London, let's focus on our international business.
Yes.
Or at least, we're a small part of it. I guess.
Meaningful part.
A meaningful part. It was a key focus of the Investor Day. Last year in November. What do you see as the biggest opportunities for growth, and what do you need to do to capitalize on them?
Sure. Reflecting back on Investor Day, I think we had more than a few people speak to the opportunities in international, specifically. I was one of them. I had my markets hat on for the last time and spoke to the markets business. Wendy Stewart, who runs our commercial banking business, in addition to Matthew, who runs corporate and investment banking, and I think Bernie brought it all together for us as head of international, and tried to show, and did show, what the capabilities are and what this potentially means for growth. Just to reset for everybody, the numbers that were thrown out were a $4 billion increase in revenue, about $2 billion in pre-tax. The expectation were to deliver about 18% return on allocated capital, which is great.
When you go down into each of these businesses, what is that? I just mentioned it briefly, but for markets, it was, we have institutional clients that we could deepen the relationship with by meaning doing more of the products that we're engaged in and they're engaged in, but we don't seem to have a good piece of market share with them. That was the most straightforward. When you flipped it to corporate clients, there was more opportunity. We've identified clients that we may not be doing business with today that we can be a value add, and there's a relationship within corporate banking or investment banking that we just need to turn on the markets business. Commercial banking, we talk about it a lot, but maybe not enough in this environment and being in this room, it may resonate a little bit more.
But for domestic U.S. companies, and we are, depending on the day, the largest commercial lender in the country, and thinking about $50 million in sales, up to about $3 billion in sales. A lot of those companies have either clients, or production, or suppliers in other parts of the world. A big opportunity for us is, we refer to as excuse me, the foreign subsidiaries in doing business with them. Like I said before, if we have a good relationship with the home operation, when they go to expand internationally, we want to be part of that discussion.
Whether it's, not part of the discussion, part of the execution, it's payments, it's FX hedging, it's rates, all of those things, and deliver that between the commercial bank, and the corporate, excuse me, and the investment bank, and that flows similarly for clients that we have internationally, that as the world supply chains are changing and some of those businesses are opening up or expanding their operations in the U.S., we want to be part of that, whether that's Europe, Asia, South America. You can see that there are a lot of synergies that may not seem obvious until you dig in a bit. But it's really across the board between commercial banking, corporate and investment banking and markets. It's a priority.
Thank you. You've touched on most businesses. One more maybe, the wealth management business. As you look at the medium term, a five-year view, what gives you confidence we can accelerate net asset growth? We spoke about 4%-5% growth. What are the drivers of that type of opportunity and to get there?
Sure. I guess a couple things. First, just resetting again on what our wealth platform is or wealth capabilities that we offer. I mentioned we have the consumer investments business, which isn't a direct answer to your question, but I'm going to weave it in anyway. We have about $600 billion in assets there, consumer investments, which we have a target for $1 trillion, which isn't part of the wealth enabler that we're talking about. But it is an important part of how we think about this wealth continuum that we have and the capabilities of offering different degrees of high touch and low touch for investors depending on their needs.
Bringing it back to specifically Merrill, I think there are a handful of ways, and I think the team's done a pretty good job articulating them, but for the benefit of those that don't pay attention to it as much, because we are a domestic wealth management business also. Like the consumer business, the traditional place to start is with your Financial Advisors that provide that high touch experience for their client. So there are a couple ways that you achieve that. One is through hiring, one is through training. Historically, I would say the last handful of years, maybe three to five years, the recruiting wasn't as high of a focus for us as it is today. I think the numbers through yesterday, we're going to be, if we forecast out for the rest of the year, we'll hire more FAs than we did last year. That's a positive.
The assets that are coming along with them are almost double the anticipated and almost double what, and again, these are not hundreds of billions of numbers, they're tens of billions. But to put some context on it, we're pleased with the progress that we've made there. We're continuing to hire people, market executives in those local areas where we need to upgrade or improve, and we're expecting to see good benefits from that. The other part of it, which may not be in the trainees, we have about 2,500 trainees that come through each year. You're going to obviously have not 100% retention, but we do see about 25% of the new business that we get tend to come out of the trainees.
Existing plus new, and then the power of really what we have beyond that is all these other businesses that we talked about that provide a source and an opportunity to build out a wealth relationship. Small business banking, commercial bank, it really touches everything, and I think that we will be focusing on more and probably continue to hear this be part of the regular conversation we have. There's also a part of the business which isn't as clear, because candidly, five years ago, I'm embarrassed to say I didn't know as much about these aspects of the business as I do today. But we have two other powerful, I think, in this category. We have employee banking and investments, which is really us having a relationship with the individuals of a company.
We may go to a company and say, "We can offer these benefits to your employees for banking." We just announced, or Bank of New York announced, and we announced that we did something with them a few months ago. I think it was second quarter. But again, this is another source of opportunity for wealth and for our traditional consumer banking. Then we have the other, which is workplace benefits, which is more about relationships with corporations and managing their 401(k) businesses as well as their employee equity plans. It's a little bit of, you don't see much written about it. In general in the industry, there's a handful of people or companies that can offer both of those capabilities, and it's another source of contact and introductions with people that we can then provide additional investment and wealth services.
A little bit like elsewhere in the organization, growth within the business and across.
Yes.
Thank you. While we spoke about the macro and most of our businesses, maybe we should go towards more operational subjects. The company continues to deliver sustainable operating leverage, investment in growth, talent, tech. As you look across the business, how do you think about balancing expense discipline with investing in growth? Maybe a word in that context about our tech strategy.
Yeah, sure. Well, the easy answer is growing revenues faster than expenses, right? That's the operating leverage. Not to oversimplify, but within that, what's the construct in terms of how we think about investments? Investments take a variety of forms. Tech is obviously a big part of that. How do we think about tech in general? Does it help us execute better with customers and clients? Then second, how does that fit into keeping our competitiveness or competitive levels high? You say, well, that sounds pretty reasonable. I think you kind of would run your life that way. But then it turns into, okay, well, how do we prioritize within tech? We have a large and important tech budget, like most firms. Then we have to start to think about, okay, within that tech investment, what's important to us?
How do we prioritize within tech? There are things that there's no negotiation around. Never down, we call it, which is, you don't want to be in a situation where you go to use the bank and you can't access whatever it is that you're looking to access. Whether that means customers or on the institutional side of the business, you go to do a transaction, and you can't execute. Not to mention, it introduces risk within the businesses when you're trying to manage risk. That's obviously a top priority. Cybersecurity, which has become even more pronounced as of late given advancements in AI and in a lot of the press that's been out there. You're always thinking about those two as kind of non-negotiables, but you have to also consider other things that are going to be important to you.
We spent a bunch of money over the last probably seven years just broadly on the tech stack, operating it better, data, cleaning up data, making data more usable by more people. Mapping out processes which at the time, I'm sure many people thought that, why are we spending as much time internally doing that? Well, one, it creates a safer environment to operate from an operational perspective. Lo and behold, when you start to look at AI and introducing it into your work processes, it's a pretty good position to be in that you have your processes mapped because you should be able to accelerate AI when you want to. Those are the top. On the margin, you're always looking at how can we improve, where can we do it, organic growth. Do we need tech for that? I think those are the main.
We're always looking at it to be competitive and being aware of what is out there. But you have to do it within a cost-conscious framework. I always like to say, whatever your tech budget is, people will, without question, come back and say, "Well, that's not enough money for me to achieve what I want to achieve." Like everything else, it's kind of life. You have a budget, you have to operate. You need to think about it that way. I almost left this off, which is probably number three, candidly, is thinking about things on a platform basis. So thinking about horizontals that we're operating on. It's very easy to become very siloed in your businesses and have tactical responses to demands that are being driven by the marketplace or just general improvements that you want to make or capabilities.
The real goal is to have these platforms, and I'm just using 80/20, but that has the 80% of the commonality in what you need to do in a platform and the customization that needs to be done for a different client group, customer group, or something that risk may need or operations may need, but have that be the 20% that's differentiated. In theory, and I believe in actuality, where we've, speaking from the markets business where we did a bunch of that, you get more for your dollar out of tech. If I would take a step back for a second and erase two minutes and go back in, I would put the platform component as up there in the top three.
Talking about the transversal aspect of our tech strategy, you discuss all the pillars of it. AI is probably one of them.
Yes.
We were, as a firm, early adopters. Where do you see the strongest outcome and what are the use cases you're exploring next?
Sure. We talk a lot about in others how I won't dwell on Erica for consumers and thinking more of small language model than large the way we think about it today. But when you really look at it was a way of self-serve for customers. You have a question, you have a problem, you don't necessarily need to speak with someone. When we reflect further on that, there are broader applications, and I can share a couple of examples. But when we look at AI in general, I think one of the biggest risks to implementation of AI is people being fearful of it and thinking that that's going to replace them.
Us.
You're going to us. I shouldn't say them.
Or me.
Us. That is not unique to AI. It is apparent every time we try to use new technology, someone is always going to be resistant. At the same time, when we had, I think we have it out to 200,000 people now, which is what the exact number? It is 90% or 95% of the people that we have working together, there is more familiarity with it, right? What is the benefit there? People get to use the technology, see it, understand it. Hopefully be more comfortable too. Then it is about general productivity, and how is it improving their life at work, and how is it improving workflows, and so on and so forth. Second place where AI, it is in third parties.
We are looking at a variety of providers out there to do different things for us, where we think that there is a place for AI, increased automation, so on and so forth. A lot of the standard things that you hear about out there. I would not say from that perspective it is anything truly unique. The last place is looking at things that are more complex and custom and unique to us, then working with internal and external to see if there are solutions that we can accelerate it. We were just talking this morning, there are a lot of questions around this particular question I was asked more on how much longer, and it was not addressed to me, it was addressed to Michael Hartnett.
But how much longer, or how long can the CapEx cycle go on for some of the larger companies that are spending large sums of money? The question was really getting at are we going to see returns quickly enough? I think that the most measurable place that most companies have articulated is around the tech organization itself, coding, and the advancements that are happening there. The numbers that are being thrown around are between 15% and 20%. Early on, people threw out 40%- 50% numbers. I think most industries have gelled around a more of a 15%- 20%. We see those numbers in terms of our productivity from the 19,000 or 20,000 people we have coding. So that is clearly identifiable. Then as we have applied Erica and Erica-like capabilities, so more self-serve internally.
We are seeing improvement. Historically, this kind of self-help was only external. Now that it's internal, we're seeing considerable reduction in help desk calls for things that are pretty basic. I know that doesn't sound revolutionary, but that's where you're going to start to see or where we have already seen those benefits starting to come through the system. Then, we have other places just in other products that we're offering out to people. We talked about payments. We have CashPro, which is more of a commercial and corporate offering for treasurers to use. There's an Erica that's part of that discussion now where people can kind of self-help and self-direct and operate more smoothly. We think we're going to end up seeing the true results of this and the normal KPIs that we look at.
I also think that probably in a few years' time, there's going to be a lot less talk about AI as separate and differentiated, and it's just going to be part of a broader discussion on technology.
Yes.
And how are you thinking about tech. But we are seeing it already in the areas that I mentioned, and I think that that's going to continue to accelerate. I left off consuming a lot of information and data and being able to parse through it and summarize it. That's standard. And doesn't really require a lot of discussion.
Fair enough. One last from me, and maybe we'll have time for one question in the room. We constantly generate excess capital.
Yeah.
And have historically returned a lot to shareholders.
Yes.
How do you think about deploying excess capital and obviously waiting, investing vs-
Sure.
returning to shareholders?
It's constant and ongoing. I wouldn't say that there's an easy answer, but I think we have some principles that we operate by. First and foremost, we have to remain financially strong because if you're not financially strong, then you can't be there for people. So that's clearly a top priority for us, thinking about strength in the balance sheet and liquidity in capital. It goes without saying, but I'm saying it, but that is the top priority. Supporting the broader economy, I mean, we're a large financial services company obviously, but banking is a large part of it and supporting the broader economy is important. Then you get into a couple of the points I brought up earlier, which are what do we need to do for investment to improve the business that we're doing with people?
I guess four, thinking about growth, not in any particular order, but these are top five. But I would say financial strength would remain number one. The others are all important and potentially equally important. Thinking about what do we need to invest to grow. Fifth, being the obvious, dividends and share repurchases. So, thinking about that framework and then saying, well, how do we make the decision to return vs invest in the business? We want it to be marginally accretive on these targets that we have of 16%-18%. From that perspective, I don't think it's surprising or complicated, but that's kind of the framework of our logic. I think we've demonstrated the ability to do both, increase dividends and- continue share buybacks and growth.
Insightful as always. Thank you.
Thank you.
Thank you for your time. We have four minutes left. Maybe we can take a couple of questions from the room, if any. I think you've covered a lot. Nope. No questions. Sure. Thank you, Jim.