Good day, everyone, and welcome to today's Bank of America 4th Quarter Earnings Announcements Conference Call. At this time, all participants are in a listen only mode. Later, you'll have the opportunity to ask questions during the question and answer session. Please note today's call is being recorded. And it's now my pleasure to turn the conference over to Lee McIntyre.
Please go ahead.
Good morning. Welcome and thank you for joining the call to review our 4th quarter results. I hope by now you've all had a chance to review the earnings release And then ask Paul D'Onofrio, our CFO, to cover the details of the quarter. Before I turn the call over to Brian and Paul, just let me remind Forward looking statements are based on our management's current expectations and assumptions that are subject to risks and uncertainties, particularly as we continue to operate during this pandemic period. Factors that may cause actual results to materially differ from expectations are detailed in our earnings materials and SEC filings that are available on the website.
Information about our non GAAP financial measures, including reconciliations to U. S. GAAP can also be found in those materials. With that, I am happy to turn the call over to Brian.
Thank you, Lee, and good morning to all of you and thank you for joining us today. Before I pass The call to Paul to review the Q4. I want to hit a few points. First, I want to provide some brief commentary on 2020 for the full year, then talk about what we see in the economy as we enter 2021 and then highlight some areas where I believe we made strong strategic progress So starting on Slide 2. 2020 was a tough operating environment, as you all know.
In that period, we generated net income of nearly $18,000,000,000 or $1.87 in EPS and earned a return above our cost of capital. Our EPS was down 32% compared to 2019, driven by the impacts of coronavirus pandemic on the company and the economy. As you know, the Fed dropped rates to nearly 0. Longer rates also fell to historic lows. Loan demand surged and then waned as the panic subsided.
That reduced net interest income. But as we told you last quarter, that we believe We bottomed in the Q3 of 2019. In fact, we saw a modest improvement this quarter, which Paul will cover later, despite the challenges from lower loans. Non interest revenue declined slightly but included some interesting dynamics highlighting diversity of Bank of America's model. Consumer fees declined driven by the activity levels of clients but also by higher account balances and customer accounts.
That's a good thing for the economy going forward. Our business mix allowed us to benefit from more market related activities in sales and trading, investment banking and investment brokerage in the Wealth Management businesses. Our full year revenue of $15,000,000,000 from sales and trading rose 17%, and we generated more than $7,000,000,000 of investment revenues this year, an increase of 27% over last year. Investment and brokerage revenue grew 5% to nearly 15,000,000,000 Our expenses were higher as a result of the many costs associated with COVID and the support for our teams, our clients and our communities we serve. For a comparison of 'nineteen and 'twenty 2019, 2020, 2020 included the 3rd quarter Addition of merchant service costs following the dissolution of joint venture in the Q3 of 2019.
These costs were always incurred as a net revenue deduction under joint venture accounting but now come through our expense line. Setting aside And you'll see that later and Paul will talk about it, and maintain a focus on using productivity days to fund all the investments we're making across the franchise and including increasing client flows. Expenses then remained relatively flat year over year. We expect them to be flat for 'twenty one versus 'twenty. Provision was higher as a result of reserves built given the macroeconomic deterioration experienced in the 1st part of the year.
This also reflects the new CECL accounting rules, which were adopted as of January 1, 2020. But as the macroeconomic outlook improved, we released some reserves in the Q4. As we look at share count, it declined 7%, With $36,000,000,000 excess capital above our common CET1 minimum requirements and excess As you know, our first priority for use of all our capital is to grow our business organically, and we have funded growth in many areas. We have funded expanded minimum wages to $20 an hour for all our teammates. We've expanded and decreased COVID benefits, and we've taken care of all that.
Now we're looking to return as much capital to our shareholders as we're allowed and as our board deems prudent. So you saw this morning the beginning of that in a separate press release that our Board has approved share repurchase in the Q1 of up to $3,200,000,000 including shares issued to employees. This is in addition to maintaining our quarterly dividend of $0.18 per quarter, and that accounts for return of another $1,600,000,000 of capital. This is the maximum allowed on the Fed's guidelines established for the Q1 2021. Before beyond the Q1, When we find out what the rules are, we'll continue to change our authorizations to reflect those rules.
In summary, it was a good year. Given the circumstance of health crisis and the impact on the economy and the markets around the world. I want to thank my teammates for the hard work they did to serve our clients, As we begin the New Year, let's turn to the economy and what we see is a continued recovery occurring. Consumer spending by our clients and asset quality continue to improve. Our companies are highly liquid and generally in pretty good shape, except, of course, for those industries that are focused on that are most hard hit by COVID.
As the economy continues to push ahead, these companies that are operating well will need operating capital, and we saw early signs of loan demand as we went through the Q4. As we all know, there's one priority, and that's to get everyone vaccinated so the health care crisis is behind us, Our research team has just this past week has upgraded their 2021 forecast, And their view is that U. S. GDP growth will be around 5% and global forecast for growth are 5.4%. Let me give you a snapshot of what we see in our customer data that supports some of our views for growth.
On Slide 5 Slide 3, you can see the consumer payments. With 66,000,000 consumer and small business We have a rich data set that provides a deep view of the U. S. Consumer payment trends and small business trends. You can see this on Slide 3.
This chart shows solid lines reflecting cumulative change to the year and spending. The dotted line shows the year over year change for each month during the year in total spending. Consumer payment activity began and ended the year very strong. In the 1st 2 months of the year, payments were up high single digits year over year. By April, given the early spread of the pandemic and the full across the board economic lockdowns, which is different in the status we are now, Payments troughed and were down 26%.
By early summer, payments snapped back, and you can see that here, with The reopening of economies in many areas, the impact of government stimulus and increased unemployment. As some of those funds were depleted and ran off And the volumes, in fact, grew back to higher normal levels. We saw a slowdown in the rate of the recovery. But still, spending managed to grow Total payments in the month of December Hit a high of $304,000,000,000 up 8% year over year driven by a record volume of holiday spending. Full year payments reached a new high of $3,100,000,000,000 up 2% year over year.
So one of the things we have done here is provide a pie chart on the lower left hand side of this page This is outside of just debit and credit spending habits, which tend to get all the discussion because they're easy to track, quite frankly. But they represent 75% of transaction volume, but only about 20% of the dollar volume of transactions. And you can see that they make up that small amount on the lower left hand side. And especially as Travel and entertainment spending has shifted away. You've actually even seen debit spending outgrow credit spend.
So 80% of dollar volume of payments made by our consumers happens through person to person payments, person to business payments, ACH, wires and many other means, including cash Now the physical payments of cash and checks have moved to more digital forms, which creates operational efficiencies for us and has been a strategic initiative for many years and one that was moved forward by the crisis. Full year 2020 cash and check transaction volume fell More than $11,000,000 of those payments have hit our accounts, about $11,000,000,000 and they flowed into the accounts mostly from digital transfers to IRS. So how payments performed in the first half of January? The first half of January across all these payment types is up 6.7% from 2020. In good news, debit and credit is up 5.6%.
Growth rates in total exceed pre COVID levels of growth rates, and there are larger dollar amounts, so bigger dollars and faster growth rates. And that is with about 30% of the $600 payments being spent by our primary checking customers, so 70% more to be spent. As we move to Slide 4, we can see the activity on the commercial side. In the closing weeks of 2020, we continue to see some stabilization, mainly driven by our middle market auto finance clients as inventories have gotten low and they rebuilt them. The chart on the top of Slide 5 reflects the total Global Banking Loans across all segments of Business Banking, Global Commercial Banking and Global Corporate Investment Banking.
As you recall, in And as you know, driven by capital markets for the high the GCIB clients And soft loan demand as people gathered their wits about them and the crisis moved to a different stage. We saw significant pay downs in loan balances. During the last 2 months of the year, we've seen more stable results that we hope can continue to turn in decreased demand and growth as we look forward. In the chart on the bottom of the page, you can see that middle market and business banking, that core part of American economy, has started to tip up, but the larger corporate loans continue to be affected by the markets and decline through the period. A decade of operating on our responsible growth principles prepared us While for this crisis, it allowed us to remain focused on our customer and our well understood risk framework and support them in the communities they live in.
And in fact, We have basically reopened all the credit underwriting to the standards we had before the crisis. We are well positioned against this improving economic backdrop because of the progress we've made in respect of our strategic initiatives over the many years. Let's go to the next slide, Slide 5, and we'll talk about the strategic process. We can start with the consumer bank in the upper left. As you know, we retain the number one deposit share position for retail deposits.
That's $800,000,000,000 plus in a couple of other wealth management deposits. For American consumers, we have $1,000,000,000,000 deposits now. We grew average checking consumer deposits $166,000,000,000 or 23%. $108,000,000,000 of that $166,000,000 was low cost checking accounts. Customer satisfaction ended the year at a new all time high.
In 25 of the top 30 markets across America, representing over half of the U. S. Population, we now hold the number 1 tourist leadership position, including in 14 of those markets the number one position, which is twice as many markets as our closest peer. Another important consumer objective 69% of our consumer wealth management households are now digitally active, not just enrolled, but active. That's this year, representing double digit growth.
And they aren't just signing up for transactions or looking at their balances. They are Also buying things. 42% of the sales this year were digital sales. It expanded in areas of checking account sales, auto sales and mortgage loan sales. Erica, our digital assistant users grew 67% to 17,000,000.
They spent 1,400,000 hours those clients did In Zelle, the payment the P2P payment form P2P payment form also is up 80% year over year. Remember those earlier payments charts on the early pages. There's a lot of growth ahead here, and it helps us move from higher cost to lower cost means. Accounts with Bank of America, an average checking balance of more than $9,000 and an average investment balances of $400,000 when they have investment balances. Now switching more broadly, consumer investment balances these are investment balances and mass affluent in our consumer business, surpassed a major milestone and moved over $300,000,000,000 with 3,000,000 accounts.
We added 5.37 new funded accounts in 2020 in that mass affluent segment that's up 20 In September, we rolled out Life Plan, our financial planning that helps people prioritize their financial goals. And we've had 2,000,000 plus plans created already, one of the fastest rollout of the product we've ever had. As we move to the Wealth Management Group, We saw record client balances of $3,300,000,000,000 through both market appreciation and flows. Product integration continued to improve as Merrell clients utilize our checking services and their checking balances of Bank of America were up 28% year over year. And digital adoption by Merrell clients increased as 43% of the checks deposited by Merrell clients were done digitally.
And the private bank clients continue the strong adoption with 70% of the checks they deposit were deposited digitally. Despite the virtual environment, the inability to have face to face meetings and inherently the wealth management business is a face to face business. Household growth accelerated through the second half of the year, with Merrell adding 22,000 net new households and a private bank adding 1800. And indeed, we had a record year for 10,000,000 When we turn to our commercial businesses, in global banking, we focused on virtual services clients through the COVID crisis, increased our calling effort 60% this year in terms of the numbers of engagements with clients. We saw a significant gain in our investment banking market share.
Overall, in all areas, but particularly in our middle market clients, we've achieved Given the nature of clients and staff working from home, the digital capabilities we had allowed our client development to continue. We saw record sign ons through our CashPro app. This is the way a commercial customer accesses that app in the commercial cash management business. In December alone, 14 of 22 business days, there were over $1,000,000,000 moved on that app. This shows our clients' growing comfort level with the system.
We reported record investment banking fees with 3 of our strongest quarters in the company's history this year. We improved our overall fee ranking to number 3 as market share grew 70 basis points and is up for 2 consecutive years in a row. These market share improvements include our highest ever shares in Equity Capital Markets and M and A Advice. In Fixed Income Trading and Markets business, the trading side of the house, we continue to enhance our e trading capabilities, increase our system speed and ability to process customer trades even faster. In the equities trading side of the house, we had our best year since 2,009 when the merger of Merrill and Bank of America took place, and we gained market achievement while the market was growing We estimate we picked up 200 basis points in cash equities in the Q4 of 'twenty compared to the Q4 last year.
The last point I want to mention is all the work we continue to do with our clients around our activities in environmental, social and governance, including Our award winning proprietary research from the number one research platform in the world as well as the sustainable financing initiatives, including green bonds, sustainable bonds and COBRA related bonds. Our team also committed $1,000,000,000 to further economic opportunities and address racial injustice in the middle of the COVID pandemic. We've made significant progress and made announcements over the last 6 months on the strong work done there. And with that, let me turn it over to Paul for the quarter.
Thanks, Brian. Hello, everyone. I'm starting on Slide 6 and 7 together. As I did last quarter, I will mostly compare our results relative to Q3 as most investors we speak with are more interested in our progress as we transverse the pandemic rather than comparison to pre pandemic periods. In Q4, we earned $5,500,000,000 or $0.59 per share, as we released $828,000,000 in reserves, nearly offsetting net charge offs, which also declined.
Also benefiting earnings, expenses declined $474,000,000 from Q3 on lower litigation costs and NII from Q3 from the Q3 trough. Non interest income declined from Q3, but results across individual line items were mixed. First, the decline in other income was driven by Seasonal client activity with respect to ESG Investments, which created higher partnership losses, but benefited our annual tax rate as I have described in previous discussions. Our tax rate for the year was 6%. If we adjust for the tax benefit of our portfolio of ESG investments, our tax rate would have been roughly 21%.
I point this out to emphasize that the full year tax benefits of these socially responsible investments more than offset the portion of losses recorded in other income throughout the year. Relative to Q3, non interest income It was also impacted by lower sales and trading, which typically slows from Q3 to Q4. But While sales and trading revenue was down linked quarter, year over year it was up 7%. On the positive side, non interest income benefited from higher asset management As the market improved and we grew net new households again this year. And finally, We had another good quarter of investment banking revenue, which increased from both the strong Q3 levels and year over year.
Also when comparing net income to Q3, remember the Q3 tax expense benefited by 700,000,000 from the revaluation of our UK deferred tax asset. Finally, with respect to returns, note that our ROTCE was 11.7% and our ROA approached 80 basis points. Moving to Slide 8, The balance sheet expanded $81,000,000,000 versus Q3 to $2,800,000,000,000 in assets, total assets. The main point is that deposits are driving and funding substantially all of this growth. Deposits grew $93,000,000,000 in the quarter and are up $361,000,000,000 from Q4 2019.
On the other hand, loans declined from Q3. With deposits up, loans down, excess liquidity is piling up in our cash and securities portfolios. Global liquidity sources are up $367,000,000,000 year over year $84,000,000,000 just from Q3. In fact, Global liquidity is up so much that it now exceeds total loans. With respect to regulatory ratios, The standardized approach remains binding at 11.9%, consistent with Q3.
Shareholders' equity increased $4,000,000,000 as earnings were more than 3 times the amount of common dividends paid, plus we issued preferred stock totaling $1,100,000,000 but this was offset by higher RWA as we invested more cash in securities. At 11.9%, our CET1 ratio is 2 40 basis points above our minimum requirement, which equates to a $36,000,000,000 capital cushion. Our TLAC ratio also increased and remains comfortably above our requirements. Before leaving the balance sheet, as usual, we provide the charts on Slide 9 and 10 to show the historical trends with respect to average loans and deposits. For reference, we included these same charts on an end of period basis in the appendix.
Overall, year over year, total loans are down 4%, and in the lines of business, they are down 2%. The decline year over year was driven by lower revolver utilization and other pay downs in commercial and by pullback in credit card activity. On Slide 10, we provide the same trends by line of business for deposits. Brian already made a number of points on deposits At $1,700,000,000,000 in deposits, far surpasses any previous record for deposits. We believe our strong deposit growth reflects our customers' overall experience with us as we continue to innovate around digital capabilities as well as enhance our nationwide physical footprint of financial centers and ATMs, which have continued to prove important to customers and clients.
I will just add that given historically low interest rates, our rate paid on deposits declined modestly linked quarter, We are now lower than the rate paid to customers in 2015 before the Fed began raising rates. And I will point out that our interest cost on $1,700,000,000,000 of deposits this quarter was only 100 and $59,000,000 Turning to Slide 11 and net interest income. On a GAAP non FTE basis, NII in Q4 was $10,250,000,000 $10,370,000,000 on an FTE basis, While net interest income declined 1,000,000 from Q3. The improvement from Q3 was driven by the increased deployment of excess deposits into securities. Lower loan balances, lower reinvestment rates and modestly higher mortgage backed securities premium write offs mitigated the improvement in NII.
The net interest yield was relatively stable declining only one basis point from the Q3 level. Note that given all the deposit growth plus the low starting point with respect to interest rates, our asset sensitivity to rising rates remains quite large and is a good reminder of the value of these deposit relationships. Now with respect to NII, As we move into 2021, we offer the following perspectives. Our perspectives on NII assume that net interest rates follow the forward curve and do not move lower than current levels, and that the economy does not take a meaningful step backwards as a result of recent negative COVID developments. With that said, first, I would remind everyone that Q1 will be impacted by 2 less days of interest, which is a headwind of nearly $200,000,000 Also, seasonally, we would expect to see payments related to holiday spending result in lower card balances.
We also have the continuing impact of higher yielding assets maturing or paying off call. At this time, all participants are in a listen only
mode and being replaced with lower
yielding ones. Offsetting these headwinds, we currently intend to again invest a portion of our excess deposits, which continued to grow in Q4 into securities. Having listed those specific Q1 impacts, NAI improvement more generally will depend on all the factors we are all focused on such as loan growth, PPP loan forgiveness and PPP new originations and mortgage refinancings as well as mortgage backed security payment speeds, which impact the write off of bond premiums. Should those trends develop in a positive way, our NII and earnings will benefit. One final note on NAI.
We added a slide in the appendix that shows the difference between 2015 when short term rates were last this low and today. The important difference between then and now is the growth in our balance sheet, which improved NII and the decline in expenses since then. Speaking of expenses and turning to Slide 12. Q4 expenses were $13,900,000,000 $474,000,000 lower than Q3. The decline was driven by a reduction in litigation expense.
We also saw a reduction in COVID related expenses, primarily those associated with processing claims for unemployment insurance, Higher planned marketing costs across the firm and revenue related processing and incentives mitigated the reductions. As we move into 2021, remember, Q1 will include seasonally higher payroll tax expense, which we estimate at roughly $350,000,000 Given the resurgence of COVID cases across the U. S. And in Europe, We estimate that $300,000,000 to $400,000,000 of net COVID related expense remained in our Q4 expenses. We continue to work hard to lower these types of expense, but not at the expense of the safety of our employees and customers.
And outside of these COVID costs, we continue to manage expense tightly using gains in productivity and digital activity to mitigate other increases. Turning to asset quality on Slide 13. Our total net charge offs this quarter were $881,000,000 or 38 basis points of average loans. Net charge offs continued to benefit from the years of responsible growth as well as government stimulus and loan deferral programs. A $91,000,000 decline in net charge offs was driven by lower credit card losses.
The loss rate on Credit card declined to a 20 year low of 2 0 6 basis points of average loans. Provision expense was $53,000,000 which not only reflected an improvement in macroeconomic projections, but also incorporated uncertainties that remain in the economy due to the health crisis. These considerations resulted in an $838,000,000 reserve release this quarter, reducing consumer loan reserves by $621,000,000 and commercial by $207,000,000 Our allowance as a percentage of loans and leases ended the year at 2.04%, which is well above the 1.27% where we began the year following our day 1 adoption of the CECL accounting standards. With respect to key variables used in setting our reserve, As done in previous quarters, we continued to include a number of downside scenarios. Based on our Q4 2020 weighting of those scenarios, GDP is forecasted to return to its Q4 2019 level in the early part of 2022.
This improved by a couple of quarters relative to Q3. The waiting scenario also resulted in an unemployment rate at the end of 2021, consistent where it is today, just north of 6.5%. On Slide 14, we break out credit quality metrics for both our consumer and commercial portfolios. On the consumer front, COVID's effects on net charge offs continued to remain benign. Overall, consumer net charge offs declined 800 excuse me, declined $82,000,000 driven by card losses and remained near historic lows.
We experienced Modest increases in delinquency and NPL levels, but they remained low and were expected given the deferral activity of customers. While Aspire deferrals drove consumer 30 day delinquency modestly higher compared to Q3, Importantly, they remain 22% below the year ago level. And Consumer deferral balances continued to decline in Q4, ending the year at 8,000,000,000 Moreover, balances are now mostly consumer real estate related with strong underlying collateral values. We added a slide in our appendix, which further highlights delinquency trends for credit card. It shows A modest bulge of the expected deferral related delinquencies moving their way through time and into the 90 plus bucket at year end.
As the bulge of deferrals related delinquencies pass through time periods, Delinquencies receded. As an example, in Q4, 5 day delinquencies were down more than 30% year over year, which shows that after deferrals pass through this time period, delinquencies fell and stayed lower. So Assuming that losses follow the historical relationship to delinquencies in the 90 plus day bucket and no other changes in card payment trends, We would expect card losses to be higher in Q1, but then decline in Q2. Moving to commercial, net charge offs were relatively flat to Q3 even as we sold some loans in affected industries, crystallizing losses but reducing risk. Overall, given the environment, the asset quality of our commercial loan book remained solid and 89% of exposures were either investment grade or collateralized.
Our reservable criticized exposure metric continued to be the most heavily impacted by COVID and increased this quarter by $3,000,000,000 from Q3, led by Downgraded exposures in commercial real estate, primarily hotels. Importantly, commercial NPLs, while up modestly remained low at only 45 basis points of loans. Turning to the business segments and starting with Consumer Banking on Slide 15. Consumer Banking throughout 2020 has been the segment most impacted most heavily impacted by COVID. And bore the brunt of revenue disruptions from interest rates, customer activity and fee waivers.
Reserve building impacted provision expense and expenses increased for PPP programs and protection of associates and customers. In Q4 compared to Q3, Revenue, expenses and provision all improved. We earned $2,600,000,000 in consumer banking in Q4 versus $2,100,000,000 in Q3, but with earnings still below prior year pre pandemic levels, We know we still have plenty of room for improvement. Client momentum in this business continued to show strength around deposits and investment flows. While near term loan growth has been impacted by The decline in mortgage balances from heightened refinance activity.
Looking at the components of the P and L linked quarter, Revenue growth included both higher NII and fees. Consumer fees reflected an increased level of holiday spending as well as higher investment account activity. Even as revenue moved higher, expenses moved modestly lower as we had a reduction in pandemic costs and continue to realize the benefits of a more digitally engaged customer base. As Brian noted, and as you can see on Slide 17, We saw improvement in digital enrollment. Most importantly, customer use of our digital capabilities increased with not only more sign on and higher digital sales, but also more service fulfillment through digital channels as reflected by volume growth in both Erika and Zelle.
Note also that both our rate paid and cost of deposits declined. Cost of deposits is now 135 basis points. In the past year, we added over 500,000 net new checking accounts, grew deposits 23% and dropped our cost of deposits 17 basis points even with the increase in costs associated with the pandemic. Let's skip the Wealth Management on Slide 18 and 19, and I will refer to both slides as I speak. Okay.
Here again, the impact of lower rates on a large deposit book pressured NII, impacting an otherwise solid quarter with positive AUM flows, Market appreciation and solid deposit and loan growth. Net income of 836,000,000 improved 12% from Q3 as revenue growth and improvement in provision exceeded a modest increase in expense. With respect to revenue, NAI grew driven by solid growth of both loans and deposits and asset management fees grew to a new record on higher market valuations and solid flows. Expenses increased driven by revenue related expense and investments in our sales force. Merrill Lynch and the Private Bank both continue to grow households as we remain a provider of choice for affluent clients.
Client balances rose to a record of more than $3,300,000,000,000 up $302,000,000,000 year over year, driven by higher market levels as well as positive client flows. Let's move to our global banking results on Slide 20. COVID has also heavily impacted global banking through lower interest rates, Softer loan demand and higher credit costs, but here again, we saw improvement. The business earned nearly $1,700,000,000 in Q4, improving $751,000,000 from Q3, driven by lower provision expense and improved revenue. On a year over year basis, earnings were $341,000,000 lower driven by NII.
Looking at revenue and comparing to Q3, revenue improvement was driven by higher investment banking fees as well as More leasing activity associated with our clients' ESG investments. Investment banking fees for the company of nearly $1,900,000,000 grew 5% from Q3 and were up 26% year over year. As Brian noted, this performance led to improved market share overall and in a number of key products. Provision expense reflected a reserve release of $266,000,000 in Q4 compared to a build in reserves of $555,000,000 in Q3. Non interest expense was higher compared to the linked quarter year over year, primarily reflecting investments in the platform as well as support for the PPP program and also reflecting the recording of merchant services expense given the change in accounting versus the year ago quarter.
As Brian noted earlier, customers continued to appreciate the ease, safety and convenience of our digital banking capabilities and usage continued to grow, helping defray other costs. We present some digital highlights on Slide 22. As noted earlier, loans declined but saw stabilization late in the quarter and continuing to trend since Q2, The spread of the loan portfolio continued to tick higher as spreads on new originations on average exceeded the average spread of the portfolio. Average deposits increased 26% relative to Q3 as businesses remained highly liquid. Okay.
Switching to global markets on Slide 23. Results reflect solid year over year improvement in revenue from sales and trading, but a decline from the robust levels of Q3. As I usually do, I will talk about segment results excluding DVA. This quarter net DVA was a small loss of 56,000,000 On that basis, Global Markets produced $834,000,000 of earnings in Q4, A decline from the more robust trading in Q3, but up markedly from Q4 2019. Focusing on year over year, revenue was up 13% on higher sales and trading.
The year over year expense increase was driven by higher Activity based costs for both trading and unemployment claims processing. Sales and trading contributed $3,100,000,000 to revenue, increasing 7% year over year, driven by a 30% improvement in equities and a 5% decline in FICC. The strength in equities was driven by market volatility and investment repositioning, which drove client activity higher. The decline reflected strong Credit trading performance, which was more than offset by declines across most macro products and mortgage trading. As Brian noted, the year over year performance of this business has been strong in every quarter of 2020.
You can see that on Slide 24, and that produced strong segment returns of 15% on allocated capital for the year. Okay. Finally, on Slide 25, we show all other, which reported a loss of $425,000,000 Compared to Q3, The decline in net income was driven primarily by the prior quarter's tax benefit of $700,000,000 associated with our UK deferred tax asset. Revenue declined from Q3 driven by the accounting for wind and solar and other ESG investments. We also experienced some modest equity investment losses.
Expenses declined from Q3 on lower litigation expense, but were partially offset by higher marketing costs. For 2021, absent any changes in the current tax laws or unusual items, We would expect the effective tax rate to be in the low double digits, driven by the level of ESG client activity relative to pretax earnings. And with that, I'll turn it back to Lee and Brian for Q and A.
We'll take our first question today from John McDonald with Autonomous Research. Please go ahead.
Hi, good morning. I wanted to ask a question on expenses. Brian mentioned expecting the cost number to be flattish in 2021 versus 2020. Just kind of wondering, is that all in expenses, Paul, or some kind of core metric, if you could give an outlook for the expenses that you expect and the COVID trend for COVID expenses this year.
Yes. John, that's all in given the so Around $55,000,000,000 both years. And so we feel good about the ability to keep bringing down COVID. It came out a little slower this quarter largely due to the fact that if If you go back and think where we were in October on case counts, the need to continue to provide strong benefits to our teammates, including the Childcare in our homes so they could be effective. That's why we get those customer scores and why the growth in checking sales was 70%, 80% of a normal year, again But after 40% of the branches closed.
So yes, flat year over year all in number, and then we're working the dynamics underneath it. But importantly, remember, we are investing. $3,500,000,000 in technology next year, new financial centers expansion, employees to help sell more, and We'll continue to drive it through. So you'll see sort of a change in the COVID cost coming down hopefully as we move through the year, but we've got some work to do but flat
Okay. And then longer term, Brian, you've talked about getting back to a low 54,000,000,000 Kind of a run rate ex COVID, is that still how you're thinking about things?
Yes, we should start to work down. Again, as we said many years ago, As we get out in the out years and get more and more efficient, the day to day, the quotidian cost of rent increases and your payroll pay increases work at you. But the idea is to have the net expense grow sort of that 1% a year. So 3% up from just day to day costs to manage a couple of percent out. And so we'll continue to work that down in the future.
We've got work to do on getting these COVID expenses out of here.
Our next question comes from Mike Mayo with Wells Fargo. Please go ahead.
Hi. I also wanted to follow-up on the efficiency. I mean, you're making big strides with digital Banking in so many ways with 39,000,000 digital households are engaged. And you go through all those metrics and you see Efficiency ratio for the quarter of 69%. And if you take out your $400,000,000 of COVID cost, maybe it would be 67%.
That's still a far cry from the 57% to 59% where you had been. I know low rates hurt a little bit, but either you're investing more than You've disclosed or there's some other COVID costs in there or you're not getting becoming more efficient as you said in your opening comments, Brian. So
So Mike, I take you back to Page 11 on the net interest yield and net interest income and realize that Basically, in the 4 quarters of last year, we lost $2,000,000,000 of revenue per quarter, which is the bridge from a lot of that bridge. And so As we work that back up and ultimately as rates rise at $2,000,000,000 that's per quarter. So $8,000,000,000 in revenue with really no cost Yes, that will go up. So we continue to get more efficient in the branches. The cost of operating over the deposit base is now at 135.
And we added 700,000 new checking accounts. So you're right, but it's more affected by the revenue Impact NII than it is by anything else in terms of expenses. I mean, we're saying net COVID cost of 300, 400. That includes offsetting against that all savings of travel and stuff. The gross costs are obviously much higher than that.
We've got about we opened up PPP today. We've got 5,000 employees ready to go to complete the next round of PP and P and the forgiveness process. And as that finishes off, that stuff will come out of the system. So we
And then the follow-up to that is going to NII. I'm not sure if you gave Specific outlook or not, Paul, when you went through that, I mean, as you said, liquidity is now greater than loans. Your loan to deposit ratio at close to 50%, I think it's the lowest in history like ever right now. So there's a lot of dry powder there. But Did you give guidance for NII for this year assuming the forward yield curve stays where it is?
And do you think you can somehow pull out positive operating leverage this year? Or Is that too tough given the rate environment?
We didn't give specific guidance. I can give you a little more color on our perspective on 2021. But I do think as you think about how you want to Estimate and model NII, and how it may unfold in 2021. I think it's really sort of helpful to To historically low levels, short rates were down 150 and long rates were down 100 basis points, plus loans declined significantly beginning in Q2 As demand weakened and larger companies assess the capital markets, pay down debt and build liquidity. In the past, when We've had situations like this where interest rates and or loans have declined.
It's always taken sort of several quarters to reach a point where Renewed balance sheet growth was significant enough to compensate. We believe we found that NII bottom in Q3 And NII indeed moved higher in Q4. All else equal, day count, etcetera, It should become easier from here to grow NII. I think what helped us to start to grow again quickly in this crisis This is a tremendous influx of deposits and our relatively recent confidence to invest the excess in securities instead of holding that excess in cash. So our continued investment of that cash in Q4 leads us to believe that we can offset the headwinds of Low loan demand in the near term, recent reinvestment yields and 2 less days of NII in Q1, leaving NII relatively flat in Q1 versus Q4 before moving up through the balance of the year.
Remember in Q2 and Q3, we picked back up those days of interest we lost in Q1. As Brian reviewed, We also saw commercial loans stabilize at the end of Q4, providing hope That increased loan demand will soon follow. Given that we expect some loan demand through the year and using the existing rate curve, which has steepened over the past 90 days. We would expect NII in Q4 'twenty one, for example, to be much higher than Q1 'twenty one. And when we get to the second half of 'twenty one, year over year quarterly comparisons to 2020 as well as the second half of twenty twenty one compared to the first half of twenty twenty should be quite favorable.
Okay. That's helpful. And when you say a lot higher in Q4 than Q1,