Hello, and thank you for joining the Bank of America third quarter earnings announcement. At this time, all participants are in a listen-only mode. Later, you will have an opportunity to ask questions during the question-and-answer session. Please note this call may be recorded. I will be standing by should you need any assistance. It is now my pleasure to turn today's conference over to Lee McEntire. Please go ahead.
Good morning. Thanks for joining the call to review our third quarter results. I trust everybody's had a chance to review the earnings release documents. They're available on the investor relations section of bankofamerica.com's website. Before I turn the call over to our CEO, Brian Moynihan, let me remind you that we may make forward-looking statements during the call. After Brian's comments, our CFO, Paul Donofrio, will review more details of the third quarter results. We'll open up for questions. Please try to limit your questions so that we can get to all the callers. For more information on the forward-looking comments we may make, please refer to either our earnings release documents, our website, or the SEC filings. With that, take it away, Brian.
Thank you, Lee. Good morning, everyone, and thank you for joining us to review our third quarter of 2019 results. These results reflect our success in a US economy that continues to grow at around a 2% GDP level. In that kind of economy, our job is simple. Drive solid customer activity, manage risk well, manage expenses well, all while investing heavily in our competitive advantage. That's what we've been telling you is in what we call responsible growth. The investments we have been making in the franchise for many years and our disciplined, responsible growth approach are evident across every line of business results in respective customer bases you'll see in the materials. Today, we reported $5.8 billion in after-tax net income and $0.56 per share for the third quarter. Those results include a previously announced $2.1 billion pre-tax impairment charge.
This charge relates to the investment in our Bank of America Merchant Services joint venture from 2009. That negatively impacted our EPS by $0.19. That charge, however, positioned us to meaningfully invest and integrate our payments platforms in our commercial side businesses over the next several years. Excluding that charge, third quarter net income was a record $7.5 billion after tax, and EPS was $0.75 per share. On this adjusted basis, net income increased 4% from the third quarter of 2018, while earnings per share increased 14%. This reflects an 8% reduction in average diluted shares from the third quarter of 2018. Returns after adjusting for the impairment charge were strong. Return on assets of 123 basis points, return on tangible common equity of 15.6%.
Before Paul dives into the quarter's results for the lines of business, I wanted to cover a little bit about client activity, costs, and operating leverage at an enterprise level. These are the items that we focus on for you that allow us to drive our competitive advantage. First, some general context around the operating environment. Despite the repeated discussions or the continuing discussions around a potential recession in the U.S., I wanted to offer some data from our customer base, which represents the activity of a substantial portion of American consumers. Our annual customer outgoing payments on the consumer side of our company are nearly $3 trillion, or when compared to the US economy, about 15%. Consumer payments year-to-date are up 6% compared to the same period in 2018 through the nine months.
For the third quarter, that pace was a solid or slightly increased from earlier in the year. This means the US consumer continues to benefit by strong employment prospects. Interesting on the commercial side, clients, at roughly a $325 billion in average US commercial loans outstanding, we do see a lot of client flows as the market leader in the United States. Our total commercial loans grew 6% compared to the third quarter of 2018, with good middle-market utilization rates. Importantly, our small business segment also grew 6%. As such, we are the largest US commercial lender and the largest small business lender in the United States, according to FDIC data. This solid activity means that commercial customers continue to fare well.
These are tangible examples that the U.S. economy is still in solid shape despite the worries and concerns about trade wars, capital investment slowdowns, or other global macro conditions. Now, let's turn to slide three. Across nearly every line of business, we are seeing strong customer activity. You can see that on the slide. I won't take you through all the statistics here, but let me highlight a few. On the Consumer Banking, on the left-hand side of the slide, our deposit growth has consistently been above the industry average for many periods. It's axiomatic that we're gaining market share. Not just in balances, but year-to-date, we've seen something that's interesting to us. We've had a 2% growth in the number of net checking households, a 700,000 increase.
This is the fourth year of growing net checking households after a decade of consolidation of accounts, relationships, and other changes to our business that began a decade ago to reposition it. It is also at record levels of primary accounts and record levels of total balances and average balances in those checking accounts. 92% of our customers, we have its primary checking account in the household, and the average balance reaches $7,000. Through a renewed focus on growth in our wealth management franchise, Andy Sieg and Katy Knox are leading the charge, and we've seen net new Merrill Lynch and Private Bank relationships up over 30% plus in each case. We're expanding the franchise by bringing our retail franchise, our Consumer Banking franchise, to markets where we had long-established wealth management or commercial client coverage.
Paul's going to cover the continued growth in digital usage across our client base, which provides an important dual benefit of strong customer service and lower cost structures. On the commercial and corporate side, as you can see on the right-hand side of the slide, as well as the institutional investor coverage we have, we're also growing the client bases. We have been investing in the client-facing teammates in our commercial banking for a few years, and we've increased our investment banking coverage, especially in the middle market. We've added new traders and sales staff in Europe as we opened our Paris brokerage office. As you can see, these efforts are deepening relationships with 3% growth in solutions for household customer relationship and commercial. This investment has led to an improvement in our client coverage and investment banking market share.
Earlier this quarter, my teammate Tom Montag highlighted some of the gains we were making in middle market investment banking coverage at a conference. We have seen that continued success, and we expect for it to continue in the future as we continue to bring our capabilities to our great commercial banking franchise in the United States. Let's turn to slide four. This increase in client activity can be seen in the growth in deposits loans. On slide four, we look at the deposits. Average deposits grew $59 billion or 4.5% year-over-year. For four years now, we have grown deposits compared to the prior year for every one of those quarters by more than $40 billion when compared to the year before, all while we've improved the mix of deposits.
Deposits with our consumers grew $38 billion in total or 4%, reflecting the value clients place on the relationship benefits offered by the convenience of our network, the value of our leading digital capabilities, and our unique Preferred Rewards program. Global Wealth Manager was responsible for $16 billion of that $38 billion in consumer deposit growth, reflecting client expansion and preference to hold cash and move investments, as well as inflows of about $8 billion from the conversion of some money market funds deposits at year-end 2018. Our Consumer Banking deposits grew by $22 billion or 3% year-over-year. More importantly, you can see in the upper right-hand side of the slide that these came from checking balance growth. One additional point we'd focus on here is the long-term trend of deposit growth, even in a moving rate environment.
When the Fed started raising rates at the end of 2015, many of you had questions as whether our deposits could continue to grow and what rates we'd have to pass through the customers. Since the end of 2015, our average Consumer Banking deposits are up $145 billion in balances, three-quarters of that coming from checking accounts. These balances are either no interest or very low interest and are a core relationship in the households of America. Our rate paid remains low due to that superior mix of deposits. When you look at global banking on the lower right-hand side of the slide, $23 billion in deposit growth reflects the rise in rate environment and additional bankers we have deployed over the last few years to continue to sell our superior Global Transaction Services capabilities. We move to slide five, we see the loan side of the equation.
Overall average loans are up nearly 4% year-over-year, despite selling about $9 billion of non-core consumer real estate loans out of the all other category over the last year. Average loans on line of business grew $52 billion or 6% year-over-year as both consumer and commercial loans both grew at a 6% pace. Middle market borrowing, as I said earlier, continued to complement large corporate financings. As you can see in the bottom right-hand chart, we continue to demonstrate a fairly consistent range of responsible loan growth in our commercial businesses in all our business segments. Within Consumer, you'll note the strong residential mortgage growth, but also the more stable credit card balances, which reflect our decision last year to continue to manage less profitable promotional balances down while driving core balances and our relationship, especially in Preferred Rewards capabilities.
Within commercial, I want to highlight a couple of areas of activity important to understand as you think about commercial clients in the state of the US economy. First, as I said earlier, small business lending. Over the last year, we've grown small business loans 6%, regaining our market position as the number one lender to small businesses in the United States. Supplying capital to small business is very important as they are the key driver of employment in the U.S.,. As we continue to innovate around capabilities and offerings to important client base, another portfolio within our commercial loans and leases book is our global equipment financing portfolio. Growth in this portfolio is a sign that commercial clients are investing capital in the U.S. economy at a faster pace than the overall economic growth.
This portfolio is $65 billion. It grew $6.5 billion plus or 11% in the past 12 months. This reflects investments by clients and equipment to drive their business invest in renewable energy products. These are just a couple examples when our stable lending portfolio is growing and supporting clients in a real economy and growing the size of smaller competitors' entire lending portfolios. As we look to the expense side of the equation on slide six, we've been driving a Responsible Growth. Part of that is to have sustainable growth, which means we self-fund our investments and find ways to handle the inflationary cost to keep expenses relatively flat while we continue to invest heavily, $3 billion in technology, new branches, new teammates. Slide six shows a two-year expense trend here.
I will talk about the expense on slide six, excluding the impairment charge we took in our investment in Bank of America Merchant Services. We've been operating a tight range of $13 billion-$13.3 billion with only one exception for the last few years. We've been able to operate at a $53 billion annualized expense base despite increased investments in technology and infrastructure and buildings and people and philanthropy and other costs. At $13.1 billion this quarter, we were basically flat compared to quarter three of 2018, despite elevated litigation costs of about $350 million compared to a six-quarter run rate of about $100 million per quarter. Regarding headcount, year-over-year headcount went up. It went up in the sales professional category by 1,700 people.
We offset that cost through the reduction in other teammates. As you look to the next slide seven, you see the familiar operating leverage trend, which has been a highlight for the firm's culture of funding investments to operational earnings. Despite the immediate revenue impact of a lower interest rate environment and other revenue challenges with a slowing economy, we have a good track record of generating operational savings. We're able to keep operating leverage relatively flat. Essentially, expenses and revenue grew less than $500 million each. On a more core operating basis, taking account the elevated litigation, you could see operating leverage even in this difficult NII environment. As I've said before, generating operating leverage does get tougher. We told you that over the last several quarters, after four successful years of keeping expenses declining and holding relatively flat.
This will continue, especially as we work through periods of interest rate cuts, but we remain focused on our mission to continue to grow revenue faster than expenses. The question we ask ourselves is how much flexibility, and the question you ask us is how much flexibility we want to leverage from initiative spending on technology or infrastructure or hiring, or do we keep investing to build our market share of momentum. As we talk to the investors who own substantial portions of our stock, they continue to tell us to invest in our client and customer successes, to take advantage of our strong position and continue to invest in times. Even with that, you can see in this chart that we maintain our discipline around operating leverage. With that, I'm going to turn it over to Paul for a few details on the quarter.
Thanks, Brian. I'm starting on slide eight with the balance sheet. Overall, compared to the end of Q2, the balance sheet grew $30 billion, driven by loan growth, which end of the quarter, more than $9 billion higher. We also grew the balance sheet in Global Markets to support additional client activity. Liquidity remained strong, as average liquidity sources were unchanged linked-quarter. Shareholders' equity declined $3 billion, driven by a $2 billion decline in common equity, as positive OCI from lower rates and net income totaling $7 billion was more than offset by $9 billion of capital return to shareholders through common dividends and share repurchases. The remaining $1 billion decline in equity resulted from the redemption of preferred stocks in Q3 after issuing lower-yielding preferred shares in Q2. With respect to regulatory metrics, we remain comfortably above our minimum requirements.
Regarding CET1 ratios, given the reduction in capital I just reviewed, our CET1 ratio standardized decreased to 11.4%, which is nearly 200 basis points above our minimum requirement. As mentioned in our SEC filing, the impairment charge recorded this quarter reduced regulatory capital but had no impact on our capital plans announced in July. Our risk-weighted assets increased modestly as a result of increased client activity and higher loan balances across the businesses. Lastly, our TLAC ratios also remained comfortably above our requirements. Turning to slide nine, and net interest income. On a GAAP, non-FTE basis, NII was $12.2 billion, $12.3 billion on an FTE basis. Compared to Q3 2018, GAAP NII was up $126 million, or 1%. The year-over-year improvement reflects solid loan and deposit growth, as well as modestly higher average short-term rates year-over-year. As you know, lower rates are a headwind.
The Fed cut short-term rates in July and September. Average long end rates are down over 100 basis points year-over-year. However, versus the linked quarter, GAAP NII was flat. There were two primary negative impacts to NII in the quarter. First, lower short-term rates reduced yields on floating rate assets. Second, because of lower long-term rates, we experienced faster prepayments on mortgage-backed securities, increasing the level of bond premium write-offs. Offsetting these negative impacts were one additional day of interest, loan and deposit growth, reduction in the cost of our long-term debt, and a small decline in the interest rate paid on deposits. In addition, Global Markets NII benefited from lower funding costs and a shift in mix of client activity.
While NII improved in Global Markets, results are better assessed by studying together both NII and trading account profits as client activity from one quarter to the next can shift in mix between these two revenue lines. In fact, sales and trading revenue in the quarter, which includes both NII and trading account profits, was down slightly versus Q2. With regard to deposit pricing, we were disciplined. First, note that customers who have borrowed from us on a variable rate basis benefited from an approximate 30 basis point decline in LIBOR on a linked-quarter basis. At the same time, we lowered the rates on interest-bearing deposits by five basis points to 76 basis points.
Roughly half of our $1.37 trillion deposit book in our Consumer Banking businesses, where our customer pricing remained relatively unchanged, while the deposit rate we pay in global banking and Wealth Management declined 12 basis points versus Q2.
As you know, in our banking book, we have more variable rate assets than variable rate liabilities, given the quality of our deposits, particularly in Consumer Banking. This makes us asset sensitive in our banking book, or perhaps it would be more descriptive to call us liability insensitive. In any case, this asset sensitivity increased compared to Q2, driven by the forward curve at the end of September, which was lower than the curve at the end of Q2. Looking forward, on our Q2 earnings call, we reviewed our expectation that Net Interest Income could grow roughly 1% for the full year of 2019 over 2018. That expectation has not changed, despite the lower long end rates and the expectation for another short end rate cut in Q4. Nor have we changed our expectation that Q4 NII with the Q3.
In Q4, we expect the decline in short-term rates will more fully affect yields on our variable rate assets. In addition, given the decline in long end rates over the past couple of quarters, reinvestment rates on securities and mortgages is expected to dilute current portfolio yields. However, LIBOR rates have reduced the cost of our long-term debt and the funding of our Global Markets business. This, plus loan and deposit growth, are expected to partially offset the headwinds. Turning to asset quality on slide 10. We saw no meaningful change in asset quality, which continues to be strong. We have maintained our responsible underwriting standards for years now, and we remain disciplined again this quarter in a relatively solid U.S. economy. Similar to Q2, we sold some non-core consumer real estate loans where the sales price was above our carrying value due to prior charge-offs.
This resulted in recoveries that reduced net charge-offs and provision expense in both Q3 and Q2 this year. Recoveries in Q3 and Q2 were $198 million and $118 million respectively. Including these recoveries, total net charge-offs in Q3 were $811 million compared to $887 million in Q2. Adjusting for the recoveries, net charge-offs were just over $1 billion in both periods, and the net charge-off ratio would be 42 basis points in Q3 and 43 basis points in Q2. On that adjusted basis and comparing to Q3 2018, net charge-offs were $77 million higher, reflecting modestly higher commercial losses and seasoning of card losses. Provision expense was $779 million and included a modest $32 million net reserve release. The prior year period included a $216 million reserve release, driven in part by energy releases.
On slide 11, we break out credit quality metrics for both our consumer and commercial portfolios. As you can see, asset quality remains strong. Consumer non-performing loans declined as a result of loan sales. In commercial, ratios tracking non-performing loans and reservable criticized exposure remained near historic lows. Turning to the business segments. Starting with Consumer Banking on slide 12. Consumer Banking produced another solid quarter of revenue and earnings growth. Earnings grew 5% year-over-year to $3.3 billion. Revenues grew 3%. We believe our efficiency ratio of 45%, which is one of the lowest among our peers, is driven by our digital delivery platform and simplified product offerings, which enables not only ease of use, but also efficiency. Our investments in this business continued at a steady pace. Client activity remained strong with respect to loan and deposit growth, as well as consumer spending.
Again this quarter, we added salespeople, expanded in new and existing markets, renovated financial centers, and improved capabilities for consumers as well as small businesses. Even as we continued to invest, the cost of deposits year-over-year declined to 150 basis points, nearly offsetting the increase in rate paid, which is now 11 basis points. Deposit growth was up $22 billion or 3% and centered in low rate checking. Loan growth was up 7% year-over-year. The low long-term rate environment continued to generate momentum in consumer real estate as new originations nearly doubled from last year to more than $20 billion. Asset quality in this segment remained strong as the net charge-off ratio was 118 basis points, down modestly from both last year and the previous quarter. In addition, we saw origination spreads improve in both mortgage and consumer vehicle lending during the quarter.
Consumer investment assets grew $19 billion to $223 billion as strong client flows were partially offset by market declines. Turning to slide 13. Note that our 3% year-over-year improvement in revenue was driven by both NII as well as fees. NII benefited from deposit and loan growth. Card income was up 4% year-over-year as we experienced solid spending levels, partially offset by rewards, which continued to be a headwind. Each quarter, we show you the improvement in the consumer digital statistics, which are highlighted on slide 14. Customers continue to transact and interact with us in person as well as through digital channels. We continue to invest in both by adding financial centers and renovating existing ones, as well as enhancing and adding capabilities to our number one ranked digital banking platform.
In fact, over the past year, we have opened 98 financial centers, renovated 562, and installed nearly 1,000 ATMs, and remain on track to hit our build-out targets. This includes opening financial centers in three new major US markets in the past year, where we had previously no retail presence. Remember, while many are new markets additions from a retail perspective, other lines of businesses, like commercial banking, Merrill, and our Private Bank, have been serving customers for decades in these markets. Turning to digital. In the third quarter, we saw nearly 2.5 billion consumer interactions across all channels, with digital accounting for more than 2 billion, and digital sales now represent 26% of total sales. By the way, our digital and physical worlds are increasingly connected and synergistic. Digital appointments are a great example of that.
13% of our financial center platform traffic is now driven by appointments set in advance. This allows us to better prepare and staff for the specific needs of our customers and improve their experience. Turning to Global Wealth and Investment Management on slide 15. Strong results were aided by growth across AUM, loans, and deposits, and generally good market conditions in the quarter. Client balances are approaching 3 trillion as a result of flows and market valuations. Referrals across the company remained strong. Net income was $1.1 billion and grew 8% from Q3 2018. Pre-tax margin was a record 30%. The business created nearly 300 basis points of operating leverage year-over-year, as revenue increased 2% while expenses declined 1%. Within revenue, positive impacts from growth in deposits and loans drove NII higher.
Asset management fees grew year-over-year as fees from AUM flows and market valuations more than offset general pricing pressures. Transactional revenue declined modestly versus Q3 2018. With respect to expenses, investment in sales professionals, technology, and our brand were more than offset by lower intangible amortization and deposit insurance costs. Mobile channel usage among wealth management households grew 45%. Moving to slide 16. GBWM results reflect continued solid client engagement in both Merrill and the private bank. Strong household growth contributed to higher client balances, which exceeded $2.9 trillion. AUM flows were nearly $6 billion in Q3, or $21 billion in the past 12 months, boosting AUM balances to a record $1.2 trillion. On the banking side, average deposits of $254 billion were up $16 billion, or 7% year-over-year, driven by client growth and a 2018 year-end conversion of balances from money market funds.
Average loans were 5% higher year-over-year, reflecting strong growth in mortgage and custom lending. As you turn to slide 17, before I review the slide, and as I've done in the past, I want to provide summary information on Global Banking and Global Markets on a combined basis to allow comparison against competitors that may not break out these business separately. On a combined basis, these two segments grew revenue to $9.1 billion and earned nearly $3 billion in Q3, generating return of more than 15% on their combined allocated capital. Looking at them separately, and beginning with Global Banking, the business earned $2.1 billion and generated return of more than 20% on allocated capital. Earnings were strong, up 3% from Q3 2018, driven by an increase in investment banking income and leasing-related gains.
The year-over-year growth in earnings was mitigated by the absence of prior year reserve releases, primarily from energy exposures. Growth in investment banking fees was the largest contributor to the 8% improvement in revenue year-over-year. Strong deposit and loan growth reflects the benefits of adding hundreds of bankers over the past few years, as well as continued advancements in how we deliver our loan product and treasury services. Expenses were up 4% as we continued to invest in technology and client-facing associates. Looking at trends on slide 18 and comparing to Q3 last year, as you heard Brian mention earlier and Tom discussed at an investor conference last month, we have made steady progress in investment banking over the past year. Our steady progress with clients is reflected in both our improved fees, as well as market share rankings and lead tables.
IB fees in Q3 were more than $1.5 billion for the overall firm, up 27% year-over-year. Advisory was particularly strong at approximately $450 million, as we advised on five of the top 10 transactions completed in the quarter. Pointing to our strength and leadership in credit underwriting, activity in debt capital markets was strong, with some record weeks of debt issuance. In Q3, we continued to add regional investment bankers with a focus on expanding our geographic coverage in the U.S. to match our coverage model and market leadership in commercial banking across the U.S. One of the reasons for growth in deposits in Global Banking has been our consistent investment over multiple years in digital capabilities within our transaction services platform.
Referring to slide 19, note the growth in mobile and digital usage at the top of the page and our focus on solutions for clients on the bottom of the page. Treasurers are looking for the same type of convenience as consumers. Our consumer and commercial teams work closely together to leverage technology advancements and drive usage and adoption of mobile and digital solutions. We now have over 500,000 CashPro users. Mobile CashPro users doubled year-over-year. Mobile payment approvals by these users were $144 billion over the past 12 months, nearly doubling year-over-year. Switching to Global Markets on slide 20, as I usually do, I will talk about the results excluding DVA. Global Markets produced $858 million in earnings.
When comparing results year-over-year and quarter-over-quarter, note that both prior periods included similar-sized equity investment gains that were noted in previous earnings calls. In both cases, these gains were not included in sales and trading results. Year-over-year, revenue was down 2% as the segment's share of improved investment banking fees and the modest improvement in sales and trading did not offset the prior year's gain on an equity investment. Sales and trading improved 4% year-over-year. FICC was flat with Q3 '18, while equities improved 13%. FICC's revenue showed improved results in mortgage trading and municipal trading but was weaker in FX and credit products. The improvement in equities to $1.15 billion was driven by growth in client-facing activities, as well as we continued to invest in our equity financing products.
In 2019, in equities, we added new clients and increased our market share with existing ones. Benefits derived from increased scale have improved the efficiency of our balance sheet as well as return metrics. Expenses were up 2% year-over-year as we continued to invest in technology. Brexit preparedness continued to add expense. On slide 21, you can see that our mix of sales and trading revenue remains weighted to domestic activity where global fee pools are centered. Within FICC, revenue mix remained weighted towards credit products. Finally, on slide 22, we show All Other, which reported a loss of $1.6 billion. Results here included the joint venture impairment charge. Excluding this charge, the segment would've reported a profit of roughly $100 million. A few other items impacted results here.
First, provision benefit from the recoveries totaling $200 million related to the sale of primary non-core consumer real estate loans, totaling $1.8 billion. Second, the elevated litigation expense Brian mentioned is booked here. Third, the effective tax rate this quarter was 16% and included discrete benefits booked here and related to the resolution of several tax matters. We continue to expect the effective tax rate in Q4 of around 19%, excluding unusual items. Okay. With that, let's just open it up to Q&A.
At this time, if you would like to ask a question, please press star and one on your touch-tone phone. You can remove yourself from the queue by pressing the pound key. Again, that's star and one. We'll take our first question from James Mitchell with Buckingham Research. Please go ahead.
Hey, good morning, guys. I guess I'll ask the question, and you can decide not to answer it. Just if there's any help you can give us on sort of the NII outlook beyond 4Q. I know there's a lot of moving parts, given the forward curve, maybe you could also help us think about the premium amortization year to date, what that drag has been, and how that would play out in a stable rate environment from here. Thanks.
Sure. Let me start with the premium amortization. I'm not going to give you a precise number, but if you think about the extra 1 day we had from Q2 to Q3, the increase in premium amortization in the quarter more than offset that. Going forward, unless long-end rates fall meaningfully from here, we wouldn't expect that level of increase in premium amortization in Q4 or even next year without significant decrease in longer rates. In terms of the outlook for 2020, obviously that's going to be highly dependent on future Fed activity and on deposit pricing across the industry. We don't think it's really prudent right now to provide specific guidance at this point. You have our thoughts well, I'm sure we're going to be talking about Q4, and you have our thoughts on that from our prepared remarks.
You've also going to have our asset sensitivity disclosures. The only thing I would remind you is when you think about Q1, we will have one less day of interest which impacts NII by about $80 million, but we'll get that day back in the third quarter.
Right. Maybe just to follow up on that, just on the balance sheet growth, it seems like both loans and deposits have accelerated a little bit. You indicated some pretty strong trends in sort of new account growth in both consumer and Wealth. Coupled with sort of a lower rate environment, do you see deposit growth picking up across the Consumer franchise broadly, whether it's Wealth or traditional banking?
I think we have, if you go back many quarters ago, we discussed our thought process is to tell our teammates to price to achieve sustainable deposit growth of 3% or more faster than the economy, which means your axiomatic point there is you're gaining share at all times, if the economy's growing less. They've been doing that. We are staying very careful and disciplined. There were some adjustments made on the wealth management business. If you look back, last year, we had some growth there that we slowed down because it was a little too tied to bidding too much for rate. They changed that process. They flattened out. Now they're growing again. On the commercial side, the changes of interest-bearing and non-interest bearing and the fees for services and all that stuff, calculations change.
I'd say you should expect us to continue to grow at the rate we're growing now or faster because frankly, we've been very disciplined about how we've been driving against core checking accounts on the Consumer side, core checking and savings accounts in the Wealth Management business and obviously GTS business. I'd expect it to continue to grow maybe faster than 3%, 4%, 5%. The thing about that is, that is incredible amounts of new customers at very advantaged pricing that we can put to work.
Great. That's great. Thanks.
Yep. I think one thing, James.
Yep
As I said in my prepared remarks, there was a lot of discussion when the Fed started raising rates, what would happen, and what I said back there was, Consumer increased their deposit balances by $145 billion since the first Fed rate increase, and now there's been two decreases, right? Think about that machine just churning out growth and growth and growth. 75% of that was checking balances. That's the real encouraging part of the story in Consumer. All-time customer satisfaction high in those businesses. All-time employee satisfaction high. All-time customer growth rates high for 15 years or so. You just take that and play it out. It's pretty important.
Yeah. It seems like it could be a good leading indicator. Thanks.
Our next question will come from Mike Mayo with Wells Fargo. Please go ahead.
Hi. I'm a little stuck on slide seven with the efficiency. You mentioned all the investing that you're doing. Are you willing to go to negative operating leverage, or with the investments, like you have the new salespeople in the branches, you have more deposit growth, you have new regional banking coverage, you have more investment banking? The investments are paying off. What's your confidence in growing revenues faster than expenses over the next year, even though you're not giving specific guidance? More generally, what's the role of technology inside the firm that's enabling this operating leverage? For example, how many data centers do you have and how many are you going to close? What % of your applications do you expect to migrate to the cloud?
Just a little bit more color of what's happening behind the scenes that enables your operating leverage and your expectations for continuing that.
No. Mike, those are good questions. I think we are going to invest for long-term value of this company and our clients. If this quarter we were sort of flattish on operating leverage, if we happen to go negative, I'd argue and that was the right things to do based on everything we're assessing at the time you do it. These quick changes in rates obviously have an impact that you then outgrow with the volumes coming in and producing the value. That takes some compounding through the quarter. Our attitude in talking to our investors is, if we're gaining share and doing the right things, keep going. The real key is back to your second question, which is we are gaining the benefits of sustained long-term investment in the changes the way this company operates that continue to push through.
Two and a half years ago, we said we'd operate this year on $53 billion and change in expenses, and we hit that number, and a lot of you had us in at $57 billion or something like that. Next year, we told you we'd be in the low 53s again, and we still are sticking to that. That's three, four years out, and you're saying, how can you plan out with all the investments we're making? That is because we know we're making investments at the same time they're taking out cost. The cloud journey for Bank of America is an interesting one. We started about really the new BAC framework for those of you who remember that. It came out of that into early days of Simplify and Improve. We had 200,000 plus servers. Those server counts are now down to 70,000.
The first decision we made was to actually create an internal cloud. Those servers were operating about 30%, 60-some data centers, very much dedicated by line of business, by operational unit, by risk or whatever. We took all that away and built common architecture. The lion's share of our applications run around 8,000 servers. We still have 70,000 servers, but those are more dedicated for very specific things, and we'll continue to work to take them down. We're down to 23 data centers. Those who've been around the company for a while know we took a $350 million charge a few years in the second quarter of 2017 to pay for part of this changeover. In that timeframe, we've reduced expenses by basically around 40% or $2 billion a year on our backbone.
At the same time, if you looked on pages 14 and 19, you can see just over the last couple of years the volume of transactions. We're up 86% in mobile logins. We're up 39% in wire transactions and things like that. What you've had is this scale effect that we've been able to internalize in our provision these services from what we can get in the external cloud is still 25%, 30% cheaper, which we expect to change, honestly. We are working with potential providers to take the next step, which was discrete data centers and resources to external cloud, save a ton of money, then use that power to actually negotiate with third parties to how they might help you and support you, and that's going on with Cathy Bessant and her team right now, and Howard Boville runs this for us.
So far, we're still cheaper, and so far, we have to make sure that the external providers are safe, sound, leave the data just for us to use with our customers, don't mix it with other people's data, et cetera. That discussion negotiation goes on as we speak. We don't need to own the hardware. We just need to find out who can provide it the right way.
Well, thanks for providing data that others have not provided yet. Just one follow-up. Again, the spirit behind this is you're getting the operating efficiency while you're making investments. You're doing stuff behind the scenes like this. If you've gone from 60 data centers to 23 data centers, how much further do you have to go? If you've gone from 200,000 servers to 70,000 servers, how much more do you have to go? What % of your applications do you expect to migrate to the cloud over time?
The last question I'd leave to people with more expertise. Mike, in the spirit of constant improvement, I never give people a number that I'm satisfied with, and you shouldn't either. In other words, if we think we're at X for Howard and the team in this case or any of our businesses, you can improve it every day. That is the cultural change we've made in this company. Frankly, the stability of having not had any acquisition activity since 2009 and anything other than organic movement, you can plan these things out and execute them. Some of these things take three to four years to get done. You have to be patient. You have to be consistent. You have to keep allocating investment to them to cause a change to happen and then be disciplined about the cost coming out the other side.
I'll never tell people we're done because then they'd stop working at it.
All right. Thank you.
Our next question will come from Glenn Schorr with Evercore. Please go ahead.
Hi. Thanks very much. I'm curious, now that you've taken the charge on the Merchant Servicing JV, I'm curious about the go forward. Can you talk a little bit about what is built? What do you want to build? Is there going to be an impact on expenses that we'll see, and how soon we'll see progress in what we'd see?
Yes.
Curious to learn more.
Sure. Glenn, let me start with a high-level comment. Then I'll let Paul, because remember, many of you don't probably remember that Paul ran GTS for a while and had as part of his portfolio. He can hit some of the details. Philosophically, we wanted to control our destiny to be able to provide this type of service to our clients in a much cleaner way. We had a great partner in FDR, and at some point, that was good for what was going on in the world then. It's changed. We're making a change. A lot of the discussions in terms of where we take this, the team is working with FDR closely to unwind the venture as per the contract, et cetera. It's been a good relationship. Expect that to continue in various ways.
On the other hand, we had to get control of our destiny, the sales force, the implementation. Paul, why don't you hit some of the pieces in terms of the numbers and that he was asking sort of what impact on expenses and things like that, revenue.
Yeah. I guess in terms of expenses, I would remind you that the accounting for BAMS doesn't change until the JV actually ends in June. That's the first point. When you get out to Q3 2020, we'll begin reporting our share of the revenue and our share of the expenses versus today where we record that share as net earnings in the other income line under the equity accounting method. As we sit here today, given all we have to do between now and then, we're not disclosing specifics. There's a lot of work to do, and the bottom line impact is really not that impactful. As we get closer to, I think, the actual dissolution, we'll give you some more guidance.
Do you have a lot to build in terms of being able to service the clients and deliver everything that you want to deliver to them? Everything that you're doing now, I'm assuming your current partner is doing so. I'm just curious how much of that you can do behind the scenes as you lead up to June 2020.
We're working on our plans. We have a fair amount to do. As you think about technology spend and incremental bill costs, that's going to be prioritized within our normal $3 billion or plus a year that we're investing.
Okay. Brian, maybe one just high level one on loan growth. I think growing loans, core loans 6% in a 2% world like you described would be considered great by most metrics. Just curious if you think that's sustainable if we're going to sustain this 2% world.
I think it'll ebb and flow. If you looked at that one page on the low rand quarter, it shows you across 6% to 3% to 6% for commercial. What have we been doing that's helping drive that? One of the major things we did is I think if you calculate, we have four segments which go against commercial lending, the small business segment and our Consumer Banking, the Business Banking segment, the Global Commercial Banking segment, which most of you call middle market, then our GCIB for large companies. If you look across those segments, especially in small business, importantly in Business Banking and Global Commercial Banking, Ather Williams, who runs Business Banking, Alastair Borthwick, those guys have been investing in headcount and people and relationship managers.
I don't have a precise number for each of them, but think 25% more bankers today than there were three years ago, which gave us an opportunity to divide the portfolios of clients up further, so people had less clients who get more depth of relationship, and that's why you see statistics about key products per relationship. Secondly, with the capacity we added to get new relationships, all consistent with our credit. We often get asked, you're growing commercial loans. We always ask ourselves, are we sticking to our credit standards? We've been able to do that. I think it's sustainable in mid-single digits, maybe 6%, a little higher, maybe 5%, maybe 4%, maybe 6% if economies are 2%.
This taking market share because of the deployment of the capabilities into the middle market and business banking franchises, along with some of the work that's going on with investment banking and others is a good place to be. It's a three or four-year investment. It takes about three years to get a commercial banker coming into our franchise up to speed, honestly. Then on top of that, there's a fellow named Robert Shiflet, who runs a group that does the underwriting process for the whole enterprise behind all these businesses. We've invested tremendously in the technology and the support of that group for their underwriting capabilities, turnaround time, all the things. That is allowing us to frankly have, as we're told, the fastest turnaround time of the banks, large, smaller, bigger or smaller.
We feel that we're creating a kind of competitive advantage that this franchise has embedded in.
Awesome. Thank you, Brian.
Our next question will come from John McDonald with Autonomous Research. Please go ahead.
I wanted to follow up on Jame's questions around NII, Paul. You mentioned the full year outlook for the 1% hasn't changed. The prior outlook for the fourth quarter was to be around $12 billion. You came in a little bit higher this quarter. Just as we think about jumping off point into next year, you still thinking about a fourth quarter NII around that $12 billion? Is that a fair reading of your disclosures and things like that?
Yeah, that's a fair reading.
Okay. Just could you remind us how to read those disclosures and think about the impact of another Fed cut from here? There's some differences to the 10-Q disclosure you mentioned prior, like it's only the banking book, it's relative to the forward curve. How should we net all that and think about what one rate cut is if we're going to model that going forward?
Sure. You'll have our sensitivity disclosures in our normal filings, but when you look at them, you're going to see that if the Fed were to cut rates by 25 basis points, and remember, that disclosure is beyond the forward curve, which has three rate cuts in it, right? If you look at that disclosure, you'll see that a full 100 basis points would equate to around $3.3 billion on the short end. You just divide by 16, and you're going to get the impact on a quarterly basis of around $200 million. It's going to be a little bit less than that because, again, that forward curve includes three rate cuts, and then you're talking about 100 basis points on top of that. That sensitivity disclosure literally means you'd be at zero interest rates.
Obviously, the next rate cut, we're not going to be at zero interest rates. It's not going to be the full 200 when you do the math on that disclosure. In addition, as you point out or alluded to, that's just our banking book. If you include Global Markets, which is modestly liability sensitive, that decline would be even further mitigated.
Okay. something I think you've said maybe before in the $125-$175, or something less than $200.
Yeah. It's going to be less than 200, and I'd even tell you it's going to be meaningfully less than 200.
John, these things, I know you guys would like us to round it out to 6 digits each time and give it to you for the next years. The reality is we gave you an estimate for this quarter, last quarter, I mean fourth quarter, the current quarter, and we gave it to you last quarter. In fact, there's been more rate cuts, and we're still holding the same guidance of $12 billion and change. That shows you that we're managing the heck to try to avoid some of these impacts and how we price deposits and better growth in deposits than we may have estimated in that. There's a lot of estimation.
We're trying to give you thematically, as Paul was talking about over time, but it's not that it's imprecise, there's just a lot of moving parts that frankly we've managed better than we thought we could.
I totally get it, and that's totally appreciated, Brian. Just with that one more nitpick, Paul, just from the third to the fourth quarter, 12.3 this quarter. The pressures that you have in the fourth is kind of the combination of the LIBOR and then also the premium NIM. Is that why you could come down a little more than 200 in the fourth quarter? Again, subject to all the caveats.
Look, as you're thinking about the second quarter versus the third quarter, remember, we had one extra day. We had a second rate cut that came at the end of the quarter. As we sit here today, we don't have that extra day. We've got two rate cuts fully baked in that are going to affect asset yields. Plus you've got in that forward curve. Everything we're talking about here assumes the forward curve. You've got another rate cut. I already told you that I thought that the premium M&A work would not be as significant, anywhere near as significant as it was second quarter to third quarter. We're going to have loan and deposit growth. We're going to, again, as Brian just said, work hard on all the other levers we have, like deposit pricing. I'm not giving you guidance.
I gave you kind of how to think about it based upon those sensitivity disclosures.
That's why it's a little bit different going from 3Q to 4Q, versus Q2 to 3Q.
Okay, great. Thanks. Very helpful. Thank you.
Our next question will come from Betsy Graseck with Morgan Stanley.
Morning, Betsy.
Hi, good morning. The question that we get with everybody we speak with is around how you're thinking about the competition in retail brokerage with some of the e-brokers obviously going to zero commission cash and options, and different players, different price points there on different products. Just wanted to understand how you think about that. I realize it's a small piece of the revenue line you've got. Just want to see if you think that this is at all something that you need to address in the marketplace.
Betsy, let me take that, because if you remember right, I had that business when we introduced $0 commissions in 2006, so it's not a new concept to Bank of America. About 87% of the current trades are $0 in the area that in the Merrill Edge, in the self-directed platform. That's been true forever. This is not a change to our operating strategy, but we don't focus on trying to drive a pure trading type of thing. We think about the relationship and the Merrill Edge and things like that. If you look at the consumer investment assets on page 13, you can see they're up $20 billion year-over-year. We're driving a whole relationship into these managed portfolios that's based on financial advice to that, yet we still have a very competent, capable against some redoubtable competition.
We have a very strong platform that grows also. The $0 change won't affect us much largely because we frankly introduced it 13 years ago.
Right. That's with preferred accounts.
Yeah.
When people look at page 16 and they see the brokerage rev line there, it's like $700 million this quarter. That is really commission on other things than stocks and options. Is that a fair way to read it?
That's really not relevant here because that's in the wealth management business. Where this stuff shows up is actually back in the consumer side because Merrill Edge is in that area, and that's where the lion's share of this is. That $700 million is the financial advisory team under Andy selling things, the closed-end funds, muni bonds, stocks, and a lot of other things. That's been under pressure for years, and as you well know. That's a constant change of fighting the average yield for the total client assets in that business, but that's not affected by this decision.
Got it.
You'll see us push a little bit on some of the qualifications for Preferred Rewards to open up this capability in another set of clients. We only have 13% less to go.
Got it. Okay, and then just separately, one more question on NII, Paul, if you don't mind, but in the quarter, the Global Markets NII helped out this quarter, I believe, and just let me know if I'm reading that right.
Yeah. You're reading it right. Markets NII went up this quarter. We've said that the Markets business is liability sensitive, so it does help NII if rates decline. I just would point out that we really manage that business looking at total sales and trading revenue, not NII.
Right.
Although the trading book is liability sensitive, it is really important to remember that client activity and product mix in Global Markets can vary quarter-over-quarter and will drive sort of income statement geography, which can produce an increase, as you saw this quarter, in NII or maybe reduce NII in another quarter, with the offset is going to be in trading account profits. That's why the real key here is to focus on the sales and trading disclosures as opposed to the mix between NII and trading account profits.
Yep, got it. Okay. Thank you.
Thank you.
Our next question will come from Saul Martinez with UBS. Please go ahead.
Hey, good morning, guys. I'll also ask a question on NII. It seems like obviously third quarter is a little bit better than maybe expected, and you're retaining the 1% growth, kind of implies $12 billion for the fourth quarter. You obviously have had rates come in, long ends come in, forward curves pricing in at least two more rate cuts. It also feels like maybe you're a little bit more optimistic about the NII trajectory than you were maybe earlier this quarter. Is that a fair reading, Paul? If so, what makes you a little bit more optimistic about your ability to sustain NII? Is it just that loan growth is coming in better? You've been able to reprice deposits a little bit faster?
What makes you a little bit more confident that your NII trajectory could be a little bit better than what you thought maybe even a couple of months ago?
I think we do feel good. I think we feel that way because we've seen how our teams are performing in a different interest rate environment. We've seen how teams and our clients, by the way, have reacted to appropriate adjustments on deposit pricing given the change in LIBOR. You got to remember, all of our clients are getting a huge benefit
What they're paying on their loans. It's appropriate to adjust deposit pricing. I think we're obviously growing loans and deposits well. We've deepened relationships and we've improved our capability to service them on both the loan deposit side. I think it's just another quarter under our belt where rates were different, and we've seen how the teams have performed, and we're feeling good.
No, that's helpful. On the deposit cost side, obviously, interest-bearing deposit costs were down 5 basis points, and it seems like that's going to be given the limited scope in retail, wealth and commercial, you're being proactive there, as you should. You're coming from a lower starting point on deposit cost than most of your competitors to begin with. Can you just talk to how much more room you feel like you have as we get further along in the rate cycle? How difficult does it become, or does it become more difficult to be more proactive in terms of lowering your deposit costs?
I think back to the earlier discussion, that sort of general guidance we give our teams is you have to get us 3%. In the current economic environment, we want to see 3% in core growth in deposits. You have to then price to achieve that both, and then also at the same time achieve your goals on NII and things like that. I think we try to be consistent. We value relationships. We focus on the core. On the commercial side, the GTS relationships drive the economics in the business, as you well know. On the wealth management side, we're driving not only the investment cash but all the transactional cash, and you have to think of those as two separate executions.
By putting teammates into the Merrill Lynch offices who can help the client associates and others who have always done a good job, doing a better job of getting core checking relationships and mortgages and things like that, which all help. Then on the consumer side, obviously it's just the power of the brand and the franchise and digital competency. We don't let people off the hook either way. We want them to grow, but we want them to grow with pricing that if somebody comes in and says, "I can grow by issuing a bunch of term CDs at premium price," we say, "That's kind of interesting, but that doesn't qualify for what we want." That then if you look at it by business, you're seeing leave aside the movements as rates moved up and following.
You're seeing as you stabilize and even come down a little bit, you're seeing them able to continue to grow while managing rate paid carefully.
Should we expect non-interest bearing deposits to grow disproportionately in this environment? It seems with lower rates, it seems like higher yielding CDs become less attractive. This is for a bank like you, it's a national bank, and this great franchise and a national franchise. It would seem like a pretty attractive environment or a good environment for you guys to take share and suck up demand deposits at maybe a faster rate than some of your peers.
I think, yes, we expect to grow at a faster rate than our peers. That's kind of axiomatic when you're gaining the shares we're getting. If you look at the slides on the deposits, you can see that growth in consumer drives the equation on the non-interest bearing and very low interest cost deposits. The team there, Dean and the team, have done a good job. They've gone from six basis points to 11. That's due to mix. As Paul said earlier, we are liability insensitive to some degree because of the mix deposits. You got to remember, on $700 billion, 11 basis points is $700 and some million dollars a year of cost. There's only so much price leverage in there. We say, just keep growing and grow in the right categories. Yet they have CDs, and the CDs grew year-over-year.
The only thing I'll add there is, I think you all know this, but if interest rates are lower, then deposit rate paid is less important relative to all the other reasons why people invest with us, or I should say deposit with us. Theoretically, you might see more deposit growth in a lower interest rate environment.
Right.
Trust is more important. The deep relationship they have with us across Preferred Rewards and other things we do for them. Mobile, the online capabilities, the nationwide network of financial centers, our global GTS capabilities, those just all become more valuable to customers if rates are lower.
Great. Thanks so much.
Our next question will come from Kenneth Usdin with Jefferies.
Hey, guys. Just a quick one. Brian, you mentioned that obviously delivering positive operating leverage gets harder in rate environment where it is. As you look ahead, and you've done this good job of keeping this $53 billion or so, what are the incremental things that become more productive underneath that allows you to fund the incremental investments? Do we transition to other parts of the business becoming more productive or other pieces that you maybe still haven't yet attacked that could still provide that underlying support? Thanks.
Sure. We have the operational excellence platform which a fella named Tom Scrivener had, now he's moved over to work on part of the operations group under Cathy. Anne Walker, she had Simplify and Improve. This is an ongoing program which has literally every manager in the company a couple levels down from my team constantly working on coming up with a mapping of the process, improving the processes, and asking for investment to help improve those processes. There are areas where we're very digitized and no paper and very electronic, and you can think of that in some of the Consumer areas. There's areas where we're still just now getting the benefits of major investments. You may think about the underwriting area in commercial I talked about earlier, that we're now bringing the people, the teammates onto the platform to drive it.
All our platforms have major improvements available to, even though we're very efficient and our efficiency ratio in each of the business units are industry leading, apart from our scale and apart from just the discipline of the teammates. We look at deployment of the relationship management talent. Are we getting the calls and the customer visits and the productivity out of that? We're looking at continued work on our real estate configurations, that we're down 50 million square feet in real estate from the start of 2010, and yet we don't satisfy ourselves in the occupancy rate. Can we push it up? Can we densify the space? The new building we built in New York will be all sort of this new modern style of work environment that will allow us to make economic at a higher rental cost.
You look at every aspect of the company and continue to look at managers. We're down 10,000 managers over the last three or four years. That continues to drift down as we continue to look at what a manager does and how we test that. We let attrition work for us, and by not hiring and making sure we're planful on hiring, we can drive it out. Everybody wants to say, what's the silver bullet? The answer is, everywhere there's opportunities, and we don't know how far this goes with machine learning and artificial intelligence. These things you hear about are still in their infancy of being applied.
By the way, we spent $1.5 billion in data work over the last five, six years, largely around all the CCAR stuff, but ultimately, and some of the work we're doing, but really to get to all the data rates is actually the bots and things that can operate are operating on good data. That investment then allows us to take advantage of it, and we're still in the early days. Quartz that we invested in the markets business. It's from one side of the company to the other, and going to your earlier comment, what target do you have? The answer is, we don't have a target except to improve every month, day, week, and quarter, and we'll continue to do that.
Thanks a lot, Brian.
Our next question will come from Brian Kleinhenzl with KBW. Please go ahead.
Yeah, thanks. I just have two quick questions here. On the Wealth Investment Management, I heard that you were bringing down the non-interest expense. Can you go into a little bit more detail if there's still more that can be done on expenses in there? I mean, it's surprising to see the positive operating leverage with expenses down.
Yeah. You have the pre-tax margin, if you think about it, once you pay the talented teammates we have in the financial advisory platform and the private banking platform. You're working on about half the revenue, and we're getting 30% of that to the pre-tax line. The idea is you got to improve it all directions. It's not just expenses, and it's efficiency expenses, simplification of product, and especially for the clients with $500,000, $600,000, continue to add straightforward products that are digitized on both the way they're delivered and the way they're statement and everything. Then making the advisors able to handle more clients, and that allows us to get more efficiency. Real estate configuration. There's a lot of paper still in this business just because of the history of it.
They're probably in the first inning of really, it's a very digital business in some ways when you think about trades and how they go through, but it's a very paper-intensive business in other ways. The way we do AML, KYC refreshes. We're going to recognize a team that took several thousand hours out of the work to do that. It's just a thousand things. Importantly, also by driving the growth in loans and deposits and stuff, that creates more pre-tax profit margin, frankly, off the strength of the bank's balance sheet and the size of our company. That gives us unique positioning. We're running industry-leading margins, and we know we can continue to push them up. It is a very slow thing, and we don't change the way we pay people.
We really focus in on working around and making all our teammates ability to have a great career, make more money, and serve their clients better while we keep making the place more efficient.
A separate one for the US cards. It's like you saw the gross interest yields still tick up in the quarter despite the rate cut and the change in prime rates there. Was there something unique going on that allows you to kind of expand yields?
The card portfolio, right?
Correct. Card portfolio.
Look, we've been focused on profitability. We have been careful about growth as we're growing. We're adding 1 million new cards a year, again, with a focus on profitability. We've sort of scaled back on people we think are trying to game the system or just going after promotions. That's improving the profitability overall. I think you saw that in the RAM that you're referencing, which is up year-over-year. That's mostly being driven by NII. I mean, NIM growth in the card.
Great. Thanks.
Our next question will come from Matthew O'Connor from Deutsche Bank. Please go ahead.
Hey, Matt.
Good morning. If we look at your expenses, X, the impairment and the legal cost is about $12.7 billion. Obviously, if you annualize that, it's below the $53 billion you're talking about next year. I know there's some seasonality the first half of the year that drives costs higher. I guess first, is there anything in the $12.7 that's kind of not sustainable or unusual? Why isn't there maybe some downward flexibility with the $53?
You mean to our benefit? You're saying to our benefit.
Correct.
Yeah, I think the third quarter was just a little bit of timing. We're increasing our investment in people, in financial centers, in marketing, but it's not even throughout the whole year. You got to think about the guidance we've given for the full year as opposed to just any given quarter.
Okay, just some ebbing and flowing there.
Yeah. It's just ebbing and flowing on marketing and other areas which will rebound investments. We expect some of that to rebound in the fourth quarter.
Matt, that's why if you go back to that earlier page in the deck, if you think about the last couple of years, there's always ebbing and flowing, but we're showing that we're kind of holding it here. As you look over the next couple of years, we think we can hold it here, and then at some point, we'll start growing, and we're trying to grow. We're trying to spend 3% more a year but only grow the expense base 1%. It's kind of the long-term picture we're trying to take. Maybe 1%-2%, and with revenue growth of 3%-4% in a normal environment, that produces great operating leverage and EPS growth. That's the long-term view that we keep holding to. When interest rates move quickly, those are things that deal with it. Over time, that's what you're trying to achieve.
You could take that as sort of the general operating principle we push our teams towards.
Okay. Just separately, you talked about deposit growth potentially of 4%, 5%, accelerating a little bit from where we're at right here. You talked about loan growth potentially being in the, call it 4% to 6% range. As we think about the overall balance sheet, should it grow in line with deposits, or are there some opportunities to bring down debt and you'll see a little bit less earning asset growth?
Yeah. Look, on the specific point, are there opportunities to bring down debt? There's a little bit of opportunity there. Our TLAC ratios are probably a little bit higher than we want them to be. That was because we were adding a new bank in Dublin, adding a new broker-dealer in Paris. By the way, putting up our broker-dealer here in the U.S., for resolution planning. We have a little bit of opportunity there. I wouldn't make too much of a big deal about that. Basically, our balance sheet is going to grow as we grow deposits. With all that deposit growth going into loan growth, we still have the non-core portfolio running off a little bit. Whatever doesn't go to loans is going to go into the securities portfolio.
You have the Global Markets business, which also because of financing activities and equities, not a lot of risk, but notional growth of the balance sheet that you've seen.
Yep.
Okay. Thank you.
We will take our last question from Gerard Cassidy with RBC. Please go ahead.
Thank you. Hi, Brian.
Hey, Gerard. How are you?
Good. First, I just want to thank you and Bank of America for the continued support of the BancAnalysts Association of Boston meeting. You guys do that dinner every year like you're doing this year. So thank you very much. We really appreciate that. The second point, credit is very good for you folks in the industry. Can you share with us when you look out over the next cycle, where are you guys spending extra time today just making sure that you don't take your eye off the ball because of some potential problems that could be on the horizon?
Gerard, you asked the question that Paul and I and Jeff Green, our Chief Risk Officer, and importantly, our Enterprise Risk Committee led by Frank Bramble, our Board of Directors. We keep saying, how do we make sure that we're sticking to our knitting, so to speak? You do that by, you see all this goes industry limits, country limits, leverage underwriting limits. You pick just limits after limits, house guidelines exceptions. I think one of the things my peers and I would say is with stress testing and other things, you're required to think of the worst of times and hold capital for it. I think in the industry generally, that has had a great impact in terms of us all thinking through the long-term impacts.
Importantly, the data and the capabilities that we built starting 10, 12 years ago are just tremendous. When we ask the question, we can actually see in very discrete areas where's our exposure to this or that or the other thing. That's important because then you can manage at that level. The team under Jeff has done a great job of sort of bringing that data to fore and making sure we're always watching all the different pieces. Mick Ankrom , who is in charge of credit risk of the company, I'll call him up after the Houston hurricanes a couple of years ago. I said, "Mick, what's our exposure?" He said, "What zip code do you want it for, and which product do you want it for?
Do you want the card versus the mortgage, or people have both? All that's just this is on like a Saturday night or something like that. Not saying he doesn't have more fun things to do. I think that allows us to keep track of it. It's just all those limits and those granular limits, and then the intrusion of a underwriting process requires really for any reasonably sized loan, a risk manager to specifically sign off along with a banker on a commercial side and consumer side, the parameters of the buy box of so-called are set by with risk and joinder. It's kind of beaten in the system. It's not something people argue about or think about.
Our real estate exposure is limited by a limit that James DeMare presents as the head of the real estate exposure for the whole company and from the line side and supported by the team on the risk side. It's just in the 30 years I've been around this business, you just see the granular. We used to say, "What do we have?" People'd have to run out and look. Now you have it, and then you can manage a lot more effectively on a go-forward basis.
Very good. Pivoting a bit, you touched on it in your prepared remarks about the regional bankers that you guys have been hiring here in the States. Tom talked about it at a conference recently. You had good numbers in your investment banking area this quarter and are taking some wallet share. Is it because of hires that you're making across the globe, or is it because some of your competitors are still struggling to really get back into the old groove of what they were, let's say, 10 or 12 years ago?
I think that Matthew Koder and the team have just realized we had the capabilities, the franchise, the tools. We just needed to really drive the calling effort. He's done a great job of doing that. Alastair Borthwick and Matthew together have been working on building out this middle market team, which is good. It's not only just pure investment banking, everything's M&A or maybe debt capital markets. Also, the exposure plays a lot into the markets business, hedging fuel costs or hedging interest rate risk or currency risk. The average mid-size U.S. company is engaging all over the world, and that's a competitive advantage only a few of us have, is to be able to deliver in India for a mid-size company in United States and help them think through that or other places. I think the team's done a good job there.
We work very closely with the wealth management team in terms of referrals and coverage of the entrepreneur segment, thinking of a private banker or a financial advisor at Merrill Lynch and their clients working with a commercial. We measure that, we goal it. It has to come sort of naturally by money in motion or transactional activity. The awareness of the capabilities and the coverage is they've done a good job. We will always be susceptible to the biggest deals. If the activity slows down, all of us have that issue. That underlying middle market's just a lot more companies, 10,000, 5,000 companies that there's just a lot higher probability of one of them doing something on a given day than the top 1,000 companies.
No, very good. Thank you and look forward to seeing you in three weeks. Thank you.
Okay. Thanks, Gerard.
There are no further questions at this time, so I'll turn it back to Brian.
Thank you very much for your time and attention, and thank you for attending our earnings call. I think the themes for this call, and you heard them in the Q&A and earlier presentations, are the years of investments that the team has made and managed are paying off. We're using our loan and deposit growth above industry averages and above the market on a conservatively responsible growth basis continues to help offset the NII pressure due to rate changes, which all of you are focused on and should be. We still continue to make sure we stay dedicated responsible growth to make sure that credit risk and market risk we take on is consistent with how you expect us to manage it.
We continue to manage investments and expenses and run that sort of dual brain side of saying we can grow our investments, and we can also continue to manage our expenses carefully and relatively flat. Then on top of all that, over the last few years, our ability to have sustainable, predictable earnings and the excess capital is coming back to you along with 100% of the earnings at levels which are unprecedented among our peers. That's helping drive down the share count and helping produce the EPS growth that we need. Consistent with responsible growth, and we look forward to seeing you next time.
This does conclude today's program. Thank you for your participation. You may now disconnect.