Brian Moynihan: If I think about it, if you go back to sort of the period prior to the run-up and the couple years after the pandemic, you’ve had sort of the billion and half type of numbers a quarter. We think we’re fundamentally stronger in the market position, as you said, so we feel very good about the work Matthew and the team have done. As we look at it, we believe that they’ll continue to gain share, and I think this is a more normalized level and whether it’s pulled forward or not, we’ll find out, but it’s a more normalized level given those dynamics and one we should be able to build off of, especially as I said earlier, the penetration in the middle market side of our business, of whether those clients working off our wealth management in the markets generally, plus working across the globe and we’ve done better work international, so we feel good about everything the team’s done, the combination of corporate and investment banking was very strong, so we don’t think this is an unusually high water mark and we should be able to build from here.
Ken Usdin: Okay, got it. Then one question about wealth management and just client choices in terms of where they’re sitting relative to earning NII or earning fees. Where do you sense that the cash versus fully invested is in terms of the wealth management brokerage business, and could that turn to the better, turn to the worse depending on how that mix answer goes? Thanks.
Alastair Borthwick: Well, wealth management, I think Lindsay, Katy and Eric highlight for us regularly just the elevated levels of cash that our clients have. A lot of that is on us, and you can see that in our deposit chart; but there’s a lot that we captured in the investment area too, where a lot of t heir flows are coming into maybe it’s money market funds, maybe it’s short dated treasuries, but there’s a lot of cash at this point, and so that would tell you it’s supporting the ability to see continued assets under management flows going forward, depending on how obviously the stock market shakes out over time. We’re all struck by just the sheer amount of cash on the sidelines at this point.
Ken Usdin: Okay, got it. Thank you.
Operator: Once again, that is star, one if you would like to ask a question. One moment while we queue. Once again, that is star, one. We’ll take our next question from Gerard Cassidy of RBC.
Gerard Cassidy : Hi Alastair, hi Brian.
Brian Moynihan: Hi Gerard.
Gerard Cassidy: Alastair, coming back to Slide 8, which is obviously quite impressive on deposits, particularly the upper left-hand graph you presented, when you go back to maybe 2014 or ’15 and take a look at deposit levels of your company from 2015 to 2019, you just didn’t have the growth that you experienced from the end of ’19 through today. Can you guys share with us, what drove this meaningful increase in not only excess deposits but all deposits?
Brian Moynihan: I think, Gerard, you’ve been around long enough to understand some of those dynamics. As we moved through the post-financial crisis, we had–in terms of that chart, if you looked at it, you had a lot of loans that we’d ran off because they weren’t core loans anymore, and it kind of troughed out at the $900 billion level and then grew out from there. In 2015, that’s when we started driving responsible growth. It was a call to grow now that we’d pushed out a lot of stuff from the financial crisis and got it behind us. The loans then start picking up, but if you remember back then, I think we had almost $300 billion, if I remember right, and if you looked at the slide on loans and the non line of business loans, they were $200 billion or something like that, and it’s down to $10 billion, so think about that dimension.
As we ran that down and could grow, we could overcome it, and so then on the growth on loan side, it’s driven by discipline, where we want to play, and the card business is getting it positioned right. Now we can start to push from there, whether it’s on home equity business, on the auto loan business. On the commercial side, it was–we had less issues after the financial crisis in commercial, but kind of getting through all that, it was getting to the credit quality we wanted. A source of great growth for us from 2010 and beyond has been we probably gone from, I don’t know, $20 billion, $30 billion of outstanding loans in the international part of Matthew’s business [indiscernible] to almost $100 billion type of number, so expansion of our international capabilities and downright great credit work by Jeff Green and the team and Bruce Thompson and the team, so put all that together, that’s the loan side.
On the deposit side, it really started with a focus that began really prior to–in the middle of the financial crisis and beyond, where we said we’re going to go for core checking accounts in consumer, primary checking accounts, drive customer satisfaction, drive organic growth, and not care about the number of sales as much as the net growth in net sales. As the team, Dee and Thong over time in there, and then Holly now have continued to push that, adding a million-ish net new checking accounts all core, we’ve gone from 60% core to 92%. We’ve got customer satisfaction to the highest levels ever, in the mid-80s, top two [indiscernible], etc., attrition down to lowest ever, preferred rewards kicked in, and all that has led to higher and higher balance retention per account, and then also more accounts.
We’ve probably grown in the consumer from, I think, around $300 billion at the beginning of 2010, 2011 to now $900 billion. Now, there’s economic growth and economy growth, but that’s way outsized, and that’s what’s driven the real value of the deposit franchise. Then wealth management – again, after Merrill putting it together and then driving the core aspects between the team there has kept us up to $300 billion, that’s from 200 and something pre-pandemic and probably less than that – I think it was 200 at the time of the merger, so all these things are just part of it, and the GTS business, investments in that have driven those products, so that spread is high and growing again, which is kind of counterintuitive to the narrative that even one of your colleagues mentioned earlier, which is leave aside all the quantitative tightening and all the interest rates and all the stuff that’s supposed to happen, quarter after quarter we’re now growing the amount of deposits over the top of the loans, and the loans hopefully will kick back in and grow a little faster.
But they still won’t use a lot of those balances up, and so we feel very good about that position, and those deposits, as you can see on the bottom of Page 8 on the left-hand side, all-in cost is under 93 basis points against a Fed funds rate of 5.5, and the rate of change in those deposit prices has flattened out to be very modest quarter over quarter. That’s just tremendous leverage for the company.
Gerard Cassidy: Very helpful, Brian, thank you. Maybe as a follow-up, I think Alastair, you pointed to that your CET-1 ratios, Basel III ending, wondering as originally proposed, you’re very comfortable with it. Can you guys share with us, what’s the latest–you know, we all read about the watering down of Basel III ending. Do you guy have a sense when we may actually see a final proposal? Could it get kicked into next year, possibly?
Alastair Borthwick: Look – we don’t have an update on the timing yet, Gerard. We’re in the same place you are – we’re kind of waiting for the rules to come out, and we’re still listening for updates from the Fed Chair and the Vice Chair, and we’ll wait until we see those come out.
Brian Moynihan: The key is we’re sitting, every under the current interpretation, we told you earlier on without any modifications, we’re sitting on enough CET-1 nominal amount, $197 billion, that exceeds what we’d need for the increase in RWA under the current version of the rules as proposed. Anything that changes in that will be positive, Gerard. We don’t need to retain capital to meet those standards, so we’re off and running.
Gerard Cassidy: Appreciate it, Brian. Thank you.
Brian Moynihan: I believe that’s–one more question? Okay.
Operator: Yes, we’ll take that question from Jim Mitchell of Seaport Global.
Brian Moynihan: Morning Jim.
Jim Mitchell : Oh hey, good morning. Maybe just one last follow-up on that last question from Gerard. If Basel III is reduced as Powell has suggested, is it with limited loan growth just more likely to be put towards buybacks, or do you see opportunities beyond loan growth, whether it’s growing the trading balance sheet or other opportunities to deploy that capital, to drive growth? Just curious how you deploy that.
Brian Moynihan: Well, number one, our primary interest is the capital to support our businesses, so you’ve seen that happen in the markets business – as we said, it was one of the best quarters in a decade, first quarter. That is a multi-year process of building up not only the balance sheet and capital committed to the business, but importantly also the investments in systems and technology and risk management and those things, they continue to make money almost every trading day over the last several years, so that’s where we’d like to use it, supporting that business and supporting the loan business, supporting all the businesses. The reality is outside of the capital markets business, then you go to loan growth and the kind of loan growth in the mid single digits, that doesn’t eat a lot of the capital up, so then it’s just there to be returned, and so we’ve got two basic phenomena.
One is we store-housed a bunch of capital, if you think about the last few years, between the changes in CCAR a few years ago that changed the capital dimension, then the proposed rules and then now whatever happens with it, so they were sort of sit in the pandemic. Before that, we were sitting on a fair amount of capital – that should be released over time here, and then secondly the question will be what those rules are going forward, and then third will be what do you need to support the business, which again that’s our primary responsibility. But generally, that is a modest amount of capital, and so most of our desire is really deploy more expenses in technology investments, and we’ve gone from $3 billion to $3.8 billion in annual technology investments across the last couple years with more branches, but that’s more of an expense question than a capital question, Jim.
Jim Mitchell: Right, right.
Brian Moynihan: [Audio loss] wealth management business, investment banking and trading. NII continues to outperform what we told you last quarter, for the first quarter. We rolled that into second quarter and we expect to continue performance in that as we go through the trough and meet the higher second half of the year. We continue to manage expenses well under the inflation rate, and we
start with strong capital and liquidity and a strong balance sheet. The team has done a great job this quarter, and we look forward to talking to you next quarter. Thank you.
Operator: This does conclude the Bank of America earnings announcement, and you may now disconnect. Everyone have a great day.
