- Net Income: $6.9 billion after tax.
- Earnings Per Share (EPS): $0.83 diluted EPS.
- Revenue: Increased from Q2 2023, driven by non-interest income.
- Fees: Grew 6% year over year, representing 46% of total revenue.
- Asset Management Fees: Increased 14% year over year.
- Investment Banking Fees: Increased 29% year over year.
- Sales and Trading Revenue: Increased 7% year over year.
- Card and Service Charge Revenue: Grew 6% year over year.
- Net New Consumer Checking Accounts: Added 278,000 in Q2 2024.
- Client Balances: Managing $5.7 trillion across consumer and wealth management segments.
- Digital Banking Users: 47 million active users.
- Digital Sales: Represented 53% of total sales in consumer businesses.
- New Financial Centers: Opened 11 new centers and renovated 243 in the first half of 2024.
- Technology Spend: Expected to spend nearly $4 billion on technology initiatives in 2024.
- Common Equity Tier 1 (CET1) Ratio: 11.9%.
- Share Repurchases: $3.5 billion in Q2 2024.
- Dividends Paid: $1.9 billion in Q2 2024.
- Average Loans: $1.051 trillion, up 1% year over year.
- Return on Average Assets (ROA): 85 basis points.
- Return on Tangible Common Equity (ROTCE): Nearly 14%.
- Provision Expense: $1.5 billion in Q2 2024.
- Net Charge-Offs: $1.5 billion, with a net charge-off ratio of 59 basis points.
- Consumer Banking Earnings: $2.6 billion.
- Wealth Management Earnings: Over $1 billion.
- Global Banking Earnings: $2.1 billion.
- Global Markets Earnings: $1.4 billion.
Release Date: July 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Bank of America Corp (BAC, Financial) reported a net income of $6.9 billion after tax, or $0.83 in diluted EPS for Q2 2024.
- Revenue grew year-over-year, driven by a 6% increase in fees, which represented 46% of total revenue.
- Strong performance in wealth management with a 14% improvement in asset management fees and a 29% increase in investment banking fees.
- Continued digital growth with 47 million active users on the consumer mobile banking app and 23 million consumers using Zelle.
- Maintained a strong capital position with a CET1 ratio of 11.9%, supporting loan growth, share repurchases, and dividends.
Negative Points
- Net interest income (NII) declined this quarter, although it is expected to grow in the latter half of the year.
- Consumer net charge-offs increased to 59 basis points, the highest since 2014.
- Commercial real estate exposure remains a concern, although there was a decrease in reservable criticized loans and net charge-offs.
- Expenses grew by 2% year-over-year, driven by higher incentives in wealth management.
- The net interest margin (NIM) remains low at 1.93%, indicating under-earning compared to historical levels.
Q & A Highlights
Q: Given all the pieces of the puzzle that you gave us, expectations for modest loan and deposit growth and slowing deposit-seeking behavior, if you get that 4% pickup from 2Q to 4Q this year that you're expecting, right now or at least recently, consensus had NII looking flattish with that fourth quarter number and that doesn't make a lot of sense given all the pieces. So maybe if you can just comment directionally if you don't want to give the number of, does it make sense to you that we'd collectively be expecting flat NII with your higher fourth quarter number?
A: So, Glenn, you're right. We're probably not going to give guidance around 2025 for all the reasons that you would expect. What we're trying to do here is reinforce for everyone what we've been saying from the beginning of the year, and that is we think Q2 is the trough, and we believe from this point we're in a good position to grow. Now, when you look at some of the elements of this bridge, you'll draw your own conclusions with respect to fixed-rate asset pricing -- it is going to persist for some period of time, and you'll be able to draw your own conclusions. But I just want to point out we've been pretty clear on our guidance for Q1 and Q2. We've always felt like this would be the trough. We feel like Q3 and Q4 are likely to be better. You can see our work here. We've laid it all out. Nothing's really changed in terms of that. And the most important thing I think for everybody here is we feel like 2024 is a really foundational year. It's this twist period where we just got to get through the last of the deposit rotation, and we're establishing a foundation for growth from here. So that's what we're trying to convey.
Q: Maybe I could just ask a follow-up on deposits within the wealth business. You have $4 trillion of client assets. I'm curious if you break out the split between brokerage and advisory accounts.
A: Look, Glenn, I'm not sure that distinction would be the distinction I'd look to. We've gone through a massive change in cash infused in the economy and withdrawn now under monetary policy. And so as we stabilize, our instructions to our team are to grow our deposit base a little bit faster than economy. That means you have to price across the board to achieve that. And what -- if you look at the slide 4 or 5 where I showed you sort of the change, what you see is the wealth management business takes a little bit longer because those clients have more investment cash with us. Not what you're thinking investment accounts puts in their money. How they think about cash, they don't need for daily cash flow, and they move that around. That largely is over. And if you look in the last four or six weeks, we're seeing those deposits in that business bounce around the $280 billion level, not a lot of movement. And it'll keep moving in and out depending on customers paying down their income taxes, taking more risk in the market and all those things, but the deposit pricing changes that we made to ensure that they were at a platform they could grow, having been as high as $350 billion down to $280 billion were made in the quarter and all through the P&L.
Q: Can you just help us think through the puts and takes on -- you have rate cuts at the end of the year. Forward curve implies more next year. As that cumulative impact starts to hit next year. I guess, what gives you confidence that this is sort of a trough? What are all the puts and takes that we should think about in how we model the NII for next year when we think about the forward curve and that impact?
A: Jim, I think this bridge probably is all the right inputs for any given year. I mean, we've chosen to do it for 2024. We've always resisted going out too far for the very simple reason that there's so many variables and they start to multiply with one another. If you think about even the rate cut one here, we're using the three cuts, September, November, December. If I did this as of Wednesday of last week, there would have been two. Earlier in the year, there were six. So, since we don't know what that path looks like, it's very challenging then to provide guidance for '25 at this stage. What we're laying out here is, these are the component parts. We're going to get some benefit from fixed rate asset pricing over time. We're going to get some benefit in the immediate term from the BSBY cessation and that leading back into the P&L. As that rolls off, we'll get benefit from cash flow hedges repricing. And then we use the forward curve same as you do for the rate cuts. We benefit a little bit from global markets liability, sensitivity. And then that final piece is the piece that we're trying to drive in terms of organic growth. We're trying to drive this loan growth, we're trying to drive the deposit growth. And as Brian pointed out, it's been a pretty unusual period in history, where we've had an enormous change in the rate structure, and in the fiscal stimulus and the effects now fading away to something more normal. But that last box will come down to your assumptions versus our assumptions. And we will update you as we go through the next couple quarters, and we'll give you a better sense towards the end of the year.
Q: You mentioned loan spreads have improved. Why is that? Where's that? Do you expect that to continue?
A: Loan spreads have improved for us, Mike, over the course of the past -- I think it's now eight or nine quarters. It's primarily in the commercial businesses. And it's largely because we have to price the balance sheet for the returns that our shareholders expect. And that's true, I think, for the industry. And we've been quite purposeful in that regard. So we've tried to balance price, spread and growth over the course of time, but it's primarily a commercial phenomenon at this point. And I would expect that to continue for the foreseeable future, but it's a competitive environment, we've got to see.
Q: How are you thinking about kind of targeted capital levels going forward? Obviously, we're still waiting for final rules. Maybe there's a little more volatility in your SCB than you would have thought, but you still got a nice buffer? And then I guess one last piece I was thinking is the remixing of the balance sheet that's been commented kind of throughout this call over time probably causes a little creep in RWAs, right, like loans higher than, say, securities. So lots of excess capital, but some puts and takes and how are you thinking about it between now and when we get final guidelines?
A: The first thought, I think we always want to use the capital to grow the business. So if we need to use it to support RWA growth for loans or something, that's a good outcome and
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
