Bank of America Traders posted a record second quarter as the company reaped the benefits of volatile markets and net interest income top analyst estimates. For more, we sent things on over to David Weston. He's standing by with Bank of America Chair and CEO Brian moynahan.
Hey, David, thanks so much Tim for our Bloomberg is worldwide. This is Bloomberg. I'm David Weston, and this is Brian moyhan who's the chair CEO of Bank of America. Brian, thank you so much for being back with this, really appreciating this busy day for you.
That's great to be here. David, good to see you again.
So let me start with one of the favorite questions I have for you. Because you, at Bank of America have a window into so much of America, consumers and businesses of all sizes, you sort of have a sense of where the pulse of America is. There's been a lot of changes announced and talked about in Washington. Do you see from your customers much reaction to that, either to the tak of tariffs, to the one big beautiful bill to consumers or business Are they changing their plans because of that?
So if you look on the consumer side, in our seventy million consumers who engage with the economy every day and they send through their accounts and their and spend the cash and everything about four trillion, five trillion dollars a year. That grew up four percent plus the second quarter twenty five or the second course of twenty four.
So they because they're employed and because wage growth, and that's not every single consumer, it's but in the in the large, in the main, they are continuing to grow and spend more and that helps the economy.
And so you're seeing in some.
Of the modern income households there's a little bit of chef moving around to different things. You're seeing people trade for one thing another, less planes, more cruises earlier, that's leveling out now, a lot more going to movies because the movies are good.
But the end of the day, they're spending.
Discretion necessary about the same percentage they traditionally spent. They've got money in their accounts, they're employed, and the wage growth has been relatively strong, and you know, so they're pretty good shape. The credit quality is good, they have equity in their homes. They're rate financing, and the mortgage
so it was pretty good. When you go to small businesses, that's more of the question small medium sized businesses because the interest rate environment hits them harder because they borrow on lines of credit short term for a lot of their activities, and that rate went up substantially. And anythink about the if I'm a one hundred million dollar company, a fifty million dollar company here in North Carolina, and I'm engaging in the world finance, I'm importing goods and
manufacturing them, further manufacturer, I'm selling them. You know, it got pretty interesting here trying to figure out all the trade and tariffs. So I think certainly on the tax rate helps them, meaning the big beautiful bill passing and the tax rate that's a very good thing. The alternative would have not been good if their tax rates would change.
A satisfactory resolution to the trade so that they could learn the rules of the road over the next thirty sixty ninety days and get their plans for next year put together. And I think ultimately they're gonna we've got the satisfactory resolution on immigration and population growth because the end of the day, when I'm hearing more from the
construction companies, farming companies and travel entertainment type companies. Is I'm starting to worry about I'm starting to struggle with labor availability at any price, and that's that we got to make sure they have the workers because they will supply great service.
Economy continue to grow.
One of the things you reported today was net interest income, which is really important to all banks, but particularly Bank of America and just steady growth that you're showing in that how sensitive are you to the rates set by the Fed? If that comes down substantially, does that affect Bank of America.
Much so embedded in our estimates. So we've told the world that this quarter we had fourteen point eight billion dollars in net interest income, and that is the fourth straight quarter of growth and came off the floor last year. This quarter, when I was talking to was the lowest it's been. This quarter was a record in the company's history, and we're saying we're going to grow from that record to fifteen five to fifteen seven and two more quarters
the third quarter and the fourth quarter. That embeds in it the rate cuts in the market that are expected by market. We don't we only show it that one if you have rate cuts over above that that would hurt that number, but it would still grow frankly and so and that the good thing about that is because a great loan of Positi growth seven percent loan growth four percent to Posit growth over the last year. That's in the system that's capitalized it.
I mean, that's here. It doesn't go away.
And as that continues to stay and we add to it, what you're starting to see is that sets us up great for next year for further ANII growth and further EPs growth. So this quarter was the trickiest quarter to get through because you every year we finally got some MENI growth, but you every year the market's business doing strong expense growth is a little more robust. That'll get lined and then you'll see NI dropped the bottom line and it will set up for twenty twenty six we do the more growth.
When you talk about twenty twenty six, one of the things we're going to have is at all likely a new FED chair. There's been a lot of talk even today in Washington by the FED chair, and you said you believe in an independent FED. But if in fact President Trump gets his wish, as is his right under law, to appoint a new chair who will be more in line.
With his views.
He said he thinks the interest rate really at one percent or even below that, is that good for Bank of America? Is that good for the economy.
Well, let me make two things. One is you're absolutely right and may have next year. The term the curve FED chair ends after being reappointed, and it's the right of the elected president to appoint the next successor and go through Congress. And I think in that dialogue around that there will be a lot of dialogue about, Okay, how do you set interestrates? What do you think about interest rates? Because the FED is an independent agency and they're they're meant to be outside the purview of the
executive and Congress. They are called a task and are monitored and they're reviewed and.
All the things.
But the really reality was set up to be independent so that our Central Bank.
Of America was independent.
So I think no matter who gets in, they're going to look at it and have to look at the facts and make a decision because if you drop rates too far, inflation you may kickup and then you're gonna have to raise them back quickly. On the other hand, if you think the prior FED has been slow to the lower rates you might lower and faster. Our team believes that the Fed will lower rates in a second
half of next year by one hundred basis points. No change until then because inflation is still going through the system. That brings the FED funds rate down closer to three, which they think is probably more of a long term rate and frankly, is more similar to what we had for most of American history. What's been unusual is the period after global financial crisis, a very low interest rate structure.
That is really not a good place to be. Honestly, we'd rather have a higher interest rate structure, a little more inflation, a little more robust economic growth. So I think everybody asks me a little careful about keeping that engine going, because if this engine fails, a whole world fails.
You also reported increased loans from Bank of America, which is good news for you, and tell us about your competition for that. We now have private credit really coming into that area substantially. There's talk that maybe that would be peaking. Is that the way you see it?
Well, I think that. So if you think about all our loans, a trillion and one of loans, say half from the consumer and so there's that competition's always been there. Half of what goes on for consumer lending goes on outside the regulated bank industry. That's been true for a long period of time. We saw growth across all the segments.
We feel very good about that. We go to commercial, the private credit effects sort of the leverage finance and some of the areas, and it's been an effective competitor.
It's grown.
I think we in the industry and we in the company back of America have come back with a way of operating we think is consistent with our credit quality, consistent with who are customers, and will also deliver a competitive product. Then we grew commercial loans leave us side the market based business.
We grew commercial loans.
I think seventy eight percent excluding the Cree office that we are running down still in the middle market, which is as strong as anybody.
And we feel very good about the.
Credit quality of those loans, but more importantly feel good about the thirty fifty seventy year corporate relationships we have and if they want a different kind of financing, we'll bring it and take it to the market form like we've always done.
You also had a great quarter in terms of trading, give us a sense about where you're going with your trading activities and your investment bank. In the past, you've added more balance sheet strength to that. You've come up in that. Do you plan to keep doing more of that?
Yeah?
And so Jim Damar and the global markets business, which is a trading business as you call it, they are up fifteen percent year every year. Both fixed income and equities were up, and he has had thirteenth straight quarters like it is of year over year quarter of comparison growth. And so there's some d and flows in that business.
But this quarter started off a little interesting with Liberation Day and I think the first four of the biggest days ever and equity stock trading occurred in the first week of April or something like that.
So it was a pretty wild time.
But over the course of the quarter it got more stable and they made it. We have given him more capital and more balancing, hit him in the team more importantly, and that team, under his guidance, has has delivered on it is getting a good return on it, and we have lots of capital. If he can put it to work, there'll be more of it. The trick is he's also got to use it efficiently and get that return on table common equity, return to allocated capital straight when you
go to investment banking. Look, April was kind of quiet, especially on the M and A side. For us, it came back and you saw us. You know, it was recently a three or four weeks ago we thought we do one point two billion. We did one point four billion, and with pipelines full, Matthew Coder and team are out there driving at it.
We did. We lost some deals to other people in the M and A. We were on the wrong side of the trade. That happens.
But the reality is what really changed over the course of the months was a financing side kicked in and that you know, that's three quarters of our revenue, and that that was good and that's why the revenue came up, and that team does a good job and there's lots
of places to grow. That is going to be much more dependent upon the IPO markets being open, the M and A markets, the M and A taking place, and I think was stability again back to the tax bill, some trade stability, and then frankly deregulation.
You're going to see.
I think that activity keep kicking in as we moved through twenty twenty five into twenty six, which will be good for the economy because it creates a lot of activity, investment changes in businesses, and all those things that we expect to.
See you It took time out from your earnings announcement to really focus on artificial intelligence, something you have been talking about for quite some time and adopting, for example with Erica that you have. Give us a sense of how that's changing the business at Bank of America, for example, on the expense side, does it really lead to saving some costs?
So at the end of the day, the artificial intelligence, as we know is an extension of a series of technology capabilities that allow us to take work and have machines do the work and people and enhance the people's ability to do more work and do more things and spend more time on things that aren't capable of going through that. It just gives you a different sort of a different attack surface for lack of better term. In the past, we had three hundred thousand people fifteen years
ago in our company. Today we have two hundred twelve thousand people. The companies bigger, complex, more transactions from that time, our digital logins were probably I don't know, ten twenty million a quarter and we felt good about it. They were several billion or billion a month. Just to get your sense, think of all the investment to do that.
But that digitization was customers doing things on their own at ten o'clock at night and seven o'clock in the morning, and that allowed us to save our time for our people to go out and help customers solve difficult problems.
What AI.
The place that we think AI has real help is in the preparation of our relationship management force and our small business bankers, our business bankers, our commercial bankers, our wealth management, our investment bankers. Allows them to be much more prepared. So we're using those tools to prepare the information, pull it together because it could take text and manipulate it and put it into the forums and the capabilities.
So that's a big thing in front of us. We've done five or seven hundred pitches so far, and that cranking up. We see it in employee self help. If you had a computer that went down at Bank of America, you can click on Erica from employees and a chatbot will take you all the way through the replacement of your computer process and evolve no people and you'll get
the computer delivered to you. So you know, that's how we took that save Erica model that for you know, twenty million consumers use two hundred million times a quarter.
Turn it internal and so there's all.
These applications and we think it has high application for the services business that Bank of America's in and the ability to keep doing work. And in the end of the day, we'll have teammates who will harness it and take it and use it to their advantage to make themselves even more successful.
So you know, we talk to teammates, we say.
Embrace this, let's drive it, and then let's figure out you know, what jobs are, what job you're going to do, but you're going to need this to be able to do any job in this company.
As you move forward with our visual intelligence, is it changing what you're looking for and the people coming in the door, the entry level people.
Now we're just in the process of bringing in our two thousand plus kids.
New hires that just started Hick this week. So think about that.
Two thousand kids arrive one percent of applications and less than one percent we're accepted. So weet one hundred and tinety thousand applications and a lesson and around two thousand people coming in. So we're getting the best of the brightest. We love them, they're coming in. The point I'm making is there is a group that has to use computer skills and data skills, and that that's once, I think, but everybody has to be able to use AI to help them be a better employee at Bank of America.
So as you think about that, you know every teammate and I have high confidence kids coming out of colleges are going to be a lot better AI than you and I might be, David, but we'll catch up to them someday.
One last question, Brian, you've said that you're moving towards stable coin, as some other banks are as well. You saw mister Bailey, who's the Government Bank of England, really said that might have systemic risks because they take some of the money out of the banking system. You're better off going in a different direction. Are you worried about systemic risks from stable coin?
So one of the questions, and I think what mister Bailey was talking about is a question. I think the banking system the United States, a policy makers have to think about, which is think about the money market mutual fund. About six trillion dollars of deposit banks moved to money market mutual funds, and their utility was to invest in short term you know, deposits, treasury bonds, et cetera, commercial paper. They can't invest long term, so their ability to help
the economy is really a limited amount. That six trillion is outside the system. If you said we're going to take the eighteen trillion or whatever is the banking syst today, another six trillion out, you have to think through the pol cerifications because to keep it stable you have to have it invested in a very narrow place. And I think that's what mister Bailey was talking about.
I think that dialogue is going on now.
There's another side of this, which means those deposits will come back in the system if we hold the deposit's effectively an escrow custody for our customers who are out engaging stable coins. So I think there's a lot of turns in the track between where we are today and where we might be on this. Our view is pretty simple.
Ten years ago you would have said the clients don't need a thing called zel and now they use it, you know, twice as much as they use checks, and it is used more times than the amount of checks written by our consumers in amount of cash transactions, taking the cash.
All of the ms.
So it's become the dominant payment network for consumers outside of card that didn't exist ten years ago. So we've got to have the consumers adopt us. If they want it, we'll build it and they'll use it. And if it's a way to transact, we'll be there to help them transact.
We think, you know, small bounce, cross border transfers in app sort of patient purchases, all these types of things and applications for but the end of the day, it's our customer who needs to say, I want to move money, I want to move money into euro euros, I want to move money into stable coin.
So we've got to be able to do both.
For Brian, great pleasure to talk to you, Thanks again on a busy day for joining us. That is Brian moynan. He is Chairman and CEO of Bank of America.
And now back to you, thanks so much. That of course is David Weston of Bloomberg Wall Street. We catch new episodes every Friday at six pm Wall Street Time on Bloomberg Radio and television. Also a big thank you, of course, to Brian moynihan for joining us there as well.