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00:00What a fantastic start to this year. Now forgive me, we're journalists, we've got to ask,
00:04can this really continue at this rate? Well, you just saw two statistics that I've watched
00:10carefully, which is what the activity of the consumer is and then ultimately what the
00:16unemployment new claims are. People argue it's leading or trailing, but it's actually
00:20indicator of the health of the employment market and a 4.2 percent unemployment rate
00:26with new claims at 1.8 on long-term claims and 208,000. Everybody looks at it and says,
00:33well, that's in line with 19. Remember, the workforce has actually grown a lot since 19
00:37in terms of size. And so you argue about 7,000 on 160 million workers or something like that.
00:42So it's a pretty small number. And so nominally it's a low number and percentage-wise it's a low
00:48number. And that's good news because that means the consumer spend. And what we see in our data
00:51is the consumer spending. If the consumer spend in America, that means the economy is okay. And
00:55that probably means the rest of the markets and the construct and the final demand is there.
00:59The weather for the banking industry has been shining brightly. The sun is out. The backdrop's
01:03great. The environment has been good. I want to draw a distinction between the environment and
01:07execution because fees were up everywhere. What are you proud of after that quarter on execution?
01:13Where are you gaining market share? Every single business grew the revenue, grew operating leverage,
01:19which is critical because that means your revenue has grown faster expenses and increased their
01:23returns. Every single business. It grew the customer bases and all those things. So what you're seeing
01:27us is the power that the engine of Bank of America is across all the businesses. So our consumer
01:31business made three billion after tax this quarter. Plus, you know, that's as that's half as much as
01:38Wells Fargo made. And, you know, it's a big number. That's one of our four businesses that we disclose
01:43in the smallest of which made a billion and a half this quarter. So these are big businesses are scaled.
01:48They're accumulating new clients, accumulating new activity. The markets business had a great quarter and
01:54investment banking had a great year over year comparison. But at two point one billion for the
01:59quarter, you know, that we were two billion last quarter two point one. It looks like a huge increase
02:03because last year second quarter we all thought the world was coming in. And with Liberation Day this year, it's
02:08different. But what's really important is the pipeline they have is strong. The deal in discussion are
02:15strong. And you're seeing deals announced every day across all the spectrums. M&A, strategy, financing, all of
02:21which is important. Just elaborate on that a little bit more. How strong is this pipeline? Because things just look
02:24phenomenal. We've had a record IPO. Alphabet came out with a monster equity capital raise. We saw SK
02:30Hynix more recently do something similar. We're going to see more of that in the year ahead. Yeah. I think
02:35you know. So if you look at we and all our peers are deploying more balance sheets. Our balance sheet
02:39to the markets
02:40business went up a hundred billion dollars for the quarter over what they thought they were going to be at.
02:44Just to give you a
02:44sense. And so we said we had that capital based on that capability just to meet the moment. But if
02:49you
02:49look at investment banking, the deal when you talk to CEO is because if you think about last year this
02:54time and the amount of things they had to think about, we've added one with the wars. But at that
03:01time it was taxes weren't set yet. The immigration policy was people are trying to figure it out. Trade and
03:09tariff policy and then deregulation. You come to the fall, they felt that that was sort of working its way.
03:14through whether the tax and the tariff policy kind of looked at said ads sort of 10 to 15 percent
03:20of
03:21countries willing to do business in the United States and 50. If they're not, I can figure that
03:25out. Let me go figure out how to run my business that got with a court decision. All the work
03:30that's
03:30going to hold around a little circles a little bit. So we added some uncertainty. But on top of that,
03:35what you added is a year's worth of growth and a year's worth of belief that this year is going
03:39to grow
03:39at 2 percent plus. Next year is going to grow 2 percent plus. That's committing people's convincing
03:45people that despite higher energy prices, despite inflation, despite the Fed having to keep rates higher,
03:50despite all that, the economy is growing through it. That's the interesting part. And I think CEOs last year got
03:57clarity on taxes, got clarity on deregulation, got clarity on immigration. And now are thinking hard about, wait, I can
04:06do things. I can see a little more
04:08distant future. Does that mean there's a parade of possibilities to change that? That's out there every day.
04:13Let's talk about the parade of possibilities. Sorry. I'm a journalist, so I have to. There's this question about how
04:18market dependent
04:19some of this capital markets activity will be for the rest of this year. The idea that a lot of
04:24people are borrowing money they
04:25don't even need right now because the market is so wide open to them. What are the potential thresholds, whether
04:31it's in rates or whether it's a
04:33sell off in equities that could potentially stymie some of the pipeline. So if we were here a year ago,
04:38you'd say nobody's ever going to get a mortgage
04:40at six and a half percent. Just to give you sense. We were 30 percent up in production mortgages this
04:45quarter. So as people get used to
04:48environments, they start to behave differently. And so the consumer borrowing is strong, but there's a lot of capacity left.
04:55But mortgage production being up 30
04:57percent is kind of an interesting statistic in a world where if you said rates were going to be this
05:01high, they'd be doing
05:02mortgage volume. If you go to the commercial side, which is where you were talking about, you know, we're seeing
05:07good loan
05:07growth, high single digits year over year in our core middle market, small business area. We're the largest small business
05:13lender in the United States. That's good news because that means back to John's question. That's a little bit that
05:18if I'm not going to borrow if I
05:20don't need the money, I'm not going to borrow if I don't need to do something. Despite what people talk
05:25about, you're not going to issue
05:26debt and increasing interest costs and have just sit there because the arbitrage, if you don't issue below treasuries, which
05:33these
05:33guys, no borrower does, you're going to pay three or four hundred basis points to let money sit there. It's
05:38just not going to work. So
05:39people are borrowing because they see opportunity, whether it's equipment buying, whether it's hiring, whether it's a building a plant,
05:44whether
05:44it's inventory buildup. And so they're going to be more worried about can they get the margin on that. That's
05:49the question of inflation coming
05:51through the system later on. They're going to be more worried about will the final demand sit. That's watching the
05:55consumer
05:55behavior. If they're in consumer side driven or if they're in supply chains, is the demand going to stay there.
06:01So I think
06:02it's the markets will stay there if the companies see opportunities, whether small, medium or large size. And they'll stay
06:08there as long as they have something to do with the money. Nobody borrows money just to have it sit
06:12around. Despite what people
06:13think about SK Hynix and what just happened. I mean, just say, you know, one could say. You've got to
06:18have a view or they're going to do
06:19something with it or else they just made in the profit margin. So whatever they're going to do with it,
06:23they're thinking about
06:23something. One thing that you know that the mortgage is is something that Tommy show mentioned earlier. And he was
06:28saying that you've seen a lot of the traditional financial institutions gain market share back from
06:35alternative asset managers. And that's one of the reasons why the regulatory pullback has been so
06:40beneficial. Is that been your experience as well? Well, I think also the investor money going into the private capital
06:47funds
06:47and stuff has been slowed and there's been withdrawals and people getting out. And that then slows down the
06:52activity. But I think also the questions are raised around how much leverage is is too much. And I think
06:58if you
06:58looked at the the average leverage of the different deals, it was different inside the banking system and out. So
07:03I think
07:03we've seen a little bit of pullback pushback to the system. And I think we also had to come with
07:08competitive responses.
07:09So we put together pools that we could we and our peers and our you know it's two different pools
07:14where we
07:14could when the opportunity was there hit the bid for the core differences. If we do a five billion dollar
07:21transaction, we tend to syndicate and get five banks in. That takes time and effort and creates a little bit
07:26of uncertainty. The other players are saying, I'll give you all five billion. I'll bring you that. We plus I'll
07:31bring
07:31all that. We build a practice where we can do more of that for our good middle market companies. It
07:36still will be laid off.
07:38It's just when you lay it off up front or behind. And so we put a couple of things. I
07:42think between
07:42that and the efforts the industry and the efforts our company are seeing some of the market share
07:45come back in. So it's a lot of factors. But we grew a commercial loans at 8 percent. That's a
07:49pretty
07:49good growth rate. Brian, you continuously measure mention if we were this time last year,
07:54Liberation Day, unsure about tax policy, where the deregulation was going, where immigration policy was
07:58going. Are you more focused on Washington now than you have been in the past because of how
08:04pronounced this administration has been on policy? Well, I think we're the companies
08:10around for 242 years. So we've been around through every every administration that you
08:16can name pretty much. So it so it affects the economy when it affects the economy
08:21affects CEO's views of what they want to do. All that if that affects us. But I think you
08:27also the interesting question is right now is that, you know, if you there's just the say do paradoxes
08:34as high as it's ever been. If you read the consumer surveys, it says I'm worried about in a list
08:40of
08:40out. Look what you saw in retail sales in the in the month of June. The money moving out of
08:45Bank of
08:46America customer accounts was seven percent high sixes. And in July was the same strength. That's stronger than it was
08:53in
08:53May and April and March. That is counterintuitive to what the people are. So people are upset about high gas
09:01prices
09:01or upset about affordability. That that's a fact. That's a fact that may change our behavior. Right now the behavior
09:06hasn't changed. And I think that's sort of a parallel to all the things about policy. People talk about it
09:13and think about it. But if the
09:14underlying business conditions are fine, they just go to work and get through it. And so the question is, when
09:18does it
09:19affect their things when supply chains become uncertain because for pricing because of tariffs, they had to slow
09:24down and wait it out. Now they've got to kind of figure it out and they can pass it through.
09:29When the immigration
09:30policy meant they might not get workers, they had to think that through. They're used to that now. And a
09:34lot less
09:35immigration. They've rearranged their work supply. You still hear that from our small businesses that workforce
09:41availability is a big issue for them, especially for the construction and things like that. And so I think we've
09:45got to get that
09:46rational at some point. But but right now there's enough momentum behind it that we're going through it. I've always
09:51given you credit to really understand where your research team is at with regards to their outlook to know what
09:56they're
09:56thinking about with regards to rates. Other banks don't really do that. You do their view on interest rates right
10:01now. Just share that
10:02with us. And if you can build on that, what does it mean for the business if they're right? That
10:06trajectory for interest rates
10:07turns out to be right later this year. Well, number one, they're a great team. And that's why I listen
10:12to them because they know a
10:13lot more about this than I do. Number two is it's a big investment. So I better get you better
10:18take advantage of that
10:19investment on an annual basis. They they it'll I have to say I have this Friday. They re-upped their
10:26things. They had three rate rises
10:27this year. And I think that's that was an outlier. And with some of these numbers, they may change that.
10:31But the principle
10:32what they're saying is inflation will be here longer. It'll take us into 28 to squeeze it out. That's probably
10:37a year
10:37later than they thought six months a year ago. But they've raised their if you think about the travel of
10:44the last 12
10:44months, two and a half to percent GDP growth of 26 down to one and a half back up to
10:49two to two three. That's showing that
10:52they're believing that the AI built out the consumer spending consistency, the employment consistency overweights this. And that's why
11:00rates will stay higher because the economy is strong enough in inflation. And then you've got to wait for the
11:05second wave of
11:05inflation for gas prices. First it comes to the the fast turn stuff and it comes to slow turn stuff.
11:11What I mean by that
11:12is this this keyboard is produced with petroleum related products to produce the plastic. It just takes time to get
11:17through
11:17the supply chain. So we'll see that their views. Three rate rises this year. I can't speak for them but
11:24I think the numbers may
11:26change that a little bit. But we'll see that they're out there independent. They make their decisions. But the
11:30principle was inflation is going to be sticky and we think it's a year sticker was six a few months
11:35ago. AI is a piece of
11:36that. Yeah. And maybe you can speak to what's happening internally at the bank right now. We've seen plenty of
11:40examples of certain companies certain firms maybe backing away on spend telling the staff internally not to do this maybe
11:46to
11:46focus on that instead. How have you approached this moment just on a cost basis. We realized that was a
11:50risk from the
11:51start. So we built we built optimization models on top of the models for lack of better terms. So and
11:57then we also
11:58negotiated for lack of better terms sort of fixed based pricing. So subscription model pricing. So you know like with
12:04your
12:04firm we pay your subscription and inside you have the Bloomberg ask Bloomberg or whatever the AI capability with other
12:09firms. We did the same thing. And so will that hold forever. I don't know. But right now we're not
12:14seeing a big cost increase. And so we
12:16expect to spend more on it. It's more about implementation. And if we look across I think of two big
12:23differences in the
12:25accelerate. We've had Erica for almost a decade now. And we can talk about that and what we've learned from
12:30that. But if you think
12:31about the implementation since the chat GPT moment type of thing you've had one implementation where we're just spending money
12:38to get
12:38people really used to this. And that was to roll out across 200000 people the ability to have AI and
12:43use it and do things with
12:44it. Everything else we have had. And that's a very modest cost. When you think about a 72 billion dollar
12:49expense base
12:50frankly. And with Microsoft and and Copilot and all that stuff. We already had a big license fee. It increases
12:56some. But that we
12:57said it would be hard to measure the incremental return. Everything else 110 business cases that 37 they're implemented all
13:03have a business
13:04case. It says here's the cost. Here's the benefits revenue expense whatever it is. It makes sense. Let's make the
13:11investment. Thirty seven are implemented. We implement about one a week. 110 are approved. It's just a matter of getting
13:16the
13:16work done. And they've had a profound impact on the company. Now the reality is it's slower than people might
13:22think. It has to be
13:24done much more carefully because the three billion dollars we spend on data over the last decade allows us to
13:30have these models
13:30operate our company. Otherwise it'd be a problem because they'd be picking up wrong stuff and it'd be in problems.
13:35So you
13:36had this. You had to have your data right. You had to have your infrastructure right. You had to have
13:39your security right.
13:40Yeah. Isolate your data. So it isn't taken into the world so to speak. And so there's a lot of
13:45pre-work that the team got
13:46right. Now that allows us to go faster once a product once an idea comes up. About a year ago
13:52maybe a little bit more. You said
13:53that you thought that the effect on the overall employment picture for Bank of America was that you'd be able
13:59to do more with the same volume of staff. Is your view the same today. We effectively just grew the
14:06earnings 30 percent
14:06and we have a little less people we had last year. And so that's. But meanwhile in that is a
14:12very subtle
14:12exchange. So 18000 programmers using technique. I coding. We didn't cut the programs. We just are doing more
14:20coding. We're just doing more activity. Relationship managers picking up agent force and and that's going
14:25to the system right now. We didn't change the number relation. We were adding relationship managers
14:29at all times. So. But if you had 100 percent. You know the 100. We had an example 100. We
14:35had today
14:35could get 10 percent more efficient. They can do 10 percent work. It doesn't mean we're not going to go
14:39to
14:39105 because we want to have more production capacity. So it really is a very subtle answer depending on the
14:44activity.
14:44Our job is to handle it well and redeploy people. Last year we redeployed 14000 people.
14:49We just hired 2000 kids. They'll start next week from school. We had 2000 summer interns. We agreed
14:54to hire 10000 military veterans. You know we are hiring a lot of people. We have to hire 1300 people
14:59a
14:59month to have neutral headcount. How concerned are you and how much oxygen has been sucked out of the
15:04room from mythos and some of the cybersecurity concerns from earlier this year. We heard some of your peers
15:10talking about that. And anecdotally we hear a lot of fundamental concern about the risks the financial
15:15system. I think the you have the government the administration looked at it quickly. The secretary
15:21treasurer and others said wait a second. And so we all got started on this and we all been working
15:26a long
15:26time. And yet it it just speeds up the pace of the work you have to do to patch the
15:33systems and do the
15:34things. So it's a serious concern. I think the so-called AI industry and industry writ large have worked
15:41together. But it's you can't think that we're ever going to be able to control this because there's four
15:46models that people use. There's not everybody's going to have the same thought process that our country
15:51has. But our country's tried to handle it and tried to be fairly systematic about it. But it's a big
15:56change
15:56in the amount of work that will have to go on in the pace of which these tools will affect
16:01your vulnerabilities
16:02in your system and how fast you have to take care of that. That's the core work that's going on.
16:07And then you've got
16:08you know proprietary software open source software open source supported software third party software.
16:14And it's you know we're making sure the third parties are doing the work and and working cooperatively with
16:19the team. We have a great team there. We have three thousand plus people that work in that area a
16:24billion
16:24dollars plus a year in spending. And they do a tremendous job under a fellow named Chris Fader under
16:29Hari's leadership. And they do a tremendous job for us. But and they work very cooperative with their peers.
16:34And so you should rest assured we're all working hard on it. You should rest assured it's a serious
16:39issue. I've been saving the most important question. You ready? Yeah. How many World Cup games have you
16:44been to? I've only gone to one but I'm going to some this weekend. I knew it. Too busy. One
16:50game.
16:50There's 102 of them. You sponsored the World Cup. One game. We share the we share the fun. So we
16:56have
16:56teammates. We have it's been an unbelievable experience. And so it got my fan band on and we've given out
17:01about a
17:02million three of these so far this year. We've had 102 102 games. Yeah. 102 games left to left. Which
17:09game did you watch? I was in the quarterfinal Boston. OK. Yeah. And and and look. Yeah. It has been
17:17something that has been very interesting for our company. But the way we the way the team went after
17:22it. You know with the military tickets or the soccer fields we this is part of our sports with us
17:29complex. Which the golf with us is the Masters and in the golf with us program kids getting on
17:34muties for five bucks. The the the running. I saw the Masters ad campaign. It was fantastic. The
17:40the the the running campaign. The last people they did. Yeah. They went back to like legendary golf
17:45shots and the kids replicate them. It was very cool. And so now the campaign you're starting to see
17:49now is is around the World Cup is sort of the the you can do it. You know with David
17:54talking to the
17:55young lady named Callie who's working with the Street Kids United which is a UK based charity which runs a
18:02Street Kids World Cup that we had the commercials filmed at with with David and in Bono and you to
18:09the new song.
18:10So it was kind of fun. But the idea is what we're trying to do is say fields in places.
18:14We're trying to soccer in
18:15schools. We're trying to help increase the availability of a game that is massively played in the United States but
18:21just the
18:21availability on a on a on a access basis without having to you know spend for travel
18:26teams and stuff like that. You've got to pick a team you know Spain Argentina. I don't pick teams.
18:31Of course not. David's a good David's a good friend and unfortunately that was a tough result yesterday.
18:36I saw him basically crying last night. It was a tough result. So and I look I never played the
18:40game. I have no
18:40merit to talk about the quality of any decision or anything that went on the refereeing or anything.
18:45I played football and rugby. I have no idea how soccer's played. But you can call Bex now and get
18:50his opinion.
18:51He might have an opinion. I'll ask him.
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