Bank of America Corporation

Please stand by. Your program is about to begin. Good day, everyone, and welcome to today's Bank of America earnings announcement. At this time, all participants are in a listen-only mode. Later, you'll have the opportunity to ask questions during the question-and-answer session. You may register to ask a question at any time by pressing the star and 1 on your touchtone phone and remove yourself by pressing the pound key. Please note this call is being recorded. And it's now my pleasure to turn the conference over to Mr. Lee McIntyre. Please go ahead.

Good morning. Thanks for joining this morning's call to review our 1Q19 results. By now, I trust that everyone's had a chance to review the earnings release documents, which are available on the investor relations section of bankofamerica.com's website. Before I turn the call over to the CEO, Brian Moynihan, Let me remind you that we may make forward-looking statements during this call. After Brian's comments, our CFO, Paul D'Onofrio, will review the details of the 1Q results. After that, we'll open it up for all of your questions. For further information on forward-looking comments, please refer to either our earnings release documents, our website, or our SEC filings.

With that, take it away, Brian. Thank you, Lee. And good morning, everyone. Thank you for joining us this morning. to review our first quarter of 2019 results. In the first quarter, we reported $7.3 billion in net income after tax, the best quarter in the company's history. So let's begin on slide two. This slide shows the building blocks in achieving another record quarter. It also shows our commitment to responsible growth and how it drives our shareholder model. We reported diluted EPS of 70 cents, which grew 13% from the first quarter of 2018. This reflects a nice mix of both operating improvements and capital returns. Pre-tax income of $8.8 billion grew 4%. You can see that in the upper right. And we generated operating leverage of more than 400 basis points, which you can see in the lower right. Asset quality remained strong as net charge-offs remained around a billion, the same level they've been for several quarters. Provision expenses up year-to-year to match those net charge-offs more closely. And we had a small reserve bill this quarter against the net reserve release last year. Through disciplined capital deployment, after meeting all the requirements to make loans to our customers and support their businesses, we continue to drive our share count lower. You can see that in the lower left. We are well underway with our goal to wring out the dilution in shares caused by the increased capital build after the crisis. Through share buybacks, our diluted shares are down 7% compared to the first quarter of 2018 and down 1.5 billion shares in the past four years. Turning to slide three, part of responsible growth is to produce sustainable results, and part of that is to drive operational excellence, and we did it again this quarter. As you can see on slide three, we extended our positive operating leverage streak to 17 consecutive quarters. As you think across the last four years or so, we've had many different markets out there, many different interest rate environments, many different changes and perceptions in the U.S. economy and the global economy. All those things affect our business in a given quarter, but what has been constant behind that is our ability to drive operating leverage. We achieve it differently in different quarters, but as shown here, we achieve it consistently. When you think of our company, there are three broad and diverse buckets of revenue, two of which have annuity-like characteristics, and one is more susceptible to prevailing market conditions. The first bucket is spread revenue from loans and deposits. And the second bucket is recurring fees like our cash management fees and our commercial business or our consumer account fees or interchange and things like that. The third bucket of revenue, which are more market-related, would be the sales and trading revenue, the investment banking fees, and asset management brokerage revenue, which are both dependent on market levels at a given moment and market activity giving rise to those levels. So if you think about this quarter versus last year, our market-related types of revenue are was down 12%. The other two non-market-related revenue sources were up 7%. That shows you the diversity in this company. And all in, that ended up with flat revenue growth. However, our laser-like focus on expense management came to the table again and resulted in the year-over-year expense decline of 4%, which resulted in the 400 basis points of operating leverage. All you can see as you move to the right-hand side of slide 3. When you think about how we're driving the company, well, managing expenses, we continue to invest in the future. Our expenses have come down from $57 billion to $53 billion and change over the last four years or so. And we've been driving operating leverage in each quarter during that time. But we also continue to invest deeply in our franchise. And why do we do that? Because it is working. We're getting more business as we add relationship management capacity to increase our marketing, and drive deeper penetration of U.S. markets through the full franchise entry in more and more markets across the United States. We also continue to invest in our people with industry-leading benefit plans, both in health and retirement, with industry-leading capabilities in universities to train and reskill our teammates, and plus the pay plan we announced recently. We're going to increase our minimum wage over the next 26 months from $15 an hour plus to $20 an hour. We need to do that because we need the best teammates to make this great company work and work for our clients. Across the company, we had 500 new sales professionals this quarter, more consumer relationship bankers, more wealth advisors, more commercial bankers, and more business bankers, more small business bankers, and more investment bankers. And as we have discussed many times, our initiative spending for technology has been running around $3 billion for many years now, but is currently, due to savings from tax reform, expected to be 10% higher in 2019. We continue to enhance both our physical network for delivering products and services to clients, as well as the facilities we operate in communities and countries around the globe. All in, Bank of America invests around $2 billion a year in capital expenditures to build out and enhance our buildings, facilities, and infrastructure. As it relates to our financial centers, our ATMs, and other physical build-out, the point is we haven't just announced what we're due. We're halfway through the broad-based build-out in our consumer business. We're executing a plan we laid out several years ago. But importantly for you, the cost to complete the work is already embedded in all our expense guidance. It's, in fact, embedded in our current run rate. So we drive operating leverage and we invest, and we see returns on that investment. One of the ways that we get a return on that investment is through our digital capabilities. Each quarter we show you the charts on slide five of our digital customer statistics. Because, as I discuss them with many of you, we sometimes miss the obvious. What is driving this trend? It's a change in our customers' behavior. We are continuing to serve our customers in every manner possible. The customer can have their cake and eat it, too. They can have digital, physical, 24 hours a day cash and electronic payments, checks and Zelle, wires and ACH, a loan officer, an online application, and fulfillment of their mortgage. It is their choice. 37 million digital users now with 27 million of those mobile. and we now have 27% of our sales transacted digitally. 77% of our deposit transactions are now done through digital means. This means more of our financial centers and their teammates and their time can be devoted to important events in the client's financial lives. We welcome 800,000 customers a day into our financial centers, and they remain very important to our capabilities. and we continue to invest in those financial centers to upgrade them and make them more modern. And while consumer payments go slow from the 8% to 9% pace of a year ago to a 3% pace in the first quarter of 2019 over the strong quarter in the first quarter of 2018, that still amounted to over $700 billion in payments in the quarter. An example is part of those payments you can see in the Zelle users have grown to more than 5 million active users, and we processed $16 billion of payments for them this quarter. So if you look at the drivers of our income, let's go to slide six. We'll spend a couple minutes on client activity on these matters. Average total deposits grew $63 billion on a year-over-year basis. This is our 14th straight quarter of growth of $40 billion or more organic deposit growth versus the prior year. Global banking grew deposits at an 8% pace, as did wealth management. Consumer banking deposits grew by 3%. Consumer core checking grew 7% from last year, showing more households are choosing us to be their core bank. Our pace of growth has consistently exceeded the industry's growth rates. Customers value the capabilities and rewards of their relationship and continue to see lower attrition and 90% plus primary bank status. In addition, wealth management also saw a strong growth of deposits and new relationships. Our global banking team continues to benefit from strong customer demand as we continue to deploy bankers and treasury officers across our franchise. Within global banking, you will note that commercial customers move balances from non-interest-bearing to interest-bearing As the Treasury credit rate we give them for their balances to pay for their services rises, they plainly need less noninterest-bearing balances. However, this change stabilizes when the rate curve stabilizes, as it has. As we go to Slide 7, let's talk about average loans. The good news is the average impact of the late fourth quarter growth we spoke to you about last call was complemented by further good growth during the first quarter. Particularly promising was a strong rebound in our middle market customer base, where we saw growth and line usage increase. This means middle market companies are increasing their own activity as they draw lines to finance raw material purchases, payrolls, and other investments. Overall, from a corporate top-of-the-house level, we grew loans 1%. However, looking across our business segments, core loans grew $33 billion, or 4%, on a year-over-year basis. That's consistent with our responsible growth model. The lower left-hand chart shows the core business growth has been consistent across the last five years or more. Consistent growth consistent with responsible growth for several years. And the growth rate improved this quarter. In fact, this quarter, our ending balances in commercial banking showed the highest linked quarter growth rate in the last six years. As we move to slide eight, you can see the highlights for the quarter. I've covered a lot of the core points here, but I wanted to focus a little bit on returns. Despite a modest increase in the average balance sheet, our return on assets in the company was 126 basis points and improved both a year ago and a sequential quarter basis. Our return on tangible common equity was 16%. Our efficiency ratio continued to move down to 57% from 59.5% last year. With that, let me turn it over to Paul to walk you through more details of our first quarter results. Paul?