Bank of America Corporation

Good day, everyone, and welcome to today's Bank of America earnings announcement. At this time, all participants are in a listen-only mode. Please note this call may be recorded, and I will be standing by if you should need any assistance. It is now my pleasure to turn today's program over to Lee McIntyre. Please go ahead.

Thank you, Catherine. Good morning. Welcome. I hope everyone has had a good weekend. Thank you for joining the call to review our third quarter results. I hope everyone's also had a chance to review our earnings documents released earlier this morning. As always, they're available, including the earnings presentation that Brian and Alistair will refer to during the call on the investor relations section of the bankofamerica.com website. I'm going to first turn the call over to our CEO, Brian Moynihan, for some opening comments, and then I'll ask Alistair Borthwick, our CFO, to cover the details of the quarter. Before I turn the call over to Brian, I'll just remind you that we may make forward-looking statements and refer to non-GAAP financial measures during the call. Forward-looking statements are based on management's current expectations and assumptions, and they're subject to risks and uncertainties. Factors that may cause actual results to materially differ from expectations are detailed in our earnings materials and the SEC filings that are available on the website. Information about non-GAAP financial measures, including reconciliations to U.S. GAAP, can also be found in our earnings materials that are available on the website and in the docs. So with that, I will turn it over to you, Brian. Thank you.

Good morning, and thank you for joining us. I want to start by sending our thoughts to the impacted areas from the devastation of recent storms, especially our impacted teammates and their families. Our team's remain busy assisting those clients and associates in the impacted areas. So we're going to start on slide two of the earnings materials. This quarter, Bank of America reported $7.1 billion in net income, or 81 cents per diluted share. We grew revenue 8% year over year. We delivered our fifth straight quarter of operating leverage. Every business segment delivered operating leverage. This takes us back to our five-year run before the pandemic. The highlights this quarter were also once again marked by good organic customer activity. This was coupled with a significant increase in net interest income. In addition, the teams adapted well to our new capital requirements, and as a result, our common equity Tier 1 ratio, or CET1 ratio, improved by nearly 50 basis points to 11%, moving 60 basis points above its current minimums. The decline from prior year reported net income and EPS comparisons reflect a reserve bill versus a reserve release in last year. At the same time, however, our asset quality remained strong as net charge-offs and several other metrics, in fact, improved from the second quarter of 2022. Pre-tax, pre-provision income grew 10% year-over-year. From a return perspective, we produced a 15% ROTC and a 90 basis point ROA. Our efficiency ratio this quarter dropped to 62%. Taking up the litigation, it would have been 61%. So even while investing in marketing and people and technology and physical plan, the team continues to drive operational excellence. An easy way to think about this is we currently operate Bank of America with less people than we had in 2015, seven years ago. Let's go to slide three. Those continued investments over the past several years in our people, tools, and resources for our customers and teammates. as well as our new and renovated financial centers, has allowed us to continually enhance the customer experience and fuel organic growth as we drive responsible growth. In the third quarter alone, we added more than 400,000-plus net new consumer checking accounts. We added 1.3 million new credit card accounts. We added 100,000 new funded investment accounts in our consumer business. Customers are finding it increasingly convenient to access us. Digital users grew to 56 million. Logins by those users cleared $3 billion in the past quarter, a billion per month. Erica surpassed 1 billion interactions since it was introduced four years ago this quarter. It has become a primary interaction method for our clients, with more than 130 million interactions this quarter alone. When you look at our sales, 48% of third quarter sales were digital, a 36% year-over-year increase. This occurred even as we fully reopened our financial centers and had our teammates also selling. Now, once again, you can find all these digital statistics and more in the appendix of our earnings material as usual. I encourage you to look at those statistics for every one of the lines of business, not just consumer. They compare favorable to any of the competitive measures we see when we see people actually publish their numbers. At the same time, 27 million customers visit our financial center in the quarter. This highlights the importance of having both high-touch and high-tech approach. In the wealth management business, we added 400 advisors this quarter. Our advisors added nearly 6,000 new households in the Merrill and private bank areas. We saw solid net flows despite the turbulence of markets. Eighty percent of our GWIM customers are digitally active. Thirty percent of the new Merrill accounts are open digitally. That combined with our consumer investments business has seen more than $100 billion of net client flows year-to-date. We continue to see increased activity both in investments as well as the banking products in this area. This quarter, GWM opened a record number of bank accounts. GWM also saw its 50th consecutive quarter of average loan growth. The banking capabilities and success differentiates our platform. The business grew revenue, delivered operating leverage, and saw record pre-tax, pre-provision growth, even in choppy markets. As we turn to global banking, Ending loan balances were down like quarter. However, we did see solid production in this area, and that was offset by client paydowns, decrease in the value of foreign denominated loans, and loans sold to manage our risk-weighted assets, which helped us build the capital levels I talked about earlier. As we look at global markets, the team had a strong third quarter in sales and trading performance. In fact, in the third quarter of 2022 was the strongest since the third quarter of 2010. It grew 13% from last year. It was led by strong performance in our macro FIC business, which has benefited by investments made over the past year. We had no trading loss days this quarter. Let me also make a few points using the customer activity highlighted on the continued resilience of Bank of America's broad customer base. So if you look at slide four, you can see some points about the overall health. that demonstrate what's going on in the customer base. Let me make a couple key points. First, consumers continue to spend at strong levels. Second, consumer customer average deposit levels for September 2022 remain at multiples of their pre-pandemic levels. You can see that in the lower right. Third, there's plenty of capacity for borrowing as credit and card balances at BAC are still 12% below pre-pandemic levels. And the payment rates on those credit cards are 1,000 basis points over pre-pandemic levels. So on spending, a couple of thoughts. A perspicacious analyst might wonder whether talking inflation, recession, other factors would fructify in a slower spending growth. We just don't see here Bank of America. Year-to-date spending of $3.1 trillion through September is up 12% compared to last year. Second, as you look across the periods, you can see in the trend of year-over-year spending. As we entered the pandemic, we saw spending decline and quickly recover, then grow across the quarters. And while still strong in September at 10%, spending growth has slowed just a bit from the 12% year-to-date pace, which shows you that early in the year is a faster year-over-year growth rate, but still strong. And the first two weeks of October show that strength as still growing at 10%. It is notable that it isn't just inflation that is driving spending, as transactions are up at single digits year-over-year pretty consistently. You also note on the bottom left the continued growth in goods and services, particularly retail, toward experiences of travel and entertainment. While fuel price volatility continues, it is not currently impacting the spend levels in this quarter as prices stabilize. On the level of customer liquidity, the level of customer liquidity remains strong. Average deposit balances of our consumer customer remained at high levels relative to a year ago. These balances are still multiples of the pre-pandemic periods. and they were largely unchanged at these elevated amounts for the month of September. These deposit levels suggest continued capacity for spending at healthy levels. On slide five, we show you, as we did last quarter, some other stats about resiliency. As you can see, whether you look at early or late stage card delinquencies, they all remain well below our pre-pandemic levels. These are decades-old lows, and we're just now seeing a gradual move off these lows in early-stage delinquencies. Late-stage delinquencies are still 40% below pre-pandemic levels. Keep in mind, asset quality metrics were strong even before the pandemic. On this page, what you see is the 30- and 90-day card delinquencies. If you compare them against the average for the past five years leading up to the pandemic, a period of growth and unemployment falling, those averages were 183 basis points and 91 basis points, respectively. So the current ratio of delinquencies would have to worsen 30% or more to even approach that five-year pre-pandemic average at a time of economic growth and falling unemployment. So consumers remain resilient. Let me take a couple minutes to talk to you quickly about the balance sheet, and I'll turn it over to Alistair. As you think about loan and deposit balances in general, we're seeing what we expected. as monetary policy titans. On deposits, we see clients with excess liquidity looking for yield, with that being the global banking movements you can see from moving from non-interest-bearing to interest-bearing accounts. Or in our wealth management business, we saw clients shift out of brokerage sweeps into preferred deposits or other investment products like treasuries that we offer. But if you look at our core customer base, where the transactional balances drive the outcome, we are seeing steady balances driven by new account activity and a good value proposition we have for our customers. When you think about loans, consumer loan balance growth was led by card and reflects increased marketing and continued reopening of financial centers to lending high levels of new customer relationships. On commercial, the average loans were a $16 billion length quarter, or 12% annualized. You did see a modest ending balance decline as good loan production was offset by the sale or syndication of $3 billion of loans and also by $4 billion in negative foreign currency impacts. We obviously took activity on balance sheet optimization, which helped our RWA discussion, helped reduce our RWAs and led to the capital levels I talked about earlier. We have provided an update in the appendix as to the credit transformation of our loan portfolio and a few other consumer credit slides that help illustrate the quality of our portfolio under years of responsible growth. We updated the slides again this quarter to show you them, and you can find them in appendix, and I recommend them to you. So in summary, client activity remains good. NII has improved quickly, and the customer's resilience and health remains strong. We've also managed our expenses very well. We drove operating leverage. The team managed the balance sheet well and approved capital, even as we increased our dividend and bought back a modest amount of shares. We call that responsible growth. With that, I'll turn it over to Alistair.