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Bank of America Corp Earnings - Analysis & Highlights for Q4 2024

Overview

PositivesNegativesOutlook

Expenses were up 7% YoY due to revenue improvement and continued investment in the business.
Net new checking, new households, new companies of commercial banking, growth in institutional markets business.
NII grew by 3%, investment banking grew by 44%.
Revenue of $6 billion, grew by 15% YoY, led by 23% growth in asset management fees.

Q4 2024 Earnings Call

Non-interest expense was $16.8 billion, up due to incentives paid for strong revenue growth and related activity costs.
The company recorded a negative pre-tax impact to its market-making revenue of approximately $1.6 billion related to the cessation of BSBY as an alternative rate, reducing EPS by $0.15.
The company is concerned about the buildup of leverage in the system, which could lead to difficulties at the household and company levels.

Q4 2024 Earnings Call

The company expects to start the year in Q1 with NII modestly higher than Q4.
The company expects the first quarter to include some normal seasonal elevation and believes this amount will be roughly $600 million to $700 million, primarily for payroll tax expense.
The company expects $17.6 billion for Q1, before seasonally declining in Q2.
The company expects NII to grow from Q2 2024.
The company expects to grow the company and drive operating leverage.

Q4 2024 Earnings Call

Q&A Highlights from Bank of America Corp Earnings Call Q4 2024

Analyst asked about the breakdown of Bank of America's growth, specifically in terms of loan growth versus rate or repricing tailwinds.
- Alastair Borthwick, the company's CEO, explained that the company is seeing a pickup in loan growth, but it's not the primary driver of growth. Instead, he highlighted the company's success in growing deposits, which has led to an increase in net interest income (NII). He also mentioned that the company is still benefiting from fixed asset repricing and cash flow swaps, which will continue to contribute to NII growth in 2025.
Analyst asked about the company's confidence in its ability to deliver 200 bps of sustainable operating leverage, with revenue growth of 4% to 5% and expense growth of 2% to 3%.
- Brian T. Moynihan, the company's CEO, explained that the company has a history of delivering sustainable operating leverage, and that its current environment is different from previous ones. He noted that revenue growth is currently higher than it has been in the past, and that the company is taking advantage of this growth by investing in incentives for its Wealth Management teammates. He also pointed out that the company's expense base is flattening out, which will allow it to return to its expected level of operating leverage.
Analyst asked about Bank of America's CET1 target and buffer in the current environment, and how it relates to their buyback program.
- Brian Moynihan, CEO of Bank of America, explained that they have been buying back $3.5 billion in stock per quarter and expect to continue doing so. They have a 11.9% CET1 ratio and believe that a buffer of 11.50% (11.2% after adjusting for the 10.7% requirement) makes sense. He mentioned that they hope to see some relief in the volatility of CCAR outcomes, as they jumped quite a bit without a lot of correlation to the actual risk of the company.
Analyst asked about areas where Bank of America Corp may slow down on the expense side given their optimism on organic growth.
- Brian Moynihan, CEO of Bank of America, responded by highlighting three key areas: 1) If the company achieves high double-digit or 20% growth in market-related businesses, the expense guidance may be a little tight but still achievable. 2) The company is focused on completing remediation and look backs, and keeping headcount and OpEx focused on generating capabilities. 3) The company is driving efficiencies by leveraging national brand campaigns and affiliated properties such as US soccer and FIFA, to reduce expenses.
Analyst asked about the benefit of BSBY hedges in Q4 and the cadence of that benefit in 2025.
- Alastair Borthwick, CFO of Bank of America, responded by stating that the BSBY accretion back into the P&L is similar to the way the company treats other cash flow swaps. He mentioned that the benefit in Q4 was a couple of hundred dollars, and the guidance for 2025 includes all cash flow swap activity, deposit growth, and loan growth.
Analyst asked about the company's plan to go down to a 11.2% CET1 ratio and step up their buyback.
- Brian Moynihan, CEO of Bank of America, stated that the company wants to keep a 50 basis point buffer and currently has a CET1 ratio of 11.9%. He mentioned that the company's goal is to support growth and that they will not deplete the ratio quickly. He also said that the company will continue to invest in their markets business and grow their loan balances through good work by their team.
Analyst asked about areas that the company would incrementally lean into if there was relief on capital.
- Brian Moynihan stated that none of the company's businesses are constrained by capital, and that they have not had to say no to any business plans due to a lack of capital. He mentioned that the company has grown their balance sheet by $300 billion over the past few years and will continue to grow through G-SIBs. He also mentioned that the company's focus is on managing risk and keeping the balance of their business plans.
Analyst asked about the possibility of changes to how Bank of America evaluates businesses, specifically in regards to equity prime brokerage.
- Brian T. Moynihan, CEO of Bank of America, stated that the company does not expect to change how it evaluates businesses, as regulatory capital is only one factor considered. The company also looks at risk, market-based capital, and other factors. However, he noted that regulatory capital could take a little bit of the penalty off some businesses.
Analyst asked about the risks that Bank of America faces, specifically regarding unexpected changes in the rate environment or other external factors.
- Brian T. Moynihan responded by discussing a variety of risks, including wars, trade wars, and shortages of physical and human resources. He also mentioned the long-term trend of improving credit statistics and the potential for leverage to build up in the system, which could lead to difficulties for both households and companies. The company worries about these risks and how they might impact the banking system, and they manage the company accordingly to ensure it can continue to operate in the face of these risks.

Q4 2024 Earnings Call