Bank of America Corporation (BAC) Earnings Call Transcript & Summary

[Audio Gap] of Bank of America, and joining us from Bank of America is Aron Levine. He is the President of Preferred Banking, Consumer and Small Business. Welcome, Aron.

Great to be here. Thanks for having me.

Absolutely. So I just wanted to kick off, maybe tell us a little bit more about yourself, a brief background of your time at Bank of America. And also maybe give us a little bit of a history lesson of the Preferred bank and how it fits within the BofA Consumer franchise.

Okay, sure. Well, just very quickly, so I've been with the company 30 years. So literally 2 weeks out of college, I joined a predecessor bank. I worked across multiple businesses and ultimately ended up in the consumer business in about 2010. And so I think the -- having come from the corporate side of the bank and the wealth side of the bank, the idea back in 2010 was how do we take this consumer business and really transform it into a relationship model versus a sort of transactional product model. So over the last 12 years, I've been focused on doing just that, creating kind of a relationship-based consumer business. So you think about the consumer business, it is 68 million customers. We have about $1.6 trillion in assets. We generated $42 billion in revenue last year. And again, that $1.6 trillion is effectively deposits, $950 billion; a loan portfolio across card, mortgage, home equity and auto, roughly $310 billion; and then we have built a consumer investments business, I'm sure we'll talk about, that's now over $420 billion in assets under management. 10 years ago, it was probably $40 billion. So it's been a great part of the growth story. And so Preferred is, if you take our 68 million customers, 26 million of them are what we define as Preferred, and that's -- the best way to describe that's sort of mass affluent clients, the sort of $50,000 of income and kind of $100,000 investable assets. And so again, these are clients that really need banking, lending and investing solutions. And so we run the consumer business really thinking about those 2 key segments, preferred, and then my co-leader of consumer, Holly O'Neill, leads retail, where we're sort of focused on the more lower end of the client base and making sure they get what they need. So that in a nutshell is the consumer business and how Preferred fits it.

So the Preferred bank grew by about $140 billion in assets -- is that right? -- since 2019. So you're roughly $385 billion, $387 billion, covering 25 million clients. And part of that -- is that right?

Well, no, the entire Preferred is 88% of total Consumer, so $1.4 trillion in assets.

Oh, wow. Okay, sorry.

So just deposits grew [indiscernible].

Just deposit. Sorry.

Just deposits grew, yes.

But part of that total asset size is the self-directed platform. So maybe tell us a little bit -- and I know your background comes from Merrill, because we used to work together -- how does the Preferred bank integrate with Merrill?

Yes. So that's one of the great things. When we talk about the $1.6 trillion in Consumer, you really have to add in another almost $3.8 trillion from Merrill and GWIM. So we really manage over $5 billion -- $5 trillion in Consumer, people's assets. And the continuum really starts with what we call consumer investments -- many people know it by Merrill Edge -- but we really have 2 pieces of that puzzle, the Merrill Edge self-directed platform, where clients obviously can go on, and we've done very well of bringing in clients who want to invest long-term, mutual funds, stocks and that kind of thing, and then we have a growing managed business, Merrill Guided Investing. And included in that, we have about 3,000 advisers that sit in the financial centers and serve that segment and that client base. So that business is completely integrated, and that's what's really unique. It all reports up through me in that the ecosystem of a financial center is based on a model in which our clients can receive the advice and guidance that we need. And I think that's really what's been important about how we've built the consumer business, which is how do we drive it as a advice model and a relationship model as opposed to a transactional model. So we now have 3.8 million accounts for Merrill Edge. And again, this all grew over the last 10 years from effectively a starting point after the merger with Merrill, we maybe had about $40 billion, $50 billion in assets total. And when clients need something beyond what we can offer -- so we obviously offer self-directed or managed digital advice in the kind of a hybrid model. For clients that have more wealth, more complexity, we have a very close relationship with our Merrill Lynch FA partners and with our Private Bank. And so those clients get sort of, if you would, warm referred over to a full-service FA, and so we can move clients from within the consumer business directly to our wealth management business and vice versa. There is increasingly a large number of Merrill Lynch and Private Bank clients that take advantage of our self-directed platform. And so we're able to sort of retain assets and retain clients that way. So it's a really important two-way street. Really local teams are just working together. So we have a what we call a financial solution adviser that sits in the financial center, the Merrill Lynch team that might sit in their office, and they just work really closely together. So the clients no matter what their wealth spectrum, where they are in the wealth spectrum, they have $5,000 to invest or $50 million to invest, we can support them, and we do it in a very open manner in a way that's best for the client.

What investments are you making to continue that momentum in investment accounts, assets, flows? And how do you view the success of these wealth management solutions? And how do you see them trending over the next year?

I think it's really important when you think about the consumer business and think about the investments we're making in the entire business, right? The consumer investment is one piece, but starting 10 years ago, we were very active, obviously, trying to build a leading -- industry-leading digital capabilities. So we were certainly early in adopting Erica, right? So kind of AI, early AI version, and Erica has grown significantly over the last 10 years, obviously, things like Zelle, just digitizing our entire Consumer platform has been really important. And we've been making very consistent, significant investments year after year, so that we had a very clear strategy, and we said that we believe to really keep primary relationships, to win the battle for a client's primary relationship, you have to have both the high-touch side, which is the physical financial centers and the specialists that sit within them, and you have to be great on the digital side. And so we started investing pretty heavily into really both, and that's built that out. The Merrill Edge component of that, back in 2019 we launched, again, this digital adviser model, sometimes called a robo-adviser, although the -- all the investments are handled by Chris Hyzy, who's our Chief Investment Officer for the whole wealth spectrum -- and then the self-directed platform, we're really proud. I think we've won about 75 awards already just year-to-date. I think we won that many last year. on just delivering a platform that the clients can use, and it's the integration, right? The fact that you can go on to your mobile app, you can go on to your computer and get everything, your bank accounts, your lending and your investments, in one place and do all the types of movement that you want to do is very powerful. And so what we've tried to do is make sure all of our investments on the technology side are very complementary to investments we make on the physical side and so that our clients are basically able to work with us in however they want to, but it's been a huge part of it. And then really surrounding that has been something we've done for now quite a while, is really moving to a specialist model. When I say that, I mean a small business banker, a lending specialist, a financial adviser, sitting within our 3,800 financial centers, so that we've changed the reason of why someone comes to a financial center from what historically was transactions, and those transactions -- depositing a check, paying a bill, transferring money -- that all can happen on their phone on an ATM. But coming to a center to sit down and talk about your life priorities, your goals, your financial needs and providing advice, and that's been something that we really started focusing on probably back in 2014 and have built out over these last 10, 12 years.

So maybe zooming out a little bit, Aron, Bank of America has a particularly unique purview on the U.S. consumer, given how many times you touch their day-to-day financial lives. So talk a little bit about what you're seeing in terms of consumer spending trends from here? And how are deposit balances, a big topic that you always address, comparing to pre-pandemic levels? And so -- and how far have those excess savings come down?

Yes. So let's start on the spending side. So 2023 spend was roughly 3%, 4% year-over-year, so it stayed healthy. And we're seeing that trend continue in the first part of the year. So over the last 30-day rolling, it's been about a 3%, 3.5% spend. We saw pretty good spend levels during Presidents Day, and so the spending levels have continued. They might be coming down a little bit, but still fairly strong, I'd say, overall, and that's reflecting again the low unemployment and those sort of things. So that's still healthy. On the deposit side, what we're seeing is what really probably coming in a little better than we expected. Obviously, as clients are paying for higher debt payments and some -- their spending, and [ as well ], money moving to investing. So when you think about how deposits are still -- the average client has about 24% more in their checking account than they did in 2019, probably about 16% more than they did -- in savings more than they did in 2019. So overall, the levels have come down from peaks, but they're higher than they were. And I think that's really important. I think you have to break it into different cohorts. So at the upper end, sort of high net worth affluent clients, those clients that have, let's say, $1 million or more, you've certainly seen them move money into higher yielding and other alternative investments over time. So their deposits have come down a little faster. When you go to the lower end, so clients that might have had $3,000 or $4,000 in their checking and savings in 2019, they hit a peak of about $13,500, $13,600 during the pandemic and have only come down maybe 5% or 6% is still around $12,000, $12,500. So still about 3x more in that cohort than they had pre-pandemic. And then the middle section, sort of that preferred segment, it's probably still about flat from where they were a couple of years ago. So you have different kind of deposit trends across the spectrum. But overall, there's still more deposits, checking and savings now than they were in '19, and you're seeing that come through with these spending levels, and of course we'll go through the tax cycle now, and so it will be a little bumpy. But generally speaking, we think we're seeing it coming in a little better than our expectations were for the first quarter.

So just to -- wanted to zoom out again and repeat that. So you talked about 3 different cohorts, but the average of those cohorts, the balances are still 24% higher than in 2019?

Yes, checking was up about 20% and then saving was about 16%, yes.

Wow. That's great. So retail deposit costs continue to push betas higher. It's -- obviously, wealth has repriced. Corporate has repriced. Institutional has repriced. Can you talk about the retail deposit pricing strategy in an environment where the forward curve is changing rapidly? And how do you balance repricing as the Fed pauses when rate cuts are imminent?

Yes. I think what's really important to understand about our deposit base in Consumer is the vast majority, almost half of it, sits within our core checking that I talked about, right, which is either no interest or very low interest checking accounts. We have 37 million checking accounts. So we start with that is a huge component of our deposit base. And these are the accounts that people use to pay their bills, they use their -- they want to go to the movies, they want to buy something. That is not a rate-sensitive sort of -- those are -- that's cash that people just need to have. Their paycheck comes in, they use it...

Operate their day to day.

Yes, operate their day to day. So that's a huge part of our base. So then for us, there's really two places in which the clients that might have some excess and want to potentially look for higher rates, we really can capture in two ways: one, through Merrill Edge, we have a bit of a higher rate program that we can capture; and then CDs, so obviously we offer a higher rate CDs for those who are looking for it. But when you combine those two pieces, it's probably about 16% of the entire Consumer deposit base. So for us, we have the ability to retain and defend clients where appropriate and using those two offerings. But the vast majority of our deposit base is what allows us to stay so low relative to the industry, because we're driving and continuing to grow organically the number of accounts, and probably equally as important is our retention rate. So we have been operating at basically historic lows of client attrition. So once a client opens up that account, it's a primary relationship, they stay with us. And so that keeps our overall cost probably lower than most.

So on the rate-sensitive products, so CDs continue to be quite low for the industry relative to historical norms at a more normal and comparable level of rates. As we think about rate cuts, how quickly can you adjust? And are you going out to the market with shorter duration in terms of CDs?

Yes. I mean, I think our main products are 7 months and 13 months. So we're already starting there. I think there are certainly a lot of players that have higher rates today. But I think our CD rates are competitive, and we'll maintain it competitive. And we're watching market by market. And so we are pricing to remain competitive, and I think that will be the same case as rates come down. So as rates went up, we were able to sort of stay competitive. We weren't at the high end. As rates go down, we won't be the first to cut, but we also will sort of balance it. And again, I think for us, it's really a function of you're taking 10%, 15% of the portfolio and making sure for those clients that have those needs. Plus clients looking for rate, we obviously have the opportunity to have them move money into the markets and capture that either through Merrill Edge or through Merrill Lynch or the Private Bank. So we have a lot of different ways to satisfy those clients who have higher rate needs. But at the end, that big core of checking, that won't change. The rates are -- there's no movement there. So we feel pretty good about that.

So let's explore a scenario of a more prolonged pause, and that's more dominant in terms of how investors are thinking about it. How does consumer behavior in terms of mix shift evolve if we're in a more prolonged pause?

Look, I think the real question for consumer behavior was around unemployment, right? And so obviously, the strength of the consumer right now is around the low unemployment rates. Again, the fact that there is still this excess amount of dollars in checking and savings. So the question is how much spending will stay and what -- the question of will they kind of bring spending down a little bit over the next 12 months. So far, there's nothing pointing to that, where the spending is going shifts a little bit in terms of more travel and services, entertainment, right? A lot of people buying tickets to concerts and movies and those kinds of things. And I think that, again, clients will -- there are certain clients will keep their money in more products like a CD or a higher-yielding savings account from one of our wealth accounts longer as the rates stay higher. But beyond that, I think, again, you're seeing just a normal shift of more affluent clients bringing their money to the markets and making that change. So for us, I don't feel that there's a major shift that will happen over the course of the year regardless of where the rate environment goes.

So the net interest income trajectory at BofA is so dependent on how the retail deposit business is doing overall. And so given everything that we've talked about in terms of deposit dynamics, maybe I'll ask a question about net interest income here. Based on what you've observed, and we will flick a rubber band if I get this wrong, so $13.9 billion to $14 billion was the guide for 1Q, NII to go down a bit more in the second quarter and then stabilize in the second half of the year. How are you feeling about that net NII trajectory sitting in your seat?

Yes. So again, based on what I said is our deposits are coming a little higher, but we feel very good. We feel very good about that guidance. Obviously, Alastair can come and give a broader explanation over time, but we do feel very good about the guidance. Yes.

Wealth management has obviously seen substantial growth over the past decade. And I think you recently crossed over the $375 billion AUM level?

Happy to say over $425 billion.

$425 billion. Okay.

We grow fast.

You grow fast. That's really nice. How do you solidify integration across the wealth management spectrum in different markets? And is there anything differentiated in your approach to high net worth wealth management compared to your competitors?

Yes. What's fantastic about the Bank of America model is that we do have the entire spectrum. So we have the self-directed and kind of robo digital adviser model within Consumer. Obviously, we have the thundering herd and 12,000, 13,000, 14,000 advisers within Merrill Lynch that do a fantastic job around the country supporting their clients. We have the Private Bank, led by Katy and her team, that really serves the sort of highest net worth and ultra-high net worth. So when you think about that, that gives us the ability to help clients across the entire wealth spectrum. And increasingly important is there is a lot of interaction and integration amongst that. So clients aren't necessarily mutually exclusive. So a lot of clients will walk into a financial center, they'll have $1 million, $2 million. We have partnerships between my advisers and both the Merrill Lynch and the Private Bank. So we'll have a direct team approach, where that client can get better served, they need a broader breadth of capability, and that's what Merrill and the Private Bank can offer. Clients within the Private Bank or within Merrill Lynch have accounts maybe with an outside self-directed platform or they're looking to put one in, so they can consolidate their assets and we can defend those assets and they stay with us. And that's what you're seeing more and more is this ability for clients to leverage us across all of those things, plus banking, and bringing everything together and getting the benefit of that. So it's -- we're set up in every market where the local teams come together, so whether you're sitting here in Florida or you're in New York or Seattle or Chicago, the local leadership, whether it's my team in Consumer or the Merrill Lynch team or the Private Bank team or the corporate team, they get together on a regular basis and identify opportunity and figure out how to work together. And I think that is a very unique model, that the way people are compensated is to support putting clients into the best place for the client. So my guys are incented to make sure that if a client is better served in Merrill than the Private Bank, they do that and they get the benefit of that, and vice versa. And I think that having the continuum capabilities, but also have the sort of business operating model and the culture that says we need to work together, is unique and what's driving a lot of success across all of the platforms.

So a big message that's coming through from this conversation is the way BofA is looking at the total relationship of the consumer. Speaking of that, we had a watercooler conversation about Preferred Rewards, so I wanted to dive a little bit deeply here. Credit card has always been a hypercompetitive industry. And it feels like, especially for the Preferred client, it's been even more ramped up in terms of pure marketing, advertising, lounges, rewards. So talk a little bit about, you mentioned in 2014 you innovated the Preferred Rewards program, and maybe give a little bit of a history lesson of how BofA decided to approach the Card business through this total relationship lens at the time.

Yes. No, I appreciate that question. So if you go back to 2012, 2013, and we said: how are we going to focus on the consumer business from the client out, right, not based on products, but based on what's best for the client? And every client, we want to start with one thing, which is we'll have their primary relationship, right, that core operating account. And then from there, how do we make sure we deliver lending and investing. And so what we said is, historically, reward programs were either a checking account promotion or credit card points, obviously, has always been the main driver. And the vision was, how do you bring that together so a client feels not only that they get rewarded as they bring more to us, but we're thinking about their entire relationship. So Preferred Rewards was launched in 2014 with this, and hopefully, some of you in the room are familiar with the program. The idea has three tiers, right? And as you bring in more deposits and investments, and you go into different tiers, you're actually getting more credit card rewards on top of whatever the maybe individual card program might have been. This is a bonus on top of it, You also get benefits for saving rates, you get benefits across your mortgage and home equity loans. You get benefits for your Merrill Edge accounts. So now for the first time, we're taking a client and looking at the entire relationship and rewarding them for -- which is good behavior -- saving, really bringing in more deposits, more investments. And then you get the biggest bang for your buck, the biggest reward, is the credit card. So you get very significant additional points on the card. So that really changed the whole dynamic of how we think about rewards from just being a pure card transaction to now a relationship model. So here we are, 10 years later, Preferred Rewards has 11 million activated users, we have -- it has over $1 trillion in assets connected to the program, and probably most important is the retention rate on those clients that have activated Preferred Rewards is 99.2%, right? And that's over a 10-year period. So the idea, again, is we've now created a relationship, and we've said what's important to us is the entire relationship, and we're going to reward you across the whole spectrum of that, credit card being a big part of the value prop but now a much broader one. And so that program has been kind of a cornerstone of this Preferred model. And so remember, you're starting with clients that have $20,000 and then go all the way up to $100,000, $200,000-plus and all those tiers. So that's, for us, been a really important way for us to help demonstrate why it's important for clients to sort of consolidate and bring assets to us and grow with us over time and the benefits they get are sort of far reaching.

So earlier, tangential to this topic, you talked about having strength in gathering the operating day-to-day account that is not rate sensitive. You get your paycheck, pay your mortgage, go on about your day, and then some of the products like savings and CDs. A certain small deal that was announced in the market last week, essentially one of the big synergies would be the advantage of owning the PULSE, a debit network that has different debit interchange economics, which would then potentially allow for healthy offerings in a checking product. We talked about this over there as well. Maybe talk about your response to the potential for like Discover was piloting a cash back checking program, for example.

Yes. Since the last 10 years, there has always been in the market different competitors that have very aggressive either promotions, and you certainly think of the rise of the fintechs that were getting a great deal of attention 10 years ago, were offering some very significant, still do, promotions, you've got credit card companies offering significant promotions, you've got wealth management players. So there's an entire spectrum that have -- we've been competing with now for a decade, and each one of them offer something. And what we have found -- and certainly if you see, again, the growth that we've enjoyed, both on the deposit side, right, we're up $400 billion in deposits over that time period, and growth in our investment side, is that the model that we've set up with this relationship-based model with the Preferred Rewards program, and then equally important is the digital capabilities, so the convenience, the security, the access to specialist tools like Life Plan, which we rolled out a number of years ago, which has about 11 million, 12 million users, which allows you to sort of create what your goals are and talk to us about that. So that relationship model is a very powerful one. And yes, while some segment of the marketplace will potentially look for new discounts, the real battleground has always been: do you have a primary relationship? And for us, the 37 million checking accounts, 92% we consider primary. I mean we have a full relationship with them. So I think we will continue to compete as we have been, and that merger will create some new opportunities. But I think the success of our model has been always in this -- the value that we give a client way beyond just a promotion. We get great reward programs, that's part of it, but just the access to all the different tools, research, the amazing digital capabilities that we have, Erica, Zelle. I mean all those things is what clients are looking for. And so I think that gives us a very unique competitive advantage.

The company has been talking about digital capabilities for a very long time and focusing on that. At the same time, the branch continues to be very important to the consumer strategy. So -- and one of your -- arguably, your biggest -- rivals in the space, just a big splashy Wall Street Journal article about 500 branch expansion. It's pretty big. So I guess the best way to ask this question, Aron, is there's been always so much conjecture about like everything is going digital, branch, et cetera. What does the consumer distribution strategy look like 5 years from now? Now as you think about both digital and both branch, right, and I think there's a misconception of what's happening in the branch, how are you envisioning the 5-year-from-now distribution model of BofA?

Yes. We've had a vision, and we've been operating over the last 10 years on a vision of that says the branch is transforming from a transactional model to a relationship model. So we started to put specialists, as I mentioned before, into the branches and really expand the advice model probably 6, 7, 8 years ago and continue to that. So if you think about it, what's changed -- and of course, the pandemic accelerated it -- transactions, so people coming in to literally stand at the teller line and deposit a check or to do something like that, has come down by 50%, right? So half of that traffic. At the same time, appointments for us has gone way up. So someone going online, setting an appointment, saying, "I want to talk to a mortgage specialist or I want to talk to my small business banker or I want to talk to a financial solution adviser." So that traffic has continued to accelerate and go up over that same time period. So what we have done is really a twofold strategy. One, we have certainly -- for efficiency rates across a lot of our existing markets -- and remember, we're #1 in deposits overall. We hold the #1 position in 16 of the top 30 markets, we're #1, #2 or #3 in 23 of the top 30 markets. But we have density in certain markets where you can say, rather than having four centers, maybe I can have three or two, because that transactional traffic has gone down and people can move into these nicer centers that are more office space where they're going in for meetings. So we have been bringing down on a net basis the number of total centers. And meanwhile, we've been building 50, 60, 70 new centers every year. And part of that was, in 2014, we entered 9 markets that we hadn't been in. So we were probably at the time in 74 of the top 100 deposit markets. We opened, starting in 2014 with Denver and then Minneapolis, Pittsburgh, Indy, Salt Lake City, some of the Ohio markets, we moved ourselves up to covering 83 of the top 100 markets. So we expanded, and we've been really pleased with the success of the expansion, very strong results there. We announced last year, if you remember, 9 other markets. And so again, we're moving to markets in which we already have a presence with either Merrill Lynch or our commercial bank or our corporate bank. So we have a presence in a market, we just didn't have a retail presence. And when we move to a market, so we opened up in several markets last year, Columbus and Cincinnati, we see benefits to the whole enterprise. So the financial center has benefit beyond just Consumer, but we're really pleased with the performance we get there, but our wealth management business benefits, our commercial business benefits. So the financial center channel has been transformed into a place where you get advice and guidance. The transactional element has sort of come down. But that means the financial center plays a really important role in delivering for clients and that deepening and that relationship over time. Clients still -- we still have 600,000 a day coming into the financial centers, right? And that's the entire wealth spectrum. We get an enormous amount of our growth in wealth management because of financial center traffic. But the idea was we had to rethink what was a financial center. And it's not a transactional place, it's an advice and guidance. And so over the next 5 years, we'll continue to sort of be efficient and really drive out a model that says in every market we'll evaluate how many centers do we need, lots of opportunity to potentially open one beautiful new one and close two of the older ones, right -- so you're net down, but you're really expanding, continue to have the right level of staffing in the centers so that we can meet the needs of clients that do want to come in and talk to us about things. And so I think 5 years from now, the financial center channel will be really important, but for just a different reason than historically, as more and more checks are done using Zelle versus paper checks, people are using their mobile capabilities to do all the transactions, but the financial center still is a great place. Our community centers, we can do seminars and better money habits. So we really have -- it's really a powerful part of the model. But you have to have both. And I think for us, this high-tech, high-touch mantra that we've had for about 10 years has been really important. So the investments we've been making have been significant. And remember, we've renovated the entire 3,800 footprint over the last 6 years. So we can talk about building new centers, but equally as important is we have centers in great locations, but they needed to be renovated. And so we've made a huge capital investment into renovating them, adding more office space, putting the right number of people, and then just more and more of that teller line is what sort of reduces.

I have a few more questions for you, but I thought this would be a great time to remind everybody in the audience [Operator Instructions] You sound very excited about the business, obviously. And BofA has been such a consumer juggernaut for so long that the word growth isn't necessarily attached to the prospects for this business. What are you seeing -- what you've invested in, seeing what -- like my $375 billion was too old in a month, what are you most excited about in terms of growth?

Yes. Well, one of the metrics we focus on, and Alastair will mention it in every quarter, is this idea of net checking, right? So again, core operating accounts, ROE growing. And we have now, as of fourth quarter, we hit our 20th straight quarter of having positive net checking growth, which means acquiring new clients, but more importantly, that back book, right, this huge portfolio of clients, our attrition rates are so low that we're net growing overall, which if you go back historically, that wasn't always the case, and I'm sure not the case for all players. But this idea of we have a wonderful way, through a whole host of different things that we do, both within the community, we've created models that are really powerful we call employee banking and investing, and that's where we have partnered with our corporate and commercial bank for their clients and worked with them to sign -- and you saw we had a press release, we have over 400 clients that we've signed, where we engage them and bring our consumer bank to their employees. So the corporate client is getting this wonderful benefit for their employees, because they get the Preferred Rewards without all the qualifying criteria. So there's a real perk. And they get the benefit of really providing to their clients access to advice and guidance and seminars and at every level, and then this rewards program, and we get a great way to create more traffic. So there's a lot of different sources. We have, again, with 36 million checking accounts, certainly there are clients within that that don't yet have a card with us and don't have a mortgage with us and don't yet have the investment account. So we're growing rapidly, but there's still a huge opportunity within the footprint. So that core growth of the operating account, that allows us the opportunity to engage clients, especially digitally, right? Clients are going on every day on to Bank of America's mobile app to check their balances and to do transactions. But that gives us a chance to offer and make them more aware of all the other things we have, right, like Merrill Edge or some of the other tools that we have. And then over time, we can deepen that relationship. And that's a powerful sort of engine for growth. So we really spend our time focused on acquisition. And like I said, we track that net checking growth and we're really proud of that. But we also have a huge opportunity for deepening over time because clients stay with us for a long period of time.

For the generalists in the audience and online, I just like to think of checking as like the cost of goods sold, right, for a bank. And with -- if we never go back to 0 -- hopefully we don't -- I mean it's very powerful for a franchise like yours to get to focus on that metric. And maybe lastly for me, where are you focused in terms of efficiency improvements? Clearly, the distribution model continues to shift for the consumer. But outside of that natural evolution, where could you be more efficient within the Consumer franchise?

Yes. Well, look, clearly, when you have the scale that we operate at, you think of our call centers and the millions and millions of calls. So Holly O'Neil and her team have really done a fantastic job over the last 5 years identifying all the places in which a client could potentially self-serve and use digital capabilities versus a phone call. And so we can find there's still lots of opportunity left, clearly, as we think about AI in the future. So the whole fulfillment process, when you talk about the scale that we operate at, for how we fulfill on our lending products, our investment products, there's a middle and back office that we continue to evaluate and really do end-to-end looks at how a client is ultimately fulfilled on what they're looking for. And along that end-to-end chain, there are places that you can use technology, there's certainly going to be places for AI, that could reduce time, reduce -- make it more efficient and ultimately bring down costs. So we have a lot of places still, given the scale of the business, that we can constantly find costs and then reinvest those dollars into more marketing, more front-end technology. So how we identify issues, how we manage risk, how we manage the portfolios, I mean, it's just ripe with places in which it's still manual. It's still systems talking to each other versus maybe one combined system. And so we've been on a journey for the last 5 years. I think we've made pretty good progress. You see how efficient we are. And then same thing, the financial center channel will continue to also drive some efficiency for us as we continue to optimize it market by market.

How is the conversation -- maybe just as a follow-up there -- are the conversations with the regulators active in terms of how banks could use technology and artificial intelligence to service customers?

Yes, certainly very active. And I think for us, it's -- right now we are very much in that test mode. So across the company, we probably identified 10, 15 use cases. And Aditya and the technology team are actively building out and saying, let's test in these very specific use cases, make sure we understand how it works and make sure we see things unintended consequences or implications of that -- and so we're not -- we're at a point where now it's a huge effort, but effort focused on really identifying how that technology can work, how does it best get utilized, before we scale it. And so I think you're seeing -- and those are the conversations we're certainly having with regulators, certainly having within the company, within the management team, and just find out, okay, now this new technology, let's make sure we really understand it and understand how it's going to work before we apply it sort of more broadly, but a great deal of activity sort of behind the scenes working on and testing some pretty cool applications for it.

Got it. So I think we have time for maybe one question from the audience if you have it. You need a mic? All right, Aron, that was great. Thank you so much for joining us.

All right. Thank you so much. Appreciate it.

Thank you.