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

We will go ahead and get started. So good morning, everyone. Welcome again to Bank of America's 33rd Annual Financial Services Conference. I'm Ebrahim Poonawala, Head of North American Bank's research for BofA. I would like to take this opportunity to thank all the management teams and investors for their partnership that has helped make this conference a huge success. As part of the conference, we are hosting over 300 institutional investors over 120 corporates to discuss with us their outlook for the U.S. economy and their own businesses. I would also like to thank my colleagues in research, Craig Siegenthaler, who heads the coverage of Diversified Financials, Asset Managers and Brokers; and Josh Shanker, who heads Insurance Coverage for all the hard work and putting together a great event. So thank you both. And I would also request you to save the date for our next year's conference, February 9 through 11, 2026. So we look forward to seeing you next year. Now none of this would be possible without the blessing of my next speaker. So without further ado, I would like to welcome my big boss, our keynote speaker, Brian Moynihan, Chair and CEO of Bank of America.

Before I get started, thank you to all the companies that have come and all the investors for showing up and supporting our conference, and thank you to you and your colleagues for running a good show. So thank you.

I guess maybe just starting out, first of all, congratulations on 15 years as CEO earlier this year. If we think about the banking sector over this last 15 years, both for the bank, Bank of America and the industry, if you don't mind spending a few minutes around the evolution that's taken place and where things stand today?

I think, think about along 2 or 3 dimensions. One is the dimension post-financial crisis of the recalibration of the industry both in the U.S. and on a global scale, and we hit that quickly. The second is the impact of technology, which we're all talking about AI, but there's been a huge impact already in the industry and how it's impacted capabilities, headcount, everything else. And the third is the -- in our company, but a lot of it is the customer focus of the industry. We came through a product-driven industry for years and customer focus. But on the U.S., look, at the end of the day, if you think about where we were prior to the financial crisis, the belief was Europe was going to be bigger than the U.S., China was going to be bigger than the U.S. economy-wise, and therefore, the banks that emerged out of those systems will be bigger than the U.S. And here we are 15, 17, 18 years later, the U.S. banks earn a lot more money. They're much better capitalized. Their liquidity requirements are high. They -- we took our lumps, we had some disappear. We absorbed some in our company and other companies and off we went. And the economy is also 1.5, 1.75x bigger. And the European economy has not -- maybe 1.2x or something like that. So that's the competitiveness in America. That's the resiliency system. Frankly, that's taking our lumps and getting along with it. And then the safety and soundness and regulation that came out of a lot of that is an understanding of one key factor that we got to think about again, which was everybody should be on the same tent. So in 2007 and '08, when we went to the Fed, there were participants there who were under the same tent, one of which was Merrill, one of which was the SMS, et cetera, and Lehman. And a weekend later, we were all under the same tent. That changed the nature of how the regulation liquidity and requirements worked so we didn't have arbitrages. And we got to be careful going forward there. The technology impact is really something else. And so we all talk about what happens next, okay? When the management team took over the company in 2010, we had 285,000 people. We peaked at 305,000 people. Today, we have 213,000 people. We have more customers, more activity, whether it's in the trading business, whether it's in the wealth management business, whether it's the consumer business, all that activity is done with a lot less people. Now the people get paid more because of the nature of inflation plus just the job content. And that tells you what technology would do. You went from -- Zelle wasn't around. Erica wasn't around. Mobile check deposit was still in its infancy, pick it. CashPro wasn't around. You take all the stuff. It's all there now. And now the question is AI where you take it next when we talk about that. And so then the third in our company is really becoming consumer focused on the consumer side, wealth management client focus, commercial client focus. We can get away from the products that we grow relationships, not products that allows you to grow with 4 or 5 pillars. So Holly O'Neill is here who runs our consumer business with Aron Levine. They can grow along multiple dimensions as opposed to being, I'm in a credit card business, I've got to grow credit cards, no matter what happens. That can tend to lead to interesting activity, I assume that.

And just on that, if you could double-click on the customer focus, like you hear that from all the banks that I speak to, bringing the entire bank to the customer. How well is the bank today in its current form equipped to do that with the various businesses talking to each other?

Well, it's -- so first was to get all the products underneath the customer base, so as consumers, mass market consumers to wealthy consumers, whether it's small companies to large companies, whether it's investors, to get all the products underneath them and not have separate activities that happened. And then over the years, we've made great progress. We at, Bank of America, knit that together. So here in Miami, Gene Schaefer is the Market President. There's -- I met with the management team in the market yesterday, including the markets business with [ Sarah Hess ], including the commercial banking business, the business banking business, et cetera. And they all work and we keep track in 100 markets or so we serve of all the activity that moves beyond with the customers. But there are 2 elements of this. One is to actually think about in the wealth management businesses, Liz and Eric and Katie's obligation is to get the entire relationship, which means loans, trust, asset management, brokerage activity, et cetera. So they have a direct obligation. Then their second obligation is to have their teammates in a market like Miami, refer their businesses across each other. And we've made great strides, 9.5 million pieces of business moved within the franchise that way last year. We expect to do more this year. One of Lee's other job -- Lee McIntyre's other job is as he actually runs the infrastructure team behind this, and they do a great job. But that's a sophisticated understanding which plays off of that customer focus and it works.

I guess maybe switching gears to the macro outlook. You obviously had the inflation data this morning. But I think it feels like the Fed engineered the soft landing. But give us your view on what the economy looks like? Are there still areas that you worry about that are going to be under stress if rates remain elevated?

The answer is yes, we're worried about -- we always worry about a lot of things. But I think, look, if we look first at the various segments of customers and what we see, if you look at the consumer, as we came to last summer, the consumer started slowing down. And you can even see it in the confidence stuff that's reported out of Michigan and other things. And the spending started slowing down a little bit, not still 3.5%, which is fine. But because the -- what the consumer is being told is where rates are high, it's restricting activity, et cetera, et cetera, et cetera. So they all start to react to that. As you came in the fall in the first -- when the Fed first started to say, we're going to cut rates, not even a rate cut coming through, the consumer confidence started picking up, the activity started picking up. And so in the fall, you get a pretty good equilibrium going 4%, 4.5% growth of customer money movement out of our accounts, $4 trillion plus a year going in the economy versus the year before. And interesting enough, as you come through the first part of this year in the first 40 days, we're up about 6%, call it. That's a little stronger than that may be leading to some of the price pressures and demand side is higher. You got to be careful at the beginning of the year, there's stuff that runs through, that's more -- you have to deannualize. But even on the car data, which is more consistent, that's 5%, 6%. So the consumer is in good shape and spending, which is good news for the economy, but we've got to be careful that they don't start spending a level that drives prices up and the inflation comes back in. If you look at -- and higher rates affect the consumer in some areas, car purchases, obviously, the mortgage market affects it heavily. But you have to remember, if you think about a consumer, there's 60-odd million, 70 million mortgage loans outstanding. They're all locked in, that's that part. The rental market, rates went up and that caused stress in some consumers in terms of making rent payments, but the mortgage, they're fixed and are locked in. And it's -- in some cases, even though it's a liability, it's the best asset the consumer has is a 2.5%, 3% loan for 25 more years is a pretty good thing. So they -- that didn't affect them as much, effect on cars, effect on new mortgage production, new housing activity. When you go over credit cards, the rate structure is more driven by sort of people borrow and people don't. It's not as sensitive. When you go to the place affects most of the small businesses and middle market companies, they use lines of credit. The basis went from 50 basis points to 5 plus. That is a lot more borrowing cost, and so they slowed down their borrowing. They have yet -- they picked up a bit, but they have yet to pick up a lot. So we're getting new customers to grow our commercial loan balances above the industry, et cetera. But if you actually look at the uses of alliance by the current customers, it's basically 36% on average across middle market, small business, think of that as being 40 pre-pandemic. So what's that -- they're using lines a little bit less more because they're trying to figure everything out, more because the higher rate structure, you've got to be damn sure that you've got a good activity. You can't guess if it's costing you 7%, 8% to borrow. You can guess what's costing you 4% to borrow. And so that difference is -- so that's the most effective place. The capital markets, the activity is high. The spreads are tight, stuff's going on. Hopefully, the deregulation is the activity. But the real bites in that midsize and you've seen the effect of it, and that's where the Fed has to be balanced, even though inflation is higher and holding rate is higher, and our team had taken all the rate cuts off the table, your team had taken all the rate cuts off the table for the year, et cetera. They got to be careful that the real drag on the economy is still around that business segment and the cost of borrowing is still high nominally from what they're used to. They will get used to it. It's not that high in historical measures. But where it came for 15 years, it's higher.

And I guess maybe that's a good segue into -- we have a new administration in D.C. There's a lot of optimism around what that could mean around tax policies, just deregulation across the economy when you talk to banks and what it means for their clients, how do you balance that versus rates probably staying elevated? We've seen a lot of headlines on tariffs over the last week? Do you think there's enough out there for businesses to pull the trigger on big CapEx investments? Or are most of them still in wait and watch mode?

Well, if you think about the CapEx of the hyperscalers and all the people around that industry, that's through the roof. If you look at normal things, it's solid, and the consumer spending is a little stronger, business investment is solid. And so we see that and how people are using it. Look, our customers if you came through last year in the small, medium-sized sort of backbone of America business, they were really confounded by the regulatory stuff. Rates bothered them, that the regulatory stuff bothered them. As you watch it come forward now, they're a little more worried about labor and capacity, which is an interesting question when you think about all these policies and how that's going to work, and that's where I think the administrations have to kind of think it through what choices they want to make. But the reality is regulation was a big thing. So I think your team from sort of the research platform and then just common sense in talking to customers, it ends up in the same place. If tariffs increase cost, if inflation stays a little higher, I can handle it if I get some benefits from deregulation to reinvest in it. So there's a belief that the margin expansion of deregulation will come. Taxes won't go up. And therefore, they'll have a little bit to absorb it and they'll pass price through the customer, and that mix will work out. We'll see how that plays out, but that's going to be a tension in the system for a little while here.

I guess maybe bringing the topic of regulation to the banks. We've had this view, and you can tell me if I'm wrong. But we may be seeing a bit of a regime shift relative to the last 15 years to a more balanced, predictable regulatory backdrop. Would you agree with that view in terms of we are moving there? And if so, how quickly can the industry get some relief on some of these?

Well, I think you don't have to take -- you're in my opinion, you can see it take place. So what's happened with the consumer bureau in terms of stopping and putting some people in to have a point of view, they have to figure out the charter of that agency. The OCC is now getting people in place to go work and the Fed Vice Chair for Supervision has to be in. But if you think the FDIC has moved. And so if you think of all that, it appears the first step is let's stop everything and take stock, and then let's figure out what the right thing to go in the business. That is a classic reengineering effort, which is you stop everything, assess it and then you go to the next step. So what's going on in these agencies instead of saying, okay, let's keep going business as usual, and let's then figure out what to do, they're saying if we stop everything, it's sort of hypocritic. First, we do no more harm. And then we'll figure out what should go forward. I think the challenge for our industry is we got to make sure stuff sticks to the ribs. In other words, we got to have the right regulation rightsized for different types of institutions, rightsized for common activity and common regulation. It got past the point and we all pushed, even sue the Fed as well to change it. The idea is we believe it should come back, but we also believe it has to be effective. And that's where we got to make sure we get a balance because if you just keep swinging this pen on back and forth, it's hard to operate a company. And so some of these rules and regulations got way past what the intended statutes were. And Congress administration is going to use their authority to bring them back in line. And whether it's the capital rules, whether it's consumer compliance-type activity, consumer laws, rules, regulation, whether it's AML KYC and changing thresholds to make that much more modernized, whether it's that. But remember, there was a back past in '20 -- whatever '22 on AML. It was never implemented. So some of the stuff they just got to go do what they're supposed to do.

And just I think...

But look, at the end of the day, we need a well-capitalized, highly liquid, strong industry. If you go back and think about the financial crisis post what we did is we took our lumps, recapitalized our industry, got the set of rules and here we are with the best managed industry in the world, making money, serving its customers very well. Customers have access and capabilities that occur nowhere else. We support that multinational activity around the world, the capital markets and all that. It works if you get it right, but it takes some -- and we got past the point. Now we got to bring it back.

Got it. And just one quick follow-up on that. We saw the BPI, ABA sued the Federal Reserve on the stress test framework. Just give us a sense of -- I mean, it's unique for those of us who watch this industry for a long time to see a legal challenge to the Fed. What does win signify? Like what does the industry expect to get out of this in terms of the transparency that we need from the Fed?

At the end of the day, the stress test capability and what we all do in our companies is a very good thing. The odd thing is why would we -- we've had the lowest losses in stress test for almost every year. The volatility around the answer would go, I think we were 230, then 270, then 250, then 320. Like this is 4 straight years of basically the key driving assumptions in a small quarter. Unemployment goes from where it is to 10%. The real estate market was down by 30-odd percent. The stock market is down. Four years in a row, the things don't change, but the outcome is very different. And what we're saying is, wait, that makes no logical sense. Now if you look at it a couple of years ago, remember, we protested the expense base. Counter -- we have a bunch of our revenue in the wealth management businesses driven by market levels. If markets go down, it should come down. They wouldn't let us change expense base. They've assumed that we had to play all the financial advisers to same money next year if the market was down 50%, and the revenue we're getting is down 25% here. Like no, it doesn't work that way. Same with the team's investment bank. If there's nothing going on, we pay people a lot less. If there's something going on, we pay them more. It's -- and it wouldn't let you change anything. And so those types of things, I think -- the frustration was no matter how many times we talked about it, we couldn't get through. The lawsuit was more of a technical issue than to preserve rights. I wouldn't be overworked up about that. But the reality is even the Fed Chair yesterday and many times publicly has said, we're going to keep working on this thing to get it right. And the transparency of the models and stuff, it's interesting for the broad part of America. The last thing I'd want to do if I were in a banking system is to have a -- go look at models about losses or something like that, they think of it. All we're saying is -- I think [indiscernible] said, sunshines are great for whatever is a killer bacteria or whatever the word you used. It's the same thing. You put those out there and people are going to say, "Wait, that doesn't look right. That expense base should come down." And then hopefully, you can get the things more accurate.

Some more sunshine?

Yes.

Maybe just bringing it back to the bank, if you can -- we've talked about 200 basis points of positive operating leverage. It feels like there's an engine in place for that. Give us a sense of how you think about in your seat when you're listening to all these businesses, the need for investments versus where these savings are coming from.

As you think about the 8 lines of business we have, plus the control structures, we think about where we put money. At the end of the day, the common theme is, and there's common platforms like our cash management, GPS, we call it business or our employee bank investments business or workplace benefits business, those big platforms and then the operational platform, technology platforms. If you think about those businesses, we have plenty of capital that doesn't really affect. It's really the question where you're going to put the next dollar of incremental expense either for people expansion or for technology deployment. And so we invest $4 billion plus in technology code a year. We're driving that across the businesses. And if the issues -- you get to the point of how much can you do more than how much can you spend. And so the team does a great job at [indiscernible]. On a given day, 35,000 to 50,000 coders out there coding and stuff. Every weekend, we do several million lines of code and the systems change and stuff. So they are driving that. And that -- so that's really the question, where are you going to add people, where are you going to want to add. So as we look across the company, we're adding people is in the consumer business, the people stay flat, but you're constantly taking people out of the sort of operations side and putting them into the customer relationship side. So if you go across, we had 100,000 people in consumer in 2010. We have 50,000, 60,000 today. You had about 10,000 people actually relationship managers. Now you have 25,000. So you're making this massive change and you keep making that change happen. So even though headcount stays flat, that reengineering goes on. If you think about it in the financial advisers, we're adding financial advisers. You think about it in commercial bankers, we add commercial bankers, business bankers, but what we do is constantly take it out of their side. And that allows us to keep the expense base from 2016 now the same nominal amount of dollars spent, which is pretty amazing. And yet the activity is much different. And that was taking out work that goes away and plowing again in the front end. So it's really a question of who's got the need for technology investment. We invest a lot in the cash management platform, invest a lot in international country build-out, invest a lot in the market -- new markets for consumer. We've got 9 more coming. We've gone into -- basically, we have a pretty good coverage of those markets, 165 new branches coming out. We've done branches even in the current markets. You start adding all that up, $5 billion in branches across time, $4 billion a year in technology initiatives, $12 billion in the overall technology spend. But it's just -- it's a lot of activity, but it's never a question of we have to make a choice, honestly. It's really who can get the stuff done in a rational time frame that has the impact.

I guess just talking about digitization, talk to us a little bit in terms of the customer journey. Like we've seen increased adoption from the consumer on digital account openings, et cetera. Where does that stand in terms of digitization? And also maybe tied to that, AI comes up in every conversation when we're thinking about tech. How big of a needle mover you think AI could be?

So digitization, we put out the statistics, half our sales or 58% are digital today, but 42% aren't because -- there's 4 million cards last year. So think about that number. There's 4 million net new checking accounts, 3 million to 4 million gross. So think about just how much you can change. So the mobile check deposit, nobody writes checks any more. That's not quite true. But there's a lot of checks go through and they're deposited. So it just has a lot of activity, the current what we think of. What we see with the combination of models now with AI models versus machine learning models and things and models in the past is a step change. So what we see in Erica is 20-odd million people using it a couple of hundred million times a quarter, 175 million, 108 million times of what it was last quarter. All that activity would have gone through a call even if it was a VRU call answered by machine. So that's a big pickup and the ability for it to learn and get better. And so we took that model, which was built first 10 years ago before people knew what a large language or small language model was. It was effectively a small language model. We had it built for us. We put it in Erica. That model is trained on our systems, and our procedures is exclusive to our data, has learned. And so we can bring that model to other places. So that model is embedded in CashPro now. That model is embedded in Erica for employees, which if you go into our company website or Internet for the employees and you click on it, you can change your password and all these things. It took half the interfaces that would have gone through calls to a technology specialist to order your equipment to do this. It took half of them off in 2 months. And then we've got to get the rest of them off. So the ability of AI to move this thing to another place is that in our coding, if you think we have 35,000 programmers in the company broadly stated, another 15,000 working for us outside the company. And you say we can save 10% to 15% with the coding techniques that we see through this AI-developed code, that's a pretty good kit. Now we'll get to 20% or 30%, maybe, but I'm in for 10% or 15% to start. That's a pretty good number. And we can reinvest that all. So we can do 10% to 15% more business delivery and stuff. So we think it's very good. We've got 1,000 patents issued and applied for AI techniques, and we're pounding away at it. And it's just going to have another effect. But don't unlink it from this long-term movement from work content being digitized, work content being driven by machine, work content going away. The difference is they can attack different types of work. And so let's think of a group that analyzes a lot of text, reformats it and puts it out, maybe call it the research function.

I know -- I felt you were going -- keep going.

And think about that. That's the difference. They can do that kind of work, which then you can sit in front of them and get a lot more efficiency behind you. So when Candace and the team said we need more analysts to cover these great financial service companies, they said, "Wait a second, just save the 10% or 15%, 20% capacity need. That will make you smarter, faster, more intelligent, allow you to access more data." It still has to be -- have somebody in front of it because it come up with some interesting stuff. I was trying to get a mortgage amortization schedule. I pounded in at 3 times, I got kind of something you couldn't read. Finally, just got a picture of a house because it came up and just stood. And so -- and that's not right or wrong, it's just still learning how to do this stuff. And I'm learning how to do the stuff with it. So I think those things -- so that's the major difference. Before, if you thought about the people we had in Tom Scrivener's operations group, you engineered that and you did. Erica saved calls going to Holly's call centers that -- this is now -- wait in the legal department of 1,000 people, can we make a 10%, 15%, 20% better? The finance teams, can you do the kind of reviews and examination, which make Alastair's team better? In the risk side, 8,000 people in risk, can you start to shave the growth rate of that for -- look, we've run model-driven AML, BSA analysis. It's very sophisticated model, but this helps to be in more.

Okay. It sounds like a multiyear runway in terms of this productivity boost for us, for the industry.

It may be a cliff. These things tend to take time. And then remember, companies that your other teammates cover like a Salesforce or something, all these guys are betting it in their capabilities. So Marc Benioff with agent force that you're hearing a lot of talk about Workday, all the major providers saw Microsoft and 365, they have to embed this. So the race will be, do you want a separate model or is it going to come with it -- it's a dirt coming with the dinner, right, for Salesforce buy and they'll embed it. The interesting thing is when it comes that way, you already have all that verification of all the data and all the information, which makes it easier to implement. And so that's going to be the tension. Do you want a separate big model? Do you want a separate small model? Do you want the model embedded? And the real question is the data and information that feeds that model explainable, because at the end of the day, despite other industries, this industry already is liable for anything it does. So if I underwrite a loan, our company underwrites a loan, turns you done for mortgage loan we're liable. We can't say all the machine made is negative. So the reality is we already have -- we don't need to do regulation. No matter how you make the decision, you're liable for the outcome, if it's wrong and discriminatory or whatever it is. And so the ability to do it, but to care is you got to realize you're liable for it, therefore, you've got to put a lot more controls on it probably than can go on if I'm just asking some questions of public to me.

Got it. I guess maybe just switching to some of our businesses, when we think about the consumer bank, I think there was an interesting stat we disclosed about $500 billion of investments coming from the consumer bank. And on the investment side, just give us a sense of, is the consumer bank set up from a digital technology standpoint, incentives that are in place to increase wallet share from our existing clients?

No, that's the way it operates. So we have a concept called the stair step. And if you think about the broad American consumer, the first step is a core transaction account. The second step is the first borrowing account, typically a car, maybe an auto, something else. The third then is the investment, and you walk up that stair step and you're just in a home loan and then invest. And so you're walking up that stair step with the consumer. And we don't think we're successful until we get to the top stair, which is the 4 or 5 core needs of every consumer in America covered by our company. And we think our products and services are better than anybody else. And therefore, if a customer is not getting from us, we're not getting the deal. And then he prefers rewards program nits that together and gives better value in some of the other rewards programs that we have. So that's the basic core. But if you think about -- this has been taking investments. The other thing is you have to think across time and what we call continuum. So if you think about investments, what we do was Merrill Edge, which is in our consumer segment, is think about it as basically getting investors with our company that at an early stage. So 300,000 plus new customers year-over-year, average investment balance in those accounts $7,500,000. So these are small -- these are big accounts and people have it. But they're not at the point where they can have a new service, which is FA model or the private banking model. So the idea is if you do this right, what you're doing is pulling a whole bunch of people in. You got 100 people come in the door. By math, by statistics, 20 of them will become wealthy enough that the financial advisory model will work for them, 20%, 25%. The other 75% will invest their whole life, and we can do it digitally. You can execute completely digitally. And with the portfolios built from Candace's team to Chris Eisser's team, you can do automatic rebalancing, so maybe -- which is Merrill Guide Investing has now $30 billion, $40 billion and that is automatic rebalancing, starting from scratch 5 years ago, whatever it was, up to that level. And so more and more investors put -- pour money into that, very cost efficient for them from the investment side. And that's a great model. What that does over time, if you think about it, a 25-year-old person making the first investment thing when their first job started more money in and out, they start to say they have to put it to work. We open the Merrill Edge account. And then that person could be you in 20 years, with all the wealth that you have. And now you're a private banking customer and you follow that continuum. So our job is to cinch off the competition. The bank industry traditionally had a hole between consumer and private bank, the traditional banking. We all started working on that with securities -- financial advisory platforms. We have Merrill, which is a whole different size, scale and scope, but still the principle is we got to catch everybody and keeping for their whole life. And that continuum with the capabilities that are the best in class for Merrill Edge, the best in class for Merrill, the private bank says, "You never have to leave here and we can grow with you." If you don't have that kind of wealth or that kind of demand or that kind of customer need, you stay with Merrill Edge. And it's a pretty unique system.

Okay. Makes sense. Maybe switching to another business, Global Banking and Markets, I think forever, there's sort of been an additive where the bank would be doing a lot more in the markets business. We made a lot of investments a few years ago in that business. Just talk to us how those investments panned out relative to your expectations? And is there more runway that you see to invest further?

So this is markets. So the serving clients out here with research ideas, financing, et cetera, as opposed to corporate investment banking, which we can talk about separately. So the investments we made in this business were really around 3 dimensions. One was people, talent, expanding here in South Florida. We set in the team to build out a team because a lot of people move down here as an example around the globe, et cetera. So one is talent and the trading talent, et cetera. The second is technology. And the third is balance sheet and capital. And so the business we are running, say, in mid-2015, '17 range, you're running, I don't know, $600 billion of balance sheet on a given day, now you run $900 billion. So you expand the balance sheet fairly dramatically. A lot around financing capabilities and things like that. The talent, we're in every trading venue in the world, and we keep adding the talent we need and doing that. And then technology. In the end of the day, across global corporate investment banking and markets, about $1 billion of technology code in a year, new code, new stuff. It takes that kind of investment. And so to run those businesses and markets is a good chunk of that and getting the data lakes and the information to be able to report the $3 billion quotes we have a day or whatever the number is out in order and be precisely right, it is a tough thing. So what's happened is, Jimmy and the team have done a great job building that -- getting all that done, talent, technology, et cetera. We expand the balance sheet. And now we're sitting, he's moved -- gained market share against everybody and moved up in the 4 positions so far. And we're 3, 4, 1 -- it depends on the businesses and the locations and stuff. But the idea is the constraint on Jimmy's growth is to make sure that we can get the customers to do more with us as opposed to whether it takes down another $2 billion of capital is kind of being less or whether he has built a balance sheet, you have to be careful the GSIB calculations and all that technical stuff, but they do a great job, and we're pushing on them. And -- but you can't tell them just to grow, they have to grow and make money well. And so the best thing they've done is lower the breakeven for a quarter by $1 billion a quarter. So in other words, they dropped the level which we make money in the quarter. So we used to make money, it's like 3 quarters and then you lose a little money in the fourth quarter when activities have settled down or -- now it's basically, you make money every quarter and that range is over $1 billion to $0.5 billion or more or less and that's pretty good, but that was by cost exercise or dropping the breakeven, it's like $2.5 billion of revenue from $3.5 billion of revenue.

Got it. I guess maybe just switching to the other part in terms of investment banking, there is a fair amount of optimism around a rebound in the investment banking wallet. How would you characterize our franchise and our ability to actually gain market share?

Well, we've been able to do that. Matthew Koder and the team, Alex, Thomas Sheehan on the investment banking side, Lisa Clyde. So we continue to gain share. If we're sitting at 3, it's a dog fight every quarter. But -- and so in the glass half full, the fees, $1.6 billion a quarter, you feel good about. And the glass half empty, that's still where we were in '19 and the size of transactions has gone up and the numbers of transaction start to pick up. So we've got a lot of room ahead of us. That was going to take a different regulatory environment for M&A deals, especially. And so, those have been around a long time. Even in this industry, clearly, but even in other industries, any deal, $3 billion, $4 billion, $5 billion, the advice you gave the client, Jeff peaks out there, the advice you had to give a client was you really got to be sure that you've got this antitrust possibility read right. And the clients would look at you and say, you got to be kidding me because they have lawyers and that was a reality. And so that's now probably changed, and you're seeing that go through. So there's enthusiasm that a lot of conversations can allow for structural consolidation in the industries, not just our industry, but across the board, the ability to make those strategic buys. Now pricing and everything else has to come true. The stars have to align. But if all the stars align, it took you 2 years to get a deal done, not everybody had the staying power to do that. And then in this industry, I think it will be much different especially -- not for us, we can't make any transactions because of the -- limit has been for 30-plus years on deposit size and stuff. So -- but for the broad industry, the capabilities of doing deals is high. So we feel good about that. So pipeline is strong. The IPO pipeline is strong. We've got to make sure we get enough stability in the market for that IPO pipeline to pull through. The IPOs have traded up last year relative to the market, which had a strong year. The IPOs were up stronger. You've got to broaden out those IPOs a bit. But we see that, and we see the owners of those companies really want to get into market and willing to be pretty realistic about getting some liquidity versus top dollar. And so that ought to come through, but we just need a little stability. The discussion about all these policy changes has to settle in for people to do it. So we feel pretty good about it. So the teams -- they're doing everything we thought we'd do this quarter, and we'll see how it plays out. It's still pretty early enough.

Got it. I guess maybe switching gears to the wealth management business. Talk to us in terms of when you think about the growth drivers for wealth and even the private bank. And maybe spend some time on -- you mentioned the integration, like I talked to our FAs all the time, and it feels like they find it a competitive advantage to have the bank behind them when they're talking to their customers. Just talk about the power of that integration that the bank's achieved.

So I think there's a couple of ways that make it a little unique. So when Merrill and Bank of America came together in the first day of '09, there was a lot of stuff going on out there for a while. But basically, if you looked at it sort of thoughtfully, you had a financial advisory platform and there's a thing called BAI, which is the Bank of America piece that went in. You had a bunch of loans deposits with what was then called the premier business that went in. So you end up with a much different business profile, more loans, more deposits, big wealth management business and a business that's still going through the change from brokerage activity to AUM activity, et cetera. But what you also had was Merrill had 600 offices. And about 1/3 or 1/2 of their office were in places we didn't have, retail banking. So if you take Columbus, Ohio as an example, Merrill had a nice office there, a nice series of offices there, actually, but we had no branch structure. So the question we've been at over the last few years is as we build out in the cities over across America, one of the advantages we have is our digital capabilities and then the Merrill teams and some of the other businesses there that we can actually open up a lot of customer relationships quickly. And so that's sort of the things. Then on a given day, look, at the end of the day, if you're providing holistic wealth management advice to client and you only have a sliver of their relationship, you're either underserving them or they really don't trust you to the level that they say. So the question is, you ought to be able to get everything. And so some of that's more routine transaction accounts for the family and the kids and all that stuff. Some of it's very sophisticated and lending against our -- lending against the other types of stuff that we have a great practice. Some of it's very sophisticated in terms of estate planning and all the intricacies of all the different holdings and all different types of things because if you look at a customer, they're going to have pretax holdings, after-tax holdings, trust holdings, unless you got to figure out how to do it. So an integrated approach leads you to get more stuff. In the backbone that sits behind the private bank at Merrill, whether it's the trust capabilities, whether it's lending capabilities, whether it's just the stock execution capabilities, all that is all a common platform that everybody can bring. And as we watch it play out, $280 billion of deposits, I'm trying to think of loans in the wealth management business. And loans, I don't know, $100 billion or so, whatever it is. And those are margin loans and art loans and what we call mortgage loans. It's a big banking business. It's a big wealth management business, and that's good because it has a lot of customers. In the end of the day, you're serving the customers' full needs. And we're not asking a customer to accept some inferior service. We're accepting some of the highest rated consumer transaction banking capabilities and personal capabilities there is, where I accept the best trust company within the world. These are not like come -- we're going to give you something that's off brand and we're giving you the best there is. And so that capability over time, we're just seeing that happen. That means those customers are even more loyal, bring more tourists, tell their friends, and that's all good stuff.

A couple more. One, just talk about international and Bernie's business. We've invested a fair amount internationally. Just where we are in that investment cycle, what the aspiration is?

Yes. And so we -- if you look across Bernie Mensah, that has the international business. His job is to coordinate with Matthew and Jim and Mark Monaco and the GPS, Lisa Clyde, Alex and Thomas, all the activities across the world. And Bernie's got to manage all legal entities and make sure a lot happens plus he's got to lead the customer interfaces, policy interface. So he does a great job doing that. But if you think about Bank of America, at the end of the day, we serve global clients, whether investors, whether large companies across the world. And so in the market side, we've been -- we've pretty much been in all the major trading venues. Everything was fine. It was sort of building our capabilities, a little weaker in FX here, a little bit stronger here, do it. So we've been doing all that. In the banking business, it was more getting coverage even out across -- even in investment banking across industries and across locals, and the team has been doing that. In the commercial banking business, the corporate banking business, it had a lot more to do with cash management than a corporate banking. And so we've been investing heavily in cash managers. So if fellow like Mark Monaco runs that business for us, and we put several hundred million dollars a year in building out its capabilities and that's where we're seeing a lot of market share. So our global banking business has $0.5 trillion plus of deposits. It's been growing much faster than the industry, and that's largely due to those cash management capabilities on a global basis. So that -- now at the end of the day, Bank of America's global banking business, global corporate investment banking has more loans outside the United States than it does inside the United States, believe it or not. It's just the nature. So it's a big -- it's $130 billion of loans. It's a big business for us. And then Bernie's job is to make sure it all works and then the team has to execute one client at a time. Recently, we -- with the disruption that went on in Switzerland, we added some bankers to go -- to build out our team there. So we doubled the size of the banking team pretty quickly in Switzerland to not only cover the larger clients better and with more breadth, but also beneath that to actually cover another size down of clients. And so countries that we feel confident that we can understand it and our cash management capabilities there that we can make money, we are now pushing into the U.K., Switzerland, Germany, going down a little bit its size of restriction in an effort to drive the business. And so -- it's -- they do a good job. We don't look at it as international versus domestic, and that sometimes it's hard to explain our team. We look at it as clients, global clients. We got to serve them everywhere. And the research team has to -- if you're going to research financial services, you got to know the whole globe's financial services outcome because people -- your clients are buying it. If you're got to research auto, you got to know the whole globe's auto production, et cetera. So we have teammates that specialize in Chinese auto companies and German auto companies, the U.S. auto companies. Put that all together, we have a read. So I think it's -- these are global companies we have to follow them, and we've done a good job.

One last one from me. Just around -- talk to us about capital allocation and maybe even touch upon the dividend payout ratio for the big banks. 30% has been viewed as an implicit sort of cap around earnings payout. So one, how do you think about the dividend payout? And then how do you think about excess capital funding the business versus buybacks?

So I think, number one, there -- whether these hold true forever, what they've held true in the past is if the dividend payout ratio stays below 30%, you don't have to cut it and you can go back and look at that research and do it. The second is if you have 6% tangible common equity, banks don't fail that much tangible common equity. So there's a sort of resolute, let's keep the balance sheet fortress and drive it. So we've always done that. Now how can you increase the dividend and grow the earnings? And then secondly, you take share count down. So the same 30% of an earnings number is a higher per share because the shares -- so you have that math going in your favor. So we've increased the dividend at 8% this year and it keeps moving forward. But by keeping it low, when the pandemic hit, earnings went from $30 billion to $17 billion, our dividend coverage is $8 billion. It wasn't close, right? And so you just -- that was never the question. And so you always want to be able to keep that going forward. Then when you think about $1 of capital earned, our principle has always been about 30% out in dividends, the other 70% first is there to grow the business and whatever they need. And then after that, the rest goes to share buyback. The reality is we're sitting with extra capital. And the reality is if the math gets cleaned up, the GSIB indexing, things that make just general sense, if you have a number that was calculated in 2012, in 2025, you might want to look at the calculation. We're not radical here. We're saying the economy has grown a lot. We've kept our size and now we've presumably got bigger. If that changes, then I think we'll have more to send back. Right now, we're sitting on the excess capital. So the capital to grow demands are -- if you think about it, we put $100 billion of loans, that's $10 billion of capital. So that's not a big demand in the grand scheme of things. Markets, the capital is there. It's really the impact on some of the calculations. So the amount of use of capital to grow the business is relatively straightforward, then the rest goes out. And if we get relief that the $11.89 billion that we report today is $25 billion more capital than the $11.9 billion we reported in 2019 to get the same calculation. That's what's been going on behind the calculation seeds. And so we're saying if we can get that ironed out that why does it take that much more money to report that much stuff, it's all just RWA calculations and stuff that have been -- I want to say wait a second, the risk hasn't really changed. And so if that happens, we should have more capital to either grow the business even further without having to ever retain more capital. But right now, we're basically -- we pay out the dividend and the rest of the capital goes back out in the market because we grow about $1 billion in capital, kept the even quarter maybe more or less, and that's just funds the incremental growth in the balance sheet.

We are out of time. I just wanted to see if there's any room -- if there's any question in the room, but if not, Brian, thank you so much. Thank you all for doing this.

Thank you. Thanks, Ebrahim.