Unnamed: 0
int64 | symbol
string | quarter
int64 | year
int64 | date
string | company_name
string | company_id
float64 | text
string |
|---|---|---|---|---|---|---|---|
800
|
BA
| 1
| 2,024
|
2024-04-24 10:30:00
|
The Boeing Company
| 370,857
|
David Calhoun: Okay, Sheila, that's like a 3-parter.
Sheila Kahyaoglu: Sorry about that.
David Calhoun: Yes. I'll do my best. So I -- all of the 737 disruption that it goes on today, in my view, is self-inflicted in the sense that we've made the decision that the amount of traveled work, particularly as it relates to the fuselage that was embedded and normalized in our factory, that we would make a dramatic reduction in it. So that move we made with all the inspectors and all the rework operators down to Wichita, the visibility we've provided to the Wichita workforce with respect to the rework that we were doing, the FAA didn't demand that. We demanded it because it's -- we're determined to get ahead of it.
What the FAA is doing, and they have been very diligent and business-like in the way they've approached this is they want a control plan. And they want a control plan in 90 days that, in essence, monitors and measures whether our production system is in control moving forward. And if it ever gets out of control, the signals are clear, both to the FAA and to us even more importantly. And if we don't, we won't extend. We won't rate up. We won't do anything until it is under control, and that has to stay that way.
So 90 days isn't like a wave a magic flag and everything is great, and you guys can go from 38 to 40. It's quite different. It is simply a set of metrics and controls that we both agree are the right ones to monitor the performance of our factories. And I am confident it will be a good set of controls and something that we can live up to.
And we're going to work our way through this one. As I said, the most important thing that occurs over the next 6 months or frankly, starting in January when we launched this effort is going to be the pace at which clean fuselages come out of Wichita. That is the most essential part of this equation.
|
801
|
BA
| 1
| 2,024
|
2024-04-24 10:30:00
|
The Boeing Company
| 370,857
|
With respect to IAM, as you know, we worked through the summer. There's a lot of discussions going on between our team and their teams. It feels productive. While we're doing that, we have huge engagement with a relatively new workforce across our factories in light of what we've just experienced. That engagement helps. It doesn't hurt.
I am -- I can't ever tell you I'm perfectly confident that we rush to an agreement. But we're all going to try to solve for continuous production. And I think we -- I think our chances are good. So -- but we're not going to know until we get really close to the deadline, and that's just real life and labor negotiation. I think that covers most of what you asked. Was there any other part I missed?
Sheila Kahyaoglu: The $10 billion free cash flow, does it incorporate the IAM negotiation?
David Calhoun: Oh, yes. Yes, yes.
Operator: And the next question is from the line of Noah Poponak from Goldman Sachs.
Noah Poponak: I guess this is sort of asked and you've alluded to pieces of the answer to this, but I'm just going to ask it anyway because it seems to be the most important thing, which is just how long does it take to do everything you need to do on product quality? And how much of it needs to be done before you can increase production again versus how much of it can be done as you're increasing production again?
Because I've heard you now reference 6 months a few times, and you've referenced the back half of the year looking a lot different than the first half of the year. And 6 months isn't a short window of time. But in the context of what you're doing and referencing 30,000 ideas and if you're going to take Spirit in, that hasn't even happened yet, and it's almost May. When you were working with the FAA on 787 a few years ago, you didn't deliver one for 18 months.
|
802
|
BA
| 1
| 2,024
|
2024-04-24 10:30:00
|
The Boeing Company
| 370,857
|
So I don't know what you can say to that, but how do we get confident that the time just doesn't keep ripping by, and you're not iterating back and forth and there isn't a much longer window of time needed to do everything you need to do to start to ramp again?
David Calhoun: Yes. So Noah, I'll address this one. First of all, I'm glad you asked about the 6 months. When I say 6 months, I'm talking about the first half of this year because remember, we commenced all of these actions the day after the Alaska Air accident.
Our determination -- the big factor here, in my view with respect to the essence of the question, is this move to eliminate traveled work in our factory and specifically and most importantly, the fuselage. So that action was commenced on March 1, inspection line in place, full inspections being performed in Wichita.
Our rework teams with respect to nonconformances that were worked up in Seattle, those teams have been visiting regularly down to Wichita. And I fully expect, I fully expect for them to come up to rate with clean fuselages here as we get into the second half.
That, again, is the big productivity driver in the Renton factory. And the cycle time improvements also double up as capacity improvements for pretty much for us and for them. So that is the big question.
The 30,000 ideas, that is a long list of stuff that just provides for continuous improvement from this day until forever. So that's not something that all has to get processed and completed before we can sort of flip the switch and go. It's quite the opposite. It is a set of continuous improvement concepts and ideas that we simply set out with our workforce and our leadership team over time. And that's recognized by our employees and by our leadership team. So that's how I think about this sequence.
|
803
|
BA
| 1
| 2,024
|
2024-04-24 10:30:00
|
The Boeing Company
| 370,857
|
Noah Poponak: Okay. Have you guys thought about framing and disclosing some version of that time line of work maybe in big buckets or categories that you would provide to the investment community? Because it feels like everybody is guessing and has no visibility.
And if you said, traveled work is one category, Wichita, I don't know what the categories would even be. But if there was 4 or 5 of them, and you could provide an update on which are complete and how complete the other ones are as you report just some version of milestones that investors could follow on your progress here?
David Calhoun: I think that's fair. Noah, the most important one, the essential one and that we will have to report as we close the second quarter is going to be the number of clean fuselages that we're receiving from Wichita and the prognosis for that going forward. So that will be the most essential part of the equation I think you're trying to solve.
I think all the other stuff, we'll categorize for you. That's not hard. We do it for the FAA. We do it for our own teams. But that is not going to be rate limiting. It's not -- none of that is going to factor into the rate limits. What is going to factor in is this determination, it's to make sure traveled work doesn't come back to us and that Wichita is up to the rate increases.
Operator: Our next question is from Kristine Liwag from Morgan Stanley.
Kristine Liwag: Dave, Brian, you mentioned that the first half deliveries for the 737 will be under pressure as you focus on quality. But then again, stability of the supply chain is also a priority. So in the event that 737 MAX production and deliveries continue to be under pressure beyond the first half of this year, how long can you keep the supply chain at a higher rate? What does it mean to keep them stable? And then also as a follow-on to that, if this were to play out, can you talk about the puts and takes of free cash flow generation in the second half of the year?
|
804
|
BA
| 1
| 2,024
|
2024-04-24 10:30:00
|
The Boeing Company
| 370,857
|
David Calhoun: Yes. I'm sure Brian is going to answer this one, but let me start. We have a rate increase plan. And as everyone knows, it gets us up to 50 here as we get into that '25, '26 window. So our job now, given the slowdown here in these 6 months and then sort of the pushout of those rate increases is to make sure we have all the inventory we need to satisfy that 50 number and have the buffers where they need to be to make sure that the supply chain can demonstrate the capacity to meet those numbers.
So this slowdown, in my view, is an opportunity for us to shore up whatever supply chain issues were out there sort of one supplier at a time and to get there. Now if we get to a moment because the slowdown has gone on too long, if we get to a moment where the buffers exceed that requirement, we will curtail but not until they exceed that requirement. Brian?
Brian West: Only thing I would add is that tactically, we have adjusted the master schedule at a supplier-by-supplier basis. It's all out there. They know it. We will continue to pace final assembly in line with that master schedule so that we don't sacrifice stability because what we're talking about is a very important near-term investment that we have to stay laser-like focused on so that we don't take a step back. And that's what we're focused on. And we believe that we can handle the cash flow fluctuations as we get through the first half into the second half and position ourselves for 2025.
Operator: And our next question is from Scott Deuschle from Deutsche Bank.
Scott Deuschle: Dave, could you further characterize what you're seeing with respect to supply chain performance on the 87? And where the constraints are that are driving you to drop back below 5 a month? And then I'm curious if there's been any change to the plan on the 777X ramp.
|
805
|
BA
| 1
| 2,024
|
2024-04-24 10:30:00
|
The Boeing Company
| 370,857
|
David Calhoun: Yes. No change on the latter. But we really have two constraints to think about on the 87. One is discrete. It's well understood and known, and it's heat exchangers. This is a product that used to be built in Russia. When the invasion happened, it got moved, and the capacity of that supplier has not kept pace with us. But the improvement plan that we all see gets us where we need to be by the fourth quarter, and we have a lot of confidence in it. So again, discrete, well known, et cetera.
The other one that is -- that affects us is not necessarily our suppliers. But as you may know, the seat suppliers out there are in shorter capacity. A lot of that is buyer furnished. But nevertheless, it holds up an airplane. And so that one is a little more medium term-ish. Capacity is being built out.
I think people will get ahead of it, but that will be a little longer than the heat exchanger. And anyway, so that will affect us a bit. And when you have a buyer-furnished problem like that, you don't have a consequence attached to it, as you probably know.
Scott Deuschle: Got it. And then, Brian, can you get an advance on the large P-8 contract that you won this quarter?
Brian West: So we're going to not talk about that specifically in terms of that award. But I did want to come back to two things that you asked about. I want to make sure there's color out there. 777X, as we described, no changes. But I would like to indicate that we're starting to see the inventory implications of that ramp. And that's something that's big and important as we move through this year, and we're excited to be able to put that in service. But that does create some working capital pressure that I don't want to be -- have lost on anyone.
And as it pertains to the 87, very nice progress in terms of our inventory liquidation progressing well. Keep in mind, not all of that will get delivered. All that will get reworked and completed, but the deliveries are going to lag.
|
806
|
BA
| 1
| 2,024
|
2024-04-24 10:30:00
|
The Boeing Company
| 370,857
|
And as far as production is concerned, we will be a couple lower than that 5 per month for most of the year as the supply chain catches up. And as Dave mentioned, we do have a recovery plan, and we are optimistic.
And one bright spot is that, that second line has now been activated. So as soon as that supply chain is positioned, we'll be ready to go, but it will be lower as we move through this year.
Operator: And the next question is from David Strauss from Barclays.
David Strauss: Just wanted to clarify on your comments around the balance sheet and liquidity. Is equity -- considering equity issuance, is that still off the table as you think about the balance sheet and potentially funding Spirit?
Brian West: Well, as we stand for what I described in terms of what we're looking at right now, working closely with the rating agencies, we believe we can do the move I described in the near term with market access without that.
As it pertains to Spirit, we talked about that this is a deal where discussions are ongoing. It's complicated. There's other parties involved. And what this means is that once it does get signed, we expect it to, that it's going to take time to close. And in that time between signing and closing, we're going to explore the optimal financing for that transaction in order to maintain the investment-grade credit rating. And that's important.
How exactly that looks? Don't know. We've got the time. And importantly, at the same time, we're going to have a factory that we expect to get more and more stable. So we're going to get to the optimal answer. We're going to protect the investment-grade credit rating. And how the pieces play out, stay tuned.
|
807
|
BA
| 1
| 2,024
|
2024-04-24 10:30:00
|
The Boeing Company
| 370,857
|
David Strauss: Okay. And a quick follow-up there as it relates to Spirit. How engaged is Airbus in this process at this point and thinking about potentially taking back their own work? And does the deal need to wait until you get full clarity on what might happen with that Airbus business? Or do you think you can move forward without full clarity there?
David Calhoun: No. We can move forward without full clarity. And as you probably know, we're not going to get involved in that, whatever is going on there. We encourage Spirit to do whatever they need to do to try to remedy or improve their business relative to our potential acquisition. So I don't have a lot of insight into that, but I encourage Spirit to try to resolve that kind of stuff as quickly as they can. But we are not -- we're not being held hostage to that.
Operator: Our next question is from Peter Arment from Baird.
Peter Arment: Dave, can you talk about your pending kind of leadership change? I mean you've been on the Board for many years. You've been CEO for 5 years during what's obviously been a very challenging environment with MAX, COVID, 787. But it kind of -- as we think about it in reality, Boeing is in kind of a position to have a multiyear improvement story. So what do you think is the right leader that's needed to execute kind of what is a very complex company?
David Calhoun: Yes. I always -- I appreciate you're asking that, Peter. First of all, the process we have in place is a good one. Steve Mollenkopf in the Chair role, Bob Bradway in the governance role. The Board at large, they're going to look at the market every way they can. They know I have an internal candidate that I think the world of. They will balance sort of their perspective and get to the right conclusion with my full support. I do not expect that to happen in the next month or 2. So let's all be clear about that.
|
808
|
BA
| 1
| 2,024
|
2024-04-24 10:30:00
|
The Boeing Company
| 370,857
|
Look, my prescription is pretty simple. You know as well as anybody, maybe better than anybody how long term this business is. You also know that mistakes that matter are usually in the development of another airplane, not so much in the production issues that we face today or the supply chain issues that were created from COVID. These are in the context of aviation, short-term issues that have to get wrestled through slowly in a disciplined way.
On the other hand, when you get big development programs wrong, you pay a price, and you pay it for a long time, and I know an awful lot about that. So my view is that next leader has to be prepared to make smart long-term decisions and get the development programs right.
So that's the prescription that I've offered to the Board, that I offer to pretty much everybody. And again, I have an internal succession plan broadly that I like. And anyway, we'll see where things turn out. But either way, they have my full support.
Operator: And that question will come from the line of Jason Gursky from Citigroup.
Jason Gursky: Okay. Great. Recognizing that you've got 2 other segments, the last caller here, nobody has touched on BDS.
David Calhoun: Go Jason. Thank you.
Jason Gursky: So first on the services business. Look, the operating margins there have been quite healthy over the last year or so, and I think are operating well above kind of your targeted margin range for that medium-term targets out there in '25, '26. So the question is, can we sustain the margins that we've got that we're seeing today out into that period?
|
809
|
BA
| 1
| 2,024
|
2024-04-24 10:30:00
|
The Boeing Company
| 370,857
|
And then over on BDS, the incremental charges seem like they're coming down quarter-on-quarter. But Brian, just kind of curious, are there some -- any significant milestones or risk retirements that you're -- that you could point to here over the next 12, 18 months that kind of give us a little bit of an idea of when those things completely go away and we begin to start seeing that financial model that you've talked about start to lock in for that '25, '26 time frame?
David Calhoun: Let's split this, Brian. I'll do the services. You can handle the defense contracts. So services. The one thing that I don't think anybody's factored into margin for us in services, a big profit pool that we have is our distribution business. This was the acquisitions of Aviall, KLX over the years.
This calendar year, we have a full integration of those 2 distribution companies in mind. I've reviewed this program. This will be another important productivity stepping stone for the business that, in my view, provides for a sustainable margin improvement and just a better, smarter, simpler way of doing business around the world.
So that project is in full swing. We will likely do the change somewhere in the fourth or first quarter of next -- fourth quarter this year or the first quarter of next year. We'll let that team tell us when they want to pull the trigger.
But that one is a pretty big one, and it's a pretty important one. It's one I've always wanted to get done. It will take those brands out of play. It will simply be a Boeing brand. And the integration in the warehouses broadly across our company, it's pretty significant. So you want to hit that?
Brian West: Sure. On BDS, Jason, characterized in a couple of ways, we're retiring risk every day, particularly on a program like VC-25B, which will move our way through. And we will deliver 2 airplanes, and then that will be over as a program.
|
810
|
BA
| 1
| 2,024
|
2024-04-24 10:30:00
|
The Boeing Company
| 370,857
|
The ones that are interesting to us in terms of the development side would be the T-7 and the MQ. T-7, we expect to get through the flight test program. Good progress with the customer. It's proceeding well. That's an important milestone as we exit this year.
Similarly, on MQ-25, we will get to the build, we will get to the software integration, and we will be able to get through an important milestone with the customer as we exit this year. Importantly on the MQ-25, as I mentioned, we just signed with the customer 2 additional airplanes that are going to be cost type. That's important. Another move towards our intent to derisk.
And then on the commercial crew, we've got a launch coming up. That will continue to derisk that program. And the tanker, the tanker continues to show good progress. It does get impacted somewhat by our determination to reduce traveled work. But long term, the tankers are performing in the field.
We're getting a better handle on what that needs to look like over time, and we're confident that we're derisking it. So by and large, we still feel confident that we'll work our way through it. And that will result in a BDS margin level as we get into the '25, '26 time frame that we believe is going to be in the high single digits. Nothing has taken us off that, and we look forward to retiring these risks.
Matt Welch: And that concludes our call today. Thank you, everybody, for joining.
Operator: Thank you. And ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T teleconference. You may now disconnect.
|
811
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
Operator: Thank you for standing by. Good day everyone and welcome to the Boeing Company's First Quarter 2025 Earnings Conference Call. At this time all participants are in a listen-only mode. Please be advised that today's call is being recorded. The management discussion and slide presentation plus the analyst question-and-answer session are being broadcast live over the internet. [Operator Instructions]. At this time, I am turning the call over to Mr. Matt Welch, Vice President of Investor Relations for opening remarks and introductions. Mr. Welch, please go ahead.
Matt Welch: Thank you and good morning, everyone. Welcome to Boeing's quarterly earnings call. With me today are Kelly Ortberg, Boeing's President and Chief Executive Officer, and Brian West, Boeing's Executive Vice President and Chief Financial Officer. This quarter's webcast, earnings release, and presentation, which include relevant disclosures and non-GAAP reconciliations, are available on our website. Today's discussion includes forward-looking statements that are subject to risks and uncertainty, including the ones described in our SEC filings. As always we will leave time at the end of the call for analyst questions. With that I will turn the call over to Kelly Ortberg.
|
812
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
Kelly Ortberg: Thanks Matt and thanks to everyone for joining in today's call. Let me start out by saying that we had a really solid quarter of performance across the business and I'm pleased to report that our recovery plan is in full swing and showing signs that it's being effective, albeit early, I do like what I'm seeing. In BCA, we continue to implement our safety management system and remain on schedule with our safety and quality plan that we've established with the FAA. The key performance indicators that we're using to measure our production stability continue to progress and we delivered 130 airplanes in the quarter, which was better than our internal plan. I want to remind you that we planned the ramp up conservatively so that we had some capacity to deal with unknown challenges. In BDS we had improved performance on our fixed price development programs and held our EACs for the quarter. We continue to make progress on our active management approach on the programs to improve performance and reduce our future EAC risks. And of course winning the F-47 program was a transformational accomplishment. To be selected the contractor for the world's first sixth generation fighter is a testament to our focused investment in some pretty difficult time and to our dedicated team. This will secure our fighter franchise for decades to come. And our BGS business continued to deliver strong results and we reached a milestone event by delivering our 10767-freighter conversion. So let me dig a little deeper into our four-point plan for our recovery. Recall from previous calls that I highlighted four key areas. The first, stabilizing our business. Second, improving the development program execution. Third, changing our culture. And fourth, building our new future. So for stabilizing our business our balance sheet has been an important focus. The equity raised at the end of last year was sized to provide us the ability to restore our production system to health. With the better than expected delivery performance we
|
813
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
to provide us the ability to restore our production system to health. With the better than expected delivery performance we naturally had less drain on cash in the first quarter, so we continue to be on solid footing here. As we announced yesterday the expected divestiture of portions of our digital aviation solutions business will also provide a significant cash infusion. The key to cash generation will be continued progress on the 737 MAX ramp. We are currently producing in the low 30s per month and expect that we'll get to the 38 per month cap over the next few months. We'll ensure that the KPIs are showing a stable production system and then request an increase to 42 per month with the FAA later this year. We've stayed very close to the new Department of Transportation and FAA leadership, and we remain aligned on the criteria to move to the next rate. If you look back before the strike last fall, we've seen about a 50% reduction in traveled work and a 25% reduction in rework hours on the 737 line. So the changes we've made to strengthen our quality system are delivering results. Even more importantly almost every customer I talk with report an improvement to the quality of the airplane. On 787 we continue to produce at five per month and I'm pleased to report that we've completed the work on the last joint verification airplane in Everett which now allows us to close our shadow factory and redeploy the people and facilities dedicated to that work. We're poised to move to seven per month this year provided our KPIs indicate a stable production system and they're currently looking very good. As we highlighted last quarter, we continue to work through seat certification issues affecting some deliveries and I expect this will be a challenge for us for the balance of the year. With the current cash balance and the production ramp status I feel we are well on our way to stabilizing the business even in the face of the tariff situation which I'll address in a moment. Now let me switch to the next priority which is
|
814
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
even in the face of the tariff situation which I'll address in a moment. Now let me switch to the next priority which is improving the development program execution. As I mentioned a quarter with EAC stability in defense is a good start, but our efforts run deeper than that. During the last quarter I mentioned that we had reached an MOA with the customer on the T7 program for which we termed active management, and we've since completed our first two incentive milestones associated with that agreement. On VC-25B we continue to work with the customer to revise the program plan to allow for an earlier first delivery while maintaining our focus on safety and quality. And we recently transferred our MQ-25 aircraft to our new production facility in Illinois to begin final assembly which is the last production step before we move to ground and flight test later this year. And this next quarter will be an important one for us as we begin to baseline the performance of our F-47 plan. On commercial development programs we reached authorization from the FAA to expand the 777X flight test activities to include additional aerodynamics, brakes, and engines. The aircraft are flying daily and performing well in flight testing. Along with the 777X, the 737-7 and the 737-10 continue with their certification programs and there is no change to our previously shared certification timeline on any of the commercial programs. So while there's still a tremendous amount of work to do across all of our development programs, I am seeing an improved sense of urgency around the baseline management and risk management on these programs. Now the third area of focus is changing the culture at Boeing and we've made some good progress there as well. In the quarter we had a series of employee meetings talking specifically about culture change. We formed an enterprise working group to help us refresh our values and behaviors and we've recently completed an all-employee survey the first in five years and got very constructive feedback on what's
|
815
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
and we've recently completed an all-employee survey the first in five years and got very constructive feedback on what's needed to improve the future of our company. We've introduced the new values and behaviors to the organization and we'll be incorporating those into our new performance management system, our leadership training, and leadership selection criteria. Our people are passionate about the culture change, so I really want to seize the moment to make the necessary changes within the company. Now the last area to discuss is building our future. The planned divestiture of portions of our digital aviation solutions business is an example of the portfolio streamlining that I highlighted on earlier calls. There are a couple more steps that we are considering in this regard to help us keep focused on the right products and capabilities for Boeing's future. And obviously the F-47 win is a key step for building our future, cementing our franchise in the fighter business. So that brings me to the current tariff environment and the impact to our plan. I would break this down into two categories. Input tariffs that affect our cost to manufacture our products and then the potential impact of retaliatory tariffs like those we're seeing in China. Brian will walk you through the financials but the input tariffs incurred in the first quarter were immaterial and we really didn't see any impact to deliveries in the first quarter. Much of our supply chain is based in the United States and many of our imports from Canada and Mexico are exempt under the USMCA agreement. We do have suppliers in countries subject to the new U.S. tariffs, most notably in Japan and Italy where our suppliers do significant structures work on our wide body airplanes. We are currently paying the 10% tariff on those components, but we should recover tariff costs for those aircraft that are subsequently exported, which is a large portion of our wide body. I hope over time that these tariffs can be resolved through negotiated agreements but until
|
816
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
a large portion of our wide body. I hope over time that these tariffs can be resolved through negotiated agreements but until that happens, we will have to manage our way through these increased input costs. The other issue is impact of potential retaliatory tariffs from other countries which could affect our ability to deliver aircraft. The only region that we have an issue with aircraft delivery today is China and due to the tariffs many of our customers in China have indicated they will not take delivery. Given the uncertainty we're taking a very straightforward approach to dealing with these deliveries. We have approximately 50 China deliveries in our plan for the balance of the year. We're in close communication with our China customers and we're actively assessing options for remarketing already built or in process airplanes. And for the nine airplanes not yet in the production system we're engaged with our customers to understand their intentions for taking delivery and if necessary, we have the ability to assign those positions to other customers. It's an unfortunate situation but we have many customers who want near-term deliveries so we plan to redirect the supply to the stable demand and we're not going to continue to build aircraft for customers who will not take them. We've bounded our exposure and until we get more clarity, we're going to do our best to keep the China situation from impacting our production flow. We put in place a conservative recovery plan this year anticipating some perturbations or risk so I feel really good about our overall plan for the year even though I expect the China situation will take away some of the headroom we've built with our strong first quarter deliveries at BCA. We continue to work this situation proactively with the administration and it's clear that they understand the importance of the aerospace industry to the U.S. economy and the role that Boeing plays as a top U.S. exporter. So before I wrap up my prepared remarks I want to recognize and thank our
|
817
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
the role that Boeing plays as a top U.S. exporter. So before I wrap up my prepared remarks I want to recognize and thank our employees for their work in the quarter. We've really had a good start to the year and I'm glad we put a conservative plan together that allow us to deal with the tariffs. Let me also give a special shout out to Matt Welch who is moving on to his new role as BCA CFO. He's done a great job for us so congratulations and thanks Matt for all you've done. Now let me hand it over to Brian to detail the operating results before we take your questions. Brian?
|
818
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
Brian West: Thanks Kelly. Good morning, everyone. Let's start with the total company financial performance for the quarter. Revenue was $19.5 billion up 18% primarily driven by higher commercial delivery volume. The core loss per share of $0.49 was a significant improvement compared to last year driven by higher commercial deliveries and improved operational performance across the business. Free cash flow was a usage of $2.3 billion in the quarter reflecting higher commercial deliveries and a working capital usage that improved compared to both the prior year and quarter. Our free cash flow was better than expectations shared last month driven by volume and favorable working capital timing. These financial results reflect only tariffs enacted as of March 31st which was not material. Turning to the next page I'll cover BCA. BCA delivered 130 airplanes in the quarter. Revenue was $8.1 billion and operating margin was minus 6.6% primarily reflecting higher 737 and 777 deliveries as well as lower period costs. BCA booked 221 net orders in the quarter. 777-9s and 2787-10 airplanes for Korean Air and 50 737-8 airplanes for BOCA. Backlog in the quarter ended at $460 billion which was up more than $25 billion sequentially. This includes more than 5,600 airplanes that translates over seven years of production and importantly the 737 and 787 are sold far into the next decade. Now I'll give more color on the key programs. The 737-program delivered 105 airplanes in the quarter including 33 in March. On production, the factory gradually increased rate during the quarter and monthly production was in the low 30s in March. Importantly the operational KPIs continue to progress and we still expect to be in a position to go to 38 per month over the next few months. Spirit continues to improve the quality and flow of fuselages which sets us up well for the reintegration and the deal is expected to close around mid-year. More broadly on the master schedule, we continue to make adjustments as needed and manage supplier by supplier
|
819
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
around mid-year. More broadly on the master schedule, we continue to make adjustments as needed and manage supplier by supplier based on inventory levels. Over the past year our buffer inventory has grown to promote stability across our production system. As production stabilizes and rates increase over time, we plan to deliberately return buffer inventory to more normal levels. Today we have about 37 737-8 built prior to 2023 which is down 25 from year end and includes 25 airplanes for customers in China. We still expect to complete the rework on these airplanes and shut down the shadow factory by mid-year. On the 7 and 10 inventory levels were stable at approximately 35 airplanes and certification timelines are unchanged. On 787 we delivered 13 airplanes in the quarter generally in line with expectations outlined on our last earnings call. The program continued to stabilize production at five per month in the quarter and we remain intent on demonstrating stability in the production system and supply chain prior to making the next rate increase to seven over the next few months. Today we have about 20 airplanes and inventory built prior to 2023 that required rework down five from year end. Four of these 20 are for customers in China. Importantly, we finished the rework and shut down the shadow factory in the quarter and expect to deliver about half of the remaining airplanes this year. Finally on the 777X the program took another important step in its certification timeline as it received approval from the FAA to expand flight testing activities. We'll continue to follow the lead of the FAA as we progress through the certification process and still expect first delivery in 2026. 777X inventory was up approximately 800 million in the quarter and will continue to grow as we move towards entering service as we've previously shared. Moving on to the next page and BDS. BDS books $4 billion in orders during the quarter and the backlog ended at $62 billion. Importantly in the quarter BDS was selected by the U.S. Air
|
820
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
in orders during the quarter and the backlog ended at $62 billion. Importantly in the quarter BDS was selected by the U.S. Air Force to design, build, and deliver its next generation fighter aircraft BF-47. This order was not included in our first quarter backlog pending the completion of the source selection and evaluation review process. Revenue was $6.3 billion down 9% on planned lower volume including the impact from commercial derivatives associated with the production restart. BDS delivered 26 aircraft in the quarter. Operating margin was plus 2.5% up 30 basis points compared to last year and reflected stabilizing operational performance in the quarter. We made important progress in 1Q and the game plan is to get BDS back to high single digit margins over time. Our core business remains solid representing approximately 60% of our revenue and performing in the mid to high single digit margin range. The demand for these products remains very strong supported by the threat environment confronting our nation and our allies. The roughly 25% of the portfolio that's primarily comprised of fighter and satellite programs operationally performance improved in the quarter which drove favorable margin trends. Lastly, on our fixed price development programs that represent the remaining 15% of revenue we continue to work to stabilize and mature these programs. This quarter's results reflected stabilizing operational performance, and we remain focused on retiring risk each quarter and ultimately delivering these mission critical capabilities to our customers. During the quarter the MQ-25 program successfully transported the first engineering development model aircraft to the new production facility in Illinois where it began final assembly. The last production step before ground and flight testing begin later this year. On the T-7A we achieved the first two EMD performance milestones outlined in the MOA that was finalized with the U.S. Air Force in January. This continues to be an important example of how we are working
|
821
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
the MOA that was finalized with the U.S. Air Force in January. This continues to be an important example of how we are working with our customers to find better overall outcomes for both parties. Overall the defense portfolio is well positioned for the future and we still expect the business to return to historical performance levels as we continue to stabilize production, execute on development programs, and transition to new contracts with tighter underwriting standards. Moving on to the next page and BGS. BGS continued to perform well delivering very strong financial results in the quarter. The business received $5 billion in orders and the backlog ended at $22 billion. Revenue was $5.1 billion stable year-over-year. Operating margin was 18.6% in the quarter up 40 basis points compared to last year on favorable performance and mix with both our commercial and government businesses delivering double-digit margins. In the quarter BGS delivered the 100 767-300 Boeing converted freighter to SF Airlines and received a modification contract from the U.S. Air Force to integrate electronic warfare systems for the F-15 Eagle. It remains a terrific long-term franchise focused on profitable capital efficient service offerings and continues to execute very well. Turning to the next page I'll cover cash and debt. Cash and marketable securities ended at $23.7 billion primarily reflecting the free cash flow usage in the quarter. Debt balance ended at $53.6 billion down $300 million due to the paydown of maturing debt and leaving 550 million of debt maturities remaining in the year. The company maintains access to $10 billion of revolving credit facilities all of which remain undrawn. We remain committed to managing the balance sheet in a prudent manner with two main objectives. First, prioritize the investment grade rating and second allow the factory supply chain to stabilize. As you saw yesterday, we entered into an agreement to sell portions of our digital aviation solutions business for $10.55 billion which is an
|
822
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
we entered into an agreement to sell portions of our digital aviation solutions business for $10.55 billion which is an important component of our strategy to focus on our core businesses and strengthen the balance sheet. Stepping back let me provide some additional context on a macro backdrop before getting into the free cash flow outlook. We continue to closely monitor recent policy developments and believe that the administration understands the aerospace industry's importance to our economy broadly and U.S. manufacturing jobs specifically and is focused on keeping our U.S. industrial base globally competitive for the long-term. Given our position as a significant U.S. exporter free trade policy across commercial aerospace remains very important to us. As noted recently on the supply side roughly 80% of our annual commercial supply chain spend goes directly to U.S. based suppliers and we'll work closely with all our suppliers to ensure continuity of supply and pursue options to mitigate cost pressures. Conversely on the demand side about 70% of our commercial deliveries this year are planned for customers outside the U.S. and importantly the company has a large and diverse backlog of over $0.5 trillion with our key commercial programs sold out into the next decade. Specifically on China, it represents approximately 10% of our commercial backlog and if we need to redirect supply to more stable demand the strong market backdrop across the rest of the world still supports our planned production rate increases. Regarding free cash flow, we set a conservative plan for the year and had a strong start operationally which we believe puts us in a position to largely offset any potential cash flow impact of China deliveries this year as well as higher expected input costs due to tariffs. Regarding deliveries our plan for the rest of the year was to deliver roughly 50 airplanes to customers in China. There is strong demand for these airplanes and we are actively assessing options should we need to redirect the 41 China
|
823
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
China. There is strong demand for these airplanes and we are actively assessing options should we need to redirect the 41 China airplanes that are already built or currently in production. We will continue to monitor the demand situation and if tariff related impacts expand beyond China, we would expect to see additional pressure. Broadly the markets we serve continue to be significant and our backlog of more than a $0.5 trillion demonstrates the strength of our core product portfolio. Long term these fundamentals underpin our confidence in managing the business with a long-term view built on safety quality and delivering for our customers. And before I open it up for questions, I too would like to thank Matt Welch for his partnership over almost four years and we all know they weren't easy four years. He's a terrific Boeing leader and we wish him all the best in his new promotion, and we welcome Eric Hill into the IR role. With that, we'll open it for questions.
|
824
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions]. Your first question comes from the line of Doug Harned from Bernstein. Your line is open.
Doug Harned: If we go back to the first Trump administration your negotiations on subsidies across the Atlantic led effectively to a zero-tariff environment for aviation. And you know when you look at the recent tariffs announced and under consideration, I mean we would say they do nothing positive for the industry. I expect if Guillaume Faury were on this call the two of you would probably be in violent agreement on this. But you commented earlier that the administration understands the importance of the industry, but can you describe how you and others are interacting with Washington to get around get out of this tariff environment and what are you hearing back? What's your sense on how this might evolve in the U.S. and even in Europe and China based on your interactions there?
|
825
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
Kelly Ortberg: Yes, Doug. Well, obviously, it's an important topic right now and very dynamic topic. I don't think a day goes by where we aren't engaged with someone in the administration including cabinets you know cabinet secretaries and up to POTUS himself. So this is a dynamic environment as you as you point out we've had the luxury of operating for decades actually since the 1979 civil aircraft aviation agreement on large aircraft in a tariff free environment. So we're spending a lot of time making sure the administration understands the implications of either short-term or long-term tariffs on not just our company but the overall aviation industry here in the U.S. I would just tell you that they understand they know this is extremely important to our trade to the trade balance. Aircraft are such a significant part of our trade surplus and if we see markets closing that's going to be a big a big challenge for us. So look I'm very hopeful that we get to some negotiated agreements here and that we can move forward. Right now China's our only problem and as we said in the prepared remarks, we're going to work our tail off to make sure that China issue doesn't implicate our recovery and particularly our stability in our production system. So we'll deal with that. Customers are calling asking for additional airplanes so this is really going to be just a short-term challenge for us to either have China reverse course and take the airplanes or get us to in a position to re-market those airplanes and as you know to re-market them we'll have to do some things like painting them and things like that. But having said that, look I can't predict where this is going to go. I don't know any better than anybody reporting. We do hear signs that indicate that negotiated settlements are there are opportunities for that. I just don't know the timing and so again we're going to take the actions we need to make sure if this takes a while we don't get into a situation where it impacts our recovery. The one thing that we have to
|
826
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
to make sure if this takes a while we don't get into a situation where it impacts our recovery. The one thing that we have to watch is to make sure we don't see more countries in a similar boat as where we are with China. You know we're watching the EU. You made the comment on our competitor, and I think you I would agree with you wholeheartedly that that both Guillaume and I would welcome a non-tariff environment for both of us. This isn't good for either company to be in this situation or the industry. So hey we're working through it. I can't tell you the timing of when this is going to all get resolved but I can tell you we're going to take proactive action and manage our way through it.
|
827
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
Operator: Your next question comes from the line of Myles Walton from Wolf Research. Your line is open.
Myles Walton: Congrats on the move Matt. You survived a lot. So Brian, I think in January you were expecting deliveries on the 37 in the low 400s and maybe 80 or so on the 787. Does that still that framework still hold with the 50 aircraft from not going to China specifically as Kelly mentioned?
Brian West: Thanks Myles. On the 37, yes, we still think that's the right ballpark of 400. You had a nice strong start to the year operationally and that should allow us to offset most of any delivery pressure that would come from the 25 airplanes already built in inventory and around six that are in production airplanes that we plan to deliver this year. And for the second quarter specifically we expect to deliver in the high 20s for April and the quarter should be more or less in line with 1QX China which is in the low to mid 90s. On the 87 you're also in the right ballpark. We also are having a nice start to the year and we expect to ramp to seven per month in the next few months and China would only be a handful of airplanes impacted. So we like the ballpark that you mentioned and for 2Q we've already delivered five so far in April and we expect 2Q to be a bit higher than where we were at in 4Q '24 delivery. So things are going pretty well. I think what's really important is any delivery timing won't disrupt our production rate increases on these programs and we're making really good progress operationally and we're tracking to achieve the right milestones that Kelly mentioned and both programs in the coming months.
Operator: Your next question comes from the line of Seth Seifman from JPMorgan. Your line is open.
|
828
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
Operator: Your next question comes from the line of Seth Seifman from JPMorgan. Your line is open.
Seth Seifman: Congratulations Matt. Just wanted to ask a follow-up question on tariffs on the cost side. I guess if there's anything you could say to kind of size if we're thinking about the two impacts being kind of the China impact and the cost impact maybe kind of sizing potentially those two impacts and then talking about the drawback process on the cost side. Do you need to maybe manage the supply chain a little bit on the cost side if there are suppliers down in the chain who can't handle this as well as you know some of the larger and more well-capitalized suppliers? And also how you deal with I gather you're going to get a push from certain suppliers to kind of push through tariffs that they have with different surcharges and anything you can say about that that process?
|
829
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
Kelly Ortberg: Yes, Seth. Let me start with the kind of the process and I'll let Brian kind of quantify it. So as you point out we do have the duty drawback opportunity and as you know about 80% of our airplanes go outside are delivered outside of the U.S. So we have the opportunity for those duties that we pay those tariffs that we pay to recover that when we deliver the aircraft. Now you know it creates a little bit of a cash flow timing issue that we'll have to work through. We are actively working as well with the supply chain because they don't have that opportunity. Their point of delivery is to us and that we in turn deliver the product outside of the U.S. So we are working to see if we can't -- if in effect allow them to piggyback on our duty drawback and that that requires you know accounting processes to make sure we can track things. And so we're working that right now. We do have some suppliers who've indicated they're going to have some pricing increases associated with that but it's not overly material and we're working through that. The thing I'm really trying to make sure we're focused on is making sure that an argument over a 10% tariff who's going to pay doesn't turn into a continuity of supply issues. So we really need to make sure that that people are buying and bringing in the parts that we're going to need and then we'll work through the financial implications. I'll let Brian kind of quantify that for you.
|
830
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
Brian West: Sure. So I think I'll start with the supply chain input costs and then I'll get to the China piece. On the supply chain side the net annual impact of higher tariffs on our input cost is manageable and within our plan it's less than $500 million annually. And here's how to think about some of the pieces in addition to what Kelly described. Yes, we have elevated inventory levels that are all pre-tariff. Aluminum and steel are typically one to two percent of the average cost of the airplane which is virtually all U.S. sourced. And with higher inventory levels and hedging strategies that one to two percent is even lower in the current environment. We do bullet buys on behalf of our supply chain partners and those could be subject to some price increases as tariffs move higher that we can't pass along. But that's a very small amount of money nothing to worry about. As Kelly said, we do have this duty drawback opportunity to get to that net a few hundred million dollars. And I would point out that we have a global trade and supply chain team that have decades of experience with tariffs and duty recovery. And when you're one of the world's biggest exporters we really have a good handle on this. So we feel confident in some of the ways that we've been describing this. I'd also say that keep in mind that over time any input related costs will work its way through to price escalators. So it should mostly neutralize over time. And then in addition to what Kelly said about the suppliers as you know many are on fixed price life of program contracts where the [importer] [ph] record does pay the tariff. And as Kelly said we're doing what we can to help them through this situation. As it pertains to China specifically. And we talk about 50 or so airplanes that it could be north of a billion dollars. But as I said it's all contemplated within a conservative plan that we put together. So we feel pretty good.
Operator: Your next question comes from the line of Scott Deuschle from Deutsche Bank. Your line is open.
|
831
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
Operator: Your next question comes from the line of Scott Deuschle from Deutsche Bank. Your line is open.
Scott Deuschle: Brian on the last call you seem to reference that the free cash flow usage for the year will be somewhere in the $4 billion to $5 billion range. I guess can you give an update on how you're thinking about that specific range as well as some further characterization of the free cash flow cadence as we move through the year. Thank you.
Brian West: Sure. Thanks Scott. So we start with the second quarter. So we expect the second quarter to be roughly in line with the first quarter usage. And as we've said we expect the second half free cash flow to turn positive and then accelerate as we exit the year driven by a few really important levers. The 737 production ramp to 38 per month and even potentially higher as we exit the year. Higher 737 delivery volume. We've got the 787 production ramp to seven per month and also potentially higher as we exit the year. We have the higher 787 delivery volume, and we have customer receipts that will be favorable. And those are offset by a couple of things. Higher investment levels including the 777X and the potential impact of both China and this net impact from higher input costs from tariffs that we've discussed. So in terms of the range that you mentioned we're not going to adjust that full year range right now. We're good with where it's at. We had a really good start to the year. We need to execute on the production rate increases and we need more clarity on China and tariffs more broadly. So give us a little bit of time to see how things play out. The good news is that as Kelly said, we deliberately built the year to account for some unknowns and we're still comfortable with the plan that we've outlined.
Operator: Your next question comes from the line of Sheila Kahyaoglu from Jefferies. Your line is open.
|
832
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
Operator: Your next question comes from the line of Sheila Kahyaoglu from Jefferies. Your line is open.
Sheila Kahyaoglu: Good morning, Kelly, Brian and thank you Matt so much. So maybe just on that last thought you know assuming the skyline is largely intact outside of China and there's no demand impact with tariffs. How are we thinking about production ramps outside 2025 with the 37 and the 87 rates and how you're watching the biggest risks in the supply chain in the master schedule and how that correlates to cash flow expectations as you continue to benefit from volume ramps but also on-time deliveries?
|
833
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
Kelly Ortberg: Actually let me take the demand side now. Let Brian comment. So we don't see any change in the overall demand here. Our backlog is well over $0.5 trillion. It's everybody wants the aircraft. So we're going to work through this China situation. Maybe have to redeploy some aircraft but we don't see any pullback whatsoever in demand for the aircraft. So our rate increase plan remains unchanged. We'll go to 38 a month here. We'll get to the stability and then our first rate increase will be from 38 to 42 and then we'll do five per month increments after that. So 42 to 47, 47 to 52. Those rate increases would be no earlier than probably six months in between. But again it depends on each one will require that we have stable KPIs and the more you move up the rate the more difficult it is to make sure you maintain stable KPIs. So if we go to one of those rates and we need to stay there for a little longer to be mature that's what we'll do. But I don't see any change in our long-term rate plans. All the KPIs on 787 right now are all green look good. So we'll make this next rate increase in the coming months on 787 and then there for future opportunities there as you know we've invested additional capital billion dollars here in our Charleston facility, that's where we are today to expand our production capacity here. So we definitely want to get the 87 back up to double digit production rates and none of what we're seeing right now is knocking us off those plans.
Brian West: And on the supply chain side as I mentioned we have a lot of inventory. Enough inventory that is there for us to achieve the rate that Kelly's mentioning and we've got really good alignment with our key suppliers. Fuselages, engines, everything looks pretty good. Yes, we have to get through some discreet moments around this tariff and ensuring the continuity of delivery which we'll work through as Kelly mentioned. But as we look a little further out good alignment, plenty inventory, feel pretty confident about supply chains out of it.
|
834
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
Operator: Your next question comes from the line of Scott Mikus from Melius Research. Your line is open.
Scott Mikus: Kelly, congrats on the F-47 win. I have a quick question there. There was a comment from the administration about the EMD phase being cost plus but there were some competitively priced options for LREP. So I'm just wondering are those options fixed price? Do they have inflation escalators built into them? How should we be thinking about the risk from those options?
Kelly Ortberg: Yes, hey Scott. On the F-47 we're not at liberty to disclose anything relative to the contract structure beyond what the Air Force has said. So the only thing I can say is, is what you've read there is the extent of our disclosure. Clearly, we haven't come off our strategy of ensuring we're entering into the appropriate contract type for the appropriate type of work. So I wouldn't worry that we've signed up to undo risks like we've done in some of our past fixed price programs. But that's about all I can say on that right now.
Operator: Your next question comes from the line of David Strauss from Barclays. Your line is open.
David Strauss: Hey Kelly. Could you maybe dig in a little bit more on the status of the six KPIs specifically the progress you're seeing there I guess maybe three months ago both on the MAX and 787. I think you had highlighted there was one on the 787 that was kind of out of line a little bit. If you could just touch on that. And then how you've gone about mitigating risk around the Jenkintown. the fire there and how do you feel like you know how you've got that kind of captured in the guidance as well. Thanks.
|
835
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
Kelly Ortberg: Okay. Hey look on the KPIs as I mentioned on 787 when we talked at the last earnings call we had one of the KPIs that was below threshold and that was in final ticketing the number of snags of final ticketing. That's all gone green. So we're looking really good. The 817 has done a really, really nice job of focusing on that. We are still burning down some rework associated with pre-strike level inventory aircraft. We're getting close to that. I switched to 737 now. And so we still have a little bit of work on one KPI and that's on rework relative to the 737 MAX. However, it's coming down -- the rework is coming down per our plan. So you know I feel pretty good that that as we continue to go through from the low 30s to 38 and we get the cleaner airplanes flowing through the factory that will actually be green on all of our metrics. So look as I sit here right now things really look good. We had as I said in my prepared remarks we had Secretary Duffy and the Acting Administrator Chris Rocheleau here in Seattle. They spent time off the floor talking to FAA people talking to our machinists and things look pretty good. I think we're really aligned on what we need to do to get to the rate increases. So you know so far so good. We can't claim victory. We got to get to 38 and show stable performance there. But our plan seems to be working and we'll make any adjustments we need to. Regarding the SPS fire the team has done a very, very nice job of reacting and jumping all over that issue. It's a combination of finding alternate source requalifying find an inventory and getting it in the right place. And it's not just us as you know it's some of our major suppliers as well who this impacts. I think we're going to be able to scramble our way through this. And I don't think we'll be at the inventory levels we want. But I don't see right now that any aircraft program is going to be held up over these fasteners. The team every time I meet with them they've burned down the open issues to fewer and fewer. And it
|
836
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
up over these fasteners. The team every time I meet with them they've burned down the open issues to fewer and fewer. And it looks like we're going to be able to manage our way through this. Now you know it's going to take a while to get this capacity back into the system. So we're going to just have to stay diligent as we as we manage this and particularly as we ramp up in rates.
|
837
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
Operator: Your next question comes from the line of Noah Poponak from Goldman Sachs. Your line is open.
Noah Poponak: Kelly, how did you reduce traveled work by 50% in a few months? And how did you have a positive defense margin despite the tanker news in the quarter? And really the bigger picture question there is, were some of these improvements inevitable with time or how much have you changed specifically since you've come on board with the blocking and tackling of the operating performance of the business? You've laid out how you're going to turn the battleship but curious if you could talk about the shorter term simpler blocking and tackling improvements you've made. And I thought maybe those would be two that would be helpful to hear more about.
|
838
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
Kelly Ortberg: Yes, so let me address the traveled work first Noah. First of all I don't build any airplanes so the team's doing a great job. It's not me that's what the team is doing. And we've put in a new a major new process in the in the way we're building the aircraft. For any before we move the aircraft and these are moving lines so before we move the aircraft we now have what we call a travel ready process. And what that requires that any work not done on station any traveled work has to be evaluated or safety risk assessments done against that. And if it induces safety risk like we saw with the door blowout we're not going to move the airplane. And the last I saw and I know these numbers are probably higher right now but the last I saw the numbers we had implemented that process on 800 airplane moves and we had stopped the airplanes 200 of those 800 times. So long winded that's how we're not getting the traveled work we're not traveling the airplane. And so if the work is not done we're getting it done we're holding the airplanes and getting it done and being much more disciplined. Now I'll also say our supply chain is much better shape than it was pre-strike. So we're not dealing with near the number of shortages that we were prior to that. Look on the defense side it is around you know this this new focus on working with our customers to get these contracts so that there is win-win. We made real good progress as I've talked about particularly like on the T-7, DC-25, the Starliner. I think we've got all these programs now well contained in terms of what our ETC now. I'm not claiming victory here yet. We've got a lot of work to do on the ETCs on a lot of these programs but I do think our discipline cost risk management and active management with our customers to get to a win-win on these programs is helping and obviously you know our goal here is to get our defense business back up to a high single digit kind of performing business and there's no reason I see we can't do that. So this is a good step but
|
839
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
up to a high single digit kind of performing business and there's no reason I see we can't do that. So this is a good step but we got to continue to have good EAC performance to make that happen and the team's really focused on doing that.
|
840
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
Brian West: And on the tanker specifically, Noah. That crack on the leading edge the team identified it very quickly determined it wasn't a safety of flight issue the population that they had to go do was small, the rework they could get to that very quickly. So it really wasn't a big deal. So it didn't disrupt the quarter at all.
Noah Poponak: Okay. I appreciate all the detail and Matt congrats on the promotion and thanks for all the help over the years.
Operator: Your next question comes from the line of Peter Arment from Baird. Your line is open.
Peter Arment: Congrats Matt. Hey, Kelly. I guess maybe just to wrap up a little bit on a lot of questions around the rate breaks. But when you get to 38 and obviously you're the FAA is reviewing the KPIs with you how do we think about that when you're moving beyond rate 42 or rate 47? Is that something you're doing in concert with the FAA? I know you mentioned to Sheila that you're looking for stability first on all those. Is it just keeping them in the loop or are they more involved in the process? Appreciate it.
|
841
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
Kelly Ortberg: No. Our current plan is that unless until the plans change we will go through the same process with each rate break. They have access to the metrics we have a digital dashboard they look at them on a daily basis. So it's not just looking at one point in time. They're regularly looking on these. So that's why I said when we go from 42 to 47, if we're not stable for a couple months we'll stay at that rate until we get the stability. And so we think the fastest we'd want to go would be about six months in between rate breaks but it really we do have to have a stable production system and they're going to be the same KPIs that we're using on the initial rate break. I said this last quarter and I think it's going to still be true is that I think the first rate break will be maybe take the longest just because it's not something we've collectively done before. I think we've got a good plan to do it but that may take a little while to get through that plan then I think it's going to be much more standard work. And we've always had a process with the FAA we call it capstone reviews where we do a major FAA review before we go higher in a rate increase. So this isn't really a new thing to sit down with the FAA as we go through rate increases we just have a new process here to do it.
Operator: Your next question comes from the line of Robert Stallard from Vertical Research. Your line is open.
Robert Stallard: Congrats Matt on the move. Quick question on the sale you announced yesterday. Brian, I was wondering if you could give us some idea of what the impact could be on future EBIT and free cash flow dilution as this exits the business. And what you expect your net cash proceeds to be after tax from the sale. Thank you.
|
842
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
Brian West: Thanks Rob. So on the margin question. This is not going to disrupt our long-term view is to be in the mid double digit margins for the business it's just it's just not very big impact. So not worried about that at all and the service business will continue to perform in that grow in the mid single digits revenue and deliver nice mid teen margins. So that'll be consistent. This is nothing to do with that. In terms of the deal itself the there's not a lot of leakage on this, so you can think about it being 10 billion net so it's going to be pretty close to the full purchase price. And then I'd also add that the way that this deal got done is that it's all cash. So it's important to know that we're not going to take any risk between signing and closing which I think is a good for the company and good to get this behind us.
Matt Welch: And Rob, we have time for one final question.
Operator: Certainly your final question comes from the line of Richard Safran from Seaport Research Partners. Your line is open.
Richard Safran: Matt, congrats. I think you guys have talked several times about your portfolio shaping I thought maybe you'd update us on where the Jeppesen sale leads you as you look forward. Is there anything else that you're considering on any other items on the list? And on Jeppesen specifically, I think it's a pretty important digital asset so I was just wondering how you think about where to set the perimeter of the deal. I was wondering if you kept what you needed to ensure you have a strong digital capability going forward. Thanks.
|
843
|
BA
| 1
| 2,025
|
2025-04-23 10:30:00
|
The Boeing Company
| 370,857
|
Kelly Ortberg: Yes. So that's a good question. We spent an extraordinarily long time looking at the boundary of this and ensuring that that we're retaining access to everything we need for the future of our aircraft. You're right it's a great digital asset. We'll continue to do business with Jeppesen even post divestiture. It's a great asset. But I can assure you that, all the things that we need for the success of our cockpits, and our future aircraft support and maintenance, we've retained either access to that or it was outside of the perimeter of what we're talking about in the divestiture. We do have a couple more, Rich, that we're looking at. I would say that they're probably not going to be as big as Jep but we've got a couple more things that I'd like to action in the portfolio. I am done with the review, so I kind of have our mind on what we need to do here. I think a couple more smaller activities are probably in the cards and we'll just have to see how those play out over time.
Operator: And that concludes the Boeing Company's first quarter 2025 earnings conference call. Thank you for joining.
|
844
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Operator: Good day, everyone, and welcome to today’s Q4 Bank of America Earnings Announcement. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. Please note today’s call will be recorded. And I will be standing by should need any assistance. It is my pleasure to turn the conference over to Lee McEntire. You may begin.
Lee McEntire: Good morning. Thank you. Welcome, and thank you for -- coming to the call to discuss our fourth quarter results. Our earnings release documents are available on the Investor Relations section of the bankofamerica.com website. And they include the earnings presentation that we'll make reference to during this call. I hope everyone's had a chance to review the documents. Our CEO, Brian Moynihan, will make some opening comments before Alastair Borthwick, our CFO, discusses the details of the quarter. Let me just remind before we start that we may make forward-looking statements and refer to non-GAAP financial measures during the call. Forward-looking statements are based on management's current expectations and the assumptions that are subject to risks and uncertainties. Factors that may cause our actual results to materially differ from expectations are detailed in the earnings materials and the SEC filings available on the website. Information about non-GAAP financial measures, including reconciliations to U.S. GAAP can also be found in our earnings materials that are available on the website. So with that, I'm happy to turn the call over to Brian.
|
845
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Brian Moynihan: So good morning, everyone, and thank you for joining us. Before we begin today, I just want to express our deep concern for our communities, clients, and teammates impacted by the California wildfires. Our top priority, of course, is ensuring the safety and welfare of our team and helping our clients and customers. Our imperturbable Market President Raul Anaya is leading our team out there. We have teams on the ground assisting in any way we can and are monitoring of the situation to extend support and resources. So far, we have activated our Client Assistance Program, donated $1 million in disaster relief to the American Red Cross, additional contributions to the L.A. Food Bank and the L.A. Chamber of Commerce Small Business Efforts. With that, let's turn to earnings starting on page two of the presentation. This morning, we reported $6.7 billion in net income, that is $0.82 in EPS for the fourth quarter. That was a solid finish to another good year at Bank of America. We grew revenue on a year-over-year basis in every category in quarter four. We saw good loan and deposit growth, and Alastair is going to walk you through some of the details of the quarter in a moment, but I want to thank our team for another great year. For the full-year of 2024, we generated $102 billion of revenue and reported net income of $27.1 billion of EPS of $3.21. We produced 83 basis points return on assets and 13% return on tangible common equity. We generated these results working from a strong balance sheet that allowed us to support clients and economies continue to grow. The economy appears to be now settled into a 2% to 3% GDP-type growth environment. It has healthy employment levels in the resilient consumer. The immensity of the American consumer can be seen in our data. So far in the first two weeks in January, they're spending money at 4% to 5% clip over last year, similar to what they did in the fourth quarter. In our business side, the clients are profitable, they're liquid, and seeing good productivity.
|
846
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
they did in the fourth quarter. In our business side, the clients are profitable, they're liquid, and seeing good productivity. We ended the year with $953 billion in liquidity. We also ended with $201 billion of regulatory CET1 capital and a CET1 ratio of 11.9%, leaving us nearly 115 basis points of excess capital as we begin 2025. For Bank of America, the year was characterized by a few important highlights that played out as expected and were consistent with our communications to you throughout the year. First, we saw net interest income bottom out at $13.9 billion on an FTE basis in the second quarter of 2024. We ended the year with a fourth quarter on the same FTE basis at $14.5 billion, then that was a bit better than we expected. This obviously provides a great starting point for 2025, and based on the assumptions Alastair is going to discuss a little later, we should report record NII in 2025. So how did we do that? We drove organic growth in all the businesses, and that we have highlighted on Slide 3. We saw continued growth in net new checking, new households, new companies, and commercial banking growth in our institutional markets business. This organic activity enabled us to grow loans and deposits at a pace we believe is to be ahead of our industry average and our peers. A key for us, obviously, is a growth in our deposit franchise. If you look at Slide 4, you can see we've now grown deposits for six consecutive quarters. In the most recent quarter, we saw growth in consumer balances and stability around non-interest-bearing balances across all the businesses. We continued to price in a disciplined manner, and rates paid moved lower this quarter across the board. Overall, rate paid on deposits moved from 210 basis points in the third quarter to 194 basis points this quarter. And we're lower in the fourth quarter, we're lower in every business segment. On the loan side, consumer loans grew in every category-linked quarter. Commercial loan demand continued to build off the strengths we saw in the
|
847
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
consumer loans grew in every category-linked quarter. Commercial loan demand continued to build off the strengths we saw in the third quarter of 2024, and commercial loans grew 5% year-over-year for the fourth quarter, and a much faster annualized pace when comparing the third quarter to the fourth quarter of 2024. So back to Slide 3. In our wealth management business, we added 24,000 new households in 2024. We ended the year with $6 trillion in total client balances that we manage for people in America across our global wealth and consumer businesses. Our consumer investments team, what we call Merrill Edge, crossed a new milestone this quarter and now sits in excess of $518 billion in balances. Investment banking gained share of industry revenue in 2024. Our sales and trading team put up the 11th straight quarter of year-over-year revenue growth and achieved a new full-year record of nearly $19 billion in revenue. As the quality stabilized and remained strong, with net charge-offs declining modestly from third quarter. Early in the year, we highlighted that our expectation on consumer credit is that they would stabilize to normal level. And on commercial office losses, they would trend down during the year. We saw both those trends continue into quarter four. On the expense side, we continue to invest in our franchise. And even though spending increases in brand, people, and technology, and strong fee growth, which drove incentive and transaction processing costs higher, we managed to create operating leverage in the fourth quarter. Our digitalization and engagement expanded across all our businesses. We saw more than 14 billion logins to our digital platforms in 2024. Our Erica capability surpassed 2.5 billion interactions from its inception. And our CashPro app surpassed $1 trillion in payments made through the app in 2024. It's also worth noting that digital sales in our consumer product areas crossed 60% in the fourth quarter again. You can see all these trends in our industry-leading digital disclosure on
|
848
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
areas crossed 60% in the fourth quarter again. You can see all these trends in our industry-leading digital disclosure on Slides 26, 28, and 30 in the appendix. All the success in balance sheet straights allowed us to deliver more capital back to our shareholders. We returned $21 billion of capital to the shareholders in 2024, which was 75% more than 2023 and included an 8% increase in the common dividend. So in summary, for both the fourth quarter and for the year, we enjoyed good profitability, we drove healthy returns, we saw good organic client activity across all the businesses, we continue to manage the risk well and increase the capital delivered back to our shareholders. And we positioned ourselves well for growth in 2025. I want to again thank my team for continuing to drive another year of responsible growth. And with that, I'll turn it over to Alastair.
|
849
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Alastair Borthwick: Thank you, Brian. And I'm going to start on Slide 5 of the earnings presentation, because it will provide just a little more context on the quarter. For the fourth quarter, as Brian noted, we reported $6.7 billion in net income or $0.82 per share. And before we talk about comparisons between periods, I just need to remind you that our fourth quarter 2023 GAAP net income number included two notable items. In the fourth quarter of ‘23, first, we recorded $2.1 billion of pre-tax expense for the special assessment by the FDIC to the industry to recover losses from the failures of Silicon Valley Bank and Signature Bank, and that reduced EPS last year by $0.20. Second, we recorded a negative pre-tax impact to our market-making revenue of approximately $1.6 billion related to the cessation of BSBY as an alternative rate, and that reduced earnings per share last year by $0.15. So when you adjust for the large FDIC assessment and the BSBY cessation charge, fourth quarter ‘23 net income was $5.9 billion or $0.70 per share. On Slide 6, we note some of the highlights of the quarter and we reported revenue of $25.5 billion on a fully taxable equivalent basis, up 15% from the fourth quarter of ‘23. And if you exclude the fourth quarter ‘23 BSBY cessation charge, our revenues grew 8% year-over-year. As Brian said, all the revenue items are showing improvement year-over-year. NII grew 3%. Investment banking grew 44%. This quarter, our $4 billion of sales and trading revenue marked a fourth quarter record, and it grew 10% from the year ago period. And investment brokerage fees rose 21%, with both assets under management flows and market levels contributing nicely to the growth. Our card income and service charges grew 7%. Non-interest expense was $16.8 billion and was up when adjusted for the FDIC special assessment driven by incentives paid for the strong revenue growth as Brian noted and the related activity costs that comes with that. Expense also included additional investments in people, technology, and
|
850
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
and the related activity costs that comes with that. Expense also included additional investments in people, technology, and brand with some major partnerships announced recently. And it included what we expect to be the peak in quarterly costs associated with enhancing our compliance costs and controls. The good news is we created operating leverage in the quarter. Provision expense for the quarter was $1.5 billion and was consistent with the previous two quarters. And lastly, returns in the fourth quarter were 80 basis points of ROA and 13% return on tangible common equity. Back to the balance sheet on Slide 7. We ended the quarter at $3.26 trillion of total assets, down $63 billion from the third quarter, driven by seasonally lower levels of client activity in global markets, while loans across the businesses grew $20 billion in the quarter. Otherwise in the quarter, the investments of our excess liquidity saw a $9 billion reduction in hold to maturity securities. And at the same time, the combination of shorter-term liquidity investments of cash and available for sale securities increased $28 billion. On the funding side, total deposits grew $35 billion on an ending basis as both interest bearing and non-interest bearing grew. Long-term debt fell $14 billion driven by net redemptions and valuations, and global markets funding declined in line with assets. Liquidity remains strong with $953 billion of global liquidity sources. That is up modestly compared to the third quarter, even as we paid down some debt and retired some preferreds. Shareholders' equity was flat at around $295 billion. And within all of that, we returned $5.5 billion of capital back to shareholders with $2 billion in common dividends paid and the repurchase of $3.5 billion in shares this quarter. Tangible book value per share of $26.58 rose 9% from the fourth quarter last year. Turning to regulatory capital, our CET1 level improved to $201 billion and the CET1 ratio rose to 11.9%, remaining well above our new 10.7% requirement.
|
851
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
our CET1 level improved to $201 billion and the CET1 ratio rose to 11.9%, remaining well above our new 10.7% requirement. Risk-weighted assets increased modestly as increases in loans were mostly offset by lower RWA supporting our global markets client activity. Our supplementary leverage ratio was 5.9% versus a minimum requirement of 5%, which leaves some capacity for balance sheet growth, and our $460 billion of total loss absorbing capital means our TLAC ratio remains comfortably above our requirements. Let's turn to Slide 8. We can go a little deeper on loans by looking at average balances. And loans in the fourth quarter of $1.08 trillion improved 3% year-over-year, driven by solid commercial loan growth. Overall, commercial loans grew 5% year-over-year. And importantly, this included an 8% drop in commercial real estate loans. Commercial loans excluding commercial real estate grew 7% year-over-year, and the consumer loans grew modestly both linked quarter and year-over-year. As Brian said, on a linked quarter basis, every category of consumer lending grew, and you can see that at the bottom of Slide 8. If we turn our focus to NII performance and use Slide 9, regarding NII on a GAAP, non-fully taxable equivalent basis, NII in Q4 was $14.4 billion. And on a fully taxable equivalent basis, NII was $14.5 billion. Several quarters ago, we signaled our expectation that NII would trough in the second quarter of 2024 and begin to grow from there. And this represents now our second quarter of NII growth. And we expect that growth to continue in 2025. In fact, if you look at the two quarters after the inflection point, NII is already growing at a 5% rate. Fourth quarter NII on a fully taxable equivalent basis increased by $399 million from the third quarter, driven by a number of factors. First, it was led by improvement in deposits across the businesses. And even as deposit balances increased linked quarter, our interest expense on those deposits declined by $600 million. Loan growth and fixed rate asset repricing
|
852
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
linked quarter, our interest expense on those deposits declined by $600 million. Loan growth and fixed rate asset repricing also benefited us again this quarter. With regard to a forward view, interest rate expectations continue to drive volatility and predictability, but we'll provide some thoughts for future NII. We expect to start the year in the first quarter with NII modestly higher than the fourth. Remember that the first quarter has two fewer days of interest and that's roughly the equivalent of about $250 million of NII equivalent. So even with that, we expect to grow modestly. Then we expect that growth to increase through the year to the point where it could be 6% to 7% higher in 2025 than 2024. We expect to exit the year at least $1 billion higher in the fourth quarter and that would put us in a range of $15.5 billion to $15.7 billion on a fully taxable equivalent basis, and that's obviously significantly higher than the Q2 '24 trough of $13.9 billion. I have to note the following assumptions. First, we assume that the current forward curve materializes. And while the interest rate curve has changed significantly over a fairly short period of time, as of the 10 of January, the curve was expecting only one rate cut in 2025 that may come in May or June. Based on our more recent growth experienced, we're assuming loan and deposit growth in 2025 that's higher than 2024, and more consistent with growth in a 2% to 3% GDP environment. The other elements of anticipated growth in NII expected are the benefits of asset repricing as fixed rate securities and loans and swaps roll off and those get repriced at higher rates. And those themes all remain consistent with our prior conversations with you in the last several earnings calls. With regard to interest rate sensitivity, on a dynamic deposit basis, we provide a 12-month change in NII for an instantaneous shift in the curve, above or below the forward curve. And on that basis, a 100 basis point increase would benefit NII by roughly $1 billion, while a decrease
|
853
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
the forward curve. And on that basis, a 100 basis point increase would benefit NII by roughly $1 billion, while a decrease of 100 basis points would decrease NII over the next 12 months by $2.3 billion. Lastly, note that our slide showing the trended investment of excess deposits is in our appendix. It's on page 21. Deposit levels grew to $870 billion over loans at the end of Q4, and that's an incredible source of value for shareholders. And $649 billion, or 54% of our excess liquidity, is now in short-dated cash and available for sale securities. The longer-dated lower-yielding hold-to-maturity book continues to roll off, and we continue to reinvest in higher-yielding assets. Okay. Let's now turn to expense, and we'll use Slide 10 for the discussion. We reported $16.8 billion in expense this quarter. And the fourth quarter of '23 included the large FDIC special assessment charge and excluding that, expense increased. The increased expense from prior periods was driven by a number of factors and was partially offset by a roughly $300 million release of prior period accruals for the FDIC special assessment. Let's talk about the drivers of the expense. First, in regard to revenue, our markets-related businesses of investment banking, investment in Brokerage and Sales & Trading, those were up 20% year-over-year. Incentives for the firm were up 15% versus the fourth quarter of '23 and were in large part related to these market-related revenue streams. On investments that we made, we added bankers and advisers across most of our businesses in 2024, and we also increased investments in our brand with significant sponsorships like the Masters in FIFA to name a few. And we increased our investments around technology as well as financial centers. This quarter alone, we added 17 financial centers with nine of those in our new expansion markets. We're a growth company, and we continue to invest in our future. As far as head count goes, we've managed our head count carefully, and we've held it fairly flat through the 4
|
854
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
in our future. As far as head count goes, we've managed our head count carefully, and we've held it fairly flat through the 4 quarters of 2024 at around 213,000 people. Lastly, we incurred additional costs to accelerate work on compliance and controls. As you likely saw in late December, the OCC issued a compliance consent order to Bank of America, and that's a result of exams done more than a year ago. This orders about correcting or enhancing certain deficiencies in some aspects of our processes that existed at the time. The order doesn't limit any of our growth plans and the order acknowledges we began taking corrective actions before the order was announced. And as a result of the work in process, we increased our resources substantially in the second-half of 2024 and those costs are already embedded in our quarterly run rate. Okay. Let's go back to expense and how to think about a forward view. First, most importantly, we remain focused on growing the company and driving operating leverage. Second, we expect the first quarter to include some normal seasonal elevation and we believe this amount will be roughly $600 million to $700 million, primarily for payroll tax expense. So we think $17.6 billion is a good number to expect for Q1 and before seasonally declining in Q2. And that's all part of our expectation that expense should be roughly 2% to 3% higher in 2025, compared to 2024. Let's now move to credit and turn to Slide 11, where you can see net charge-offs of a little less than $1.5 billion, improving modestly compared to Q3. That's the fourth quarter now that net charge-offs are around $1.5 billion. We've seen consumer losses in a pretty stable range of $1 billion to $1.1 billion over those past few quarters. And on the commercial side, we saw losses of $359 million, which is down from the third quarter, driven by the continued decline in commercial real estate office losses. Net charge-off ratio this quarter was 54 basis points, down 4 basis points from the third quarter. We don't see overall net
|
855
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Net charge-off ratio this quarter was 54 basis points, down 4 basis points from the third quarter. We don't see overall net charge-offs or the related ratio changing much in 2025, without much change in current GDP or the employment environment, we expect the net charge-off ratio to be in the range of 50 to 60 basis points of loans for 2025. Q4 provision expense was $90 million lower than Q3 at $1.5 billion as reserve levels remain constant. And as it relates to reserve levels on a weighted basis, where reserved for an unemployment rate a little below 5% by the end of 2025, and that compares to the most recent 4.1% rate reported. On Slide 12, we highlight the credit quality metrics for both consumer and commercial portfolios. And there's nothing really noteworthy here that I want to highlight on this page. So let's move to the various lines of business starting on Slide 13 with Consumer Banking. That business made nearly $11 billion or 40% of the company's earnings in 2024. In the fourth quarter, Consumer Banking generated $10.6 billion in revenue and $2.8 billion in net income. Both grew modestly from the fourth quarter of '23 as fee improvement for card and service charges is now being complemented by the growth in NII. Consumer Banking continued to deliver strong organic growth with high-quality accounts and engage clients and they achieved a new record of client experience scores in December. The organic growth activity noted on Slide 3 includes more than 200,000 net new checking accounts, which now takes us to six years' worth of quarter-after-quarter growth. And we show another strong period of card openings and investment account growth. Investment balances grew 22% to $518 billion with full year flows of $25 billion and market improvement throughout the year. Expense rose 8% as we continued investments in our business. The biggest story in consumer this quarter is deposits because these are the most valuable deposits in the franchise. And in the last six months, we believe we've seen the floor begin to
|
856
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
these are the most valuable deposits in the franchise. And in the last six months, we believe we've seen the floor begin to form after several periods of slowing decline. Consumer Banking deposits appear to have bottomed in mid-August at around $928 billion and ended the year at $952 billion on an ending basis. Looking at averages, you can see then the deposits grew $4 billion from the third quarter to $942 billion, all while our rate paid declined to 64 basis points. Finally, as you can see in the appendix, page 26, digital adoption and engagement continue to improve and customer satisfaction scores rose to record levels, illustrating our client appreciation of enhanced capabilities from these investments. On Slide 14, we move to Wealth Management, where the business had a very profitable year, generating $4.2 billion in earnings from nearly $23 billion in revenue. In 2024, our Merrill Lynch and Private Bank advisers added another 24,000 net new relationships. And the professionalism of these teams earned them numerous best-in-class industry rankings as you can see on Slide 27 in the appendix. With a continued increase in banking product usage from our investing clients, the diversity of revenue in the wealth business continues to improve. The number of GWIM clients that now have banking products with us continues to grow. And at this point, it represents more than 60% of our clients. Importantly, about 30% of our revenue remains in net interest income, which complements the fees earned in our advice model and those have also grown. Net income rose 15% from the fourth quarter of '23 to nearly $1.2 billion. In the fourth quarter, we reported revenue of $6 billion, growing 15% over the prior year and led by 23% growth in asset management fees. While expenses were up year-over-year, they grew slower than revenue creating the operating leverage in the business. Business had a 26% pretax margin and generated a strong return on capital of 25%. Average loans were up 4%, driven by growth in custom lending,
|
857
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
pretax margin and generated a strong return on capital of 25%. Average loans were up 4%, driven by growth in custom lending, securities-based lending and a pickup in mortgage lending. Deposits grew 2% from the third quarter, and the teams were quite disciplined on pricing of those deposits. Both Merrill and the Private Bank continued to see strong organic growth. And that helped to produce excellent asset under management flows of $79 billion this year, reflecting a good mix of new client money, as well as existing clients putting money to work. We also want to draw your attention to the continued digital momentum that you'll find on Slide 28. Because, for example, three quarters of Merrill bank and brokerage accounts were opened digitally this quarter. Slide 15 shows the Global Banking results and this business generating $8.1 billion or 30% of the company's earnings in 2024, and it continues to be the most efficient business in the company at less than 50% efficiency ratio. The business saw a nice rebound in investment banking fees in 2024, which we expect to continue in 2025. In Q4, Global Banking produced earnings of $2.1 billion. Pretax pre-provision results were flat year-over-year as improved investment banking fees offset lower NII and higher expense. The total earnings were down 13% year-over-year, driven by higher provision expense that came as a result of prior period reserve release. Investment banking fees were $1.7 billion in Q4, growing 44% year-over-year. This was led by mergers and acquisitions. We also saw strength across debt capital markets fees mostly in leverage finance and in equity capital markets fees and we finished the year strong, maintaining our number three investment banking fee position. The fourth quarter saw a strong momentum as the election results provided a lift to sentiment for a more pro-business climate and expectations for more deals to be completed. Expense in this business increased 6% year-over-year, driven by the 13% growth in non-interest income and continued
|
858
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
completed. Expense in this business increased 6% year-over-year, driven by the 13% growth in non-interest income and continued investments in people and technology. The balance sheet saw good client activity, and it was muted somewhat by the strength of the U.S. dollar. Year-over-year flatness in Global Banking loans includes this foreign exchange impact and a $6 billion decline in commercial real estate from paydowns. Otherwise, loans in Global Banking were up 2%. Deposits have been growing for many quarters now with our commercial and corporate clients. And total global banking deposits are now up 10% year-over-year, reaching a new record. So we're seeing strong growth across all the categories from our corporate and commercial clients all the way from the larger end the business banking on the lower end. And we also saw a 10% growth in our international deposits. Turning to Global Markets on Slide 16, I want to focus my comments on results excluding DVA as we normally do. Our team continued their impressive streak of strong revenue and earnings performance. They achieved operating leverage, and they continue to deliver a good return on capital. For the year, record sales and trading results of nearly $19 billion grew 7% from 2023 and they've been growing consistently now on a year-over-year basis for almost three years. This led to $5.7 billion in full-year profits and represents more than 20% of the company's full-year results. In the fourth quarter, earnings of $955 million grew 30% year-over-year. Revenue and again, this is ex DVA, improved 15% from the fourth quarter of '23, as both Sales & Trading and Investment Banking fees improved nicely year-over-year. Focusing on sales and trading ex DVA, revenue improved 10% year-over-year to $4.1 billion. This is the first time we've recorded more than $4 billion in our Q4 results and it included Q4 records for both FICC and Equities. FICC grew 13%, while equities improved 6%, compared to the fourth quarter '23. FICC benefited from tighter credit spreads as well
|
859
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
grew 13%, while equities improved 6%, compared to the fourth quarter '23. FICC benefited from tighter credit spreads as well as increased volatility in interest rates, while equities benefited from increased activity around the U.S. election. Year-over-year expenses were up 7% on revenue improvement and our continued investment in the business. And then on Slide 17, you can see all other with a loss of $407 million in the fourth quarter. We spoke earlier about the fourth quarter ‘23 charges for BSBY and the FDIC special assessment charge. Their reversal impacts the comparisons on revenue, expense and net income in this segment. Otherwise, there really isn't anything significant to report here. Our effective tax rate for the quarter was 6%, and excluding discrete items and the tax credits related to investments in renewable energy and affordable housing, the effective tax rate would have been approximately 26%. Looking forward, we expect the tax rate for 2025 to be in a range of 11% to 13%. And this just includes our expectation for higher expected earnings in 2025 and relatively stable tax credits. Finally, this quarter, on page 18, we thought it was important to summarize some of the guidance points we talked through this morning, and we hope you'll find this page helpful. So in summary, we're looking for a strong growth in NII, and we'll look to both continue important investments in the franchise and drive operating leverage as we grow throughout the year. We aren't expecting much movement around credit based on a pretty solid economic outlook. And we remain with a very strong balance sheet with excess capital that we can deploy to grow the business and deliver back to shareholders as appropriate. So with that, I'll stop there. I thank everybody, and we'll open it up for Q&A.
|
860
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Operator: [Operator Instructions] And we'll take our first question from Steven Chubak with Wolfe Research. Your line is open.
Steven Chubak: Hi, good morning, Brian. Good morning, Alastair.
Brian Moynihan: Good morning.
Steven Chubak: So wanted to start off, Alastair, with maybe unpacking some of the drivers of the NII growth in '25. How much of the build that you're guiding to is attributable to loan growth versus some rate or repricing tailwinds, runoff of legacy swaps, what have you? And does that acceleration in NII you cited for the second-half continue into '26 given some of those tailwinds should remain in place beyond '25?
|
861
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Alastair Borthwick: Well, first of all, I admire you asking about '26. I'm always reluctant to talk about the back half of '25. So I'll leave '26 for another time. But we don't have a whole lot of news, Stephen, relative to what we talked about in the prior quarters. We're obviously pointing right now to deposit growth in particular because it's beginning to get back to something more normal. There was a period there where deposit balances were declining as people got back to something more normal in their accounts. But we're highlighting here consumer found its floor in August, wealth found its floor in July. And that's giving some support then as we grow deposits. That's helping us with the NII growth. So that hasn't changed. It's just that now we've got successive quarters of growth that we can actually point to. The loan growth that you asked about is interesting in that -- there were several quarters there where we were bouncing around flattish on loans. In Q2, we added $9 billion of loans. In Q3, we added $19 billion. In Q4, we added $20 billion. So the loan growth has picked up a little bit. We can sort of see a little more optimism with clients, a little more activity, a little more demand from clients for loan growth. So those two things, a little more confidence around deposit growth, a little more confidence around loan growth, those obviously compound through the course of the year. So that will help us in the back half of '25. And then as you pointed out, we're still a beneficiary of the fixed asset repricing. That comes from some of the old loans that are on our books that come off in 2025 and we reprice. And then we've got some cash flow swaps that also will mature through the course of the year. So that's what leads us to this idea of we think the NII growth will accelerate to 6% to 7% and for the full-year. So a little bit of it -- a little bit faster in the back half of the year, we kind of just see that, but that's what gives us the confidence on NII.
|
862
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Steven Chubak: That's great, Alastair. And maybe a follow-up for Brian. Just at a recent conference, you spoke about the expectation of delivering 200 bps of sustainable operating leverage, laying out an algorithm where revenues grew 4% to 5%, expenses grow 2% to 3%. What gives you confidence in that ability to deliver that level of top line growth on a sustainable basis? Just want to unpack that a little bit further.
|
863
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Brian Moynihan: So I think what gives us confidence, we have periods with stable rate environment, a stable economy, growing at a slower rate than it is now. And having produced that for five years in a row, I think it was by quarters or something like that. And so it's not something we haven't done. But if you think about the current environment, what's driving is different. Our revenue growth is growing at twice that rate plus and the expense growth is growing close to that number. But when you get to higher growth rates, especially where it's coming from Wealth Management business, market-based business, businesses in investment banking, it attaches a higher sort of instantaneous expense. And yet it still produces even a little bit of operating leverage at a higher growth rate, a good after-tax, a good EPS result, a good net operating income results. So there's different times, different models. This is a model where revenue is growing faster than it might grow all the time in more normalized environments, but the business is coming from are those businesses which have the quickest move relative to expense. Giving you an example of that of the normalized last year's expense and think about our expectations from '23 to '24 and you look at the growth rate, a big part of the growth rate in expense about 45% to 50% of it is the incentives to the wealth management teammates, which is a good thing. And so that means revenue is growing, and we're taking about half of that in. And if you look at the other pieces added to that. So Steven, it's simply put, we did it before. We know we can do it. You can see underlying setup. And as you see NII kick in the consumer business, which is more incrementally profitable because of NII, you see that kick in and you see the expense base there flattening out. And you see the revenue base of the company broaden out, you'll see that we'll get back to the operating leverage that we expected, albeit it may be a little slower year-over-year growth rate unless you're going to tell the
|
864
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
leverage that we expected, albeit it may be a little slower year-over-year growth rate unless you're going to tell the market, it's going to go up 25%, 30% every year and drive the wealth management. When that slows down to a more normal growth rate that will slow down its expense growth rate also, therefore, you'll see the opening up at that level. So it's not something we make up. It's something we put in our operating principles and it's something we have done a lot of quarters, but we have to sort of get the stability in the relative business position.
|
865
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Steven Chubak: That's great color. Thanks so much for taking my questions.
Brian Moynihan: And Steve, the easiest thing to think about is headcount. At the end of the day, our costs are all people, and that's been relatively stable, and that will start to flow through because during the course of last year, we basically kept the head count relatively stable. We had some offbeat expenses that we had to deal with, but now we're sort of settling into that 213,000 level people with the takeout on stuff through operating excellence and putting in on stuff into quiet coverage, expanding our pipes to draw more marketing, more client coverage, more technology investment. So we always are shifting expenses, and that's how we make that operating leverage happen.
Steven Chubak: That's a really good point. Thanks for the additional headcount nugget, Brian. Much appreciated.
Operator: We'll move next to John McDonald with Truist Securities. Your line is open.
John McDonald: Hi, good morning. Wanted to ask as a first question, just a follow-up to Steve's NII questioning. Alastair, is the deposit growth in the model that you've laid out the year being used to pay down more expensive funding? You've talked about the ability to kind of self-fund balance sheet growth. And then also, is there any sense of the yield pickup you get on the swap roll off and replacement that you could give us kind of ballpark on?
Brian Moynihan: John, before Alastair starts, I welcome back from the cold to be able to be back in coverage and covering our company, and it's always good to know that you're going to consistently ask about NII, but I'll turn it to Alastair to give you that.
John McDonald: Thanks, Brian. You got to be typecast.
|
866
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
John McDonald: Thanks, Brian. You got to be typecast.
Alastair Borthwick: There you go. So I think your first question was if we get the deposit growth we anticipate, do we think we'll use some of that to pay off some of the higher cost liabilities on the balance sheet? The answer is yes. That's consistent with what we said in prior calls. We've done that. If you look at the other institutional CDs, you'll see they came down by another $7 billion this quarter. So as we grow the really high-quality parts of the deposit franchise that allows us to take those down. And that's one of the things that's going to help grow net interest yield on an ongoing basis. It's not NII accretive necessarily, but it helps us with net interest yield. So that remains a part of the strategy, John, you'll see that continue. As it relates to the cash flow swaps and how those reprice? No, we typically don't lay out the table of what we've got on and how it reprices over time, but it is embedded in our guidance. So each quarter, when I give you guidance for the next quarter, that will incorporate what we know is coming off on the cash flow swaps and how that does. The other fixed rate assets you can kind of see in our supplemental information just based on the originations of resi mortgage, the originations of auto loans. And every time, obviously, we're booking new residential mortgage and old residential mortgages coming off, we're picking up 250 basis points every time there. So you can see that happening each time you pick up the supplemental. We just don't tend to disclose the cash flow swaps. So I will do that for you each quarter as we go through the year.
John McDonald: Okay. And then just to switch topics so Brian doesn't make fun of me.
Brian Moynihan: That's all right, John. That's all right, John. Just kidding.
John McDonald: Now in terms of capital, how are you thinking about the CET1 target and the buffer that feels appropriate in this environment? And how does that play into your thinking on buybacks?
|
867
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Brian Moynihan: So I think we bought $3.5 billion this quarter. We'd expect to continue to step back at the highest levels, we are in the money, we pay the dividend, we invest in the growth of the business, and then we use the rest of buyback stock. That was $3.5 billion in the past couple of quarters. So at this earnings rate, that seems level that makes sense. We're 11.9, we think at a 10.7 requirement, a buffer of 11 -- 50, that's 11.2. Obviously, there's going to be some sort of changes in the capital rules, and we'll have to settle it after we see that, and we hope some relief in the volatility of the CCAR outcomes, because remember that last year, we jumped quite a bit without a lot of correlation to the actual risk of the company and stuff. So we'll -- hopefully, we'll see that settle back in.
John McDonald: Okay. Does that leave you towards a mid-teens ROTCE target, Brian, as NIM normalizes and capital normalizes?
Brian Moynihan: Yes. I think the capital normalization will be more sort of holding that capital to grow through it and not have to retain more capital for growth, frankly, if there's math that helps us favor it. But the NIM is probably more critical to move the yield from sub-2% this quarter -- 2% this quarter to 10-plus at the end of the fourth quarter and then moving from there. That, as you know, is -- all that flows the bottom line. So we'll continue to drive the RTC back up as -- if you look back in the areas where there was any front-end. Fed funds was 2%. We were running a couple of hundred basis points more. It's the huge zero interest deposit base, especially in consumer and low interest deposit base that provides a lot of leverage. So that will be a driver. The capital return would help some, but I think that will be more complex based on all the different rules and what happens.
John McDonald: Got it. Thank you.
Operator: We'll take our next question from Glenn Schorr with Evercore. Your line is open.
|
868
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
John McDonald: Got it. Thank you.
Operator: We'll take our next question from Glenn Schorr with Evercore. Your line is open.
Glenn Schorr: Hi, thanks very much. I have a relative question on trading. I know how impossible it is to predict really the environment. But you took share in investment banking, and you've invested and gotten benefits from that. You have invested in trading. So maybe it's a weird question because you just put up record revenues in FICC and equities, as you mentioned. But when we see good environments like this, some companies tend to really blow out numbers. You guys have zero loss days, tend to blow out numbers. Is that a comment about gaps in the business mix that you'd like to invest more and fill in? Is that a comment about risk tolerance? I'm just curious how to think about it on a relative basis?
|
869
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Brian Moynihan: I think you have to back up -- Jim Demar and the team are driving the business, 11 straight quarters of year-over-year growth. Frankly, I'm not sure any other company comes close to matching that. So other people have more volatile up and down in your prospecting. But over a course of time, we just want us to keep walking up the ladder and they've done a great job of doing that, continuing to drive the business. In fact, if you look at year-over-year comparisons because your point was obviously something we asked ourselves, we looked at the last 48 hours, here 24 hours, basically, a lot of people in the same range as opposed to fourth quarter where some people's last year's fourth quarter was down a lot in the prior year. Ours was more stable. And I think last year's fourth quarter was one of the highest fourth quarters we ever had. And then we put another 10% plus growth on top of it. So think of us as being that business that just is imperturbable, just keeps commonly growing forward and driving itself up without having maybe some of that more traditional trading house up and down. Not because we're not good at. They're very good at it, not because they aren't getting share because, frankly, if you look at the last three or four years, I continue to gain share, it's just we have a little less volatility in principal activity on a given day.
Glenn Schorr: Okay. I appreciate that. This might be a simple follow-up, but on your comments when talking about credit and reserves, you reserve for unemployment a little bit below 5%. We're 4.1% now. I think that's the way this cycle has played out, I think that's typical BofA conservatism. I think that's the accounting. But I guess my question is your reserves will be fine, your P&L will be fine, but if that plays out, does that completely change how we're thinking about the pickup in consumer spending, overall loan growth, things like that? Because that is -- we're talking about just the next four quarters?
|
870
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Brian Moynihan: Yes. This is where you got, Glenn, you got to kind of get away from reserve setting methodologies versus what we really believe is from our research team and your research team, your economics research team would tell you. Our core assumption is the GDP grows in the low 2s this year. The unemployment stays between 4.1% and I think -- maybe gets up to 4.3%, something like that. So this is literally a weighting of a base case, which would match that in an adverse case and some other cases just in the way we build methodologies for the reserves because you're reserving for uncertain future, and that's how it has it. I don't take it as a thought that we really believe we're going to see 4.8% unemployment in the next four quarters. And so…
Glenn Schorr: Well, I hope with that all I want to appreciate that.
Brian Moynihan: Yes, thanks, good
Operator: We'll move next to Erika Najarian with UBS. Your line is open.
Erika Najarian: Yes, hi. Good afternoon, about to be good afternoon. My first question, just as a follow-up. Brian, I think I heard you say in response to John's question that you think the exit rate, net interest margin will be 2.1%, I think in 4Q '25, I just wanted to confirm that I heard that correctly. And underneath that, Alastair, could you talk about the repricing or down deposit beta dynamics that you would assume to get to that net interest margin?
Brian Moynihan: Yes. So the simple answer is you've stated what I stated to John, but I'll let Alastair answer the second part of the question.
|
871
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Alastair Borthwick: So generally, Erika, we're obviously following the Fed rate cuts just repricing things accordingly. There are I think two things going on right now that are interesting. The first one is, generally speaking, in the commercial businesses with the higher-end deposits. We're typically following the rate cuts and just going down 25 basis points. Obviously, at the other extreme on the noninterest-bearing, there's nothing we can do with that. It's already noninterest bearing. But we're following the Fed cuts, we're moving the rates with discipline accordingly. And then the second thing that's going on is there was some rotation going on over the course of the past 2 years, where there have been a lot of things going from noninterest-bearing into interest-bearing across the different parts of our businesses. That has slowed significantly. So you look at, for example, consumer noninterest-bearing, that seems to have bottomed out in February of last year, and the noninterest-bearing balances are growing now again. So that rotation is slowing also. Both of those things are factoring into our guidance.
|
872
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Brian Moynihan: Yes. So Erika, if you look at the interesting part, that's gone on in the last couple of quarters just from a deposit behavior. If you look at our accounts that were here prior to the pandemic to now, you saw a run-up and then you saw a little depletion and it's basically stabilized at a level. But if you look at it in the aggregate, all the depletion is actually driven by the highest balance accounts, like 250, 500 average balances million and the others are still multiples of where they were before, that's been going on, and they've been growing, and they're growing 9% year-over-year in the lower balance accounts as people make more money in store more cash and have cash flow. So if you think about what had happened is our average balance count was around 7,000, went up to 11,000, and now it's basically stable at 9,000 checking accounts, and that's kind of -- and you can grow out from there. That is very valuable because checking is either zero or very low interest. And so it's where the growth we see coming as deposits grow in consumer that helps produce irrespective of the market dynamics or the higher at the market price deposits where you see the impact of the deposit franchise coming through. So consumer being down 1 basis point quarter-to-quarter doesn't sound like a lot, but you got to remember a lot of the stuff, it doesn't really price but are they growing that stuff? And each $10 billion of growth in that area is very important to us.
|
873
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Erika Najarian: Got it. That's very helpful. And just as a follow-up, both you and Alastair have during -- over the course of 2024, started introducing the concept of a normalized net interest margin of 2.3%. With the neutral rate maybe around 4%, does -- can BMA get there more quickly, particularly given the deposit dynamics that you mentioned, Brian? I guess I'm trying to -- we're just trying to figure out, you guys did introduce the concept of normalized NIM. So I'm not trying to seek out guidance in terms of '26 or '27 or whatever, but you had to have told us that for a reason. And I'm just wondering if the forward curve or what the dynamics are that would lay out the path to achieve that over the medium term?
Brian Moynihan: If the Fed funds rate stays higher, we'll get there faster. Simple because that's obvious because the sheer volume of loans. So if we were sitting here in the October, I think when we're talking about that, the amount of rate cuts was still, I don't know how many more -- 3 or 4 more than we've had so far, and now we're down to 1. So as it stays at a higher nominal rate, you'll see this adjustment come through. There are two caveats at. One is we're carrying a larger markets balance sheet, which, by definition, is a little less robust in that area. And then secondly, we're carrying a lot of low -- a lot of excess liquidity just because we're running that down as Alastair said. So during -- you have the buildup after -- during the pandemic, we built up a lot of term financing and running off. So all that will help us. But it will go faster than we'd otherwise say mid last year to now just because the nominal rate environment stays higher.
Erika Najarian: Thank you.
Operator: We'll take our next question from Mike Mayo with Wells Fargo Securities. Your line is open.
|
874
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Operator: We'll take our next question from Mike Mayo with Wells Fargo Securities. Your line is open.
Mike Mayo: Hi, so you kind of upped your NII guide for the next several quarters. And this was the first question asked. But how much is short rate? How much is long rate? But most importantly, how much of this is a little bit more states in the yield curve? And what part of the yield curve is most important for that? And what's the sensitivity for every 10 basis points of additional steepness that add how much NII are bumping along those lines? Thanks.
Alastair Borthwick: So Mike, it's still the short term that drives probably 90% of the sensitivity around NII. Because if you think about it, we just don't have enough fixed rate assets repricing to really drive NII. In any given quarter, you've got a few billion of resi mortgage, a few billion of CVL repricing, let's call that 10 to 12. You've got $8 billion to $10 billion of hold to maturity securities repricing. But that's in the context of a $3.3 trillion balance sheet. So it's still the short-term that drives most of the NII. So when Brian says, obviously, we're helped by the fact that there might be two or three rate cuts less than they were previously. That's obviously helpful. But the big thing is always for us in terms of year-over-year growth, it's always about deposit growth and loan growth. The fixed rate asset repricing is turbo charges a little bit at the margin but it's about deposit and loan growth, and those are the important ones. And getting back to growth now in each of our businesses, gives us a stronger foundation, leading into 2025, than we had this year when we still had at the beginning of the year, consumer coming down wealth coming down. Now that they found the floor is slightly different.
|
875
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Mike Mayo: Got it. And then a big picture question. Brian, with the new incoming administration and a different tone as it relates to bank regulation. In fact, the incoming Treasury Secretary said he would like to reinvigorate, thanks. So if you were talk to them and maybe their listening, what would you like to see changed as it relates to bank regulation? And then a specific question, I know it's going to be tough. If you give me any sense would be great. But your CET1 ratio, if you didn't have gold plating, if you had a level playing field, if you took out some of the extraneous operating risk penalty, how much would your CET1 ratio increase in that sort of world?
|
876
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Brian Moynihan: So Mike, I think your second question brings up. The places that our industry, our company have been advocating heavily is that we've had a little bit of a situation from the pre-pandemic to-post pandemic where you've seen capital -- required capital go up nominally 10%, 15%, 20%. And not a big change in the risk of the companies. And that is to all the mathematics behind all the counting, right? And so we're saying, oh, well, wait, we aren't indexing the G-SIB. So therefore, our relative size economy isn't growing as fast as it was intended to be indexed on that basis, isn't there. You've had, as you said, sort of accretion of sort of methodologies that keep pulling more in, including the stress test volatility that we've all pointed out to them. And then -- and the last point you make it is if you look at this concept of Basel III making equivalent around the world is completely off in a different world because we're using advanced -- excuse me, the rest of the world is using advanced. We're using standardized gold plate or whatever you want to talk about, it's just apples and oranges. And so I would never think that we go -- and we ever got to Europe, our numbers would be probably a big -- a lot higher, but that's not going to happen because just we're going to have -- we as a society have a more conservatively capitalized industry. So I think it's simply put if they were to take into account our clear statement -- our clear advocacy about as an industry about index take the volatility out of CCAR, how can it change so much in the relatively same scenario. And also, behind the scenes, all the changes in accounting, not a counting, but accounting for risk you're increasing capital requirements and without an explicit decision to do so. And we think that, that would be worth probably 100 basis points or so. If you really sat back and thought about it, how do you get there, Mike? Think about our volatility in CCAR outcomes, I think we went from we want to buy, I don't know, 50, 70 basis points
|
877
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Mike? Think about our volatility in CCAR outcomes, I think we went from we want to buy, I don't know, 50, 70 basis points last year, whatever it was. The risk of the company didn't change. As a matter of fact, it probably went down, honestly. And so that's what we're working on. So we want to see that. And then in a day-to-day supervision, we just want to see people focused on safety and soundness and good management and making sure there's the regular agencies cooperate on things like BSA and AML and things that -- everybody is all over the place, and the industry is trying to sort it out in the middle. And we've given precise points to look at, and we'll see what happens.
|
878
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Mike Mayo: All right, great. Thank you.
Operator: We'll move next to Jim Mitchell with Seaport Global Securities. Your line is open.
Jim Mitchell: Hey, good afternoon. Maybe just dialing in on the deposit growth, you clearly have been outperforming the peer group. But maybe just want to focus on consumer for a second. You generated 1.1 million of net new checking accounts, which seems best among peers. I think that's showing up in better consumer deposit growth in 4Q. So, what do you think you're doing differently that's generating that kind of consistent success in adding new accounts?
|
879
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Brian Moynihan: Look, at the end of the day, our brand is best received. You know, in terms of our scores, our customer service capabilities are scoring at the highest they've ever come. The fairness of our account structures, the transparency, the digital capabilities, it's just winning in the market. It's in a billion net new checking accounts and not -- you know, 92%, 90%, whatever they are, are primary. They start with an average balance of 2,000 to 3,000. They move to, you know, 6,000, 7,000 over the course of, you know, six months. This is just a great job done by Dean Athanasia and Aron Levine and Holly O'Neill that run this business for us, just continue to drive it. Then, on top of that, we've layered in ways with various business lines to help generate accounts. So, our work we do with companies to offer our best products and services as a benefit to their employees helps us generate some extra growth. Our ability to do business around college campuses, which is not huge for, you know, this quarter's growth. But because we're generating the amount of openings at twice the rate of young people exist in society for our customers five years ago, five years later the people are out working and they're great customers. So, it's a whole bunch of things. So, it's relentless and sustainable, you know, and yet, we still have lots of ways to grow. And we weren't in -- you know, we just entered a lot of markets over the last five years, you know, Denver, Cleveland, Columbus, Cincinnati, Indianapolis, Minneapolis, Milwaukee now, Lexington, etc. That's one way. And then, if you think about in wealth management teammates -- and Katy Knox and Lindsay and Eric do a great job there, but we have a lot of room to go where we continue to outfit those clients with a full range of services at Bank of America. And even Merrill Edge has a lot going on there. So, there's a fair amount of deposits that come from our Merrill Edge originations, which are 300,000 accounts year over year. And, you know, those are all $100,000
|
880
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
that come from our Merrill Edge originations, which are 300,000 accounts year over year. And, you know, those are all $100,000 starting accounts, not $3,000.
|
881
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Jim Mitchell: Right. That all makes sense. And then, maybe pivoting on the expense side, the guidance of 2% to 3% growth, you know, it's kind of a pretty decent step-down for what we saw in the back half of the year. So, what areas do you see sort of slowing on the expense side given the, you know, your optimism on organic growth? How do you kind of decelerate the expense growth in '25?
Brian Moynihan: I think three key things. One is if we get the year-over-year growth in the markets-related businesses, you know, in the high double digits, you know, 20% growth, you know, that expense guidance might be a little tight. But again, you would cheer for that. So, this is assuming a 5% to 6% growth in the S&P type of numbers. So, that takes some of the growth pressure off. The aggregate numbers are, you know, locked in at a high level and growing from there. And then, the second thing is, frankly, just getting, you know, a lot of this work behind us, and some of the remediation and look-backs and things are all completed and behind us. And then, you know, third is just keeping the head count and continuing to focus on OpEx and generating capabilities. And so, you know, as we stepped into some of these national brand campaigns around some of the major properties we've affiliated with -- most recently, yesterday, the U.S. Soccer, including men's and women's teams, FIFA, the Masters, these are all things we're paying by just driving other efficiencies. So, from a company that, you know, for years has gone down in expenses, the idea of growing 2.3 is not that hard a concept, albeit the growth in the back half of this year was a big -- you know, driven by the incentive explosion that happened, you know, because of the explosion of markets. You know, when they took off, our teammates did a great job of capturing revenue and incentives on.
Jim Mitchell: Okay. Yes, no, that's fair. Thank you very much.
Operator: We'll move next to Vivek Juneja with JPMorgan. Your line is open.
|
882
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Operator: We'll move next to Vivek Juneja with JPMorgan. Your line is open.
Vivek Juneja: Hi. I have two separate questions. First one, with expenses, just want to clarify to the last question, Brian, what you said. So, what are you assuming for incentive comp in '25 in your guidance? Is it flat year on year? Are you assuming some increase? Any color on that?
Brian Moynihan: It would grow -- it would grow with the markets and stuff that we have other efficiencies and offsets under that growth.
Vivek Juneja: Okay. Second one, I guess, I can't leave you disappointed. I must -- given you and Alastair love NII, so let me ask a little nitty question on that. BSBY hedges, since those started to accrete this quarter, how much was the benefit this quarter? And what is the cadence of that as we look out over '25?
Alastair Borthwick: So, we think about the BSBY accreting back into the P&L, kind of like the same way we do with the other cash flow swaps, Vivek. So, I'd say a couple hundred this quarter. And then, when we give you the guidance with all the cash flow swaps, it's all included in there. So, when I say that we think this year, Q1, should be up modestly, that is after the 250 million of day count adjustment. And it's including deposit growth, loan growth, and all the cash flow swap activity.
Vivek Juneja: Okay. So, that's 200, a couple of hundred million. That -- probably, given that it's a 1.6 billion to be recovered over a couple of years, that should continue at this pace all through '25 then, right, at least that particular item?
Alastair Borthwick: Most of it will take place in 2025. It sort of burns back into the P&L. And then there'll be a little bit in 2026 and a tiny bit in '27.
Vivek Juneja: And then, sorry, if I may, another one. Brian, to your comment on capital, you said you want to keep a 50 basis-point buffer, your CET1 for 11.9; 50 basis points, 11.2. Is there a plan to go down to the 11.2 at some point and, therefore, step up your buybacks, or what's the thinking there?
|
883
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Brian Moynihan: I wouldn't assume that we're going to take it down through, you know, buybacks in your modeling. It's got to be there to support growth. But, Vivek, the simple answer, we've got to get a set of rules that could move in around on us. And once we get them, then we can give you better guidance on that. Because, you know, it's just hard to estimate when, you know, you could have more excess if they -- you know, what I -- we, as industry, expect them to do, and then we have a different conversation. Right now, we'll probably grow part of that away through the good work of our team in terms of loan growth. And in the markets business, we continue to invest in that business. So -- you know, so don't expect us to deplete that ratio down, you know, quickly. But -- you know, but I'm holding my right to change that if we get the capital level straight down to the new rules.
Vivek Juneja: That makes sense. Thanks.
Operator: Our next question comes from Matt O'Connor with Deutsche Bank. Your line is open.
Brian Moynihan: Hey, Matt.
Matt O'Connor: Hi. Thanks for taking my question here toward the end. Just if there was some relief on capital, are there areas that you would incrementally lean into? Obviously, without knowing all the rules, it's hard to know for sure. But just are there areas that you're like, you know, if you have that extra 100 basis clients, or if it's 50, or 150, you would do a little bit more in some areas than you have been.
|
884
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Brian Moynihan: Yes. None of our businesses are constrained because of, you know, capital. So, if the consumer team had, you know, more credit card loan growth that was based on what they think the right risk balance is and getting paid for it, etc., that's gone on. You saw us just grow balances last quarter out of loans or whatever. And so, I think it -- you know, I don't see that. Wealth management, obviously, not much of a RWA user in a lot of ways. And then, you know, the real question is -- in a global banking business, again, if they get strong loan growth there's nothing that we're slowing it down. In the markets business, we continue to drive the capital up, being the lowest return on equity business we have. We have to be a little careful that we don't do it. But Jim and the team had done a great job. And we've -- basically, the balance sheet is $300 billion larger than it was four, five years ago. And they've grown -- you know, we've grown through the G-SIBs, as you know, from 2.5 to 3, and, you know, we'll keep probably growing through those and that we use some. But it's not like we'd say you can't have it because of capital. It's really just running the company and keeping the balance and the overall management of the risk and where we want to take risk and how we do it. You know, and then, frankly, it's -- you know, they come up with business plans that we've never had to say we don't have enough capital to do that. That's not the issue.
|
885
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Matt O'Connor: And I guess, so depending on how the capital rules are tweaked, it could make some businesses just more profitable, right? Even though you have enough capital to put to those businesses, if the returns aren't making your hurdles -- you know, maybe it could with some tweaks. You know, I've heard some of your peers talk about equity prime brokerage as one area that could have higher returns if capital requirements are reduced. Again, we don't know exactly how it's going to play out, but do you envision any kind of changes to how you evaluate businesses? Thank you.
Brian Moynihan: Yeah, I think it won't change how we evaluate businesses because regulatory capital is only one of the ways we look at it. We look at the risk and sort of market-based capital and other things. But it could take the sort of, for lack of a better term, a little bit of the penalty to some of these businesses down some. But you also have to remember the ROA and the mix of businesses, and there's another side to this because we have 6%, you know, tangible common equity, and we got to produce returns on that, and low ROA of businesses affect that. So, there are things that will favor it under regulatory capital but not favor it under sort of market-based disciplines. So, we work through all that. I don't expect to see change in how we do it, but also don't think that any of our businesses are constrained because we're not having capital. So, if Jim and the team have a chance to go prime brokerage and make it work, in our company, we can have other businesses which have very high ROAs to make up for it. In some other companies, it'd be more important for them because they don't have those other businesses, you know, in relative size in the markets business.
Matt O'Connor: Okay. Thank you. That was helpful.
Operator: We'll move next to Gerard Cassidy with RBC. Your line is open.
Gerard Cassidy: Hi, Brian. Hi, Alastair.
Brian Moynihan: Hi, Gerard.
Alastair Borthwick: Hi, Gerard.
|
886
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Gerard Cassidy: Hi, Brian. Hi, Alastair.
Brian Moynihan: Hi, Gerard.
Alastair Borthwick: Hi, Gerard.
Gerard Cassidy: Brian, hey, we've talked about this in the past and also with you, Alastair. Obviously, credit quality for you and your peers has been -- is very strong. And in view of the rate cycle we just came through, where we went from zero to plus 5% at the short end of the curve and really never soar a surge in charge-offs due to rates going up that much, when you guys look at credit quality, is it due to better underwriting standards, or sticking to your underwriting standards, or is it your customers themselves because we all went through the pandemic? Are just much stronger balance sheets more resilient? What would you account for, so far, that this credit cycle has been fairly benign for you and your peers?
|
887
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Alastair Borthwick: Yeah, look, it's definitely been benign. I think one thing that hasn't changed -- our underwriting strategy, our standards, our risk appetite, our client selection, those really haven't changed, Gerard. But I think you're right. Things are obviously different than 2019. 2019, we didn't have this rate structure. So, that's a little bit harder at the margin for the consumer. At the same time, the consumer is stronger. We can see that in the deposit balances. We can see it right now in the consumer spending in the 3% to 4% range. We can see it in the balances being elevated over five years ago. We can see it in the unemployment level, the income level, home prices, wealth effects. So, look, 2019 was freakishly low in terms of like a historical norm. But things have settled in here. We sort of said a year ago, we thought they would plateau right around where we are. We're glad to see three or four quarters now with some stability. It feels pretty good on the consumer side. It feels very good still on the commercial side. So, that's why we're sort of laying out. Our expectation is unless there's a big change in the economy, we think we're going to be around in this 50 to 60 basis points over the course of the next year or so.
Gerard Cassidy: Very good. And then, as a follow-up, you know, I share your optimism on the outlook for the economy and many of your peers in the capital markets business. I think many investors do. What are the risks? I mean, when you guys sit down at night and, you know, everything's going well, what do you talk about as what curveballs do we have to watch out for? Is it a rate environment that changes quickly without anybody really expecting it? Is it complacency? What are some of the risks that you guys think about?
|
888
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Brian Moynihan: Well, you have wars and hopefully a resolution of one that's just happening as we speak. But we have wars, you have trade wars, etc., that bothers. You have the availability of resource around the world, whether it's physical resource or human resource, to do work and shortage of that because unemployment rates in a lot of countries are pretty low. And so, can you get the productivity to keep growing the economy? You know, but -- all the usual things. But if you think about it, you know, Gerard, just to be clear, we've seen a 15-year run, you know, from after the pandemic -- excuse me, after the global financial crisis or more, year run, where you've seen constantly improving, you know, credit statistics that then interrupted in the pandemic a little bit and then because of the stimulus dropped down again and now it's back to normal. But that's a long-term trend. So, it's not complacency. It's just that how much leverage is building up in the system that there'll be difficulties with, either at the household level, at the corporate, at the company level. And then, you know, a lot of it's outside the banking system. So, we worry about that and how it reverberates into the banking system because just leverage that exists out there at higher levels than we traditionally have given. And the banking system still affect us because that means if people can't carry it, they'll be restructuring the companies and bankruptcies and things like that, which are going on today, but they're going on a level which is very manageable. So, we worry about all those things and, you know, the federal debt levels and the pinch that will come out of state and federal spending that they need to slow down the growth. All those things are factors which we think about. And the way we manage the company is to run it so that, given those events, we can continue to operate. And that's why the stress testing, quite frankly, is a good thing because it makes you think about the parade of horribles happening, even though they
|
889
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
testing, quite frankly, is a good thing because it makes you think about the parade of horribles happening, even though they don't happen, and make sure that you are positioned to survive them. And, you know, if you said to -- the question Alastair answered, one of the big impacts across time here in the banking industry is because the top 30 institutions are doing stress testing, which assumes that you're wrong in your underwriting and the economy goes, you know, from 4% unemployment to 10% employment overnight -- unemployment overnight. You know, think about the impact of that on bringing the underwriting narrower so that you can afford that capital that you have to hold for that outcome even though that outcome hasn't occurred. That's going across a big portion of the banking industry. So, I just think it's more fundamentally structured, but leverage is going to be the issue. It always is, and you're always trying to find the P, Where is the excess leverage, and how do you make sure you're avoiding it?
|
890
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Gerard Cassidy: No, that's very helpful. Thank you. And, Alastair, I liked your comment about when you were talking about the 17 financial centers that you're a growth company. Hopefully, that will be reflected in the P/E shortly.
Alastair Borthwick: Well, there's plenty of room on the P/E multiple, but I'll let you work on that, Gerard. You work on the E part.
Gerard Cassidy: Okay. Fair enough. Thank you, gentlemen.
Alastair Borthwick: Thank you.
Operator: And we'll take our final question from Betsy Graseck with Morgan Stanley. Your line is open.
Betsy Graseck: Hi. Good afternoon. Thanks so much for taking my question. So, Brian, here's the question. You know, small business optimism is up, and you've got a flat curve at the front end. And so, I'm kind of wondering how that feeds into C&I demand. And I'm wondering what your conversations with not only small business, mid-business, corporates, it'd be really interesting to hear how you think they're preparing for this change. Thank you.
|
891
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Brian Moynihan: Sure, Betsy. So, small business -- small medium-sized businesses -- so in our business banking category in our -- so we have small business, business bank, and we have, you know, global commercial banking, and think middle market. Across that environment, the draw rates and lines of credit stuff are still much lower than they were in a pre-pandemic and things like that and to hire some more people when the payroll dynamics of that, whatever it is. And they might permanently finance that, but immediately, they use lines. And the draw rates, you know, 400 basis points over where it normally runs, so to speak, which means that they're drawing at less rate. And that probably means they're doing a little less. And so, we haven't seen that move a lot. That's a to-come in terms of loan growth, as Alastair mentioned earlier. But their optimism has changed, and you saw that -- you know, and that's really around the other things. When you talk to our small business customers, and we made these points to, you know, people in Washington is the over -- you know, the regulation, the impact, the hard -- it's hard to do business, hard to get things done, you know, the rules coming out, they don't have the big, you know, staffs that, you know, we do and other companies do that can deal with all that. And so, it all confuses, it slows them down, it makes them hesitate. Their belief is that that's change. And that's why you see the optimism come up. And then, we got to translate that optimism into activity. And then, you'll see the long growth come. But I think it's a quick change, and it's based on their view of how easy it will be for them to get things done, both at the both at a state and federal level.
|
892
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Betsy Graseck: Yeah, I'm just looking at you or Bank of America is one of the few that actually has small business loan growth year on year. And I know a lot of that came a couple quarters ago. But with this very sharp increase in small business optimism, I would think that could potentially be something you could benefit from.
Brian Moynihan: No -- no question. And so -- but the real dollar volume of benefits going to be, you know, the small business loans I think grew -- you know, have been growing quarter after quarter, year over year for a good chunk of time now. And, you know, we feel good about that. But the dollar volume change in the middle market business from a little more drawing on the lines consistent to what people have done before is a lot of loan balances. There's $200 billion of balances in that business, so it doesn't take a lot to kick it up.
Betsy Graseck: Right. I got that.
Brian Moynihan: So, I think, look, we're the largest lender to small business, and those customers tell us they're optimistic and they see forward. And the issues were, I did -- "I couldn't get enough people." And that's something we've got to be careful of. "The regulations were hurting me." And then the interest rates -- and the interest rates coming down a little bit helps them. And the other two, the strong belief is that'll be more readily available.
Betsy Graseck: Thanks so much. Appreciate it.
Operator: And it does appear that there are no further questions at this time. I would now like to turn it back to Brian for any additional or closing remarks.
|
893
|
BAC
| 4
| 2,024
|
2025-01-16 11:00:00
|
Bank of America Corporation
| 19,049
|
Brian Moynihan: Sure. Well, thanks, everyone, for joining us today. We finished 2024 with good momentum as we enter '25. The economy is resilient and healthy. The consumers continue to spend a solid and healthy rate. The employment levels are strong. The asset quality we can see is very good. Our loans have now grown for several quarters in a row here. Deposits have grown for 6 straight quarters. The rate environment continues to be constructive. And then the added value in the last couple of quarters is the fee business have come on strong, given the extra market activity. All that sets us up well for 2025. Thank you for your support. We look forward to talking to you next time.
Operator: This does conclude today's program. Thank you for your participation. You may disconnect at any time, and have a wonderful afternoon.
|
894
|
BAC
| 3
| 2,024
|
2024-10-15 08:30:00
|
Bank of America Corporation
| 19,049
|
Operator: Good day, everyone, and welcome to Bank of America's earnings announcement. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. [Operator Instructions] Please note this call may be recorded. I will be standing by if you should need any assistance. It is my pleasure to turn the program over to Lee McEntire.
Lee McEntire: Good morning. Welcome, and thank you for joining the call to review our third quarter results. Our earnings release documents are available on the Investor Relations section of the bankofamerica.com website. They include the earnings presentation that we'll make reference to during this call. I hope everyone's had a chance to review those documents. Our CEO, Brian Moynihan, will make some opening comments before Alastair Borthwick, our CFO, discusses the details of the quarter. Let me just remind you that we may make forward-looking statements and refer to non-GAAP financial measures during the call. Forward-looking statements are based on management's current expectations and assumptions that are subject to risks and uncertainties. Factors that may cause our actual results to materially differ from expectations are detailed in our earnings materials and our SEC filings that are available on the website. Information about non-GAAP financial measures, including reconciliations to U.S. GAAP can also be found in our earnings materials that are available on the website. So with that, Brian, take it away.
|
895
|
BAC
| 3
| 2,024
|
2024-10-15 08:30:00
|
Bank of America Corporation
| 19,049
|
Brian Moynihan: Thank you, Lee, and good morning, and thank all of you for joining us for our discussion of our third quarter results. Bank of America continued to demonstrate strength this quarter in an economy that continued to be stable, albeit with slower growth and falling inflation. So many of you asked me from time-to-time what do we see in our own customer -- consumer customer base. As we talked about many times, our consumer payments is an indicator of activity. Those payments were up 4% to 5% year-over-year for the quarter in the total money those consumers moved in the economy. The pace of year-to-year money movement has been steady since late summer this year. After having fallen in the spring and early summer. This growth in consumer payments continues into October. This activity is consistent with how customers are spending money in the 2016 to 2019 timeframe. When the economy was growing, inflation was under control. This report is not meant to gainsay that consumers are worried of the cost of living, worried about higher rates and other matters. But overall activity is fine, unemployment is low and wage growth is steady, both of which bode well for the consumer overall and for consumer asset quality. With respect to what we see in our commercial businesses, it is consistent with a lower growth economy. Line of credit usage rates remain lower than pre-pandemic levels. This does not surprise us what with the dramatic increase in the cost of borrowing for small and medium-sized businesses. They aren't being indolent, they want to grow. They are simply being more careful and worry a final demand will hold. Therefore, they are being cost conscious across the board. So how did Bank of America do against this backdrop? At Bank of America, our commitment to responsible growth remains unwavering, and this quarter is another illustration of that. We grew, we did it the right way. In the third quarter, Bank of America generated $25.5 billion in revenue and earned $6.9 billion in net income after tax.
|
896
|
BAC
| 3
| 2,024
|
2024-10-15 08:30:00
|
Bank of America Corporation
| 19,049
|
way. In the third quarter, Bank of America generated $25.5 billion in revenue and earned $6.9 billion in net income after tax. Year-to-date, we've generated net income of just over $20 billion. Four quarters ago, we called that a bottom would occur in our net interest income in the second quarter of 2024. Even with a rate environment that has bounced around quite a bit since we said that we got it right. As we expected then, NII indeed troughed in the quarter two. NII grew 2% this quarter and Alastair will note later, we expect NII to grow again in quarter four, even as the market expects two more rate cuts in quarter four. This quarter, we saw a healthy revenue growth in our wealth and investment management business and in our global markets businesses. We returned 5.6 billion of capital to shareholders while also supporting the needs of our clients. So with that brief overview, let's dive into Slide 2. Earnings per share came in at $0.81 this quarter at $25.5 billion in revenue we grew modestly from the third quarter, '23 as improvement in noninterest income more than offset a year-over-year decline in net interest income. Fees grew 5% year-over-year and represented 45% of total revenue. The strong year-over-year fee performance was led by a 15% improvement in investment in brokerage services, mostly in our global wealth management business. We also grew investment banking fees 18% year-over-year sales and trading revenue increased 12% year-over-year and aggregate, these market related revenue streams rose an impressive 13% year-over-year. Our total expense in the company increased 4%. You can attribute most of the year-over-year expense growth to these market related areas. Overall, a good job by the team. On asset quality a few quarters ago we told you that consumer credit losses would go down this quarter, given delinquency trends we had seen at the time. We also told you that office losses would be lower. Both of these proved true again this quarter. Good asset quality resulted in net charge-off in
|
897
|
BAC
| 3
| 2,024
|
2024-10-15 08:30:00
|
Bank of America Corporation
| 19,049
|
office losses would be lower. Both of these proved true again this quarter. Good asset quality resulted in net charge-off in provision expense for this quarter at $1.5 billion, which was unchanged from last quarter. Our performance is partly attributable to the diversity and balance of the company. A little more than half our earnings come from our consumer and GWIM businesses serving people and the other half come through from our Global Banking and Markets businesses serving companies and institutional investors. So let's turn to see how we grew organically this quarter. We are now on Slide 3. Our organic growth has been driven by a continued focus on customers and client experience throughout all our businesses. Consumer leads the way delivering solid organic growth with high quality accounts engaged clients. For the 23rd consecutive quarter, we added significant net new consumer checking accounts and expanded our customer base and market share. We added 360,000 net new checking accounts this quarter, which brings our first nine months of '24 to more than 880,000 net new checking accounts. In wealth management, we added another 5,500 net new relationships this quarter. In our commercial businesses, we added hundreds of small business and commercial banking relationships. Also note that we saw a strong organic growth of investment balances with banking customers and growth in banking products for our investment clients in our GWIM business. This has led us to now manage $5.9 trillion in client balances of loans, deposits and investments across the consumer and wealth management clients. We saw flows of $62 billion into those businesses in the past four quarters. In our Global Banking business, we saw loan demand start to pick up late in the quarter. We again ranked third in the logic IB fees we received and have a solid pipeline. Our global transaction services platform continues to grow around the world and showed strong deposit growth for our commercial businesses over the last year and a quarter. This
|
898
|
BAC
| 3
| 2,024
|
2024-10-15 08:30:00
|
Bank of America Corporation
| 19,049
|
to grow around the world and showed strong deposit growth for our commercial businesses over the last year and a quarter. This quarter, global markets saw continued momentum. Global markets recorded the 10th consecutive quarter of year-over-year growth in sales and trading. Investments we've made in this business and the intensity of the teams has enabled a 35% improvement in sales and trading revenue in the past three years. Good work by Jimmy DeMare and the team. Our customers and clients continue to want more from us, especially when it comes to our digital capabilities. So let's discuss this on Slide 4. Slide 4 highlights this continued success across our digital platforms. As usual, we include our disclosures on digital stats across the business, which we believe lead the industry. I commend you the pages in the appendix, which give you more granular disclosure for each of the businesses' digital activities. Our fully integrated consumer banking investment application drives the utility for our customers across GWIM and consumer. The usage stats you see are strong proof points. Our second language capabilities also enhance the customer's experience. We have grown to more than 48 million active digital users and those digital users logged in more than 3.6 billion times this quarter. We also continue to see more sales through their digital properties. Digital sales represented 54% of our total consumer sales this quarter. Note that it simply takes both high-touch and high-tech to drive continued growth with individual clients across the wealth spectrum in America. Erica, our AI enabled virtual assistant reached 2.4 billion client interactions since its launch and Zelle showed continued user and usage increases. In our wealth management business, we continue to see full relationships increase with both investing and banking relationships being open. 75% of new accounts in Merrill were opened digitally whether they were banking accounts or investment accounts. This enables more efficient customer coverage for
|
899
|
BAC
| 3
| 2,024
|
2024-10-15 08:30:00
|
Bank of America Corporation
| 19,049
|
opened digitally whether they were banking accounts or investment accounts. This enables more efficient customer coverage for our advisory teams. Finally, 87% of our Global Banking relationship clients are digitally active. We have innovated and significantly streamlined service requests by enabling clients to directly initiate and track inquiries within our award winning cash flow platform. As a result, app sign-ins for these clients increased nearly 80% in just the last 24-months. In summary, the economic environment remains solid. Issues remain out there to external factors that could affect our business and the economy generally. We still see great opportunities for continued growth across all our businesses. We are focused on driving market share in all our businesses, investing in technology to further enhance the customer experience and continue to increase our efficiency. With NII now growing and complementing our fee growth along with our continued solid expense discipline, we expect to return to operating leverage as we move through the quarters in 2025. With that, I'll turn to Alastair for additional details.
|
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.