Capital management and balance sheet growth
Q: How does the bank balance balance sheet growth with capital return given the CET1 and TCE ratios?
A: Alastair Borthwick noted the bank has significant flexibility due to its 10.9% CET1 ratio and strong earnings generation, prioritizing client growth and dividends before share repurchases.
Q: Are there any updates to the operating leverage guidance for 2027?
A: Alastair Borthwick stated there is no change to medium-term targets and the bank will provide specific 2027 guidance in the fourth quarter.
Net interest income and deposit trends
Q: What are the primary drivers behind the 8% plus NII growth outlook for next year?
A: Alastair Borthwick explained that growth is driven by core deposit and loan expansion, fixed-rate asset repricing, and slowing pricing rotation, rather than relying solely on rate changes.
Q: Does the consent order impose any constraints on business operations?
A: Alastair Borthwick confirmed there are no asset caps and the costs for remediation are already embedded in the company's expense run rate.
Q: Are you assuming continued noninterest-bearing deposit growth and what are the deposit beta assumptions for next year?
A: Alastair Borthwick expects continued low single-digit deposit growth and noted that deposit betas on the way up should mirror the behavior seen on the way down.
Consumer health and operating leverage
Q: Are you seeing any signs of stress in the consumer segment given higher rates?
A: Brian Moynihan reported no signs of stress, citing strong credit quality, growing deposits, and 5% higher spending year-to-date.
Q: What are the key levers for positive operating leverage next year?
A: Alastair Borthwick highlighted NII growth, fee business expansion, and disciplined headcount management as the primary drivers.
Regulatory and operational matters
Q: What is the context behind the OCC and FinCEN orders and what are the takeaways?
A: Brian Moynihan stated the firm has a clear understanding of the requirements, is actively remediating, and the costs are already in the expense base.
Q: Which capital metrics will you manage to going forward?
A: Alastair Borthwick said they are waiting for final rules in the fourth quarter and will continue to balance multiple capital metrics, including CET1 and tangible common equity.
Markets performance and outlook
Q: Does the NII guidance imply that markets-related NII will be down next year?
A: Alastair Borthwick agreed that Global Markets NII could be lower in a rising rate environment, but noted that banking book growth should more than offset this.
Q: Is the pressure on FICC trading likely to linger?
A: Alastair Borthwick attributed the decline to client activity following the 85 basis point rate move and noted that the fourth quarter has not seen the same behavior.
Q: What is the outlook for markets in the fourth quarter?
A: Alastair Borthwick declined to provide specific guidance but noted that fourth-quarter seasonality may be less pronounced than in prior years.
Q: Are you building out rates, currencies, and commodities to be as broad as other franchises?
A: Alastair Borthwick confirmed the bank is continuing to invest in people and technology to broaden the franchise in these areas.
Technology and strategy
Q: How is AI deployment impacting efficiency and revenue per employee?
A: Brian Moynihan noted that AI projects are driving efficiency, allowing for headcount reduction while maintaining growth, with project benefits expected to rise to $700 million next year.
Q: What are your thoughts on CEO succession?
A: Brian Moynihan stated it is the Board's decision and emphasized the strength of the current leadership team.
Q: How does agentic AI impact deposit flight risks?
A: Brian Moynihan expressed confidence in the deposit franchise, emphasizing that customers prioritize safety and security, and that the bank is working to keep humans in control of transactions.
Balance sheet and loan growth
Q: Is there anything to read into the loan growth acceleration at the end of the quarter?
A: Brian Moynihan attributed the growth to core middle market and business banking strength rather than quarter-end noise.
Q: Is there a risk that deposit pricing picks up due to loan growth?
A: Brian Moynihan argued there is no pressure to raise deposit pricing because the bank has a low loan-to-deposit ratio and ample liquidity from securities runoff.
Q: How does the 6% TCE target inform your willingness to deploy balance sheet in markets?
A: Brian Moynihan clarified that TCE targets do not constrain the markets business, which receives balance sheet support based on return opportunities.
Q: How firm is the 6% TCE ratio target?
A: Brian Moynihan stated the 6% TCE target is flexible and will not constrain capital return policies.
Credit quality and economic exposure
Q: What is driving the improvement in criticized assets?
A: Alastair Borthwick attributed the improvement to broad-based commercial strength, particularly in commercial real estate, and noted credit quality remains very strong.
Q: Can you analyze the indirect exposure to the AI boom?
A: Brian Moynihan explained that the bank monitors customer concentration and cash flow durability in its underwriting to manage potential economic ripple effects.
