“With that first half performance and our continued expectations for a strong second half, we now expect full-year operating leverage to be in the range of 300-400 basis points.”

In context

“Alastair Borthwick: Thanks, Brian. I'm going to pick up on slide six and start with the balance sheet, where you can see it remained a source of strength, and we continued to support client activity across the franchise. Our ending assets were steady at $3.5 trillion, steady compared to the first quarter, and primarily reflecting lower securities balances replaced by loan growth and Global Markets activity. We maintained strong liquidity and funding while we optimized our balance sheet, and we supported all that with diversified funding and healthy client-driven growth. When you look at regulatory capital, we remain in a strong position with our CET1 ratio stable at 11.2%, and that remains well ahead of our 10% minimum ratio. Tier 1 common equity grew to nearly $202 billion, while our RWA increased to $1.8 trillion, driven by loan growth and capital markets activity. Supplementary leverage remains strong and well above our minimums. When we turn to slide seven, you can see deposits remain a key competitive advantage and a source of strength for our company. Average deposits were $2.02 trillion, up $49 billion or 2.5% from a year ago, and importantly, included non-interest-bearing growth of $19 billion, up 4%. This marks our 12th consecutive quarter of average deposit growth. Growth was primarily driven by Global Banking, where deposits increased 8% year-over-year, reflecting continued client engagement and operating account growth. The second quarter saw muted sequential growth in average deposits because it was impacted by typical seasonal tax-related outflows. Otherwise, underlying client activity remains healthy and on track with our expectations. Importantly, our deposit base remains highly diversified across consumer, wealth, commercial, and corporate clients, providing a stable and attractive funding advantage. Our strong liquidity and funding position means we don't need to change cash rate-sensitive balances. With the other relationship values like rewards, digital, and security features, it allows us to offer customers attractive rates and grow balances. We continue to see growth in both interest-bearing and non-interest-bearing balances. As shown in the upper right, rate paid was modestly lower this quarter, led by consumer deposits of 48 basis points on $957 billion in balances, so favorable balance moves. Turning to slide eight, loan growth remains strong and broad-based. Average loans and leases increased to $1.2 trillion, up $88 billion or 8% from a year ago. Ending loans were also $1.22 trillion, up $71 billion or 6%, marking the ninth consecutive quarter of both average and ending loan growth. Commercial lending continues to lead growth, with average commercial loans increasing to $733 billion, up $75 billion or 11% from a year ago. We've seen growth both domestically as well as internationally, illustrated by the chart at the bottom right of slide eight. Additionally, commercial growth has broadened away from the Global Markets activity that we saw last year. Consumer loans increased 3% year-over-year, led by growth in securities-based lending and credit card balances. Credit card grew 4% year-over-year as we increased marketing and enhanced product offerings. The combination of first and second lien mortgage balances remains relatively stable, reflecting elevated rates, and included the ninth consecutive quarter of average home equity growth. These trends reflect healthy client activity across both commercial and consumer businesses, and they demonstrate the benefits of our diversified lending franchise. Turning to slide nine, net interest income continues to perform well despite a modestly lower short rate environment, which impacted variable rate asset yields. NII on an FTE basis was approximately $16.2 billion, an increase $253 million from the first quarter and $1.3 billion or 9% from a year ago. On a year-over-year basis, growth was driven by higher loan and deposit balances, fixed rate asset repricing, and Global Markets-related activity. This was partially offset by the impact of lower average short-term rates. We've seen steady improvement now since the second quarter of 2024, when NII has grown from $13.9 billion to now $16.2 billion. Net interest yield was 2.08%. That's up 1 basis point from Q1 and 14 basis points from a year ago, reflecting favorable asset and liability mix and loan and deposit growth, partly offset by Global Markets balance sheet growth. Bank of America's banking book remains asset sensitive, on a dynamic deposit basis, a 100 basis points parallel shift above the forward curve is expected to increase NII by $1 billion over the next 12-month period. Looking ahead on NII expectations, in January, we told you to expect 5%-7% full year NII growth. In April, we raised that full year range to be 6%-8%. We now expect full year 2026 NII growth to be at the upper end of that 6%-8% range, supported by anticipated loan and deposit growth, fixed rate asset repricing, and balance sheet optimization. This assumes modest loan and deposit growth in the second half of the year, and it's based on the current forward curve, which has one 25 basis points rate hike in September. Overall, NII remains a significant contributor to earnings growth and reflects the core franchise advantages of our scale and diversified balance sheet. Non-interest expense on slide 10 was approximately $18.6 billion, up roughly $100 million from the first quarter and $1.4 billion from the second quarter of 2025, reflecting continued investment in technology, sales teams, financial centers, and brand marketing. It also includes higher activity-related costs that come from trading in our Global Markets business, particularly in our overseas markets. With those investments, we generated 660 basis points of operating leverage and improved our efficiency ratio to 59%, highlighting the performance of the franchise and the return on our investments. AI-enabled tools are now more embedded in workflows across operations, risk, finance, technology, and our client-facing teams. That's helped reduce manual work, improve speed, and enhance consistency for clients and teammates. On our first quarter earnings call in April, we told you we expected full-year operating leverage of more than 200 basis points. Operating leverage for the first half of 2026 has now exceeded 450 basis points. With that first half performance and our continued expectations for a strong second half, we now expect full-year operating leverage to be in the range of 300-400 basis points. Turning to slides 11 and 12, you can see credit quality remains stable and consistent with the strong underwriting discipline that's characterized our portfolio for many years. Provision expense was approximately $1.4 billion. Net charge-offs were also $1.4 billion, and both were largely unchanged from Q1. Consumer card charge-offs and delinquencies improved both year-over-year and quarter-over-quarter. Commercial credit also remained solid, with CRE improvement offset by some isolated corporate and commercial lending losses. Reservable criticized commercial exposures declined by approximately $2.3 billion from Q1 to roughly $22 billion, driven primarily by CRE improvement. Non-performing loans remained stable at approximately $5.8 billion, and we recorded a modest reserve release. Overall, our portfolio remains well-positioned, supported by strong client fundamentals and disciplined risk management. Turning to slide 13, now we get into the business segments. Consumer Banking delivered another strong quarter, combining solid financial performance with continued investment in growth, innovation, and client engagement. Over the past few months, we refreshed our rewards program, that's generating more than 2 million enrollments since the late May relaunch. We also launched one of our largest consumer marketing campaigns around the FIFA World Cup. We expanded our financial center network in new and growth markets, introduced new card products, and deployed new AI-enabled tools designed to enhance both the client and teammate experience. All of these investments help to strengthen the franchise and drive organic growth. Net income increased 10% year-over-year to approximately $3.3 billion, while revenue rose 5% to $11.3 billion. Through strong expense discipline, we generated our fifth consecutive quarter of positive operating leverage, maintained a strong 51% efficiency ratio, and delivered a 29% return on allocated capital. With regard to client activity, our deposit franchise remains a key competitive advantage. Average deposits rose to $957 billion, our fifth consecutive quarter of year-over-year growth. Client engagement was also strong with record checking account balances, 162,000 net new checking accounts, and card spending up 9% year-over-year to $266 billion. We continued to deepen relationships across the enterprise, consumer investment assets reached a record $640 billion, up 18% year-over-year, supported by strong market levels and net client flows. Digital engagement remains a clear differentiator, with roughly 50 million active digital users, more than 24 million active Erica users, and digital sales representing 70% of total sales. New AI capabilities have improved service, increased efficiency, and allowed teammates to focus on higher-value client interactions. Finally, consumers remain resilient as average deposit investment balances and spending all showed linked quarter increases. Additionally, consumer credit quality remains strong and in line with expectations, reflecting the strength of our customer base and our disciplined approach to risk management. Overall, Consumer Banking continues to demonstrate the power of our scale, digital leadership, and relationship-based model, positioning the business for sustainable and attractive long-term growth. Turning to slide 14, GWIM delivered another outstanding quarter, highlighted by record revenue and pre-tax income, expanded profit margins, and continued client growth. Clients continue to consolidate more of their financial lives with Bank of America. During the quarter, we added another 6,000 net new affluent households to serve, the continued strong growth in banking relationships and lending balances demonstrates the power of our integrated wealth and banking model. At the same time, both Merrill and the Private Bank continue to attract talented advisors who are drawn to the breadth of our platform and our ability to deliver comprehensive solutions for clients. Franchise continued to benefit from strong advisor productivity, growing digital engagement, and new AI-enabled tools that help advisors prepare for client conversations, identify opportunities, and deliver more personalized advice at scale. Net income for the segment increased 42% year-over-year to $1.4 billion, while revenue grew 16% to a record $6.9 billion, driven by higher asset management fees, strong flows, higher market valuations, and higher NII. With good expense discipline, we generated another quarter of positive operating leverage and saw pre-tax margins expand to more than 27%, demonstrating the scalability of this business. Client balances reached a record $4.9 trillion, up 12% from a year ago. Assets under management grew 17% year-over-year to $2.3 trillion, supported by approximately $14 billion of AUM flows this quarter and $78 billion of AUM flows over the past four quarters. Loans grew $13 billion or 5% linked quarter to $277 billion, driven by custom and securities-based lending demand. Overall, GWIM continued to demonstrate the strength of our advice-led, relationship-based model and remains well-positioned for sustainable growth. Moving to our commercial and corporate client-facing businesses in Global Banking on slide 15, where Global Banking delivered strong results in the second quarter, reflecting healthy client activity, near-record investment banking performance, strong treasury service revenue, and continued balance sheet growth. Client engagement remained broad-based with activity across capital markets, strategic transactions, liquidity management, we continued our program of growth investments, including technology modernization, digital infrastructure, and AI-related initiatives. We're also using AI-enabled tools to help bankers accelerate their research, prepare materials, and identify relevant client opportunities more efficiently. Revenue increased 10% year-over-year to $6.2 billion, while net income grew 20% to more than $2 billion. Investment banking was a particular highlight. Total corporate investment banking fees, excluding self-led transactions, increased 50% year-over-year to more than $2.1 billion, reflecting strength across debt underwriting, advisory, and equity underwriting. Average loans increased 7% to $413 billion, while average deposits increased 8% to $652 billion, demonstrating continued franchise growth and client confidence. Credit quality remained solid, returns remained healthy with a 15% return on allocated capital. Turning to slide 16, Global Markets delivered an exceptional quarter. Excluding DVA, net income was $2.7 billion, up 70% from a year ago. Sales and trading revenue, excluding DVA, increased 33% to $7.2 billion. Equities delivered a record $3.6 billion of revenue, up 70%, driven by client financing activity and strong trading performance in derivatives and cash. FICC generated $3.5 billion, its strongest quarter in more than a decade. Growth was broad-based across the franchise. Domestically, our revenue in the U.S. increased 31%, while our international business delivered a 38% improvement, with Asia-Pacific as the standout. This is generally consistent with our Investor Day messaging of continuing our improved performance internationally. Perhaps what stands out most is the consistency of our performance, because we've now delivered 17th consecutive quarters of year-over-year sales and trading revenue growth and 14th consecutive quarters of year-over-year net income growth. Combined with 16% operating leverage and a 20% return on allocated capital, these results reflect the strength of our client franchise, diversified platform, and disciplined execution. Client activity remains strong and the connectivity between markets, Global Banking, and Wealth and Investment Management continues to create value for clients. Investments in technology and AI are helping teams deliver insights faster, operate more efficiently, and further strengthen our competitive position. This was a record quarter built on scale, client engagement, and consistent execution across the franchise. Moving to all other on slide 17. We recorded a $292 million net loss in the quarter, which is larger than the year ago with no significant drivers to note. We reported an overall tax rate of 21.5%, consistent with our full-year guidance. In closing, the second quarter reflects the strength of our diversified operating model. We produced double-digit revenue growth and more than $9 billion of net income, with EPS growth of 34% and return on tangible common equity of 17%. We also delivered strong operating leverage while continuing to invest in the franchise and supporting our clients. Across the company, clients continued to invest, transact, and grow. Activity remains healthy across lending, payments, investment banking, markets, and wealth management, including technology, digital infrastructure, and AI-related opportunities. We also see meaningful opportunities to continue using AI and automation ourselves to improve productivity, strengthen client engagement, and support disciplined growth across the company. Taken together, these trends simply reinforce our confidence in the long-term earnings power of the franchise and our ability to deliver responsible growth and attractive returns for shareholders. With that, Leo, let's open it up and we'll see what questions we can answer.”