Bank of America Q4 Earnings Call Highlights

Bank of America (NYSE:BAC) said fourth-quarter net income rose 12% year over year to $7.6 billion as revenue increased 7% and net interest income climbed 10% to $15.9 billion on a fully taxable equivalent (FTE) basis. Earnings per share were $0.98, up 18% from the fourth quarter of 2024, as the company benefited from loan and deposit growth, disciplined expense management, and a lower share count following buybacks.

Accounting change and recast results

Management opened the call by noting that during the quarter the bank elected to change the accounting method related to its tax-related equity investments “to better align our financial statement presentation with the economic and financial impact of those investments.” The company filed an 8-K on Jan. 6 and provided a supplemental package that recast quarterly numbers for 2024 and 2025, along with full-year 2023 and 2024 results.

Executives said the accounting change primarily reclassified items within the income statement and had an “insignificant impact on net income.” All results discussed on the call reflected the recast figures.

Fourth-quarter performance: NII strength and market-based fees

CEO Brian Moynihan said results were led by net interest income, which rose to $15.9 billion on an FTE basis, and noted that the bank finished the year “a bit stronger than we expected” on NII. Chief Financial Officer Alastair Borthwick added that fourth-quarter NII was $15.8 billion on a GAAP non-FTE basis and increased $1.4 billion year over year and $528 million sequentially on an FTE basis.

Borthwick attributed the NII improvement to several factors, including loan and deposit growth, asset repricing as higher-yielding loans replaced maturities and paydowns, and a shift in global markets activity that moved more revenue into NII rather than fees compared with the third quarter. He said about $100 million of that shift was likely to revert in the following quarter, offset by revenue in a different line item and “revenue-neutral.” Net interest yield improved seven basis points from the third quarter to 2.08%.

Total revenue was $28.4 billion in the quarter, with $10.4 billion coming from sales and trading, investment banking, and asset management fees. Borthwick said those market-facing areas grew 10% year over year in the aggregate.

Expenses, operating leverage, and technology investments

The company reported $17.4 billion in expenses for the quarter, up slightly less than 4% year over year. With revenue up 7%, management said Bank of America generated more than 300 basis points of operating leverage in the quarter. Borthwick said expense increases were mainly driven by incentive compensation tied to revenue growth and higher brokerage clearing and exchange costs stemming from elevated trading activity, particularly in overseas markets. He emphasized those transaction costs are generally reimbursed by clients and therefore are included in both revenue and expense.

Management repeatedly returned to headcount discipline and productivity gains from digitalization and AI. Borthwick said headcount was held flat across the year despite volume growth, with productivity improvements enabling the bank to add client-facing associates while eliminating work and roles in operational support areas. Since the end of 2023, he said the bank has operated within a “tight range” of 213,000 employees.

In the Q&A, Moynihan said technology spending would rise this year, describing “5%-7%” higher spending on initiatives and noting “total spending $13 billion plus $4 billion plus in initiatives.” On AI specifically, he said the bank has 18,000 people on its payroll “through code” and that AI techniques have taken “30% out of the coding part of the stream,” which he said saves about 2,000 people. He characterized AI spending as “$ several hundred million” and referenced 15 to 20 projects across the company.

Management also addressed questions about its efficiency ratio target in light of the accounting change, with Borthwick noting prior periods were recast for comparability. In response to investor concerns about expense messaging, Moynihan said the bank’s efficiency ratio improved “a couple hundred basis points” on an apples-to-apples basis and that progress will continue, driven largely by headcount, which he said represents about 60% of expenses.

Balance sheet, capital, and credit trends

Total assets ended the quarter at $3.4 trillion, little changed from the third quarter, as reductions in securities and cash were replaced by loan growth. Deposits increased $17 billion from the third quarter, and Borthwick said the bank used those deposits to reduce wholesale funding as part of a plan to “drive a more efficient balance sheet.” Average global liquidity sources were $975 billion.

The bank returned $8.4 billion of capital to shareholders during the quarter, including $2.1 billion in common dividends and $6.3 billion in share repurchases. Borthwick said the average diluted share count declined by about 300 million shares, or 4%, from the fourth quarter of 2024. Tangible book value per share was $28.73, up 9% year over year.

Regulatory capital declined modestly, with the CET1 ratio falling to 11.4% from 11.6% in the third quarter. Borthwick said the accounting change drove a $2.1 billion capital reduction in the period, representing roughly 12 basis points of CET1 reduction, and that the impact will unwind over time as those investment deals wind down. The CET1 ratio remained above the bank’s 10% regulatory minimum.

On credit, management said asset quality remained sound. Net charge-offs were $1.3 billion, down about $80 million from the third quarter, driven by lower commercial real estate losses. The net charge-off ratio was 44 basis points, down 10 basis points year over year. When asked about normalization, Borthwick pointed to an Investor Day view of 50 to 55 basis points “through the cycle,” noting the bank was at 47 and 44 basis points over the last two quarters.

Loan growth remained a central theme. Average loans were $1.17 trillion, up $90 billion or 8% year over year, driven by 12% commercial loan growth, while consumer loans rose 4% and increased across card, mortgage, auto, and home equity categories. Deposits were up nearly 3% year over year on an average basis, led by Global Banking, which grew average deposits 13% compared with the fourth quarter of 2024, while Consumer Banking posted its third consecutive quarter of year-over-year growth.

Looking ahead, Borthwick reiterated guidance for 5% to 7% net interest income growth in 2026 versus 2025, based on an interest-rate curve that includes two cuts in 2026, and said the bank expects about 200 basis points of operating leverage in 2026. Management also guided to an effective tax rate of roughly 20% for 2026.

About Bank of America (NYSE:BAC)

Bank of America Corporation is a multinational financial services company headquartered in Charlotte, North Carolina. It provides a broad array of banking, investment, asset management and related financial and risk management products and services to individual consumers, small- and middle-market businesses, large corporations, governments and institutional investors. The firm operates through consumer banking, global wealth and investment management, global banking and markets businesses, offering capabilities across lending, deposits, payments, advisory and capital markets.

Its consumer-facing offerings include checking and savings accounts, mortgages, home equity lending, auto loans, credit cards and small business banking, supported by a nationwide branch network and digital channels.