At the Bank of America's second quarter earnings conference call, CEO Brian Monahan and CFO Ali will discuss the company's performance for the second quarter. The meeting will be opened by Lee McIntyre, who will remind participants about possible forward-looking statements and non-GAAP financial measures, and emphasize the risks and uncertainties of actual results potentially differing significantly from expectations. Following that, Brian Monahan will comment on the second quarter's performance, while Ali will delve into financial details.

In the second quarter, the bank achieved solid revenue growth, profitability, and returns, benefiting from strong organic growth in all business areas. The report shows revenue reaching $26.6 billion, net profit $7.1 billion, and earnings per share $0.89. The bank has achieved eight consecutive quarters of average deposit growth while maintaining strict deposit pricing discipline. Market-related income continues to grow, with investment banking revenue exceeding $1.4 billion. Additionally, the bank continues to provide capital support to customers, promoting their growth while also increasing capital returns to shareholders. In terms of organic growth, the bank has added new customers and deepened relationships with existing customers in consumer, wealth management, commercial, and market business. In consumer banking, the average consumer deposit balance hit a new high of over $9,200, and in investment management, customer balances exceed $130,000, demonstrating the bank's competitive edge in the market.

The bank has achieved organic growth by investing in its own capabilities, talent, and technology, significantly increasing digital engagement and business efficiency. Nearly 80% of consumer households are now fully digitized, with 4 billion logins every quarter, and 65% of consumer product sales completed through digital channels. Through the use of AI and machine learning, the bank has not only improved customer service experience but also optimized internal operations, such as handling a large number of interactions through virtual assistant Erica, enhancing personalized services for wealth management and commercial clients, as well as applying AI tools in operations to improve customer satisfaction and code generation efficiency. These technological advancements have resulted in a reduction in the number of employees while enhancing service quality and operational efficiency.

In the recent quarter, banks have proven the concept of actively investing in Artificial Intelligence (AI) in order to enhance customer experience and internal productivity, resulting in significant organic growth in customer activity, revenue, and earnings per share. Specifically, the application of AI is helping to improve efficiency. In terms of financial performance for the quarter, operating income reached $26.6 billion, representing a growth of over 4% compared to the same period last year, with several business areas such as net interest income, investment and brokerage fees, sales and trading revenue all showing growth. Despite a slight decline in investment banking business compared to the previous year, overall profitability and asset quality remain healthy. In addition, through effective capital management and share buybacks, the bank has successfully returned a significant amount of capital to shareholders and plans to further increase quarterly dividends.

The bank's CET 1 capital level remains stable, although it has decreased slightly, but it is well above regulatory minimum requirements, and it also has great flexibility. Additionally, the supplementary leverage ratio and total loss-absorbing capital both exceed requirements, indicating sufficient capital and growth potential. On the deposit side, the average deposit amount has grown significantly, especially in consumer deposits and global banking business deposits, demonstrating an expanding customer base and continued demand for banking services. On the loan side, commercial loans have grown strongly, especially in asset securitization and credit areas, showing the bank's success in providing financing solutions. Net interest income (NII) increased in the second quarter, although the net interest margin decreased slightly, mainly due to contributions from global market activities and loan and trading assets. Looking ahead, the bank expects NII to continue growing, especially in the fourth quarter, projected to reach 1.55 to 1.57 billion, setting a new record, indicating the bank's optimism about future financial performance.

The financial report for this quarter shows that the company's total expenditure is approximately 17.2 billion, a decrease of nearly 600 million from the previous quarter, mainly due to seasonal reductions in payroll taxes and lower litigation costs. Compared to the same period last year, expenditures have increased by over 5%, driven mainly by increases in wealth management fees, sales and trading revenues, investment banking fees, and continued inflation and investment in talent and technology. Despite facing inflationary pressures, the company has shown strong performance in employee retention, while also increasing recruitment of a large number of interns and recent graduates, demonstrating a focus on talent and development. It is expected that with a reduction in seasonal market costs and improvements in net interest income in the second half of the year, there will be an increase in operational leverage and efficiency ratio.

The bank continued to maintain a strong asset quality in this quarter, with a net charge-off amount of $1.5 billion, remaining at this level for the sixth consecutive quarter, with a total net charge-off ratio of 55 basis points. The performance of consumer and commercial loans remained stable, with a net charge-off amount of $1.1 billion for consumers and a loss of $4.66 billion for commercial loans. The consumer banking business performed well, with revenue growing by 6% to reach $10.8 billion, and net profit increasing by 15% to reach $3 billion. This was mainly due to the innovation of deposit products and credit cards, as well as the industry-leading rewards program. Additionally, the wealth management business also achieved stable growth, managing customer balances close to $4.4 trillion and adding 7,100 new customer relationships, reflecting organic growth in new customer funds and existing customer investments. Adoption of digital services and customer experience ratings also reached historic highs.

In the second quarter, the bank reported revenue of 5.9 billion, a nearly 7% year-on-year increase, mainly driven by a 9% increase in fees from the asset management department. Meanwhile, expenses increased by 9%, supporting revenue growth and incentives, as well as investments in technology and hiring experienced consultants. Average loans grew by 7%, driven by growth in customized loans, securities loans, and mortgage loans. While global banking business revenue declined, it still showed strong growth in core deposits and investment banking activities. Global markets business revenue grew by 10%, primarily due to strong sales and trading results, while investment banking revenue declined. Other businesses showed some losses, mainly affected by tax rates and specific investment factors.

The dialogue discussed the growth of banks in the retail deposit field and the strategy to increase market share. During the epidemic, the bank's deposits increased from $700 billion to $950 billion, with a growth rate exceeding the industry average. In addition, the bank's average deposit cost is low, and through the introduction of artificial intelligence technology, operations will be more efficient and profitable. It also emphasized increasing checking accounts and meeting consumer needs to enhance customer satisfaction and market share.

During the discussion, the company emphasized its financial outlook for the second half of the year, focusing on maintaining cost stability through strict personnel control, with anticipated expense growth closely related to revenue. Additionally, the discussion covered the company's strategy for repricing loans, securities, and swaps, indicating its ongoing process of replacing old low-yield securities with new high-yield securities, as well as the continued implementation of cash flow hedging strategies. It is expected that these strategies will continue to have an impact over the next few quarters.

During the discussion, a detailed analysis of the reasons for the growth in bank fees was conducted, particularly focusing on the increase in incentives for wealth management business and the rise in costs related to market activities. At the same time, it was also mentioned that there are plans in place to address the regulatory costs and manpower investment related to AML (Anti-Money Laundering), as well as plans for future cost control and personnel optimization. It was emphasized that despite the pressure of rising costs, the bank remains optimistic about cost growth by controlling expenses and leveraging new technologies to enhance efficiency, and expects to maintain costs at a moderate level.

In the conversation, both parties discussed whether the company can restore its efficiency to pre-pandemic levels, close to 60%, under the successful drive of digital business in the future. They also explored the possibility that achieving this goal may become difficult due to changes in business models post-pandemic. They further discussed the long-term possibility of maintaining efficiency at around 59%.

Discussions have been held on the differences in company efficiency ratios caused by changes in accounting treatment and tax policies, especially regarding the impact of tax incentives on financial performance in clean energy trades. In addition, there has been extensive discussion on stable coins.

Discussed the future development trends of stablecoins in banking transactions and their impact on payment, income, and deposit trends, particularly the potential impact on American banks and the entire banking industry. Explored the role of stablecoins as a transaction tool, including their applications in small-value cross-border transfers, smart contracts, and digital native app payments. Also mentioned defense strategies for new challenges in the payment system and possible industry collaborations with stablecoin applications.

The discussion focused on the growth of deposits, net interest income (NII), and loan growth in banks. It was pointed out that despite the decrease in deposit costs and the growth of net interest income, there are still expectations for higher growth. Additionally, the potential challenges brought by international interest rate cuts were mentioned, as well as expectations for growth in non-interest income from consumer activities. Finally, it was emphasized the need to continue driving organic growth, keep an eye on interest rate changes in the second half of the year, in order to achieve the annual growth target of 6%-7%.

The discussion focused on the future of the catering business, emphasizing the importance of organic growth, including driving growth in deposits and loans, as well as continuously benefiting from the repricing of fixed-rate assets. The goal is to ensure long-term sustainable results replication and maintenance.

It is mentioned in the conversation that banks have significantly improved both productivity and customer service quality by widely applying AI technology. Despite a 50% reduction in staff over the past 15 years, the amount of deposits and transaction volume in the bank's consumer business has significantly increased, thanks to large-scale investments in technology updates and optimizations. AI technologies, such as large language models, have been used to handle a large number of customer inquiries, reducing the need for human customer service. In addition, the bank has optimized fixed income trading through AI models, further improving operational efficiency and customer satisfaction. The saved labor costs have been reinvested into relationship banking business, driving sustained growth in bank operations.

The conversation discussed the implementation of Ed's daily practices to improve efficiency, reduce personnel turnover, and reallocate manpower resources, emphasizing the correctness of decisions and their impact on people's lives. It was mentioned in the discussion to handle things cautiously to maintain customer confidence, as well as the challenges faced in scaling application, including the sustainability of application and practical benefits. Additionally, it was mentioned to support the expected leadership position over the next five years through holding patents and models, but also acknowledged being in the early stages.

During the discussion, it was mentioned that although the bank is leading in mobile applications and digital banking, it has taken a wait-and-see approach in the stablecoin field. This is because there is a need for legal clarity, clear customer demand, as well as proof of business cases and incremental value. The bank emphasizes that most transactions are already digitized, and they are working to understand and build capabilities for new digital asset technologies, but currently, there is not an urgent demand from customers for this.

The discussion focused on the current trend of deregulation facing the financial industry and how to adjust the capital buffer issue of 130 basis points in a timely manner. It emphasized that a buffer of 50 basis points is considered a reasonable level at present, and discussed the utilization of capital, including dividends, share buybacks, and supporting business growth. In addition, opinions on the relevance and impact of the Supplementary Leverage Ratio (SLR) were also mentioned.

The capital calibration of Global Systemically Important Banks (G-SIBs) was discussed, emphasizing its importance in assessing the significance of the banking system. It was pointed out that the current calibration methods do not take into account the rapid growth of banks' size during the pandemic, and there is a need for reassessment and adjustment. Additionally, the discussion touched on how banks can increase their size through loans, deposits, and increased trading, with the recent goal being to lower capital buffers by 50 basis points. Lastly, strategies for returning capital to shareholders and how to address potential challenges of increasing G-SIB capital requirements in the future were mentioned.

The discussion focused on how to prioritize capital redeployment into businesses with greater profit potential, especially noting that the recent repurchase of 5.3 billion shares reflects a strong interest in this area. It also emphasized that each business unit has growth opportunities, but careful adjustments are needed to ensure effective use of capital and returns. Specifically mentioned was the need for more capital and capabilities to grow certain businesses with lower capital returns, while also ensuring that businesses with high capital returns can continue to grow sustainably.

In the discussion, it was mentioned that there is no longer a theoretical limit on the allocation of Risk-Weighted Assets (RWA) for market operations. The key is to ensure that investments can bring in enough returns to absorb the overall impact on the company. As the company grows, the RWA for global market operations also increases, and continued investment in this area is necessary. It is also emphasized that the Global Systemically Important Banks (G-SIB) trigger mechanism must be handled cautiously to ensure that market returns are distributed reasonably and do not have a negative impact on the entire company.

Discussed how the company plans to continue supporting and investing in wind and solar projects in the face of changes in tax planning, as well as how these investments will impact the company's profit and loss statement. At the same time, the impact of the low-income housing investment tax credit was explored, and consideration was given to whether housing investments could offset the potential decrease in future investments in wind and solar. The company expects to remain involved in relevant projects in the coming years, with these projects gradually decreasing after 2027, and the demand and scale of the housing investment market will be key in determining whether it can fill this gap.

The head of the bank emphasized in the discussion that their team is committed to achieving loan growth faster than economic growth, and detailed the growth situation of commercial loans and core middle market businesses. The leader mentioned that despite facing challenges in the economic environment, such as the flat or declining commercial real estate market, they still achieved a 6-8% annual growth. In addition, by increasing sales force and adjusting some branch sales force to adapt to the new market environment, they have seen growth in loan balances. However, the leader also pointed out that customer demand and credit line utilization rates are still low, emphasizing the importance of handling consumer credit cautiously in the current economic conditions.

In the discussion, bank executives discussed the external use of capital, particularly in the field of technology through small acquisitions, and emphasized the importance of organic growth as they are unable to grow by acquiring other deposit institutions due to policy restrictions. They mentioned achieving market expansion through the redeployment of resources and manpower, while also emphasizing the importance of efficiency and effective use of capital.

Despite potential challenges such as a decrease in Bisby benefits and lowered interest rates, the company expects to achieve growth in loans and deposits based on its organic growth business model. By increasing its customer base and deepening existing customer relationships, the company anticipates growth in net interest income (NII) each quarter, benefiting from the repricing of fixed-rate assets. The company plans to overcome any adverse factors within the year through sustained organic growth, leading to quarterly growth in NII.

The bank's net interest income (NII) performance in this quarter was affected by high market activity and large commercial deposits, resulting in a slight dilution of NII. Nevertheless, overall, there was a positive contribution to NII. Despite this, the bank's long-term goal remains unchanged, to continue efforts to restore the NII ratio to the long-term target range of 2.20% to 2.30%. The short-term performance fluctuations are mainly due to the expansion of global market business and a significant increase in commercial deposits.

The meeting summarized the recent organic client activities of the company and the revenue growth in the second half of the year, expecting that the increase in net interest income (NII) will drive operational leverage, thereby achieving sustained revenue and earnings growth. In addition, the company is introducing artificial intelligence and enhanced intelligent technology to further improve efficiency and business performance.