Bank of America signals 8% NII growth for Q4 2025 driven by strong loan and deposit performance

Earnings Call Insights: Bank of America Corporation (BAC) Q3 2025

MANAGEMENT VIEW

*
Brian Moynihan, Chairman & CEO, indicated that "Bank of America delivered a strong third quarter with good growth both in the top line revenue and bottom line EPS, all driven by strong operating leverage." He noted revenue of $28 billion, up 11% year-over-year, and EPS of $1.06, up 31% year-over-year. Moynihan emphasized "operating leverage of 560 basis points" and return on tangible common equity at 15.4%. He stated, "Our results also underscore the benefits of a diversified business model with top-tier position, not only in lending and deposits, but also across the markets-driven businesses in Wealth Management, Global Markets and Global Banking." Moynihan highlighted $7.4 billion returned to shareholders through dividends and share repurchases, and a record net interest income (NII) of $15.4 billion on an FTE basis. Investment banking fees exceeded $2 billion, up 43% year-over-year, and asset management fees rose 12%. Consumer Banking after-tax earnings were $3.4 billion, up 28% year-over-year. Global Wealth and Investment Management net income was nearly $1.3 billion, up 19%.

*
Alastair Borthwick, Executive VP & CFO, stated, "In the third quarter, we delivered 11% year-over-year revenue growth, significantly outpacing 5% expense growth and resulting in that strong 6% operating leverage." He highlighted that "expense growth versus the second quarter was held under 1%, while those same compensable revenue streams grew 8% sequentially, further reinforcing our ability to scale efficiently and invest where it matters most." Borthwick noted "Provision expense improved this quarter with net charge-offs declining 10%, and we had a modest reserve release as a result of both credit card and commercial real estate improvement."

OUTLOOK

* Borthwick explained that, despite late quarter interest rate cuts and the curve anticipating two more cuts, "we believe fourth quarter NII will be in the higher end of that range of expectations. So think of that as being $15.6 billion plus on a fully taxable equivalent basis. And that would represent approximately 8% growth from the fourth quarter of '24." He added, "for the full year of 2026, our expectations about the drivers of growth are largely aligned with 2025 performance," expecting "full year NII growth somewhat similar to 2025 performance over 2024. So think of that as something like 5% to 7% growth."

FINANCIAL RESULTS

* Bank of America reported revenue of $28 billion and EPS of $1.06 for the quarter. NII on a fully taxable equivalent basis was reported at nearly $15.4 billion. The efficiency ratio fell below 62%. Tangible book value per share was $28.39, up 8% from the third quarter of 2024. Average deposits were up $71 billion year-over-year, and Global Banking deposits grew 15%. Loan balances reached $1.15 trillion, improving 9% year-over-year, driven by 13% commercial loan growth. Net charge-offs were $1.4 billion, down about 10% from the second quarter. Shareholders' equity ended at $304 billion, with a CET1 ratio of 11.6%.

Q&A

* Glenn Schorr, Evercore: Asked about AI as a major margin efficiency driver. Moynihan responded, "We believe strongly that all technologies help drive that. And this technology and artificial intelligence allows you to do things that heretofore haven't done... its impact on expenses is felt. We are reinvesting some of that to actually grow faster, and you're seeing the results of that."
* John McDonald, Truist Securities: Questioned the outlook for capital markets businesses amid seasonality. Borthwick answered, "We've obviously seen a pickup in activity here in the third quarter... In terms of the pipelines, they're up this quarter... we feel good about the pipeline and the way it's developing."
* James Mitchell, Seaport Research Partners: Asked about balance sheet strategy and capital buffer. Moynihan replied, "Our target will be... 50 basis points over the regulatory minimums. And so you should expect us to keep working that down."
* L. Erika Penala, UBS: Sought clarity on ROTCE sustainability and efficiency ratio. Borthwick said, "You should expect us to continue to walk our return on tangible common equity north from here."
* Michael Mayo, Wells Fargo Securities: Asked for more detail on efficiency ratio improvement and AI savings. Moynihan responded, "You should be very confident, Mike, we manage expenses well in this company and the headcount well."
* Christopher McGratty, KBW: Asked about credit risks. Borthwick stated, "The broad message we need to send to people right now is the credit portfolios are performing very well at this point."

SENTIMENT ANALYSIS

* Analysts focused on margin expansion, AI-driven efficiency, sustainable ROTCE, capital deployment, and deposit growth, with a generally positive but probing tone, especially when seeking clarity on AI's future impact and capital allocation.
* Management's tone remained confident and measured, especially in prepared remarks and when discussing operating leverage, credit quality, and technological advances, while providing more detailed explanations in response to analyst skepticism. For example, Moynihan said, "We believe strongly that all technologies help drive that..."
* Compared to last quarter, both analysts and management displayed increased confidence, with management highlighting stronger organic growth and more visible operating leverage.

QUARTER-OVER-QUARTER COMPARISON

* Guidance language on NII was updated with a more specific expectation for Q4, shifting from a general "range of $15.5 billion to $15.7 billion" to "$15.6 billion plus," reflecting greater confidence. Full-year 2026 NII growth guidance was introduced at 5% to 7%.
* Strategic focus continues on organic loan and deposit growth, expense discipline, and investment in technology, with a heightened emphasis on AI implementation and operating leverage. Analysts maintained focus on expense trajectory, capital deployment, and sustainability of growth in capital markets and wealth management.
* Key metrics improved: revenue growth accelerated to 11% (from 4% in Q2), ROTCE increased to 15.4% (from 13.4%), and net charge-offs declined from Q2.
* Management confidence increased, evidenced by more assertive forward guidance and reinforced strategic messaging. Analyst tone was slightly more constructive, with less focus on near-term risks and more on long-term sustainability.

RISKS AND CONCERNS

* Management cited uncertainty from tariffs, interest rate volatility, and potential changes in regulatory capital requirements. Borthwick stated, "There remains a good amount of uncertainty from the impacts related to announced tariffs and the potential for continued uncertainty."
* Credit risks were addressed, with net charge-offs declining and a modest reserve release, particularly in credit card and commercial real estate.
* Analysts raised concerns about the pace and sustainability of AI-driven efficiency, deposit beta as rates fall, and the ability to maintain or improve ROTCE amid industry competition.

FINAL TAKEAWAY

Bank of America highlighted robust third quarter performance with double-digit revenue growth, significant operating leverage, and notable improvements in key business lines. Management reinforced their confidence in the bank’s organic growth strategy, continued technology and AI investments, and prudent risk and expense management. Looking ahead, the company expects NII to reach the upper end of previously guided ranges in Q4 and forecasts 5% to 7% NII growth for 2026, signaling positive momentum and a focus on sustainable, shareholder-friendly returns.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/bac/earnings/transcripts]

MORE ON BANK OF AMERICA

* Bank of America Corporation (BAC) Q3 2025 Earnings Call Transcript [https://seekingalpha.com/article/4830154-bank-of-america-corporation-bac-q3-2025-earnings-call-transcript]
* Bank of America: I Want To Hear About AI In Q3 [https://seekingalpha.com/article/4829786-bank-of-america-i-want-to-hear-about-ai-in-q3]
* Bank of America: Solid Provisioning Going Into Q3 2025 Earnings [https://seekingalpha.com/article/4828277-bank-of-america-solid-provisioning-going-into-q3-2025-earnings]
* Bank of America delivers Q3 earnings beat, with strength across business lines [https://seekingalpha.com/news/4504185-bank-of-america-delivers-q3-earnings-beat-with-strength-across-business-lines]
* Bank of America GAAP EPS of $1.06 beats by $0.11, revenue of $28.09B beats by $630M [https://seekingalpha.com/news/4504182-bank-of-america-gaap-eps-of-1_06-beats-by-0_11-revenue-of-28_09b-beats-by-630m]