Bank of America expects 2026 NII growth at the upper end of 6% to 8% while targeting 300 to 400 bps operating leverage

Earnings Call Insights: Bank of America (BAC) Q2 2026 MANAGEMENT VIEW * “Our revenue grew 15% year-over-year to $31.6 billion... Our EPS increased 34% to $1.21 a share.” (Chairman & CEO Brian Moynihan) * “On an FTE basis, NII was approximately $16.2 billion, up 9% over last year's second quarter... Investment banking fees increased 50% year-over-year to more than $2.1 billion, while sales and trading generated $7.2 billion in revenue, up 33%.” (CEO Moynihan) * “We've returned $8 billion to you through dividends and share repurchases this quarter... a common equity Tier 1 ratio of 11.2%.” (CEO Moynihan) * “Our associates are generating more than 400,000 prompts a day... we had over 300 AI use cases approved... 114 are live generative AI use cases. 34 of those cases are fully implemented.” (CEO Moynihan) * “Average deposits were $2.02 trillion... included noninterest-bearing growth of $19 billion... Average loans and leases increased to $1.2 trillion, up $88 billion or 8% from a year ago.” (Executive VP & CFO Alastair Borthwick) OUTLOOK * “We now expect full year 2026 NII growth to be at the upper end of that 6% to 8% range... and it's based on the current forward curve, which has one 25-basis point rate hike in September.” (CFO Borthwick) * “On our first quarter earnings call in April, we told you we expected full year operating leverage of more than 200 basis points... we now expect full year operating leverage to be in the range of 300 to 400 basis points.” (CFO Borthwick) * Versus the prior quarter’s messaging, management moved from “we continue to expect more than 200 basis points of positive operating leverage for the year” (CFO Borthwick, Q1) to a tighter numerical range of “300 to 400 basis points” (CFO Borthwick, Q2). FINANCIAL RESULTS * The quarter’s key reported results included $31.6 billion revenue, $9.1 billion net income, and $1.21 EPS, alongside “return on tangible common equity of 17%” and an “efficiency ratio improved to 59%.” (CEO Moynihan) * “Noninterest expense... approximately $18.6 billion” with the year-over-year increase reflecting “continued investment in technology, sales teams, financial centers and brand marketing” and “higher activity-related costs... particularly in our overseas markets.” (CFO Borthwick) * Credit metrics were described as stable: “Provision expense was approximately $1.4 billion, net charge-offs were also $1.4 billion... Nonperforming loans remained stable at approximately $5.8 billion, and we recorded a modest reserve release.” (CFO Borthwick) Q&A * Christopher McGratty, KBW: asked about deposit pricing discipline and NII momentum; CFO Borthwick said, “our strategy is about relationship value,” adding, “We've got $800 billion of excess between our cash and securities over our loans.” * Christopher McGratty, KBW: asked about AI and operating leverage sustainability; CFO Borthwick pointed to “growth, efficiency, risk management and resiliency,” and said, “at this point, we've got... approved model cases... 300... 114.” * Kenneth Usdin, Autonomous: pressed on tougher 2H comps and what it implies for operating leverage; CFO Borthwick said, “we're offering the 300 to 400,” and cited comparability issues around last year’s second-half NII lift and industry investment banking levels. * Manan Gosalia, Morgan Stanley: asked whether rate changes could alter the NII guide; CFO Borthwick said, “net-net-net, it's a positive for us,” while noting markets is “slightly liability sensitive.” * Benjamin Gerlinger, Citi: asked whether the higher-end NII view assumes mix/productivity changes; CFO Borthwick said the guide assumes “modest deposit growth,” “good continued loan growth,” plus “fixed rate asset repricing,” and framed balance sheet efficiency as “more about net interest yield and less about NII.” * L. Erika Penala, UBS: questioned why NII growth would slow from the first-half pace; CFO Borthwick said, “we're just up against tougher comps,” adding, “it looks to us like more like 8% for the full year just based on the comps.” * Michael Mayo, Wells Fargo: asked why operating leverage guidance rose and requested expense guidance; CFO Borthwick said, “No, we've largely gone away from that,” and pointed to core “headcount discipline... flat to slightly down.” * Gerard Cassidy, RBC: asked about underwriting/credit risk; CEO Moynihan said, “we stick to our credit knitting,” while adding, “It's all going to come down to the economy.” * Matthew O'Connor, Deutsche Bank: asked for NII “ex markets”; CFO Borthwick said he would help “offline,” and added, “markets NII... will be flat to slightly down... most all of the growth is going to come from the Global Banking books.” SENTIMENT ANALYSIS * Analysts were slightly skeptical/pressing on sustainability and drivers, including “tougher comps” (Kenneth Usdin, Autonomous) and requests to decompose NII (“What is that ex markets?”) (Matthew O'Connor, Deutsche Bank). * Management tone was confident in prepared remarks and generally steady in Q&A, using phrases such as “We now expect” (CFO Borthwick) and “we feel very good” (CEO Moynihan on pipelines/returns), with occasional caution that external events “could affect... IPOs, et cetera.” (CEO Moynihan). * Compared to Q1’s emphasis on resilience and discipline, Q2 leaned more into outperformance language (“extending our momentum,” “exceptional quarter”) (CEO Moynihan) and a higher operating leverage outlook (“300 to 400 basis points”) (CFO Borthwick). QUARTER-OVER-QUARTER COMPARISON * Q2 reported faster year-over-year growth than Q1, with Q1 stating “Revenue grew 7% year-over-year to $30.3 billion... Earnings per share... $1.11” (CEO Moynihan, Q1) versus Q2’s $31.6 billion revenue and $1.21 EPS (CEO Moynihan, Q2). * NII guidance language in Q2 shifted higher in confidence: Q1 said, “we're raising our full year NII growth guidance range... up 6% to 8%” (CFO Borthwick, Q1), while Q2 said, “We now expect... at the upper end of that 6% to 8% range.” (CFO Borthwick, Q2). * Q2 introduced substantially expanded AI adoption disclosure (prompts per day, approved and live use cases) (CEO Moynihan), while Q1 emphasized broad availability (“all 200,000 teammates have access to AI”) and “90 installations working.” (CEO Moynihan, Q1). RISKS AND CONCERNS * Management flagged macro risks: “inflation and tighter monetary policy remain key risks,” and markets uncertainty tied to geopolitics: “we can't predict what will happen next and that could affect the market's perception, IPOs, et cetera.” (CEO Moynihan) * On NII sensitivity and mix, management highlighted that Global Markets NII could be an offset in rate shifts: “the markets business is slightly liability sensitive. So that's a slight offset.” (CFO Borthwick) * Credit was framed as stable but with “some isolated corporate and commercial lending losses,” even as “CRE improvement” was cited as a driver of better criticized exposures. (CFO Borthwick) FINAL TAKEAWAY Management described Q2 as broad-based strength across NII, fees, and operating leverage, while raising its operating leverage outlook to 300 to 400 basis points and positioning full-year 2026 NII growth toward the upper end of 6% to 8%. Leadership emphasized deposit mix discipline, continued loan growth, stable credit, and accelerating AI deployment metrics (approved and live use cases and employee usage) as supporting productivity and client execution, while noting that inflation, monetary policy, and geopolitical-driven market conditions remain key variables. 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