Bank of America Corporation (NYSE:BAC) Q1 2019 Earnings Conference Call - Final Transcript
Apr 16, 2019 • 08:30 am ET
(Operator Instructions) We'll take our first question from John McDonald with Autonomous Research. Please go ahead.
Hi, good morning. Paul, I was hoping to just clarify the outlook for the net interest income. It sounds like you expect NII to be down sequentially in the second quarter on a few of those pressure points that you mentioned, and then to grow some in the back half, as loan and deposit growth and day count get more favorable.
Yeah, that's right. I mean as we said in the prepared remarks, we've got some near-term headwinds, some of them are seasonal, some of them are because longer rates were down. But as we move to the second half of the year, we expect to benefit from continued loan and deposit growth, plus another day of interest in Q3. So, ultimately, we think the full year 2019 NII is going to be up roughly 3% year-over-year. By the way, when I gave the -- in the prepared remarks when I gave the net charge-off for that single credit, I transposed the numbers, I said $84 million, it was really $48 million.
Okay. Just -- and on that outlook for 3% NII in 2019, is that assuming no rate hikes and still a pretty flattish curve?
Yeah, that assumes the curve as we sit here today, which is flat.
Okay. No hikes?
And then in terms of your rate sensitivity, you mentioned that they had gone up. How do you think about managing rate sensitivity at this point in the cycle, and actions to potentially protect NII in a flattening curve environment from here, or rate cut scenario from here? How do you think about how sensitive you want to be?
Well, look, we -- we're not a hedge fund, we're a bank and so we are customer-driven, and our asset sensitivity is driven by our loans and our deposits and the activity that our customers do with us. Having said that, we have limits on how -- how much asset sensitivity we want on the upside and the downside, we're within those limits. There may come a point in the future where we would do something to modify the asset sensitivity of the company. But remember, when you're doing that you're basically placing a bet on the future rate of -- future change in interest rates, what if you're wrong? So, again, we're a bank, we're serving our customers. That's what creates the asset sensitivity in the company. There may come a time we'll adjust that, but right now we feel comfortable.
Got it. Okay, thanks.
We'll take our next question from Glenn Schorr with Evercore ISI. Please go ahead.
Thanks. Appreciate it. I know it's within the NII construct that you just gave. But I'm curious, you made a comment on -- in the quarter, the non-interest bearing to interest bearing shift in deposits continued, but you thought it would stabilize as rates do. I'm just looking for some color on how