Bank of America Corporation (NYSE:BAC) Q1 2019 Earnings Conference Call - Final Transcript

Apr 16, 2019 • 08:30 am ET

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Bank of America Corporation (NYSE:BAC) Q1 2019 Earnings Conference Call - Final Transcript

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Executive
Brian Moynihan

economy. All these things affect our business in a given quarter, but what has been constant behind that is our ability to drive operating leverage. We achieved it differently in different quarters, but as shown here, we achieved it consistently.

When you think of our company, there are three broad and diverse buckets of revenue, two of which have annuity-like characteristics and one is more susceptible to prevailing market conditions. The first bucket is spread revenue from loans and deposits, and the second bucket is recurring fees, like our cash management fees and our commercial business through our consumer account fees or interchange and things like that. The third bucket of revenue, which are more market related would be the sales and trading revenue, the investment banking fees and asset management brokerage revenue, which are both dependent on market levels at a given moment and market activity, giving rise to those levels.

So, if you think about this quarter versus last year, our market related types of revenue was down 12%. The other two non-market related revenue sources were up 7%. That shows you the diversity in this company. And all in, that ended up with flat revenue growth. However, our laser like focus on expense management came to the table again and resulted in year-over-year expense decline of 4%, which resulted in the 400 basis points of operating leverage. All you can see as you move to the right-hand slide -- right-hand side of slide 3.

When you think about how we are driving the company, for managing expenses, we continue to invest in the future. Our expenses have come down from $57 billion to $53 billion and change over the last four years or so. And we've been driving the operating leverage in each quarter during that time, but we also continue to invest deeply in our franchise. And why do we do that? Because it is working. We're getting more business as we add relationship management capacity, increase our marketing and drive deeper penetration of U.S. markets through the full franchise entry and more and more markets across the United States.

We also continue to invest in our people with industry leading benefit plans, both in health and retirement, with industry-leading capabilities and universities to train and re-skill our teammates and plus the pay plan we announced recently, we are going to increase our minimum wage over the next 26 months from $15 an hour plus to $20 an hour. We need to do that because we need the best teammates to make this great client work -- company work and work for our clients. Across the company, we added 500 new sales professionals this quarter, more consumer relationship bankers, more wealth advisers, more commercial bankers and more business bankers, more small business bankers and more investment bankers. And as we had discussed many times, our initial spending for technology has been running around $3 billion for many years now, but is currently due to savings from