Good day, everyone and welcome to today’s Bank of America First Quarter Earnings Announcement Conference Call. [Operator Instructions] It is now my pleasure to turn today’s program over to Mr. Lee McEntire. Please go ahead, sir.

Thank you. Good morning. Thanks to everybody for joining us this morning for the first quarter 2017 results. Hopefully, everybody’s had a chance to review the earnings release documents that were available on our website. Before I turn the call over to Brian and Paul, let me remind you, we may make some forward-looking statements. For further information on those, please refer to either our earnings release documents, our website or our SEC filings. With that, I’m pleased to turn it over to Brian Moynihan, our Chairman and CEO for some opening comments before Paul Donofrio, our CFO, goes through the details. Take it away, Brian.

Thank you, Lee. Good morning everyone and thank you for joining our first quarter results. I’m going to begin on slide two. And first, this quarter is another solid example of driving responsible growth at Bank of America. My teammates continue to deliver for customers around the world, and not many companies have the resources we have to help our clients drive the global economy. But with that, we understand responsibility comes with doing this, and we do it in a responsible way. Responsible growth is driving more sustainable returns for you as shareholders also. This quarter, we produced strong revenue growth; we drove cost savings that offset higher revenue related cost; and we managed risk well; and we returned more capital to you, our shareholders through dividends and increased repurchased shares than any period since the crisis. Turning to slide three. Our Company produced earnings of $4.9 billion after tax in the first quarter of 2017. Those earnings were up 40% compared to the first quarter of last year, driven by 700 basis points of operating leverage. Revenue rose 7% and we managed to keep overall expenses flat. Our earnings per share were $0.41 per share; on a diluted basis that was up 46%. This is the fourth quarter in a row we’ve exceeded $0.40 of EPS per share. We did that in quarter one despite $1.4 billion of annual retirement-eligible incentives and seasonally elevated payroll tax costs. And importantly, we have done this in a responsible matter, not reaching for growth outside of our established risk and customer framework. And we achieved this in economy which continues to grow in the 1.5% to 2% range. On a year-over-year basis, our average deposits were up $58 billion, average loans were up $21 billion, and sales and trading revenues excluding…

Thanks, Brian. I will start with the balance sheet on page six. Overall, end-of-period assets increased $60 billion from Q4. The growth was fairly evenly split between two elements. First, we saw higher trading-related assets in global markets business with incremental customer activity following a seasonal slowdown at the end of Q4; secondly, we had higher cash levels, driven by seasonal deposit growth, primarily from tax refunds. Deposits rose $55 billion or 5% from Q1 2016 and are up $11 billion from Q4. Q1 deposit growth was primarily driven by customer tax refunds in our consumer business. Loans on an end-of-period basis were steady with Q4 as solid commercial growth was offset by seasonal declines in credit card and runoff of legacy noncore loans. Lastly, common equity increased $1.3 billion compared to Q4 as $4.4 billion in net income available to common was reduced by $3 billion and capital returned to shareholders through dividends and net share repurchases. Global liquidity sources increased in the quarter, driven by higher deposit flows and bank funding. We remain well compliant with fully phased-in U.S. LCR requirements, book value per share rose 5% from Q1 2016 to $24.36. Turning to regulatory metrics and focusing on the advanced approach. Our CET1 transition ratio under Basel III ended the quarter at 11%. On a fully phased-in basis, compared to Q4, the CET1 ratio improved 20 basis points to 11% and remained well above our 2019 requirement of 9.5%. CET1 capital increased $1.6 billion to $164 billion, driven by earnings and the utilization of deferred tax assets offset by return of capital. The ratio also benefited from an $11 billion -- excuse me, a $14 billion decline in RWA, driven by lower exposure in our global markets business, lower card exposure and legacy asset runoff. We also…

[Operator Instructions] And we’ll take our first question from Glenn Schorr with Evercore ISI. Please go ahead, sir.

Hi. Thanks very much. First, a very quickie. Did you mention what NPLs you sold during the quarter and if there was any P&L impact?

Small and small. Small sales, small impact.

No problem. I’m curious, I think we’ve all taken note of the responsible growth, what you’ve done, heard your comments on it relative to the economy. I’m curious as we watch the industry loan growth come down for a bunch of different reasons, can BofA continue on this path? I don’t want to say regardless of what the industry backdrop is, but can it buck the trend of the declining loan growth that we’re seeing in most other places?

Glenn, it’s Brian. I think at the end of day, banks reflect the economy and help make the economy happen. So, we’ve been able to grow loans 5%, 6% in the core, so the middle market segment, 7% actually year-over-year. Credit card’s been picking up a little bit, home equity’s strong and residential mortgage down. So, if you look at it overall, we’ve been able to outgrow the economy, but we’re going to be dependent upon, the economy keep growing, but what we’re showing across last couple of years with the discipline we have, driving deeper penetration or customers working hard on our relationships, even with repositioning portfolios, you can see in some of the slides and/or making sure that we maintain great discipline, we’ve been able to grow the mid single digits as we’ve told you against the backdrop of economy growing 1.5% to 2%. If that grows faster, we’ll grow faster; if that stays in that range, we should be able to continue to grow at that level.

Okay. Maybe on the credit front, as you’ve mentioned, credit’s awesome in most places. And I saw criticized credit came down with energy improving. Are there any areas that are criticized credits increasing like something like retail?

No. Credit looks good across the board, and it’s performing as we model and expect.

Okay. Lastly, little one. You mentioned the increase in Zelle activity. Do you make money on that or is that mostly a customer retention tool?

I think, Glenn, think about it this way is the way people pay each other. So, we don’t charge for it. It’s just service as part of a core DDA account, just like checks or just like an ATM card would be to withdraw. It’s just more efficient for the customer, more efficient for us too ultimately, because the payback will be taking cash out of the system. And so, year-to-date we’re up about -- even before Zelle is announced, for the first quarter, P2P payments Bank of America of 25% first quarter of 2017 versus first quarter of 2016. So, this is growing fast and will continue to grow. And what we’ll do, we’ll swap out other payment forms which cost us more to execute, but it’s free to customers.

And we’ll take our next question from John McDonald from Bernstein. Please go ahead.

Good morning. Paul, just a clarification regarding the second quarter framework you’ve provided for net interest income. Does the $150 million potential bump based on disclosures include the benefit of loan growth or was that just a rate impact, and could it be a little better if loan growth continues?

Well, the loan growth is embedded in our 100 basis-point shock. So, theoretically, it includes it. But if loan growth is little better than we think, it could be better, lower, it could be less, that’s one of the variables that we have to think about when we think about NII growth.

Okay.

John, just one thing to keep in mind there is, remember, we just capitalized or put in the run rate, for lack of better term, $600 million plus fourth quarter, first quarter, and this is on top of that. So that first benefit you think for the year, that benefit is now locked in and moves its way through the system.

Got it, so that’s incremental to the 1Q print? Okay. And then, can you remind us what kind of the project repricing beta you assume in the disclosures, Paul?

Sure. So 100 basis-point rise on interest bearing deposits, and remember we have a large amount of non-interest bearing deposits, but on interest bearing deposits, we’re kind of low 50ish but that’s full 100 basis points rise. As you can expect, the first 25, 50 of the 100 is going to be a little bit different than the second 25 or 50, and that’s about as much that I want to give you, given the competiveness around this topic.

Okay. Separate question on capital, with the CET1 at 11% now versus the 2019 requirement of 9.5%, what kind of buffers are you thinking of holding and what level of CET1 feels like the right target for you longer term?

So, with respect to buffers, I wouldn’t want to give an exact number for all sorts of reasons. We put a lot of thought into how we manage our capital and liability structure including buffers. Having said that, we have 150 basis points of cushion right now on fully phased-in minimums and a lot of time between now and 2019. So, maybe we’ll talk more about it as we get a little closer but right now we feel good where we are.

And we’ll take our next question from Steven Chubak with Nomura Instinet. Please go ahead.

So, I just want to kick things off with the question on the 2018 expense target of $53 million that you guys had outlined on previous calls. Can you just remind us what the revenue growth assumptions were underlying that target? And just giving some of the acceleration that we’ve seen in fee income growth and the higher incentive comp, is that still an achievable target in your view?

The revenue growth assumptions were like we said, if long-term we believe we can grow faster than GDP that growth, and that’s embedded in those assumptions. I think the way for you Steve to think about is look at the global markets year-over-year and what you see there is with that substantial rise in revenue, the expense growth absent, last year we had a credit and litigation issue, we had an expense, so you had a pretty good reversal there; absent that, it was 2% growth and as Paul said, had 6% less people. Comp expenses were up a bit, even though revenue was up quite a bit. So, we can manage against that with the inevitable thing that if revenue grows faster, we may have a little bit more expense pressure. But I think you know we’ll be very happy to see that happen.

The only thing I would add for the record is when we gave that guidance around this time last year, we specifically said it was based upon the economic environment at that time and that if things got better, we’d have to adjust; if things got worse, we have to adjust. Having said all that, that’s just for the record, having said all that, we’re still focused and confident we can get to the 53, approximately 53 for full year 2018. That’s what we said.

Got it. And then just one question on the provision outlook, just given the continued favorable credit and delinquency trends, how should we be thinking about the trajectory in the near-term. Is the run-rate of just around $850 million plus or minus a reasonable target?

The way I would think about it, in Q2 provision should roughly match net charge-offs. But remember, we’re bouncing around the bottom with respect to net charge-offs and commercial, so a material credit can move needle one way or the other. Absent that caution, we will build as we grow loan balances. But we should expect to see that offset perhaps by further runoff of non-core consumer real estate, and we have a high end user.

Thanks, Paul. And just one final question on capital return, just touching on John’s last question, how should we be thinking about the capital return trajectory given the 150 basis points of excess? And I’m also wondering whether some of the recent rhetoric from the regulators suggesting a disinclination of sorts to have qualitative CCAR failures, whether that informs your approach at all in terms of future payouts?

I think we have been building our capital year-over-year, and you should expect us to continue to do that since we have both the strong cushion under CCAR. We’ll see what this year’s results, we don’t know yet obviously. But from last year, just extrapolating and also our start point is higher, and our run rate of earnings is now very consistent. So, capital returns part of our story, and we’ll continue to pursue it.

We’ve made progress every year, you’ve seen that. And I would remind everybody that we tapped the de minimis last year as well. So with the stability of our earnings, with the progress we’re making on CCAR, as Brian said, we hope to continue to make progress.

And we’ll take our next question from Ken Usdin with Jefferies. Please go ahead.

Thanks. Good morning. Just first clarification, just coming back to the NII commentary, does the 150 also incorporate the extra day you get in the second quarter because that’s usually pretty meaningful for you guys?

Yes, I would think about the extra day as kind of being offset by the seasonality we have in Q1 for leasing.

Okay. So, you’ve got -- you’re saying you’ve got a benefit in the first and that kind of washes to the second; so really, your net is the 150?

Yes, approximately 150. And as you know, there’s a lot of things that go into that modeling.

Understood. Okay, great. So, on the consumer fee side, I wanted to just ask, we saw kind of a little bit of a positive turn in both card income and also in the brokers line, which is the first time in a while we’ve seen both of those move the right way. Any better line of sight at this point on just the trends getting better underneath the surface, whether it’s the rewards competition or the fee capture pressures and brokerage kind of starting to get into the run rate, and we can kind of expect to see growth from here?

Look, we’ve seen modest growth in card balances. We think that should continue. We’re adding new accounts; we had 1.2 million cards this quarter. Combined debit card spend was good year-over-year and really good recently. But as you point out, the card income line remains I think in terms of growth, remains muted by competition around customer rewards. I guess what I would point out and just remind everybody is that just focusing on the fee income line sort of ignores some of the key benefits of our strategy, which is attract relatively higher quality card customers and reward them for deepening their relations with us. This strategy, we think is driving incremental deposit growth and making them stickier, and that helps NII. And by the way, these customers have lower loss rates as well as reduced need to interact with call centers, so that helps us lower costs. In terms of the service line or service charges, they’ve shown some modest growth driven by growth in new accounts, and we expect that probably to continue here.

And can you just touch on brokerage?

You mean brokerage…

Wealth and brokerage.

Yes. Wealth and brokerage is being driven by the long-term trend that we’ve been seeing with growth in AUM as transactional brokerage continues to decline. We saw it again this quarter. This quarter, we had significant growth in AUM, which offset that sort of continuing decline in brokerage. I think AUM fees were up 8% this quarter.

And we’ll take our next question from Betsy Graseck with Morgan Stanley. Please go ahead.

Couple of questions. One on the expenses discussion earlier. On page four, you highlighted very clearly the strong operating leverage that you’ve got year-on-year from various industries, various segments that you run. The question I have is, where should we expect the next leg of improvement on expenses could come from? Because one of the questions I’ve gotten from people today is this is fantastic operating leverage, but where are the levers to take it further?

I think when we started few years ago at $70 billion operating expenses to bring it down to this level, it was more obvious. Betsy, now, it’s everywhere, it’s everywhere a little bit, everywhere a lot of hard work. So, headcount generally is drifting down on year-over-year term 4,000 or 4,000 people. That gets harder, but what we’re doing is taking out people and putting them into the front-line in the client-facing roles. And so, we’re seeing that shift go on, continue to work our real estate portfolio down, again through collocations and cities. So, you’ll see us take three buildings in an area and put them in one, and you’ve seen some announcement in that regard. In our data centers, we’re accelerating the process, to consolidate data centers and that helps continue to knock down the number of data centers. It takes $0.5 billion investment to -- or $0.25 billion investment to build one to bring it on, and so you’ll see that go on. And then, it’s everywhere we turn, every place we look, just keep working at the pieces. By the end of the day, continue to watch the FTE headcount numbers drift down and also how we move those around from less managers to more client-facing people and less layers in the Company, which we’ve been after. And so, it is just hard work and across the board using our simplify improvement, what we call organizational health going on in our company, and we’re seeing the aspects of that. By the way, I think last year, in 2016, to give you example, I think we invested -- got about $400 million, $500 million in savings from some ideas, but it took us an investment of couple of hundred million dollars to get that. And so, even that investment rate is important to getting the sales out. And so, we’re now asking to exclude but there is severance cost in here, there is real estate repositioning costs, all of that, which actually comes down as you get further and further towards the optimization level.

Okay. That speaks to why you can continue the revenue growth, but yet still bring the expenses down, got it. Two other quick ones. One on fixed income, you mentioned that credit was a source of strength this quarter; others have highlighted credit as a weakness. So, maybe you could speak to what you’re seeing in your client base that drove such strong credit quarter in fact?

Well, first, I would say look, we’ve been making a lot of investments on our global markets business across equity, across macro. Credit has always been a traditional strength of Bank of America Merrill Lynch, a lot of very strong bankers combined with strong sales and trading effort. Corporates raised money this quarter in the capital markets; we have strong relationships. So, we saw a lot of increased activity on the primary side which helps your sales and trading on the secondary side. That’s one. Two, with spreads tightening a little bit, with clients activity picking up as they were repositioning given the change in markets, the change in spreads, again we have a strong corporate credit trading desk; we have strong special situations in credit; we have strong mortgage, and they just saw a lot of client activity, given what happened in the quarter. So, when we’ve often said -- when client activity picks up, you’re going to see this business reform. And for us, client activity was more this quarter and it showed up in our results. And again, lastly, it’s impressive products, it’s significant presence and scale in every major markets around the world. So, it’s not just the U.S.; we saw activity in emerging markets around globe and we were there when our clients needed us.

Okay, thanks. And then, lastly, you mentioned on the call during the prepared remarks that you “remain mindful of the LCR rules as we grow deposits”. Could you elaborate on your thoughts behind that?

Sure. Particularly on the wholesale side, there are three types of deposits, fundamentally 25%, 40%, and a 100% runoff. And as we think about serving our customers and clients, we’re very mindful of their needs. But we’re also focused on maintaining those heavy deposits or of the highest quarter in terms of being able to use to lend out to customers. So that means you’re going to focus on the 25 and 40 or the more deposits that are much more operational in nature. The deposits that we know are corporate and FI clients are using to run their businesses. We’re focused on growing those deposits and we’re focused on helping them use those deposits to pay bills and to move their money around, to do FX, all the things you might think an individual does but just on the corporate side. Those are the types of the deposits we’re focused on; we’re not -- we’re respectful of clients who want to give us other types of deposits but we’re having conversations about them, about the value of those and therefore what they should expect in terms of pricing.

And we’ll take our next question from Gerard Cassidy with RBC. Please go ahead.

Brian, when you look out longer term and if you turn back the clock when the industry before the financial crisis typically earned a 120 on assets, 130 basis points on assets and a more normal interest rate environment. What do you see for the long -- and I know ROE is what you’re focused on and we all do. But from an ROA standpoint, when everything is going right for Bank of America, the expenses are where you want them to be, the margins are where you want them to be, what kind of ROA do you think this Company is capable of producing?

I think Gerard this is the focus we’ve talked to you about getting above 100 basis points and with the adjustments of sort of smoothing out the first quarter little bit from the one time, annual expenses occur in the first quarter, you’re getting close to that. That is not a aspiration goal which we’ll stop at. I think it will improve if the rate structure continues to move up and the economy continues to grow, we’ll get above that. But the first order business to get to that sort of we get the returns on tangible common equity and returns on equity where we want them to be. As you’re thinking about that just more broadly, remember that we have a balance sheet of $2.3 trillion or so, and think about $500 billion basically being completely liquid assets. That is a far different cry than we were -- when our balance sheet was sort of at the high point, was $2.7 trillion, and we probably had $200 billion or $100 billion to $200 billion of high-quality assets or whatever the moniker we’ve used back then. That’s going to knock around your yields on your balance sheet. And so, we do focus on ROA in our Company; we also -- because basically is the thing that ultimately drive ROE, there is this equity builds, the ROE can be under pressure just from increases in equity. But, if you think about it, the real driver of the yield on the balance sheet has more to do with the amount of asset you are carrying which are under leverage for purposes of liquidity and safety and soundness.

Right. Okay, thanks. And speaking of the lever on the equity, can you remind us what the risk-weighted assets are now for the operational risk for you guys?

Sure. We have $500 billion in RWA for operational risk, which is if I can go on a little bit, which is one third approximately of the RWA of the Company under the advanced approach and more RWA than we have for our credit.

Very good. And then, coming back to the combined payout ratio that you guys are striving for, within that, what should we envision, once you get your capital levels to the point where you’re very comfortable with, is the dividend payout ratio of 30% to 40% a reasonable expectation down the road when things more normalize?

A couple of things. One is our capital is more than sufficient. We’re very comfortable with it with the tangible common equity ratio, Gerard, thinking about before the crisis of 7.9% and a CET1 of 11%. It was a minimum of 9.5%. We’re -- we have more capital than the Company needs by the different measures, whether it’s a traditional market-based measure or a regulatory measure. So, we’re completely comfortable with that. That leads us to return more capital. You should expect our dividend payout ratio -- for the bigger companies, I think there’ll be more focus of keeping that to 30% level that’s been talked about in the various rules and regulations. And if you go back three or four or five years ago, I spoke to that at one of our industry conferences, I think if you look across time, that level of -- if you think about that level of payout against the earnings stream, there’s very low probability that you’ll have real danger in the dividend -- continuing that dividend even in tough times. So, our goal is never to keep the dividend stable and then use the excess capital to buy the stock back at around book value, we think it’s fair trade.

Paul, just circling back to your comments about the FICC, the strength in FICC, the client activity was strong. Can you give us some color on the clients? Was it primarily investment clients or pension funds, hedge funds? What type of clients did you see that strengthened the activity?

I think it was -- the only way to really classify it is really across the board. I think we have strength in all of those client sets. It was just a lot of good sales and trading activity driven by client interest and repositioning their investments, but also again driven by prime new issuance of our clients. We just have a very broad and diverse product set in FICC, both from a product perspective and geographic perspective, and that kind of footprint and that kind of diversity when clients want to make changes, we’re a natural call.

Great. Thank you. And Brian, thank you batting cleanup and not lead off; it made a lot easier for all of us today. Thanks.

And we’ll take our next question from Saul Martinez with UBS. Please go ahead.

Hi. Good morning and congratulations on the results and on the progress. Couple of questions, first, can you comment on the sustainability broadly of your returns in your markets and banking businesses, 15% return on allocated equity and markets, 18% banking despite the fact that you increased your capital allocation there? Obviously, if you can sustain those kinds of returns, it goes a long way towards helping you hit your 12% RoTCE targets on a sustainable basis. So just can you comment broadly on how confident you are that in your ability to say hit sort of mid-teen returns in those businesses?

We have been getting in global markets a double-digit return now for a number of quarters. It’s been 10ish, 11% range for a number of quarters. So, we feel like in global markets, we’ve made a tremendous amount of progress in improving returns. In global banking -- and remember, this quarter, we made this 15%, but this quarter, I think we had a very strong quarter in sales and trading. Our performance in global markets is going to be a direct result of client activity as we say every quarter. So, when client activity is lower, our results will be lower, but through a number of different quarters now with varying amount of client activity, I think we’ve been able to get 10% or more return on equity. So that’s how I’ll answer it from that perspective. In global banking, again those returns are somewhat dependent on client activity in investment banking, but there I think the global banking segment is less volatile with respect to returns tied to the investment banking fee pool in any given quarter. We’ve got a diverse product set across treasury service, traditional corporate banking products and investment banking products and then from a client perspective with the full spectrum small, medium sized and large global companies. So there, I would expect us to be able to maintain that return level.

Okay. That’s…

The thing I’d add to that is if you think about what we did, we took global banking, because we think that is an integrated business, was corporate investment banking with both corporate side and investment banking side or middle market banking what we call global commercial banking again with investment banking capital markets behind, obviously, less than GCIB. We split that out to show you that that business many years ago -- we broke global banking away from global markets to show the distinctness of business, the global banking was more of annuity stream driven by treasury services revenue, lending revenue and then investment banking fees, which ebb and flow based on client activity and returns are fairly consistent et cetera. The flip side was we also want to show I think doing this five-six years ago when we first did it, and have been doing it at ever since, and we are one of the few companies that does it on the global market side. You can see that there is actually more stability in that business in a lot of people’s thought. So if you look on the low end, we might make $600 million, $700 million after-tax and high end we made a $1.3 billion this quarter. But you’ll see this range, and if you look across years of quarters and look at comparative quarters, year-over-year because there is some seasonality, you’ll see, it’s relatively stable. And so, we sort of hit that double-digit level in the worst of quarters and during a year and in the best of quarters, it’ll kick above it. That was again how Tom and the team -- Tom Montag and team run the business, the stability to put in. And then most importantly, was brining expense structure down dramatically five or six years ago, Tom and the team did by almost $1 billion in quarter in operating expense of markets business alone and then maintaining it there and continuing to push it down where revenues have stabilized and come back up.

I mean, obviously one thing that’s has been helpful for returns in banking is very benign credit environment, commercial charge-offs with 10 basis points this quarter. It hasn’t really moved much in recent quarters. But, how should we think about more of a sustainable level and is there anything there that makes you think that you could start to see some sort of inflection or some sort of an uptick in terms of credit costs?

Are you referring to more sustainable on the net charge-off side?

Yes, exactly on commercial.

I guess how I would answer the question is we have been -- we changed our underwriting standards years ago, we’ve been focused on responsible growth now for a number of years, we’ve been sticking with that improved client selection, heightened credit standards. So, the answer is we can’t compare to a previous period in the Company’s history. We’re just going to have to see how this develops, but we’re very confident. We don’t see anything today as we look at what’s going in the marketplace that would suggest we’re at an inflection point. It doesn’t mean that I won’t be talking to you next quarter about having lived through an inflection point. But we’re not seeing anything right now that would tell us that we should expect net charge-offs to rise in the near-term. And in the long-term, there is some seasoning going on in the credit card portfolio that we expect and we’ve talked about before but outside of that, we feel good about where our credit quality is.

And we’ll take our next question from Brian Kleinhanzl with KBW. Please go ahead.

Yes. I just had a quick question. You are saying that both the business or the commercial customers and consumer customers are optimistic still. Did you see a change in that optimism over the course of the quarter and lower at the end of the quarter given what was going on with DC and everything else or was it fairly consistent?

I would say -- I could say consistent and if you look at spending, I think it actually maintained its pace through the quarter, as an indicator of their behavior March was a stronger month and the first two months of the quarter. And now you can get into day counts and movements around which we can solve but just we didn’t see any fall off in terms of the behavior in spending which I think is a good indicator how we feel.

And we’ll take our next question from Matt O’Connor with Deutsche Bank. Please go ahead. Matt O’Connor: Hi. I just want to follow up on that net interest income one more time. I mean, it feels like the 2Q expectation is a little bit less certainly versus what I would have thought. And I guess I was trying to figure out, there is just some conservatism on the deposit or pricing assumption. I mean you talk about 50% but it’s been really insignificant so far for the Fed hikes. I am trying to gauge is that conservatism on that; is it the fact that tenure has obviously come in a fair amount or some combination of both maybe?

So, I’m not going to take you through the math again because the math is fairly self explanatory but there are a lot of assumptions or I should not call them assumptions, but there’s a lot of things that go into modeling NII. You hit upon one of them. Obviously, we could have deposit daters that are different than what we’re expecting as we’re doing our modeling. The 50 basis-points obviously is for a full 100% shock. We’re talking about a 25% shock. So, it’s reasonable to expect that we would be lower than 50% for the first 25. I think the question is how low should we be, and we’re just going to have to wait and see. We’re very focused on the competitive environment. We’re focused on the needs and wants of our clients, and we’re focused, we’re balancing all of that against what our shareholders would want us to do. So, we’re just going to have to see how it develops, but there is lot of things that are go into the modeling of expected NII. Matt O’Connor: Okay, understood. And then just the impact of long-term rates, I mean, obviously, the comments you made on rate leverages for higher rates and your 75% lever on the short end, as we think about the decline here in loan rates if it holds, how frame kind of the drag on that, and I think it bleeds in over time, obviously not all at once?

Yes. The sensitivity on the long end is a function of being able to reinvest as assets mature at higher or lower rates than the average we have now and what it does to the amortization of our premium on our securities portfolio. The latter is a bigger driver in the short term; the former is bigger driver in the long term. If you think about the Company right now where long-term rates are, we’ve said this on other calls, we’re kind of pleased to be at equilibrium where an asset rolling off the balance sheet was being replaced by assets rolling on the balance sheet at roughly the same yield. I would say, we’re in a little bit more positive place right now, where -- even where rates are having long-term rates have gone up here over the last two quarters. We’re sort of in a position where an asset rolling off the balance sheet on average is being replaced by an asset coming on at slightly higher yield. So, I don’t know if that helps you. Matt O’Connor: Yes. It’s very clear and very helpful. So, thank you.

And we’ll take our next question from Marty Mosby with Vining Sparks. Please go ahead.

Thanks. Two technical issues on the net interest margin, NII. When you look at the big benefit in net interest margin, it seems like you had several things like the hedge ineffectiveness and leasing that pushed the margin up and even though you can have NII growth, your margin may even kind of just flatten out. Is there kind of a bias towards margin just being little bit higher given some of those moving pieces this particular quarter?

Look, the bulk of the increase from Q4 to Q1, the $700 million, the bulk of it was due to rates. We’d just highlight that there was meaningful improvement that was driven by the leasing seasonality. Think about it that as roughly the kind of improvement we get with an extra day in the quarter. And then there was, I think, significant improvement driven by the lack of hedge ineffectiveness in the first quarter relative to what we experienced in the first quarter. But the bulk of it was driven by rates. And if you think about the rate impact, more than half of the rate impact was driven by the long end as opposed to the short end.

And I would just focus on the margin in the sense like it was rounded up because the things are going to help next quarter going to help NII, which may not help the margin. But then, the second question was when you look at your transfer pricing mechanism, I was curious because it doesn’t seem like a lot of banks would have the benefit from rates showing up in corporate other. Is your mechanism where it’s still spread some of that -- because that will matter on operating leverage for the business segments. So, are the segments on a benefit as rates go up more than corporate? It does seem like it spread out more than other banks.

I think over the longer -- any one quarter, it could be a little bit lumpy on how the Company overall benefits versus the segments. But, I think over time, over multiple quarters, the segments will benefit. It’s just basically a function of how residual flows back to our segments.

It is. It just seems like you’ve got a good methodology that pushes to the segments, which is helping operating leverage in each of those segments as you’re getting that benefit. Thanks.

And we’ll take our next question from Andrew Lim with Societe Generale. Please go ahead.

Hi. Good morning. Thanks for taking my questions, another NII question actually. I’m just trying to understand the mechanics of how your guidance for 4Q for $50 billion uplift in NII for 100 bps shock has come down to about $3.3 billion there. If I understand correctly, the long end has increased. So, that reduces your guidance going forward, is that the way to think about it?

Yes. I think if you look at our disclosures, you’ll see that the 100 basis-point rate shock at the end of the year was basically the same as it is right now. Here we’re showing to what we reported at the end of Q3 being 4 points something. And that decline in benefit we experienced as rates rose, and that went into our run rate of NII as Brian mentioned earlier.

What I’ve got difficulty understanding is why a past movement in your loan rates should affect your future guidance going forward. So, if I think about hypothetically let’s say the yield curve did actually go up by 100 basis points shock in the fourth quarter, then your guidance going forward will actually be zero -- is that the way to think that or am I missing…

You have to go back. If you look -- you can follow up the way afterwards. But if we think about -- we told you in the fourth quarter from the third to the fourth quarter, I think you maybe off a quarter, from the third to the third quarter, what we said is you basically capitalize into the earnings run rate that $2 billion difference is now in the earnings run rate. And that’s what you are actually seeing and that’s the benefit of the lift in rates especially in the short-term side. And so that’s relatively stable now because the -- that piece went through it. So, Lee can follow up with you and take you through sort of the calculation. But it’s because -- the good news is it showed up and earnings this quarter as we said it was.

No, absolutely. I can see that. Just trying to see how that moves depending on the shape of the -- the shift in the curve.

Well, because the future investment rate on the long-term rates as it comes down, as you’ll recall we talked about, affects our yields on our securities portfolio going forward. So, as we reinvest $20 billion plus a quarter. So, I’ll get Lee to call you afterwards and take you through that.

Okay. Thank you.

And we have no further questions at this time. I’d like to turn it over to Mr. Moynihan for any closing remarks.

Well, thank you all of you for your time. Just to remind you, this is a quarter where we showed our responsible growth coming through. Revenue growth of 7%, flat expenses, 700 basis points of operating leverage across our franchise, good client growth in each of the business and our asset quality remains strong. So, we look forward to talking in the next question. Thank you for your time and attention.

That does conclude today’s call. You may disconnect at any time and have a wonderful day.