Good day everyone and welcome to today’s Bank of America earnings announcement. At this time, all participants are in a listen-only mode. Later, you’ll have the opportunity to ask questions during the question-and-answer session. [Operator Instructions] Please note, this call is being recorded. It is now my pleasure to turn the conference over to Mr. Lee McIntyre. Please go ahead.

Good morning. Thanks for joining this morning’s call to review our 3Q ‘18 results. By now, I hope everybody has had a chance to review the earnings release documents on the Investor Relations section of bankofamerica.com website. Before I turn the call over to our CEO, Brian Moynihan, let me just remind you that we may make forward-looking statements during the call. After Brian’s comments, our CFO, Paul Donofrio will review the details of the third quarter results. We’ll then open up for questions. For further information on our forward-looking comments, please refer to either our earnings release documents, our website, or our SEC filings. With that, take it away, Brian.

Thank you, Lee. Good morning everyone and thank you for joining us to review our third quarter results. This is another quarter in which Bank of America delivered on the core tenets of our shareholder model. On a year-over-year basis, we grew revenue a little better than GDP. We grew loans in our core business on the same basis and deposits along those same lines. We managed expense as well. In fact, our expenses were down year-over-year by 2%, and we continue to manage risk well. We’ve reached decade lows in credit costs. This allowed us to grow our earnings nicely, our pretax was up 18%, and we returned virtually all those earnings to you, our shareholders. And this cap returned allowed us to reduce our share count by over 5% year-over-year and grow EPS faster than earnings. So, beginning on slide two. During the third quarter, our 200,000 plus teammates did a great job for you, our shareholders. They drove $9 billion of pretax earnings. This is a highest quarter in the Company’s history. And we grew pretax by 18% over the third quarter of 2017. Our operating model continues to deliver. In each of the past 11 quarters, we have grown pretax earnings compared to the year ago period and done so by an average of 15%. We are in operating environment that has a strong growing U.S. economy, low unemployment, growing wage growth and strong consumer spending levels. Client engagement, optimism, and activity remains good. For the quarter, net income was $7.2 billion after tax, an increase of 32% over last year. EPS was $0.66, up 43%. Our return on tangible common equity was 15.5%, improving 450 basis points over last year. Our return on assets reached 1.23% this quarter. Driving that year-over-year improvement was 4% revenue…

Good morning everyone. I’m starting on slide five. Bank of America reported net income of $7.2 billion or $0.66 per diluted share. Net income was up 32% from Q3 ‘17 and EPS grew 43%. Growth was strong, even if you adjust for the lower tax rate from the Tax Act. Year-over-year, pretax income, as Brian noted, reached a record $9 billion, up 18%. Once again, our year-over-year earnings growth was driven by strong operating leverage and strong asset quality. The 4% improvement in revenue was driven by NII improvement. And with expenses down more than 2%, we drove 700 basis points of operating leverage. Provision expense was $118 million lower than Q3 ‘17. NPLs, reservable criticized exposure and delinquencies all declined while net charge-offs were up $32 million year-over-year, mostly from seasoning of our credit card portfolio and loan growth. The effective tax rate for the quarter was a little more than 20%. The tax rate in Q4 should be marginally higher, absent unusual items. Turning to the balance sheet on slide six. Overall, compared to the end of Q2, deposit growth of $36 billion drove an increase in assets of $47 billion. The deposits were invested in cash, investments as well as reverse repo. Liquidity remained strong with average global liquidity sources of $537 billion and the liquidity coverage ratio of 120%. Total shareholders’ equity decreased $2.1 billion from Q2. We returned 96% of net income available to common through a combination of dividends and share repurchases. Common equity was driven lower by $1.5 billion reduction in AOCI from the impact of higher long end rates on the value of our AFS debt securities. Preferred stock declined as redemptions of some higher yielding issuances caught up with the new preferred we issued in the first half at lower yields.…

[Operator Instructions] We’ll take our first question from Steven Chubak with Wolfe Research. Please go ahead.

Hi. Good morning. So, I was hoping to maybe start off, Brian, with just a question on the investment banking strategy. There has been a lot of focus in the press on some of the senior personnel changes at the investment bank whether your lack of risk appetite maybe negatively impacted revenue growth? And I was just hoping you can maybe set the record straight. Give us your own perspective on BAC’s performance relative to the peer set across those businesses and maybe how you’re planning on striking out right balance between responsible growth, while maintaining that commitment to risk adjusted returns.

I think, Paul actually can speak to this too, because he was a leader in that business. But, the team did a good job across the last several years of repositioning us after the crisis. Tom Montag has brought in a new leader to help carry us through the next level as we look forward. We know we can get our fair share out of that business. We got to keep it balanced, both domestically and internationally across the platform and make sure we are doing a great job in the Unites States because A, the size of the business; and b, our competitive business with our middle market business. And on the other hand, we’ve invested heavily to support the Global Banking business including investment banking and that business earned $2 billion after tax, and we’ve increased the commitments in that business internationally, as I said earlier from $30 billion round numbers after the crisis to almost to $100 billion today. So, we can do better and we’ll just keep pushing away at it. It’s a $1 billion and change of revenue. A lot of it was driven by the M&A environment where we didn’t get our fair share. But, the key is to maintain our dominance in debt underwriting and things like that which we’ve got to make sure we do. Paul?

Look, I’m not sure what else to add. I would just say look, if you look at where we can kind of underperformed this quarter, it was in M&A and a little bit in leveraged finance. And M&A, our market share declined a bit this quarter. You kind of saw that in the announced transactions, if you go back a quarter or two. Our clients -- some of our clients -- we were in some of those deals that our clients just didn’t win or our client was not involved or perhaps we didn’t get chosen in some of those deals. But if you look at announced transactions since then, I think you can see that we rebounded a bit. In leveraged finance, you all have written about this quite a bit. Regulatory guidance is out there impacting underwriting leveraged finance in U.S. banks; you’ve got non-bank entries; at the same time, we’ve got terms and structures that are getting a little bit more risky. So, we are staying focused on responsible growth. We’re not chasing the market. We want to make sure we are able to service our customers and clients through this cycle. So, that’s how I think about the areas where this quarter we underperformed a little bit. To Brian’s point, having said all that, I think we know we can do better. I did come from investment banking. I know they have built a great business with great bankers. And we have one of the best platforms on the plant. Very few banks that can do for clients what we can do for them in every major market around the world. So from my perspective, this is just about renewing our focus, reenergizing the teams. There is really no reason we can’t execute on this opportunity.

That’s extremely helpful color. So, I appreciate remarks from both of you. Just one follow-up for me and I’ll head back in the queue, on loan growth. You’ve talked in the past about mid single digit loan growth being a sustainable target for the core businesses. It’s been a very steady trend that we’ve seen over the last few quarters. The commercial side did slow down a bit. I know you had alluded to that. I’m just wondering whether you’re still committed to delivering that mid single digit loan growth and whether that’s a sustainable target from here in your view.

Yes. I think we’re still committed to doing that. You can see, as you referenced, Steven, in slide eight, you can see that commercial slowed down a little bit in the last section. But, the key, the consumer and the GWIM business continues to grow well. We expect to be in the mid single digits. The big debate is if the economy slowed down a little bit from the current growth rate next year, as many people projected, if it goes into recession, that changes the picture obviously. But, if it just slows down, remember, the economy that grew 2% plus or minus for many years, after the recovery settled in, you can see on slide eight, you can see that in earlier things, we grew loans in mid single digits. So, we’re comfortable in a 2% growth economy and we can continue to do that.

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

I had two questions. One, just on deposits. I know that you spent quite a bit of time going through on page seven the growth rates there. Could you give us a little bit of color around how you are driving that increase in deposit growth, given that your deposit yields are not the highest on the street? You’ve got a very efficient deposit franchise. So, I just wanted to dig into that, as well as on the Global Banking side, increase in deposits, would you deem those to be operating or non-operating? Just wondering.

So, on the Global Banking side, these are operating deposits that we’re growing. We are very focused on growing operating deposits, and we have very few, 100% we’re off LCR -- deposit products. There has been a shift between non-interest-bearing to interest-bearing, but they are still operating deposits. In terms of how are we growing deposits across the franchise with as little deposit rate paid growth that we’re seeing. First of all, we are growing -- we are increasing deposit rate paid in GWIM and Global Banking. We and the industry have not increased deposit rates appreciably in traditional consumer bank accounts. I think the reason for that is because Bank of America delivers a lot of value to depositors. We’ve got transparency, convenience, safety, mobile banking, online banking, a nationwide network of financial centers, we’ve got rewards, advice and counsel. This value plus the lack of market pressure so far has allowed us to keep deposit rates relatively flat on traditional retail accounts. Like I said, we’ve been rising rates in GWIM and IB. We’ll just have to wait and see. At some point, rates are going to rise in consumer as well, and our focus is on balancing our customers’ needs with the competitive marketplace and our shareholders’ interest, and we’ll do the right thing.

And your branch expansions that you’re planning on doing over the next several years, that hasn’t materially kicked in yet. Is that correct?

It’s been material relative to the start to finish and we’ve crossed a $100 million branch for example in Denver within three years, which is very strong, but it’s not material to the $1.4 trillion deposit base or the $680 billion in consumer. So, it’s not contributing; it will over time, but right now, it’s marginally adding. Betsy, a couple things to think about. The amount of investment we’ve made in the global transaction services platform across the last eight or nine years have been over $2 billion. So, those deposits come from the ability to continue to provide better and better services to clients in an investment rate, and that’s the thing. This takes a lot of investment, not only on the consumer side, which is obvious with the mobile and everything that you statistically see, but a lot of people forget on the commercial side, the institutional side, there is this likewise investment going on. So that we think is competitively advantaged and our customers respond to it.

And those deposits are up 7% year-over-year. So, we’re seeing the growth.

Okay. So, then, just my last question here is on the LCR ticked down very slightly from 122 to 120. And if the Global Banking is not driving that, what was driving the slight tick down that you had in LCR ratios this quarter?

I don’t think anything other than maybe just our outflow assumptions, the tweaking of models here or there. We have a significant cushion of LCR at the top of the house. Really, if there is any -- where we manage liquidity is more at the bank level, where we have to be more careful, at the top of the house, we have plenty of liquidity.

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

Hi. Good morning. Brian, you guys delivered on the expense numbers again this quarter, and the commitment to keep the expenses flat at $53.5 billion for two more years is impressive. I know I’ve asked you this before; I’d love to hear it again. You’ve come so far on improving efficiency already and you are doing a lot of investing, as you detailed on slide four. So, how you do all that, the modernization to build out the expansion, and then also keep expenses flat for two years?

Well, John, if you look at -- one of the interesting things, just to use the consumer example, if you look at their cost of producing the deposits, in other words, if we take all the costs in the consumer business, put it over the deposit base, you can see that’s dropped 152 basis points, so marginally improving from second quarter to third quarter by 3 basis points last year, 7 basis points this year. That is just all the stuff we are talking about. If you look, there’s a few less branches. The transactions per branch are going up. The sales in branches continue to go up, as well as digital sales. And you can look at all the statistics on page 15 of the digitalization. That we’re taking through the whole franchise. So, specifically, headcount reductions are due to continued applying of technology, branch reductions, bigger branches, more sales and relationship management people, but less number in footprint and more efficient -- more activity by the customer taking to the digital platforms, digital sales at 23%, and it’s just bringing square footage down in the company from 130 million to about 75 million, continued densification beyond that due to not only reduced FTE, but also the ability to densify the space through some of the work we’re doing in new space, for example, in New York. We created an internal cloud. There was an external cloud at the time. People didn’t even talk about the concept. We brought about 80% of our applications onto that cloud. That makes us much more efficiency in our server costs and environment; standardization of platforms. It is every little thing. Frankly, 9,000 less managers over the last three years. To give you a sense, since 2015, we started looking at layers and expanse of control in the Company. And so, it isn’t ever going to be any one thing. Each year, we invest probably $0.5 billion in initiatives to help drive efficiencies. But, the efficiencies not only show up in pure dollars, they also show up in operational losses, and litigation, and other things, which is just -- we strive to be perfect. And if we can’t be that, we’ll be excellent, and that will produce a lot of saved money. If you look back over the last decade or two, we’ve had errors and operational losses, which led to some well-known issues, but -- and all those are costly. Our job is to keep it out of here.

Okay. And just a quick follow-up to that. I know you don’t have a formal goal on this metric, but you printed an efficiency ratio of 57% this quarter. If you continue to deliver that positive operating leverage into next year and 2020, which seems likely, is there any reason you shouldn’t aspire to get to that mid-50s over time on that metric?

We should keep pushing it down to that level. Yes.

Okay. Thanks.

Our next question comes from Mike Mayo with Wells Fargo Securities. Please go ahead.

Hi. Just to follow up to that last question. So, I know John, who asked the question, said, if you get better revenue growth, are you committing or do you expect to have higher revenues in 2019 and 2020?

Given the economy, if we have what are consistent with the economic projections of us and the rest of the people, sure.

Okay. So, flat expenses with higher revenues for the next two years. I guess, one reason that you just mentioned for that is digital banking. You have 26 million mobile banking users. What’s the total size of the market? What percent of the market do you have in mobile banking?

That’s going to be -- I don’t know if I have that off the top of my head, Mike. But, if there is 130, 140 million households plus all the users, I think we have more than our fair share of it. So, we can get to that calculation. I’ll ask Lee to get back to you. I don’t have it off the top of my head.

That’d be great. And as far as the new markets, can you remind us what are your four new markets and the five new markets yet to come?

The four new markets are Denver, Minneapolis, Indianapolis, and Pittsburgh are actually open. And then we have Cincinnati, Columbus, Lexington, Cleveland -- I’m missing one.

Out west?

I got Lexington. But anyway, we’ve got them listed somewhere here. I’ll send them to you.

Okay. And then…

Salt Lake City is the other one.

Salt Lake City? Okay. So, why now? It seems like everybody’s engaging in the national digital banking wars at the same time. And so, you’re not alone in some of this expansion. I guess, your advantage -- your consumer efficiency ratio this quarter, if I’m looking at this right, was 46%. So, maybe that is your advantage. So, why are you expanding in all these markets de novo now? And are you doing enough to press your advantage, if you are indeed more efficient than others?

Mike, you have to go back to -- and you can because you’ve been around a long time, but you have to go back to the history of interstate banking. And the reason why we’re not in these markets is a completely historical accident where a franchise wasn’t when we made acquisitions. And so, the idea is that in these markets we have customer bases already there, and we’re putting the branch system in conjunction with the customer bases and the teammates we already have there. So, if you took Denver, we had commercial banking, we had business banking, we had Merrill Lynch, we had U.S. Trust. And we put the branches underneath, and you have a $100 million branch in three years. I think you can look at the competitors’ branch structures that they’ve deployed and they won’t get there for 10 years. So, it’s really a competitive advantage of our brand, our capabilities, and our customer base that we can then get fuller relationships from that already exist. And so, that’s why we’re doing it. It’s not a de novo expansion, i.e., we’d never been heard about. Bank of America’s brand name is recognized and there’s customer base in these markets, and we’re trying to build that high-touch, high-tech service model across all the businesses, including the ability for middle-market and business banking clients to have branches nearby and small business clients to interact with for their business banking needs. And so, it takes both physical plant and digital. A digital-only institution, in our mind, is not the way that you should go.

Just one other statistic for you, Mike, that may be helpful. Again, these are our customers who want us to be in these regions because they’re already there. We just don’t have a retail footprint. We have top three deposit market share in 24 out of the top 30 markets in the United States. So, this is about filling out those last six markets to get us in the top three.

And, last follow-up. Any potential changes in your marketing spend as you engage in this expansion?

We increased our marketing spend and our shareholder spend as part of sharing in the shareable side with the communities that benefit the tax reform. So, we increased it $50 million. And on the marketing side, marketing is done differently in this traditional media spend. So, we basically want our customers to be able to answer the question, assess the question themselves, what do you want the power to do. And we’ll keep reminding them that we’re here to provide the services and capabilities they need so they can live their financial lives, and we’ll market that to them. But, with digital marketing, with direct marketing to our own customer base through our -- if you look at that 1.4 billion of mobile channel usage, inherently, there’s marketing built within that and offers and products and capabilities and knowledge. So, the idea is that -- yes, the marketing spend, we did put some more money in marketing to help push some of the expansion that you’re talking about, but it’s relatively marginal. But, at the same time, we’re spending more on marketing that way. We’re also making marketing more efficient. And they self fund a lot of this initiative because they can become more efficient using the modern techniques.

Our next question comes from Jim Mitchell with Buckingham Research. Please go ahead.

Maybe just a quick question on just sort of consumer spend on debit and credit cards, 7% growth felt good, but a little bit of a deceleration from the first half. And I think at your peers, we saw some acceleration in 3Q. Is there anything to read into that in terms of the consumer activity on your cards?

The question a little bit that you’re hearing debate, as you see some of the consumer spending numbers come up is they’re very strong. So, the third quarter this year, all spending including cash, all the ATMs, bill pay, everything, it was 8% plus over last year, and last year to the year before that, that number was around 5%. So, it’s still accelerating. We can’t tell whether it’s connected to the days of summer, the dog days and the slowdown, or the hurricanes that affected it, or whether it’s those types of things. But, the reality is, it was running around 9 and 8. There’s one less -- September ended on the Thursday, Friday, or weekends and things. So, all this affects it. But basically, it’s running very strong. Year to date, it’s around 9, third quarter 8. And so, we’re seeing strong consumer spending, no doubt.

That hurricane is a good point. Maybe a quick question on asset liability management. Just thinking through on the securities portfolio, yields are kind of slowly grinding higher but obviously, it’s a little bit of a longer duration portfolio. It’s sort of taking its hit on OCI. I think right now, it yields right around where the one-year treasury is. Is there any -- how do we think about that duration and the ability to kind of maybe more quickly reinvest at higher rates, or how do we think about that?

Look, we’re always thinking about earnings capital and liquidity when we think about that portfolio. It’s not a -- when you look carefully at it, between the cash we have, between the treasuries, between the mortgage-backed securities, it’s not as -- it doesn’t have a duration as long as one might think. By the way, you can see that in our asset sensitivity. We generally don’t try to manage the NII of the company through adjusting that portfolio. That’s there -- it’s there to take our excess deposits and put them to work if we don’t have the loan growth to absorb all those deposits. As rates rise, we’re going to have an opportunity to invest at higher yields. That takes a little bit of time. The biggest impact as rates rise is you tend to see less premium amortization. But, over time, as rates rise, it’s going to have a meaningful impact. It just takes a little while.

You’re shortening that over time, though -- maturities?

No, I don’t see us shortening it. Again, we are always sort of thinking about liquidity, capital -- the effect on capital, liquidity and the effect on earnings. You kind of want to go along to get the most earnings, but it’s a pretty flat yield curve. So, you’ve got to really think about that. You want to go shorter -- if you’re trying to protect your capital, we’re just always managing capital, liquidity, and earnings when we think about that portfolio. But having said all that, generally, we don’t make a lot of changes. We have a plan to invest and we follow that plan religiously quarter-after-quarter. And again, we’re talking about the excess deposits, where do those go if we don’t have enough loan growth to absorb the excess deposits. As you know, we’re growing deposits consistently faster than we’ve been growing loans. So, it goes into that portfolio.

Okay, great. Thanks.

One more thing by the way. I just want to emphasize for everybody who doesn’t know. We don’t take risk in that portfolio. Some other peers will buy different things in that portfolio. That portfolio for us is made up of cash, treasuries, and agency-backed securities.

Thank you. Our next question will be from Matt O’Connor with Deutsche Bank. Please go ahead. Matt O’Connor: I was wondering if you could talk about the outlook for net interest income dollars, just given a little bit of a backup in long rates. You just commented that it takes a lot of work at sell-through, but obviously that’s an incremental positive. The continued steady march up in short-term rates should continue to be a positive. It sounds like you are optimistic about loans continue to grow. So, maybe just give us a little outlook on the net interest income dollars the next few quarters or however you want to frame it.

Sure. Look, we are optimistic. In 4Q, we’re going to benefit from the September rate hike. We should also benefit from loan and deposit growth. I think, the only real question is how much of these benefits are going to be offset by rate increases on deposits. As you know, we have been increasing our rate paid in GWIM and Global Banking. Having said that, so far, as I think about NII growth in Q4, and it’s obviously early, it sounds a lot like Q3 to me. The other thing I would say is, as you think about it, I would really ask you to think about the year-over-year growth instead of the quarter-over-quarter growth. I mean, as an example, year-over-year – year-to-date, I think we’re up over $1.9 billion. As you stretch out into the future, move into ‘19, we’re obviously going to factor in the day count as you think about each quarter. I would expect NII growth assuming again continued loan and deposit growth as well as a current forward curve. Deposit pricing is the wild card. We can’t predict with certainty what our competitors are going to do. So, it’s difficult to provide much more perspective than that, but we do feel quite confident. Matt O’Connor: And then, just to clarify, I think you said net interest income growth in 4Q is similar to 3Q. Did you mean the growth rate linked quarter would be similar or the absolute dollar is similar?

I would think about it -- I mean, as we’ve started Q4 and it’s early, the NII growth we’re feeling feels a lot like Q3 in terms of the movement in rate paid so far. And so, I would think about it as a year-over-year growth being something that feels the same this early in the quarter. Again, year-to-date, NII is up over $1.9 billion. Matt O’Connor: Okay. And then, just a little bit related, as we think about the NIM percentage, obviously a nice increase this quarter. I think, you’re past some of the drags as we think year-over-year in terms of the international card business; it was dragging in the first half of the year. Should that trend up as well? I know there’s also been some drag for markets for you and for others. Is your best guess the NIM percent would trend up as well?

Yes. I think, you hit all the points. In 4Q, given the September rate hike, again, I would expect net interest yield or net interest margin, whatever you want to call it, to edge up in fourth quarter. But, again, that increase is going to be dependent on several factors, including loan growth, mix shift, particularly in Global Markets, you’ve got the realization of the forward curve, you’ve got the competitive bottom with respect to deposit rate paid. And I would just, again, think about it banking versus the market’s book. I mean, we’re seeing the benefits of our strong deposit base, how we’ve invested in our clients in a rising rate environment, we’re seeing that if you look at the “banking book”. Obviously, Global Markets is going to impact that number. But if you look at the banking book, I think you get a better reflection of what’s going on at the company.

Our next question is from Glenn Schorr with Evercore. Please go ahead.

I just want to follow up on some of the comments you made on loan growth. And I hear you on high competition, good capital markets, non-bank lenders, corporates flush with cash. What I didn’t hear is anything about, from the competition, on aggressive pricing or loosening of terms. So, I wondered if you could address, if you’re seeing that, and particularly from the non-bank lending side because there has been a lot more talk about that lately. Thanks.

Consistent with what you’ve heard from other discussions over the last few days, the competition from the non-bank is high and the structures -- you’ve seen written about widely, and I’m sure you’ve written about them too, that have gotten away, and we try to play down the middle and we will continue to do that. Having been in the commercial lending business for 230 years, I think we probably know what we’re doing, and we’re trying to make sure that we’re prepared at any moment for what could come next.

Does that mean -- I get your responsible growth mantra and I think your shareholders will love that over time. But, do you see cracks in the armor in terms of -- is that just a return on investment that you’re not willing to go down the path or do you think there’s some irresponsible growth going on?

Look, I think what we would emphasize is given the strength of our platform, given the bankers that we’re adding, given our relationships globally, we should be able to grow loans the way we’ve been talking about, even with these forces, even with the non-banks, even with whatever you’re seeing out there. We should be able to grow loans we think at mid-single digits at the whole company level even with all those forces. Let me give you an example. If you look at CRE, so, this is when responsible growth kind of helps you. If you look at CRE, I think we’ve talked about in past quarters we transformed our approach to commercial real estate lending. We’re still very selective, focusing on top-tier companies, and we ensure we maintain a diversified portfolio across property type and geography. And if you look at our CRE portfolio as a percentage of our commercial portfolio, it’s probably the lowest of the top 40 banks. Having said all that, we’re starting to see other banks pull back in CRE. And we’re seeing more opportunities now with clients -- within our client selection and risk framework, we’re seeing more opportunities. So, in Q3 alone, year-over-year, CRE growth was up 3%. I think you’re going to see things like that. CRE is going to turn out to be a great example of responsible growth and how maintaining a strong balance sheet and disciplined underwriting standards through the cycle means you’re going to be able to deliver for your customers and clients when others can’t.

There’s a lot of discussion there, but at the end of the day, we think we can grow loans in the mid-single digits at 2, 3% GDP growth. And you’ve seen us to that, and we’ll continue to do that. And the ebbs and flows of the competition will come or go, and we’ll be here driving.

Loud and clear. I appreciate that. A little quickie on DCM. You mentioned part of it related to slower advisory quarter, rates, competition, Tax Cuts are there too. Should we consider this a more normalish level of DCM as you and the industry are off recent highs?

I think, look, there definitely was a slowdown in client activity in the third quarter in DCM. I would not -- I don’t know, but I do not think that’s systemic. People have to refinance their bonds, and in the growing economy they’re going to borrow more money. So, I would answer that question no. But, we’ll have to wait and see.

Our next question is from Saul Martinez with UBS. Please go ahead.

Hi. Good morning. Can you quantify the impact of the lower provisions for representations and warranties in the sale of the consumer real estate portfolio in all others? Should we just look at the sequential and year-on-year changes in revenues in all other which is something the neighborhood of 300 to $400 million and estimate that that’s more or less the size of the impact?

No, I wouldn’t chalk it up to all the reps and warranties. Reps and warranties were down a little this quarter. But, if you look at net income, it bounces around quite a bit every quarter. I would point out by the way, if you look at that, it’s been gradually declining. I think if you look year-to-date, year-over-year, it’s probably down 800 or $900 million. Remember, it includes MBI, which is less relevant and declining now for us since we’re booking 90% of our mortgages on the balance sheet. This quarter, other income rebounded a bit. It had the equity investment gain that we mentioned earlier of a couple hundred million dollars and some other cats and dogs.

So, I’m just trying to get out -- I know it bounces around a little. I’m just trying to get out what -- I wouldn’t call it a more normalized figure, just trying to clear out some of the noise to gauge where we should be thinking that line could go, but okay. And I guess, to change gears a little bit, where are you in your CECL preparations and when could we expect to see a more formal estimate of what the financial impact could be?

CECL. So, we’re not at the point where we’re going to provide an estimate on the impacts. We’ve made a lot of progress on our efforts towards adoption. However, a number of things need to be finalized really before we can disclose the impacts. I would point out by the way that we’re not overly concerned about those impacts and it’s certainly not going to change how we serve our clients in the future. Having said that, there will likely be some increase to allowance upon adoption, but the amount of increase, the impact is going to be dependent on the economic outlook and credit conditions on the date of adoption, and that’s not until 1/1/2020. So, we’ll just have to wait.

Your next question is from Marty Mosby with Vining Sparks. Please go ahead. Your line is open.

I want to talk first about asset yields. And earning asset yields were up 11 basis points. There looks to be some noise in other earning assets this particular quarter. It was up 55 basis points. So, just curious what was driving that big increase this particular quarter.

Say that again, Marty.

Other earning assets sequentially was up 55 basis points. So, I was just curious why that was up so much this particular quarter.

Other earnings assets was up 55 basis points. Do you think it was the margin?

Yes.

So, in other earning assets, we have some mix shift as some of our margin loans pay down.

Okay. And then, in consumer loans, you’ve been going up about 6 basis points per quarter over the last three quarters leading up to this quarter; now, it was up 16 basis points. So, it looked like there was another step up in consumer loans, which I thought may have been maybe something in the consumer loan portfolio as well.

I don’t think there’s anything unusual in the consumer loan portfolio that’s driving those. It’s just a mix every quarter of what we are growing versus -- fixed versus floating or what happens to the rates.

Which is good in sense that earning asset yields are moving up faster, which is what we’d expect to happen at this particular part of the interest rate cycle, as you’re beginning to reprice some of the longer term assets as well as the short-term assets. If we actually equate that to what’s happening on the interest-bearing deposit rates, you’re only up a little bit less than 50% deposit beta this particular quarter. But, if you take into account your funding which -- borrowing is a little bit more of a fixed rate, as well as non-interest bearing funds, you really have headroom with how far earning assets are going up at 10 or 11 basis points per quarter or per rate hike to increase interest bearing deposit rates somewhere between 85% and 95% before you really see any pressure on net interest margin. So, it seems like there’s some headroom to still see margins expand, even though we’re seeing deposit rates move up. And I just want to see what you thought about that threshold calculation.

Yes. You have to step back and say what the constitutions of deposits are, and I think Paul took you through some of this earlier. But, each business has interest bearing deposits and non-interest bearing deposits, but those are very different types of business. So, some people, the money is effectively investment cash, some people, it’s transactional cash, some people, it’s both, depending on the business. But, at the end of the day, we will continue to -- in the second part is you’ve got to remember that loans are basically priced to go through the market in competitiveness. Your deposits have a lot of other services attached to them. So, it’s much more complex. Rate is not the only determinant of what goes on with a deposit account, as you’re well aware. So, I think there is headroom for us to continue to expand that net interest income margin percent over time as we see a higher rate structure lock in the balance sheet for a host of reasons, most important of which is the checking accounts in consumer, which we talked about, will always have a very advantaged place. And that advantaged place had been lost as they hit the zero floors after the crisis, and it’s finally coming back, and that’s going to drive a substantial amount of deposit value, not only the consumer business but in the franchise.

I thought that highlight of transaction accounts growing was very important. And the whole reason I was asking is there’s so much consternation about margins starting to go down as interest rates are moving up and deposit rates are finally starting to increase. What investors I think are missing is there’s a lot of headroom to still kind of trickle up those deposit rates and still continue to improve net interest margin.

Agreed.

Thanks.

And we’ll take today’s last question from Gerard Cassidy with RBC. Please go ahead. Your line is open.

Good morning, Gerard.

Hi, Brian. How are you?

Good.

You have worked very diligently with your team since 2010, bringing Bank of America to this level of profitability that you reported today, 123 basis points on assets and an ROE of 11%. What do you think -- I know you’re not at your optimum mix in terms of your balance sheet. What do you think -- how much higher can you go, whether it’s ROA or ROE? Is this a bank that can do 140 basis points on assets or is that just way too optimistic?

I would say, Gerard, you’ve got to be careful because the mix of the business we have versus what people could have been familiar with at different times in our past is with the markets business and the way that business works in terms of ROA and things, but the reality is the team has done a great job of getting this Company back to an earnings level. And we expect to continue to grow that, and we continue to expect to reduce the share count, 1.4 billion reduction since we started. But, as we say to ourselves when we sit down and look at it, it’s a nice start. And so, we’re going to be here every day, pushing to increase all those things. And if it gets to the level you referenced, we’ll be happy, but the idea is how do we get a better tomorrow than it was today?

Very good. And then, following up on a comment you made a moment ago, obviously, national interstate banking changed the lay of the land for the banks. Your deposit market share is over the 10% level that prohibits a bank from making depository acquisitions. Clearly, you’re going with the organic growth strategy, as you pointed out. As we look out into the future, assuming you’re not allowed to do a depository acquisition, should we look at your return of excess capital consistently to be between 70% and 80% indefinitely out into the future -- 70, 80% of earnings, that is?

Right now, between the dividends and share repurchases, $6.5 billion this quarter on earnings of $7.2 billion, so it’s pushing to 100%. We have excess capital under any standard on top of that. So, we’ve got to adjust that as we continue to figure out what the future of the CCAR rules are and stuff like that. But yes, you should expect that we can return it all. And if we ever need to retain it, any portion of it is going to be in conjunction with earnings, which are accretive to the returns in the balance sheet, but just between repositioning loans that you can still see, despite all the efforts -- despite 12 years from the last time some of these loans were produced, we still have $60 billion of non-core loans, which continue to run off that we can replace with $60 billion of good credit, which should be another, I don’t know, 6%, 7% growth over the current core business loans. So, there’s a lot of room in the balance sheet to grow within itself. So, the idea is to continue -- one of the core business model attributes, as I said at the outset, is to continue to return all the earnings to the shareholders in dividends and share buybacks, not because we can’t support -- not because any other reason that we don’t need it to support our customers. You can have good returns and support your customers and be contemporaneous with the ability to produce good shareholder returns and good return of capital.

And this will conclude today’s Q&A portion. I will return the floor to Brian Moynihan for closing remarks.

Thank you, everyone, for your time and attention this morning. We continue to operate in a good business environment led by the consumer spending we discussed. Commercial clients continue to have good activity. We continue to perform well in this environment. And we’re getting more than our fair share of business. And to do that, we’ve managed expenses well, drove operating leverage 700 basis points for the quarter. When you think about all this, you have to think back to what we’ve been talking to you each quarter, which is we are here to drive responsible growth, and this quarter shows another quarter of that with record earnings across the franchise. Thank you.

And this will conclude today’s program. Thanks for your participation. You may now disconnect. Have a great day.