Interest rate cuts might have been on the mind of the Wall St. analysts gathered for the Bank of America third-quarter earnings call today (Oct. 15), but digital transformation and healthy consumer spending turned out to be the stars of the show.
As Bank of America CEO Brian Moynihan told the call’s audience, he sees consumer payments as the key indicator of the banks and the economy’s financial health, and those payments were up 5% year-over-year for the quarter. Moynihan and CFO Alistair Borthwick deflected persistent analyst questions about the impact of interest rate cuts on the earnings call and declined to speculate on further cuts during the fourth quarter.
“The pace of year-to-year money movement has been steady since late summer this year after having fallen in the spring and early summer,” Moynihan said. “This growth in consumer payments continues into October. This activity is consistent with how customers were spending money in the 2016 to 2019 timeframe when the economy was growing, and inflation was under control. This report is not meant to say that consumers aren’t wary of the cost of living, worried about higher rates and other matters. But overall activity is fine, unemployment is low, and wage growth is steady, all of which bodes well for the consumer overall and for consumer asset quality.”
By the numbers, Bank of America’s third-quarter earnings for 2024 reflects a solid performance, with net income of $6.9 billion and revenue of $25.3 billion. The earnings statement highlights the financial health of U.S. consumers, noting a slight decline in consumer credit card spending but a rise in consumer investment assets, up 28% year-over-year. The bank also reported 360,000 new consumer checking accounts, reflecting the second-best quarter on record.
“Our results this quarter reflect the ongoing strength and resilience of the U.S. consumer,” said Moynihan. “Despite economic headwinds, we’re seeing robust deposit growth and steady loan demand in our consumer business.”
Notably, the bank reported a slight decrease in credit loss provisions, suggesting stable credit quality among its customer base. This trend aligns with Borthwick’s observation of consistently low delinquency rates across its consumer portfolio.
Bank of America’s digital platforms continued to see significant growth and adoption in the third quarter. The number of active digital banking users increased by 5% year-over-year to 43 million, with mobile users growing by 7% to 35 million. The bank’s person-to-person payment platform, Zelle, experienced particularly strong momentum. Zelle transactions surged by 20% compared to the same quarter last year, with the total value of transactions increasing by 25%. The bank also reported that 53% of consumer sales now occur through digital channels, up from 48% in the previous year, highlighting the growing importance of digital banking in customer acquisition and retention.
Moynihan also reported that digital usage has also spiked in its wealth management business. Seventy-five percent of new accounts in its Merrill wealth management division were opened digitally, whether they were banking accounts or investing accounts. “More than 87% of our global banking relationship clients are digitally active. We have innovated and significantly streamlined service requests by enabling clients to directly initiate and track inquiries within our award-winning cash flow platform,” Moynihan said. “As a result, app sign ins for these clients increased nearly 80% in just the last 24 months.”
The company also reported progress in AI usage. Erica, its AI-enabled virtual assistant, has reached 2.4 billion client interactions since its launch in 2018. The AI-powered assistant has experienced rapid growth, with the second billion interactions occurring in just 18 months, compared to the four years it took to reach the first billion. According to Bank of America, Erica now engages with clients approximately 2 million times daily, assisting with everyday financial needs. The virtual assistant has responded to 800 million inquiries from over 42 million clients and offered personalized insights and guidance over 1.2 billion times. Nikki Katz, Head of Digital at Bank of America, describes Erica as a “personal concierge and mission control” for clients, emphasizing its role as a guide for users’ financial needs.
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