Bank of America

Bank of America reported robust second-quarter 2026 earnings results on July 14, sending shares up a low-single-digit percentage on the back of net revenue growth and earnings per share growth of 15% and 34%, respectively, from a year ago.

Why it matters: Despite a stronger relative footing in debt capital markets, Bank of America still enjoyed an equities tailwind across its investment banking and trading businesses to complement positive operating leverage and raised net interest income guidance. From 2013-2025, the firm averaged nearly 84% higher annual FICC trading revenue than in equities; thus, we believe the firm generating more equity trading revenue this past quarter truly encapsulates just how explosive equity trading volume has become, growing 70% from a year ago. We've been inspired to see net interest income guidance raised each quarter, beginning the year in the 5%-7% range and now at the upper end of 6%-8%, driven by balance sheet growth and fixed-rate asset repricing, though we believe the bank is still underpromising to overdeliver.

The bottom line: After digesting the second-quarter results for wide-moat Bank of America, we are raising our fair value estimate to $66 from $65, viewing shares as undervalued while held-to-maturity fixed-rate securities are continually redeployed at higher rates and the firm optimizes its operational footprint. As one of the pioneers of digital banking adoption, we believe the investment in bolstering platforms like Erica and Cash Pro is beginning to shine, demonstrated by 600 basis points of positive operating leverage this quarter, leading us to a more constructive expense growth forecast. We've raised our near-term trading revenue forecasts due to the perfect storm of geopolitical uncertainty and elevated asset levels, while the roll-over of low-yield, fixed-rate investments made in 2020-2021 propels long-run net interest margin expansion, even in a lower-rate environment at midcycle.

We've long held the thesis that the attractiveness of Bank of America's franchise to investors has been masked chiefly by a low-yielding held-to-maturity security portfolio comprised of mortgage-backed securities and long-duration treasuries yielding 1.9% and 1.4%, respectively. Over half of this portfolio is set to mature in the next five years, enabling net revenues to improve without any commensurate increase in portfolio risk, so long as the interest rate curve does not replicate the historically unusual shape we saw during the pandemic for an extended period.

Over a nearer time horizon, management has inched up its net interest income guidance each quarter, yet we believe that balance sheet growth alone will enable the firm to hit the approximately 7.5% level implied by the "upper end of 6-8%" range provided for the full year. With over 16% of interest-earning assets locked in at rates below 2%, the consistent maturation of this portfolio positions the firm as one of the larger beneficiaries in a higher-for-longer interest-rate environment, and we believe it is likely to exceed the near-term hurdle it has set for itself.

In addition to the anchor-like effect of the securities portfolio discussed, the efficiency ratio and returns on tangible common equity, two of the most important metrics by which investors assess and compare banks, have been muted by the elevated expense associated with bolstering Erica and Cash Pro over the past few years to service the consumer and commercial franchises. As these platforms transition from development to maintenance, a growing share of incremental net revenue should flow to the bottom line. Given the 600 basis points of positive operating leverage we witnessed this quarter alongside muted net interest margin expansion, we believe there may be even more upside to share prices over the cycle than our current fair value estimate suggests as the firm effectively fractionalizes technological investment across the second-largest deposit franchise in the United States. Lending credence to this view is the acceleration in quarterly client interactions with Erica by consumer banking clients to 200 million, up 15% from a year ago, freeing client representatives to focus on more value-added services.

We are raising our fair value estimate for Bank of America to $66 per share from $65 per share, driven by higher near-term trading revenue forecasts and slightly lower noninterest expense growth.

Consistent with other major financial institutions in our coverage, the primary drivers of Bank of America's valuation remain asset growth, the trajectory of its net interest margin, and the continued expansion of its core fee-earning businesses, particularly in wealth management, global banking, and trading. Ultimately, our revised fair value estimate equates to 2.26 times our 2026 projected tangible book value for the bank.

Digging into the drivers underpinning our forecast of 5.5% annualized growth in fee income over the coming decade, we see a stronger revenue-generating runway in the GWIM segment. While we forecast net new asset flows of 2.4% over the upcoming decade, down from 4.1% in the trailing decade, we believe that Bank of America will be able to avoid pronounced fee compression, enabling durable revenue growth on an asset base that compounds at 7.6% when married with our market growth forecasts. Further, we anticipate that investment banking revenue within the Global Banking segment should hold up relatively well, given the improved external environment for the business and Bank of America’s deep network of corporate client relationships, which yield consistent deal flow. The one fee-income line where we remain most skeptical over the long run is institutional trading, though we believe the current backdrop of elevated asset levels and heightened uncertainty as the market continually repositions portfolios due to a rapidly evolving technological landscape, as artificial intelligence is developed and proliferated, in addition to heightened levels of global conflict and geopolitical tension. That said, while increased internalization has improved the take rate for large trading operations across Wall Street, we still struggle to see why trading revenue should structurally outpace the broader economy. As a result, we expect roughly 2.9% average annual growth in trading revenue over the coming decade, implying a gradual normalization from recently elevated growth rates.

Turning to the balance sheet, we view Bank of America as relatively insulated, even as we forecast that rate cuts will resume in 2027. This resilient posture is primarily due to the firm's outsize exposure to long-duration securities and mortgages, as well as its significant book of low-yield maturities that should be methodically reinvested at higher yields over time. Altogether, we expect net interest income growth of 8.2% in 2026, 6.0% in 2027, and 3.5% in 2028, as the headwinds of rate cuts should be more than offset by earning asset growth and the redeployment of legacy securities. Further, updated risk weights from the Basel III Endgame re-proposal, particularly within residential real estate, will enable Bank of America to support its lending portfolio with slightly less common equity Tier 1 capital, improving the return profile.

Finally, expenses have been another key concern for Bank of America, particularly as costs rose at an elevated rate in the post-pandemic years, though we believe we are in the midst of an inflection point that points to slower expense growth on a go-forward basis as the Cash Pro and Erica platforms transition from development to maintenance mode, culminating in noninterest expenses growing at an annualized rate of 3.8% over the next 10 years. Given our solid revenue growth outlook and cost discipline, we expect Bank of America to beat a 57% long-term efficiency ratio, in line with its moaty bank competitors, despite operating with a significantly higher mix of investment banking and wealth management.

We assign Bank of America a Morningstar Economic Moat Rating of wide, based on cost advantages and switching costs across its consumer and commercial banking franchises, its wealth management business, and an intangible brand asset in its investment banking division. Quantitatively, average returns on tangible common equity of 12.8% over the past decade, which we believe were materially damped by the ill-timed purchase of long-duration investment securities in 2020-21, corroborate our view. In the future, we think B of A’s investments will generate a 16.2% annual profit, resulting from using more automated systems to work more efficiently. Also, it is moving money from less-profitable investments to more lucrative ones.

During the pandemic, the US Federal Reserve decided to engage in aggressive quantitative easing, and, with stimulus checks credited to more than one-half of Americans, it led to a flood of deposits to the banking system, leading total deposits at Bank of America to swell by over 30% from $1.58 trillion at the end of the first quarter of 2020 to $2.06 trillion at the end of 2021. Loan demand was weak amid the uncertainty of the covid lockdowns. Short-term instruments offered effectively no yield after the Federal Open Market Committee cut the federal-funds rate to near-zero levels. Hence, Bank of America decided to redeploy most of its excess capital into long-dated mortgage-backed securities and Treasuries, classifying them as held-to-maturity. While these instruments had no credit risk, the duration of these securities added significant interest rate risk, particularly because selling any quantity of securities classified as HTM would require reclassifying the entire lot as available for sale, resulting in significant losses.

After the rate-hiking cycle of 2022-24, Bank of America saw other banks making significantly more money on the difference between what they charged for loans and what they paid in interest. This happened because other banks had many loans with market-linked rates, so their rates rose quickly, allowing them to reinvest their short-term investments at higher rates. Bank of America, unfortunately, had to sit on the sidelines and watch its net interest margin expand significantly less, with low yields in its securities portfolio acting as an anchor on the income potential of its interest-earning assets. To illustrate the magnitude to which this depressed the earnings profile, we estimate that if Bank of America simply invested the capital it deployed in the HTM securities into shorter-term instruments that earned the federal-funds rate instead, the efficiency ratio and returns on tangible common equity would have each improved by an average of 150 basis points and 160 basis points, respectively, over the past five years. While this likely understates the net effect, as Bank of America would have been able to redeploy this dry powder into loans and securities with much larger yields than the federal-funds rate after lending demand rebounded, we believe it begins to illustrate that the return profile of the consolidated franchise has been masked by a poorly timed investment call, yet the impact will continually diminish as the balance sheet grows and these securities roll off.

Differences Mean That There Aren't Any Exact Industry Comparisons

Bank of America, much like the other money-center banks, has a profile that is significantly different from the broader banking universe, which makes comparisons across some more traditional metrics less apples-to-apples. For example, one metric that we typically view as indicative of a cost advantage through the cycle is a lower efficiency ratio, or lower noninterest expenses as a percentage of net revenue, as it indicates that a bank can generate superior profitability per dollar of revenue than peers, often attributable to fractionalizing its fixed technology, branch operation, and compliance costs over a larger or denser base of assets. Due to the relative homogeneity of the traditional banking industry, particularly for smaller-scale operators who generate the lion’s share of revenue from net interest income, we believe that the efficiency ratio is a helpful metric when assembling the mosaic to identify structural cost advantages, yet the money-center banks do not quite fit the homogenous mold. To illustrate the point, while wealth and asset management, investment banking, and institutional trading account for just 10.2% of net revenue on average across our regional banking coverage, these business lines generate roughly 46.3% of Bank of America’s net revenue.

Wealth management and investment banking are asset-light businesses that typically generate materially higher returns on capital than traditional banking but carry significantly higher efficiency ratios due to the high compensation costs of wealth managers and investment bankers. After controlling for business mix, we estimate that the efficiency ratio at Bank of America in 2025 would have been 56.8%, or 390 basis points better than our regional banking average, if it exhibited the same mix of traditional banking, wealth and asset management, and investment banking and trading as our regional banking coverage. While this likely indicates an operational cost advantage today, it’s important to remember that the efficiency ratio has also been materially dampened by the anchor of the low-yield HTM security portfolio rather than traditional banking on net interest income growth, implying that Bank of America is an even better operator than this thought experiment would otherwise suggest.

We believe that mutual advantages exist among the underlying business lines comprising the four segments, enabling the firm to monetize commercial and retail clients across its comprehensive suite of world-class products and services at levels that materially exceed those of its banking industry competitors. We typically focus on superior funding costs and operating efficiency as the two levers that banks can pull to utilize cost advantages over competitors, and we believe that Bank of America has opted to pull the latter lever by fractionalizing the fixed costs of operating complementary business lines under one roof.

Demonstrating this quantitatively, Bank of America exhibited deposit betas, or changes in the yields paid to depositors relative to changes in the federal-funds rate, that were largely in line with our banking coverage during the last rate-hiking and rate-cutting cycles, in addition to holistic funding costs that are roughly in line, yet consistently generated superior risk-adjusted revenue efficiency by posting preprovision net revenue per risk-weighted asset among the highest in our coverage. In effect, Bank of America has elected to compete for deposits on level terms with its closest competitors from a yield perspective, with the understanding that its ability to better monetize those customer relationships across its robust assortment of top-class fee-generating and lending businesses will allow it to generate superior returns on those same customer relationships than its peers could.

Expanding on this idea, all depository institutions can generate net interest income by buying securities and extending loans at yields that exceed the costs to fund them, but we believe that banks that have built out attractive fee-based businesses like wealth management and investment banking are able to more successfully cross-sell services through economies of scope and capture a larger portion of the client’s money. Bank of America demonstrates this by generating net revenue that features a materially higher mix of fee income than competing institutions. Selling more related products lets companies share expenses, making them more profitable and better able to spend more on acquiring and retaining customers than their competitors. Also, the more products a customer has, the more loyal they become, which means more profit and longer customer relationships. Beyond creating stickier capital, these robust fee-based business lines in banking require less capital to support than the asset-heavy spread business of generating net interest income, historically resulting in the fee income mix being strongly correlated with both returns on tangible equity and moat width across our banking coverage.

Service-Led Relationships Underpin Moat

Turning to the economic moats of the core segments, the consumer banking segment offers a range of products to consumers and small businesses, including checking and savings accounts, wealth management for mass-market clientele, and lending through credit cards, mortgages, and auto loans. This segment, responsible for nearly 48% of consolidated deposits but only about 28% of loans, functions as the primary engine for gathering low-cost deposits that fuel higher-yielding lending and securities investments across the enterprise. For consumer banks that have attained significant scale, competition for the prized primary relationships, where clients choose to house their primary transaction accounts and receive direct deposits, is more heavily predicated on service quality than on pricing. We believe that even financially savvy retail clients mentally separate investing cash from operational cash, not too dissimilar from the behaviors we see with commercial clientele, with decisions regarding where to house operational cash being less driven by pure yield and more driven by factors like high-quality fraud prevention services, mobile app functionality, interconnection with the rest of the financial suite, and geographic proximity to branches and ATMs.

This makes intuitive sense when considering that for the median transactional account balance (the sum of checking, savings, and money market account balances) in the United States of $8,000 (Federal Reserve Board’s Survey of Consumer Finances), shopping around for an additional 50 basis points of collective yield equates to $40 annually, a gain that many simply do not feel compensates for the added time and complexity of managing accounts across multiple platforms, particularly if it raises the risk of events like insufficient funds in an account utilized for automated bill payments. Further, when distressing events like fraud occur, clients place a premium on services such as 24/7 access to a client representative by phone, access to real humans at a nearby branch for resolution, and access to world-class detection systems. Bank of America has proven highly adept at securing primary banking relationships, reporting in 2025 investor day materials that roughly 92% of consumer clients use Bank of America as their primary bank, a strong position for the second-largest deposit-gatherer in the United States.

Establishing primary relationships is the linchpin for forging cost advantages and switching costs in consumer banking. Once a primary banking relationship is established, the consumer banking segment can more effectively monetize these clients by cross-selling higher-margin products and services, such as credit cards, mortgages, auto loans, and wealth management services. By serving as the primary banking relationship, Bank of America is put in the driver’s seat to cross-sell more effectively, leveraging access to payment data generated in transaction accounts. For example, Bank of America can see a customer’s rent payments or car insurance premiums, which presents it with a unique opportunity to launch a promotional loan offer to that customer right as they are ready to buy a home or vehicle. Additionally, the bank can use checking account data to recommend wealth management services or preapprove customers for credit cards. Bank of America is quite effective at cross-selling, evidenced by 71% of credit-eligible checking account clients having a Bank of America card.

While deposit gathering and cross-selling naturally improve the top line, we believe the benefits of each are more readily apparent and important further down the income statement. On the deposit front, we note a nonlinear relationship between branch and deposit market shares within a metropolitan statistical area. Typically, we see branch market share grow much faster than deposit market share in an MSA until hitting a critical threshold, oftentimes in the high-single-digit percentage range, after which point deposit growth looks more exponential than linear, culminating in positive operating leverage as deposit growth and subsequent revenue grow faster than the personnel and occupancy needed to service them. We believe Bank of America has been particularly adept at maintaining strong legacy positions in major markets with a more efficient branch fleet, while simultaneously expanding its presence in new markets to take share, resulting in a deposits-per-branch ratio of $566 million, which is the second-best in our coverage and double the average. Further, cross-selling enables the bank to increase revenue without incurring the same customer acquisition costs as acquiring new clientele, resulting in lower advertising/marketing spend and customer service costs. We believe these two dynamics have been the most responsible drivers for the consumer banking segment, after including its proportionate share of the corporate/Treasury segment, generating returns on tangible common equity of 18.6% over the past decade, among the strongest in our coverage and demonstrative of the wide moat rating we think this segment warrants.

In addition to helping lay the groundwork for cost advantages, the accumulation of primary banking relationships forges switching costs in the consumer banking segment. We believe this happens because consumers view their transactional accounts similarly to how a commercial client views “operating cash,” focusing more on service quality and seamless integration with the rest of their individual financial suite than maximizing yield. Further, after deciding on a provider that adequately meets the expected quality of service, namely about functionality and a sense of security, inertia becomes a powerful force in maintaining cash that isn’t yield-seeking, particularly because it introduces a heightened risk of events such as missing an automatic payment or a direct deposit.

We believe this explains why just 7% of US banking customers switched primary providers last year (according to BCG and the Consumer Bankers Association), implying a customer lifetime of roughly 14 years. We believe that Bank of America’s higher share of multiproduct customers enables it to reap the rewards of even longer customer lives, with research from Agarwal and others demonstrating that adding a second product to a consumer banking relationship decreases annual attrition rates by 12%. In quantifying customer life, we note that the primacy rate, or percentage of customers who use Bank of America as their primary provider, is 94% among clients in the rewards platform, and that the retention rate for these clients is an astounding 99%. Considering that the primacy rate for the rewards platform is not materially different than the 91% primacy rate across the entire consumer banking segment, we think that even taking a material haircut to the retention rate down toward 95%-96% would imply a customer life exceeding 20 years, granting us conviction that switching costs are on display.

Structural Switching Costs Anchor One of the Largest US Wealth Platforms

Collectively, Bank of America has roughly $2.18 trillion in assets under management and an additional $3.17 trillion in client assets held in brokerage accounts, making it one of the largest wealth management platforms in the US. Broadly speaking, we believe that wealth management is a structurally attractive industry that features dual-sided switching costs in advisor-client relationships. On the advisor side, switching costs manifest as platform switching, leading to unplanned client attrition and retraining costs, both of which incentivize advisors to just stay put. Cerulli Associates estimates that 19% of client assets do not follow advisors when they change firms, reducing the asset base on which revenue can be generated. From the client’s perspective, advisors build deep trust over time by navigating them through market volatility and major life events (retirement, divorce, business sales, family death/inheritance, and so on), fostering loyalty as they acquire and retain sensitive information about their clients over time that close friends and family may not even be aware of. Further, creating personalized financial plans for individuals or families, especially when they have different risk levels and specific income needs, can make it very difficult to compare investment performance.

Despite the impressive scale of the wealth management operation and the industry’s attractive economics, we ultimately see the GWIM segment as a narrow-moat business due to the persistent difficulty it faces in attracting net new asset flows for managed assets. Bank of America, alongside other money center banks, has increasingly adopted relationship-pricing models that provide customers with combined account balances within the ecosystem that exceed various thresholds, with benefits across other products, such as improved credit card rewards and lower mortgage rates. The cost savings associated with lower mortgage rates and better credit card rewards incentivize clients to consolidate assets at Bank of America, making the wealth management segment one of the biggest beneficiaries. While we do believe it has resulted in material inflows, we also think that net new asset flows over the past decade averaging a modest 4.1%, likely indicates a large amounts of offsetting outflows resulting from advisor attrition, particularly in advisors who have built a sufficiently large book of business and want to earn a higher take-rate by testing the waters in the fast-growing independent Registered Investment Advisorchannel. The client mix in the wealth management franchise segment is attractive, with high net-worth ($1 million-$10 million) and ultra-high-net-worth ($10 million-plus) assets comprising 32.7% and 57.7% of total balances, and fee compression has been quite modest, which has enabled the segment to generate returns on tangible common equity, after including its proportionate share of the corporate/treasury segment, of 16.6% over the past decade.

The global banking comprises one of the strongest commercial banking franchises in the United States, serving a full spectrum of client types, and a top-five global investment banking franchise, with a particularly strong reputation in debt capital markets. We believe that both businesses would likely warrant wide moats in isolation, yet the whole is greater than the sum of its parts because the bank can leverage strong legacy relationships with its commercial clients as a foot in the door to capture investment banking deal flow across advisory, debt capital markets, and equity capital markets. The global markets segment is predominantly an institutional trading operation, which we do not see as moat-worthy in isolation, though we view it as a vital component of the ecosystem that insulates the Global Banking segment from subscale competitors and improves the return profile.

The commercial banking business at Bank of America provides a range of lending products, services, and treasury solutions to domestic and international businesses across the full spectrum of sizes. We believe this business line benefits from durable cost advantages, owing to the fractionalization of its technology over a vast clientele of nearly 70 million consumers and 40,000 corporate clients. The underlying digital infrastructure (that is, cloud storage, cybersecurity protocols, and data processing) is shared across the consumer and global banking segments, avoiding the pitfalls of redundant “siloed” spending that is amortized over smaller scales. For example, the bank’s investment in its proprietary data lake allows it to process $450 trillion in annual corporate payments with the same core security framework used for its digital retail users. This scale enables the bank to offer more competitive transaction fees while maintaining higher margins than peers that must pay third-party vendors for similar technology. Another example is the cross-leveraging of Erica, Bank of America’s AI-powered virtual assistant, to power CashPro Chat for commercial clients. This multisegment application allows B of A to “fractionalize” the massive cost of training large language models across every customer type. In 2025, Erica surpassed 3.2 billion total interactions, and within the Global Banking segment, it now handles over 40% of all CashPro client inquiries autonomously. By utilizing the same AI engine to solve a consumer’s lost-card query and a corporate treasurer’s wire-status inquiry, B of A significantly reduces the need for expensive human service agents across both divisions. This “reusable AI” strategy ensures that every dollar spent on Erica’s intelligence has a force-multiplier effect on the bank’s bottom line.

Further, we believe that the commercial banking business enjoys strong switching costs across both middle-market and large corporate clients. For middle-market companies, switching costs primarily stem from workflow lock-in and credit dependence. Most middle-market companies lack the payment frequency and IT budget to justify paying for a bank application programming interface and either rely on the bank’s proprietary web portal or a secure file transfer protocol, or SFTP, connection to batch-process daily payments from their enterprise resource planning system. In either case, switching banks means the company’s entire accounting and treasury staff must relearn how to conduct its entire workflow (that is, initiate wires, manage users, pull reports, and so on), or undergo a costly, bespoke re-mapping of the company’s financial data fields and security protocols. Further, middle-market firms rely heavily on revolving credit facilities for working capital, prompting banks to explicitly include covenants in these loan agreements requiring the company to keep its primary operating deposits with the bank. To switch cash management providers, the company often must refinance a significant portion of its debt structure, triggering prepayment penalties and legal fees. Additionally, on this point, most banks use the data from a client’s payment flows to underwrite loans, so if a client leaves for a competitor, the company loses the benefit of its data-backed credit history, which could result in higher borrowing costs or lower credit limits at a new institution.

For large corporate clients, the switching costs shift toward data degradation and the economics of platform consolidation. Larger companies more typically utilize a third-party treasury management system as the front-end “glass” through which treasury teams view their workflows, powered by native API connections. Money-center banks like Bank of America experience minimal threat from smaller banks in poaching clients at this size due to the materially higher data fidelity they can provide with ISO-20022 native data architecture, when compared with regional peers who are reliant on middleware to translate messages for legacy-based core ledgers, resulting in significantly higher incidence of straight-through-processing for automated ERP reconciliation and lower incidence of expensive, manual reconciliation of messages that arrive with truncated data. The switching costs remain strong even for the hypothetical of a customer switching from one money-center provider to another because each bank uses a unique tagging nomenclature to refer to the same action type, which leads to elongated stretches of reconciliation “breakage” in ERP systems that were precisely tuned for the nomenclature of the legacy bank. Further, a single-bank ecosystem enables sophisticated multicurrency notional pooling and intraday automated sweeping, allowing the treasury team to net global credit and debit positions in real time, eliminating expensive external borrowing costs and minimizing idle, nonearning cash across disparate subsidiaries. In short, for large corporate clients who utilize third-party TMS and poly banking, the primary bank still enjoys strong switching costs associated with the operational complexity of switching providers and will offer higher ECR and interest yields to ensure higher account balances are maintained, leading to a continued retention of the bulk of the client’s wallet share.

Competitive Advantages Helm Investment Banking

In the investment banking sector, we believe that a firm’s competitive advantages primarily stem from its intangible assets. These include a bank’s brand and reputation, its relationships with investors, its expertise in specific geographies and industries, and its distribution capabilities.

Bank of America has developed a strong brand through its investment banking franchise, leading to a self-perpetuating cycle. Engaging in large, high-profile transactions increases the likelihood of securing lead roles in future significant deals and helps attract top investment bankers. Additionally, the scale and reach of Bank of America’s institutional trading operation enhance its distribution capabilities for securities underwritten during capital raises. This is beneficial for multinational corporations trading on multiple exchanges, as well as businesses seeking capital from a more diversified investor base.

While Bank of America has established a robust reputation in the domestic debt capital markets, we believe that this focus has led some investors to underestimate its strengths on the global stage. For example, the bank ranked third and fourth in the league tables for aggregate global investment banking revenue in 2024 and 2025, respectively.

We contend that the strength of Bank of America’s investment banking brand, combined with the high switching costs and cost advantages in its commercial banking operations, creates a wide moat for the segment. The synergy between these areas is greater than the sum of its parts, as the strong relationships built in commercial banking facilitate the flow of investment banking deals. This synergy has allowed the segment to generate a return on tangible equity of 11.9% over the past decade, after accounting for its share of the corporate and treasury segment.

Although the spread in returns has not been particularly wide over this period, we believe Bank of America’s position is quite resilient, providing us with greater confidence in the duration over which the segment can exceed its cost of capital, rather than the extent of those excess returns. We expect these returns to improve as the held-to-maturity portfolio continues to roll off. Additionally, new risk weightings under Basel III’s endgame will require less capital to be held against investment-grade corporate loans, which account for a significant portion of net interest income in this segment.

Last, we turn to the institutional trading business within the global markets segment, which we believe does not merit a moat on a stand-alone basis, though it remains a crucial part of the ecosystem that is simply monetized in other segments. While Bank of America operates a full-suite global trading operation, the institutional trading desk is an integral feature that enhances client monetization potential, even if it may struggle to materially out-earn its cost of capital as a fully carved-out entity.

Tying all our thoughts together, when viewing Bank of America as a consolidated entity, we believe the this is clearly a wide-moat franchise that enjoys durable cost advantages in the consumer banking and global banking segments, switching costs across the consumer banking, global banking, and GWIM segments, with an intangible asset in the form of its brand strength in the global banking segment to boot. While we did provide a segment-by-segment analysis, we ultimately believe that strong inter-segmental synergies enable the whole to be greater than the sum of its parts, forging a bulletproof ecosystem that we think even the most formidable of competitors will struggle to derail as it continually fractionalizes the costs of its operating expenses and deposit-gathering over a massive consumer and commercial client base.

Increased adoption of CashPro could make it the default choice for middle-market treasurers, providing greater access to operational cash and high-margin fee revenue.

A structural shift in the macroeconomic environment may lead to a prolonged, steeper yield curve, providing a tailwind to net interest income as the bank’s low-yield HTM securities mature.

Increased adoption of Erica for mass affluent wealth and consumer banking clients could lead to even more pronounced operating efficiency improvement.

If the energy spike from early 2026 leads to long-term stagflation, net charge-offs could spike dramatically.

The continued push toward Erica advice for mass affluent clients could decrease migration toward traditional wealth advisors.

Increased proliferation of fintech platforms that pay higher yields on deposits could increase funding costs for all banks even higher than we forecast.