What are the key drivers behind the 8%+ NII guidance for FY27, and is it primarily rate-driven?

The NII improvement is not solely rate-driven. Key drivers include more normal deposit growth (especially noninterest-bearing), slowing pricing rotation, continued loan growth (averaging $20 billion/quarter), and fixed-rate asset repricing. While rates help, the core underlying growth in deposits and loans is the primary factor. The 8% guidance includes a potential drag from Global Markets due to its liability sensitivity in a rising rate environment. “No, it's not all rates. Rates are obviously a small component of that. But same drivers as this year really, David. We've seen a little more normal deposit growth this year and particularly where we've seen it is in noninterest-bearing.”

Does the recent consent order impose any constraints on business operations or impede normal activities?

No, there is no asset cap or other constraints on the business. The company has already invested in the necessary technology and personnel to address the issues, and these costs are now part of the run rate. Therefore, it should not impact clients or business operations. “No, there's no asset cap here. So no, there's nothing there. And then in terms of -- it won't crowd out anything either because we've invested the technology, and we've invested the people that we feel like we need to get the work done. So that's in the run rate.”

What are the current observations regarding consumer health, especially with rising short rates and gas prices, and are there any signs of stress or changes in lending approach?

Consumer credit quality remains very strong, with consistent underwriting standards and declining card charge-offs and delinquencies. Account balances are growing, and direct deposits from employers show growth across all income segments. While gas spending is up, overall consumer spending is robust, up 5% year-to-date. No signs of stress in credit quality, and no changes in underwriting approach. “So in terms of seeing any stress on the consumer, absolutely not in terms of credit quality. Then if you go to the balance in our accounts, they're growing. And when you look at the Paychex, the direct deposits coming from employers to our consumers, we see those growing across the 3 segments of income we have low, medium and high, and we see the low having picked up.”

BAC

Bank of America (BAC) Q3 FY26 earnings call: guidance and Q&A

Earnings call· Sep 2026 (Q3 FY26)· Financials· Oct 14, 2026

Source: earnings call transcript

Executive summary

Bank of America Q3 FY26 — Strong Core Banking Performance Offsets Regulatory Charge and Market Headwinds

Bank of America delivered a solid third quarter, with strong organic growth in its core banking businesses, including Consumer, Wealth Management, and Global Banking's commercial segments. This performance, marked by robust loan and deposit growth and rising NII, largely offset a significant regulatory settlement charge and softer results in Global Markets and Investment Banking. The company remains confident in its NII trajectory and operating leverage, driven by continued client activity and balance sheet efficiency, while actively managing regulatory compliance and capital.

Highlights

Adjusted net income of $8.1 billion or $1.08 per share, up from last year, excluding a regulatory settlement charge.
Net interest income (NII) reached $16.6 billion, up 8% year-over-year and $450 million from Q2.
Loans grew for 10 consecutive quarters, up $34 billion to $1.25 trillion, with commercial loans up 8% YoY.
Deposits increased $14 billion from Q2 to over $2 trillion, with noninterest-bearing deposits accounting for over 75% of YoY growth.
Wealth Management client balances climbed above $5 trillion for the first time, with AUM up 12% to $2.4 trillion.

Concerns

Reported net income of $6.9 billion or $0.91 per share, impacted by a $1.2 billion ($0.17 per share) non-tax deductible regulatory settlement charge.
Sales and trading revenue (excluding DVA) was $5.1 billion, down 5% year-over-year, driven by lower FICC activity.
Investment Banking revenue declined from a strong year-ago period, driven by lower advisory and debt underwriting fees.
CET1 ratio decreased by 35 basis points from Q2 to 10.9%, primarily due to higher funded/unfunded loans and AOCI impact.

Guidance & targets

Category	Target	Timeline	Confidence
NII growth	approximately 8% high materiality	Full-year FY26	High
NII growth	8% or more higher than 2026 high materiality	Full-year FY27	High
NII trajectory	improve sequentially medium materiality	Q4 FY26	High
Operating leverage	return to operating leverage medium materiality	Q4 FY26	High
Operating leverage	200 to 300 basis points high materiality	Medium term	High
Deposit growth	low single digits medium materiality	Ongoing	Medium
Financial centers	open about another 20 or more low materiality	Q4 FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Consumer Banking Delivered a solid quarter with organic client growth and disciplined execution. Year-to-date revenue up 5% and net income up 10%. Investments in marketing and BofA Rewards are driving account openings, card originations, and digital engagement. Net income growth YoY: 2%Efficiency ratio: 50%Return on allocated capital: 31%Average deposits: $949 billionAverage deposits growth YoY: 6th consecutive quarter of growthNoninterest-bearing deposits growth: >4%Balances in checking accounts: 59%Primary accounts: 92%Consumer investment assets: $664 billionConsumer investment assets growth: 14%Net flows (past year): ~$18 billionActive digital users: >50 millionDigitally active households: 80%Digital channels sales: 71%	$11.6 billion	4%	—	Net income: $3.5 billion
Wealth Management (GWIM) Improved profitability through strong client flows, positive operating leverage, and higher margins. Growth was broad-based across Merrill and Private Bank, with deepening banking relationships and increased lending. Net income growth YoY: 22%Pretax margin: ~29%Return on allocated capital: ~28%Operating leverage: Strongly positiveClient balances: >$5 trillionClient balances growth: 9%AUM: ~$2.4 trillionAUM growth: 12%Quarterly net client flows: ~$38 billionQuarterly AUM flows: ~$20 billion4-quarter AUM flows: ~$74 billionMerrill net new households (>$500k assets): 4,200Merrill net new households growth: 17%Private Bank net new relationships (>$3M AUM): 470Merrill clients with banking relationships: 67%Ending loans: >$280 billionEnding loans growth: ~12%Private Bank lending growth: 12 consecutive quarters	$7.1 billion	13%	—	Net income: >$1.5 billion
Global Banking Benefited from strong loan and deposit growth and treasury activity, offsetting softer investment banking results. Commercial Bank added over 30 new companies year-to-date. Investment banking fees declined from a strong prior year period. Net income growth YoY: Down modestlyReturn on allocated capital: 15%Average deposits growth YoY: 6%Average deposits: $669 billionAverage loans growth YoY: 8%Average loans: $419 billionEnding loans: $428 billionTreasury Services revenue growth: 10%Total company investment banking fees (ex-self-led): ~$1.8 billionYear-to-date Global Banking revenue growth: 5%Year-to-date Global Banking net income growth: 7%Year-to-date total company investment banking fees growth: 16%	$6.2 billion	Relatively flat	—	Net income: Just under $2 billion
Global Markets Solid results despite tough comparison in FICC credit businesses due to slower trading activity. Equities delivered a record third quarter, led by prime financing and strong client activity. FICC declines were driven by mortgages, municipals, and credit. Year-to-date performance remains a record for the firm. Net income growth YoY: DownSales and trading revenue (ex-DVA): $5.1 billionSales and trading revenue (ex-DVA) growth YoY: -5%Equities revenue: $2.5 billionEquities revenue growth: 10%FICC revenue: $2.5 billionFICC revenue growth: -17%Macro businesses (FX and commodities) growth: 4%Average loans growth: 5%Year-to-date revenue growth: 11%Year-to-date net income growth: 14%	$5.8 billion	Down	—	Net income: $1.2 billion
All Other Reported a loss primarily due to the $1.2 billion non-tax deductible regulatory settlement charge. Excluding this charge, the loss was $153 million, compared to $103 million a year ago. Adjusted loss (ex-regulatory settlement): $153 millionAdjusted loss (Q3 FY25): $103 million	—	—	—	Loss of $1.4 billion

BAC operating KPIs by quarter

BAC operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Dec 2024 Q4 FY24	Mar 2025 Q1 FY25	Jun 2025 Q2 FY25	Sep 2025 Q3 FY25	Dec 2025 Q4 FY25	Mar 2026 Q1 FY26	Jun 2026 Q2 FY26	This call Sep 2026 Q3 FY26	Change vs prior quarter
Common equity tier 1 ratio (CET1)	11.9% We also ended with $201 billion of regulatory CET1 capital and a CET1 ratio of 11.9%, leaving us nearly 115 basis points of excess capital as we begin 2025. Source: earnings call transcript	11.8% Our CET1 level increased to $201 billion and the CET1 ratio is 11.8%. Source: earnings call transcript	11.5% And looking at regulatory capital, our CET1 level remained stable at $201 billion and the ratio is 11.5%. Source: earnings call transcript	11.6% Looking at regulatory capital, our CET1 level increased modestly to $203 billion, while the risk-weighted assets were relatively flat, and that drove our CET1 ratio higher to 11.6%. Source: earnings call transcript	—	11.2% From a regulatory perspective, the CET1 capital ratio declined 14 basis points to 11.2%, and that decline primarily reflects the capital return to shareholders above earnings generation as well as balance sheet growth and mix change in support of our clients, and our ratio remains well above regulatory requirements. Source: earnings call transcript	11.2% We ended the quarter with common equity Tier 1 capital of nearly $202 billion and a common equity Tier 1 ratio of 11.2%. Source: earnings call transcript	10.9% CET1 was 10.9%, down roughly 35 basis points from Q2, primarily reflecting higher funded and unfunded loans, and a $3 billion reduction in CET1 capital. Source: earnings call transcript	-0.3 pt
Return on tangible common equity (ROTCE)	13% And lastly, returns in the fourth quarter were 80 basis points of ROA and 13% return on tangible common equity. Source: earnings call transcript	14% We produced an 89 basis points return on assets and a 14% return on tangible common equity in the first quarter. Source: earnings call transcript	13.4% We produced a return on assets of 83 basis points and return on tangible common equity of 13.4% in the second quarter. Source: earnings call transcript	—	—	16% And importantly, we generated return on tangible common equity, ROTCE of 16%. Source: earnings call transcript	17% We generated return on tangible common equity of 17%. Source: earnings call transcript	—	+1 pt
Employees	~213K As far as head count goes, we've managed our head count carefully, and we've held it fairly flat through the 4 quarters of 2024 at around 213,000 people. Source: earnings call transcript	—	212K Today, we have 212,000. Source: earnings call transcript	213K So looking at the past 3 years, we've been able to lower our headcount from a peak of 217,000 to 213,000 now. Source: earnings call transcript	—	—	200K+ In addition, we added a slide on AI at Slide 20, which shows how our over 200,000 teammates are actively using AI-enabled capabilities across our company. Source: earnings call transcript	209K So -- but this company is success is due to the 209,000 people out there working every day, and they'll be a great leader for it next and the Board will make the decision when the time is there. Source: earnings call transcript	—
Efficiency ratio Consumer Banking	—	—	51% The efficiency ratio improved more than 200 basis points in the last 12 months to 51% in the quarter. Source: earnings call transcript	—	51% Business was also managed well for shareholders as we grew expense less than 2%, allowing us to improve our efficiency ratio to 51% and deliver nearly 350 basis points of operating leverage. Source: earnings call transcript	53% That resulted in over 500 basis points of operating leverage and a 53% efficiency ratio. Source: earnings call transcript	—	50% Business produced a 50% efficiency ratio and a 31% return on allocated capital. Source: earnings call transcript	—

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

Product	Type	Timeline	Details
BofA Rewards	update	Since May relaunch
Gen AI tool for Global Banking	launch	September

Risks & headwinds

Regulatory Settlement Charge Q3 FY26

$1.2 billion non-tax deductible charge ($0.17 per share impact)

Mitigation:Committed resources and ongoing cost of remediation embedded in expense base; deep in process of remediating issues; settlement resolves penalty from 2024 order.

Softer Investment Banking and Global Markets Revenue Q3 FY26

Investment Banking fees declined YoY; Sales and trading revenue (ex-DVA) down 5% YoY, FICC revenue down 17% YoY

Mitigation:Pipelines remain healthy; continued investment in bankers, technology, and AI tools; focus on broad client activity and diversified business model to offset cyclicality.

CET1 Ratio Decline Q3 FY26

Down 35 basis points from Q2 to 10.9%

Mitigation:Primarily due to higher funded and unfunded loans and $1.8 billion AOCI impact from higher rates; capital remains well above regulatory minimums; awaiting final Basel III Endgame rules for clarity on future capital requirements.

Geopolitical Instability and Economic Uncertainty Ongoing

Explicitly unquantified, but noted as always present

Mitigation:Clients keeping a close eye on geopolitical uncertainty; company's diversified business model and strong balance sheet provide resilience.

Impact of Higher Rates on FICC Micro Businesses Q3 FY26

Lower activity in mortgages, municipals, and credit following 85 bps rate increase in Q3

Mitigation:Clients tend to slow activity when rates rise sharply; company retains leadership in these businesses; potential for moderation if rates stabilize; continued investment in rates, currencies, and commodities to diversify FICC.

What to watch in Q4 FY26

NII Sequential Improvement

Q4 FY26

Current Up $450 million from Q2 to $16.6 billion

Target Sequential improvement in Q4

Why it matters

NII is a primary driver of profitability, and sequential improvement confirms the positive trajectory and rate sensitivity assumptions.

Looking forward, we expect NII to improve sequentially in Q4 and again through 2027 based on anticipated modest loan and deposit growth and continued fixed rate asset repricing.

Find out whether BAC delivers this. Inve re-checks your case every morning.

Q&A highlights

How does Bank of America balance balance sheet growth, capital returns, and CET1/TCE ratios, especially given the recent capital distributions exceeding net income?

Management stated they have considerable capital flexibility, evidenced by supporting $34 billion of loan growth, managing a regulatory penalty, absorbing rate increases, paying an increased dividend, and buying back $6 billion in shares. Priorities remain supporting client growth, regulatory minimums, and dividends, with remaining capital returned to shareholders. They are awaiting final capital rules for clarity.

“We've got a lot of flexibility with the earnings that we generate to balance exactly what we've been doing through the course of this year and over the course of time. Always our priority is going to be support the clients and the growth. We know we have to support the regulatory minimum and the dividend. And then whatever is left, we're going to return to shareholders. So no change.”

asked by Christopher McGratty · answered by Alastair Borthwick

2 min read 6 chapters

Detailed narrative

Diversified Business Model Resilience

Bank of America's Q3 FY26 results highlighted the strength of its diversified business model. Strong performance in Consumer Banking, Wealth Management, and Global Banking's commercial segments, characterized by higher loans, deposits, NII, and improved credit quality, largely mitigated the impact of a $1.2 billion regulatory settlement charge and softer revenues in Global Markets and Investment Banking.

This balance across segments underscores the company's ability to generate solid earnings despite varied market conditions.

Client Activity and Economic Signals

Client activity continues to signal a resilient and growing U.S. economy. Consumers increased spending by 5% year-to-date compared to 2025, with consistent growth observed across various income levels. Business clients showed selective investment and hiring, supporting job and wage growth. Wealth clients engaged actively, generating $41 billion in flows, while commercial clients expanded their use of lending, treasury, and payment capabilities, driving broad-based loan growth.

NII Growth and Balance Sheet Efficiency

Net Interest Income (NII) reached $16.6 billion, an 8% year-over-year increase, and was up $450 million from Q2, driven by an 8 basis point improvement in net interest yield to 2.16%. The company expects NII to improve sequentially in Q4 and through 2027, projecting full-year FY27 NII growth of 8% or more.

This outlook is supported by modest loan and deposit growth, continued fixed-rate asset repricing, and strategic reduction of short-term wholesale funding to enhance efficiency.

Regulatory Settlement and Expense Management

The quarter included a $1.2 billion non-tax deductible regulatory settlement charge, impacting reported net income and EPS. Excluding this, adjusted net income was $8.1 billion. Management emphasized that the ongoing costs of remediation for compliance issues are embedded in the expense base, with significant investments in technology and personnel already made.

The company maintains focus on productivity, evidenced by a reduction of 3,500 in headcount year-over-year, aiming for operating leverage in Q4.

Capital and Shareholder Returns

Capital and liquidity remain strong, with a CET1 ratio of 10.9%. Despite a 35 basis point decline in CET1 due to loan growth and AOCI impact from higher rates, the company returned $8.3 billion to shareholders through dividends and share repurchases. Management reiterated its commitment to supporting client growth, regulatory minimums, and dividends, with remaining capital returned to shareholders, pending finalization of new capital rules.

AI and Technology Investment

Bank of America continues to invest heavily in technology modernization and AI capabilities. Over 130 AI projects have been implemented, contributing to productivity gains and headcount management. A Gen AI tool was launched in Global Banking to improve prospecting and onboarding efficiency.

These investments are expected to drive long-term growth and enhance operational efficiency, with projected benefits from AI projects increasing significantly in the coming year.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.