Bank of America Sees ‘Steady’ Consumer Credit as Charge-Offs Decline

Bank of America’s third-quarter earnings results, released Wednesday (Oct. 15), showed momentum in spending on cards, growth in client balances held at the financial institution, and strong credit quality.

Additionally, a consumer shift to digital channels to conduct day-to-day banking activities continued to have tailwinds.

Company earnings presentation materials revealed that Bank of America added 1 million credit cards in the quarter.

During a conference call with analysts, CEO Brian Moynihan said that the digital momentum shows “the continued progression across all the businesses of applied technology.”

During his own remarks, Chief Financial Officer Alastair Borthwick said provisions for credit losses improved and net charge-offs declined 10% year over year, “as a result of both credit card and commercial real estate improvements.” The presentation materials indicated that card-related charge-offs were 3.5%, compared to 3.8% in the second quarter.

“Focusing on total net charge-offs again and looking forward in the near term, we would not expect much change in total net charge-offs given the steady consumer delinquency trends,” Borthwick said during the call.

The company added about 212,000 new checking accounts in the quarter, where deposits were also higher.

“Those are important because they are the primary operating account for a relationship, and they’re quite beneficial as a low-cost funding source,” Borthwick said.

Average consumer deposits were up 1% year over year, and consumer investment balances grew 17% to $580 billion.

“The third-quarter average balance per new account of $110,000 is up 6% from last year,” Borthwick said during the call.

As for spending, credit and debit card volumes were up 6% year over year. Zelle volumes came in at $143 billion, up from $121 billion a year ago. There were 24.7 million users of the peer-to-peer (P2P) option in the third quarter, compared to 23.2 million in the third quarter of 2024.

Asked on the conference call about artificial intelligence, Moynihan said that “artificial intelligence allows you to do things that you heretofore haven’t done.”

The company’s presentation indicated that client digital logins in the quarter topped 4.2 billion, compared to 3.6 billion in the third quarter of 2024. Users of the Erica digital assistant were 20.4 million in the third quarter, compared to 19.7 million a year ago.

“There are many other applications of AI going on in this company, but this one has been handling successful interactions for years with scale, and that application has now been applied across other businesses and even across our employee base,” Moynihan said on the call of Erica.

With a nod to overall technology investments, Moynihan said that “the idea of it providing constant leverage and constant reinvestment with the same expense base is really what we’re after, and then grow the revenue faster and continue to take market share.”

As Bank of America has gained share with consumers, the “core deposit transaction accounts” have been carrying $9,000 in average balances, Moynihan said. That number might have been $6,000 to $7,000 previously.

The move to digital channels for checking and other financial activities has also increased Bank of America’s operating leverage, according to commentary on the call.

“I think it was … two years ago where we bottomed out, and we’ve grown since then,” Moynihan said during the call. “And so, you ought to grow with the economic growth. And if you take share, you grow a little faster.”

Bank of America shares surged more than 5% in early trading Wednesday.

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