Bank of America Corporation (NYSE:BAC) Q1 2023 Earnings Call Transcript April 18, 2023
Bank of America Corporation beats earnings expectations. Reported EPS is $0.94, expectations were $0.82.
Operator Good day, everyone, and welcome to the Bank of America Earnings Announcement. At this time, I’d like to turn the program over to Lee McEntire. Please go ahead, sir.Lee McEntire Thank you, Catherine. Good morning. Welcome. Thank you for joining the call to review our first quarter results. I trust everybody has had a chance to review our earnings release documents. They are available, including the earnings presentation that we’ll be referring to during this call, on the Investor Relations section of the bankofamerica.com website.I’m going to turn the call over to CEO, Brian Moynihan; and Alastair Borthwick, our CFO, to discuss the quarter.But before I do, let me just remind you that we may make forward-looking statements and refer to non-GAAP financial measures during this call.
Our forward-looking statements are based on management’s current expectations and assumptions, and subject to risks and uncertainties. Factors that might cause those actual results to materially differ from those expectations are detailed in our earnings materials and the SEC filings that are available on our website.Information about the non-GAAP financial measures, including reconciliations to U.S. GAAP, can also be found in our earnings materials, and those are available on our website.So, with that, I will turn it over to Brian. Thank you.Brian Moynihan Good morning, and thank you all of you for joining us. I’m starting on Slide 2 of the materials.Your company produced one of its highest core EPS, earnings numbers in a challenged operating environment in the first quarter.
Simply put, we navigated that environment well. The preparedness and strength of Bank of America and the trust of our clients reflects a decade-long responsible growth model and relationship nature of our franchise. During quarter one, importantly, organic growth engine continued to perform.Let me first summarize some points, and I’ll turn it over to Alastair to take you through the details of the quarter. If you go to Slide 2 of the materials, Bank of America delivered strong earnings, growing EPS 18% over first quarter ’22. Every business segment performed well. We grew clients and accounts organically and at a strong pace. We delivered our seventh straight quarter of operating leverage, led by a 13% year-over-year revenue growth.We further strengthened our balance sheet, with our CET1 ratio increasing to 11.4%.
Regulatory capital ended at the highest nominal level in our history at $184 billion. We maintained strong liquidity. We ended the quarter with more than $900 billion in Global Liquidity Sources.We are in good returns for you as our shareholders, with a return on tangible common equity of 17%, a 107 basis points return on average assets. Tangible book value per share grew 9% year-over-year. We did this as the economy slowed. And, remember, our research team continues to predict a shallow recession that will occur beginning in the quarter three of 2023.It’s interesting, when we look at our consumer behavior, payments by consumer continued to drive the U.S. economy. We’ve seen debit and credit card spending at about 6% year-over-year growth pace, a little slower but still healthy.
But, remember, card spending represents less than a quarter of how consumers pay for things out of their accounts at Bank of America.Overall payments from our customers’ accounts across all sources were up 9% year-over-year for March as a month. Year-to-date, they were up about 8% for the quarter. After slowing in the back half of 2022 a bit, we saw the payments — pace of payments picked back up in quarter one, especially in the latter parts of the quarter.Consumers’ financial positions remains generally healthy. They’re employed with generally higher wages, continue to have strong account balances, and have good access to credit.As you think through all the tightening actions of the Fed, the flows to alternative yielding assets, investments and the disruption the past quarter, our deposits continued to perform well, ending the quarter at $1.91 trillion.
If you think about it, that’s about the same balance that we had in mid-October of 2022. So, we’ve seen these balances stabilize and remain 34% above they were in prior to the pandemic.The team has managed well during these periods by remaining focused on the things we can control to drive value through our franchise. I thank them for a very strong quarter, near-record earnings with strong returns.Let me turn the call over to Alastair to walk through the details of the quarter.Alastair Borthwick Thank you, Brian.And I’ll pick up on Slide 3, where we list some of the more detailed highlights of the quarter. And then, on Slide 4, we present the summary income statement. So, I’m going to refer to both of these together.As Brian mentioned, for the quarter, we generated $8.2 billion of net income, and that resulted in $0.94 per diluted share.
Our revenue grew 13%, and that was led by a 25% improvement in net interest income, coupled with strong 9% growth in sales and trading results, excluding DVA.Our non-interest revenue was strong, despite three headwinds: First, we had lower service charges as commercial clients paid lower fees for treasury services, since they now receive higher earned rates on balances. And, obviously, that allows us to invest those funds to earn NII.On consumer, we had lower NSF insufficient funds and overdraft fees as a result of our policy changes announced in late 2021. Second, with lower asset management fees and that just reflects the lower equity market levels and fixed-income market levels. And, third, investment banking fees were lower, just reflecting the continuation of sluggish industry activity and reduced fee pools.
Now, all that said, despite these headwinds, each of the three categories saw modest improvement from the fourth quarter levels.Asset quality remained strong, and provision expense for the quarter was $931 million. That consisted of $807 million of net charge-offs and $124 million of reserve build. And that reserve build compares to a reserve release in the first quarter 2022 of $362 million. Our charge-off rate was 32 basis points and still well below the fourth quarter of ’19 when our pre-pandemic rate was 39 basis points. And, remember, 2019 was a multi-decade low. So, credit, obviously, remains quite strong.I want to make one other point on Slide 4 and that is simply to note that pre-tax pre-provision income grew 27% year-over-year compared to reported net income growth of 15%.So, let’s turn to the balance sheet that starts on Slide 5.
And you can see, during the quarter, our balance sheet increased $144 billion to $3.195 trillion. Brian noted our liquidity levels at the end of the period, those rose to more than $900 billion from December 31. That’s $23 billion higher and it remains $324 billion above our pre-pandemic level in the fourth quarter of ’19.Shareholders’ equity increased $7 billion from the fourth quarter as earnings were only partially offset by capital distributed to shareholders, and we saw an improvement in AOCI of $3 billion due to lower long-term interest rates. The AOCI included more than $0.5 billion increase from improved valuations of AFS debt securities and that flows through CET1. And the remaining $2.5 billion due to changes in cash flow hedges doesn’t impact regulatory capital.During the quarter, we paid $1.8 billion in common dividends and we bought back $2.2 billion in shares.Turning to regulatory capital, our CET1 level improved to $184 billion since December 31 and our CET1 ratio improved 14 basis points to 11.4%, once again, adding to our buffer over our 10.4% current minimum requirement as well as the 10.9% minimum requirement that we’ll see on January 1st of 2024.
That means, in the past 12 months, we’ve improved our CET1 ratio by 100 basis points, and we’ve supported our clients and we’ve returned $12 billion in capital to shareholders.CET1 capital improved $4 billion, and that reflects the benefit of earnings and the AOCI improvement, partially offset by the capital we’ve returned to shareholders. Our risk-weighted assets increased modestly and that partially offset the benefit to the CET1 ratio of the higher capital we generated. And then, our supplemental leverage ratio increased to 6%. That compares to a minimum requirement of 5% and leaves plenty of capacity for balance sheet growth, and our TLAC ratio remains comfortably above our requirements.So, let’s spend a minute on loan growth, and we’ll do that by turning to Slide 6, where you can see the average loans grew 7% year-over-year, driven by commercial loans and credit card growth.
The credit card growth reflects increased marketing, it reflects enhanced offers and higher levels of card account openings. The commercial growth across the past year reflects the diversity of commercial activity across global banking and global markets and, to some degree, global wealth.And on a more near-term linked-quarter basis, loans grew at a much slower pace, partly driven by seasonal credit card paydowns after the fourth quarter holiday spending, and then commercial demand slowed in Q1 and we saw some paydowns by our wealth management clients as they lowered leverage as rates rose.So, let’s turn to deposits and there’s obviously been a lot of additional focus this quarter, so I want to spend extra time here and I’m going to start with Slide 7 and talk about average deposits.
Just a few points we need to make before focusing on a more detailed discussion of the recent trends.Average total deposits for the first quarter were $1.89 trillion, that is down 2% linked-quarter and down 7% year-over-year. Our deposits peaked in the fourth quarter of 2021. And even as the Fed has continued to withdraw money supply, our deposits have held around $1.9 trillion, because there’s a lot more industry deposits today in a much bigger economy today compared to pre-pandemic.Our average deposits were up 34% compared to our pre-pandemic Q4 ’19 balance and the industry’s deposits were up 31% to $17.4 trillion. So, we’ve obviously fared a little bit better than the industry. We put our pre-pandemic deposits for each line of business on the slide, so you can compare our balances then and now.I want to highlight consumer checking balances, which remained 53% higher than pre-pandemic.
And as I think all of us would expect, GWIM combined client deposits are up a lesser 23%, as those are the clients that generally move their excess cash into other off-balance sheet products. And in global banking, you can see the rotation to interest-bearing across time as rates rose.So, let’s get a little more granular and a little more near-term and we’ll use Slide 8 for that, where you can see the breakout of deposit trends on a weekly ending basis across the last two quarters. You can also see that we plotted the timeline of Fed target and rate hikes on the top-left chart, just for comparison through time.In the upper left, you can see the trend of our total deposits. We ended Q1 ’23 at $1.91 trillion, that’s down 1%. And, as Brian mentioned, over the course of the past six months, those balances have been relatively stable.In consumer, looking at the top-right chart, we show the difference here in the movement through the quarter between the balances of low to no interest checking accounts, and the higher-yielding non-checking accounts and, across the entire quarter, we saw a modest $4 billion decline in total.
Checking balances, obviously, have some variability around pay days in particular, but note the relative stability of checking deposits, because these are the operational accounts with money and motion to pay the bills and everyday living costs for families.I’d also point out that our checking balances were modestly growing even ahead of March 9th upheaval and continue to move higher through the quarter on the back of disruption. Lower non-checking balances mostly reflect money moved out of deposits and into brokerage accounts where we earn a small fee.Rate paid increased 6 basis points from the fourth quarter to 12 basis points on this [trillion dollars] (ph) of total consumer deposits and remains low, because of the 52% mix that is checking.
Lastly, I just note that the rate movements in this business are concentrated in the small CDs and consumer investment deposits, which together represent about 5% of the deposits.In wealth management, as you would expect, it shows the most relative decline, and you can see the continued trend of clients moving money from lower-yielding sweep accounts into higher-yielding preferred deposits and off-balance sheet to other investment alternatives. Now, if we went back further, you’d see that roughly $90 billion has moved out of sweeps in the past year, which leaves $80 billion in these accounts. So, you can see how with the pace and size of rate hikes slowing, we expect the declines in balances to lessen from here.At the bottom-right, note the global banking deposit movement, where we hold about $500 billion in customer deposits.
These are generally operational deposits of our commercial customers and they use that to manage their cash flows through the course of the year. Those were down $3 billion from the fourth quarter. And what’s interesting to note is that, our total deposits in this segment have been stable at around $500 billion for the past six months and this business just continues to see rotation into interest-bearing.The mix of interest-bearing deposits on an ending basis moved from 49% last quarter to 55% in Q1. And, obviously, we pay increased rates on those interest-bearing deposits. And it’s this rotation in global banking that’s driving the rotational shift of the total company, and it’s pretty typical and to be expected in this environment.So, in summary, our deposits continued to behave as we would expect.
The cash transactional balances have shown some recent stabilization. And for investment cash, we’ve seen deposits moved to brokerage and other platforms for direct holdings of money market, mutual funds, treasuries, and we are capturing many of those flows as you see in our numbers, it’s just we expect that to slow going forward.So, now that we’ve examined trends for the different lines of business, I want to make some important points about the characteristics of our deposit franchise using Slide 9, and this will just help reinforce for shareholders who own Bank of America that they’re investing in one of the world’s great deposit franchises, all of it based off of relationships we have with our customers and the value they place on the award-winning capabilities and convenience they have access to.So, starting from the top, focus first on consumer.
You can see that more than 80% of deposits have been with us for more than five years, and more than two-thirds of our consumer deposits are balances with customers who have had relationships with the bank for more than 10 years. Also, more than three-quarters of these customers are very highly engaged in their activities with us. They are also, geographically, dispersed across the United States given our presence in 83 of the top 100 markets. Lastly, whether you look at consumers or small business, the value proposition is what’s driving the same result. We’ve got long-tenured customers with deep relationships that are highly engaged.Turning to wealth management, you can see a similar story around long tenure and quite active relationships.
The average relationship of our GWIM clients is around 14 years. And, again, these clients are very geographically diverse, they’re also very digitally engaged, and we continue to see deepening around banking solutions and products of all types. There’s lots of options for these clients that extend from their operational checking accounts all the way up through preferred deposit options, and then we also benefit from having great alternatives for them within our investment platform.On global banking, note that 80% of our U.S. deposit balances are held by clients who have had an account with us for at least 10 years. Furthermore, as we measure the number of solutions that clients have with us, we know that 73% of balances are held by clients that have at least five products on us and, just like the other businesses, they are highly diversified by industry and geography.
So, those are some of the things that make our quality deposit base stable.So, now that we’ve walked through both loans and deposits, I want to transition a bit to make some points on balance sheet management and to focus on the liquidity we enjoy by having a surplus of customer deposits that far exceeds the loan demand of our clients today and far exceeded the loan demand of our clients pre-pandemic. Having the deposits alone doesn’t pay the expenses to support these great customer bases and it doesn’t mean much to our shareholders, unless we put them to work to extract the value of those deposits. So, that’s what we’re trying to illustrate and we want to show you how we do them.You can see that on Slide 10, where you note we had significant excess deposits over loans pre-pandemic.
And during the pandemic, that increased — that amount increased significantly. Before the pandemic, we had $0.5 trillion more in deposits than loans and that peaked in late 2021 at more than $1.1 trillion and it remains high at roughly $900 billion still today. That’s the context as we talk about how we manage excess cash.So, let’s turn to Slide 11. And here we’re going to focus on the banking book, because our global markets’ balance sheet has remained largely market funded. And just follow the graph from left to right. At the top of the slide, you note trend of cash and cash equivalents and the two components of the debt securities balances: available-for-sale and held-to-maturity. And you can see the trend of the overall combined cash and securities balance movement and it closely mirrors the previous slide’s excess deposit trends, as you would expect.In 2020, deposits grew, while loans declined and that was pandemic borrowing from our commercial clients stopping and then quickly paying it off.
Throughout 2020, as we put deposits to work, we took a number of actions to protect our capital and that included a buildup in hold-to-maturity, better aligning our capital treatment with our intent to hold those securities to maturity. We also hedged rate risk in the available-for-sale book using pay-fixed, receive-variable swaps. So, these securities acted like cash and they earned higher yields and guarded against capital volatility.As we entered the middle of 2021, it became more clearer that the stimulus payment would likely be the last one and, therefore, we believed deposits would be peaking. As a result, we stopped adding to our hold-to-maturity securities book. That book peaked in the third quarter of 2021 at $683 billion, $562 billion were mortgage backs, and the rest were treasuries.
And all that’s happened is that notional balances have declined in each of the past six quarters, ending the quarter at $625 billion. And within that, the mortgage-backed portfolio was down $67 billion to $495 billion.As rates began to rise quickly throughout 2022, the value of our deposits rose. And, at the same time, the disclosed market value of the hold-to-maturity securities has declined, resulting in a negative market valuation on those bonds. That negative market valuation peaked in the third quarter, came down in the fourth quarter, and it’s come down another $10 billion in the first quarter.In our 10-K disclosure, we included a chart which shows the maturity distribution of our securities portfolio. And, I’d remind you, this is based on the maturity dates of those originations, i.e., the date of the last contractual payment.
When we look at the actual cash flows of those bonds over time, it results in an average weighted life of the hold-to-maturity securities book of a little more than eight years.And as you can see, since the third quarter of 2021, we’ve continued to see increases in the overall yield on the balances due to both the maturity and reinvestment of lower-yielding securities as well as remix into higher-yielding cash. And, as you can see, with deposits paying 92 basis points, that compares to our blend of cash and government-guaranteed securities, which pays 290 basis points. So, we continue to benefit NII and yield.And, finally, one very important last point I want to make, which is on the improved NII of our banking book. Because, remember, we manage the entirety of our balance sheet.
That includes our deposits and that’s where you see the net interest income has improved significantly. NII, excluding global markets, which we disclose each quarter, troughed in the third quarter of 2020 at $9.1 billion, and it’s now $5.4 billion higher on a quarterly basis at $14.5 billion in the first quarter of ’23, and that’s the acid test of managing the entire balance sheet.So, let’s turn now to Slide 12 and focus on net interest income. On a GAAP non-FTE basis, NII in the first quarter was $14.4 billion and the FTE NII number was $14.6 billion. Focusing on FTE, net interest income increased $2.9 billion from the first quarter of 2022 or 25%, while our net interest yield improved 51 basis points to 2.2%. The improvement was driven by rates, and that includes reductions in securities premium amortization.
Average Fed fund rates are up 440 basis points year-over-year. Relative to that increase in Fed funds, which has benefited all of our variable rate assets, the rate paid on our total deposits rose 89 basis points and the rate paid today on interest-bearing deposits is up 133 basis points. Average loan growth of $64 billion also aided the year-over-year NII improvement.Turning to a linked-quarter discussion, NII of $14.6 billion is down $222 million from Q4, and that’s primarily driven by the continued impact of lower deposit balances and the mix shift into interest-bearing. It’s also influenced by lower global markets NII, which, remember, still gets passed through to clients via higher non-interest income as part of the trading revenue. Excluding the $262 million decline in global markets’ NII, the banking book NII of $14.5 billion, that was modestly higher as the benefit of increased short interest rates, some modest loan growth and some deposit favorability was offset by two less days of interest in the quarter.Turning to asset sensitivity on a forward basis, the plus 100 basis point parallel shift at March 31st stands at $3.3 billion of expected NII over the next 12 months from our banking book.
96% of that sensitivity is driven by short rates.Summary, the first quarter NII was $14.6 billion in this quarter on an FTE basis and that was a little better than our $14.4 billion expectation as we began the quarter since deposits and rate pass-throughs were both modestly better.Looking forward, based on everything we know about interest rates and customer behavior, we expect second quarter NII on an FTE basis to be around 2% lower compared to Q1. So, think about that NII as about $14.3 billion FTE, plus or minus, driven by expected deposit movements as well as lower global markets’ NII, which again is offset in the trading revenue.So, let me remind you of some of the caveats when it comes to that NII guidance. First, importantly, it assumes that interest rates in the forward curve materialize and that includes one more hike and then a couple of cuts in 2023.
We also expect funding costs for global markets client activity to continue to increase based on those high rates. And, as noted, the impact of that is still offset in non-interest income, and that obviously assumes our current client positioning and the forward rate expectations.We continue to expect modest loan growth. So, that’s in our NII expectation as well, and it’s driven by credit card and, to a lesser degree, commercial.And then, finally, we just expect lower deposits and rotational shifts towards interest-bearing, really for three reasons. First, we expect further Fed balance sheet reductions to continue to reduce deposits for the industry. Second, we anticipate lower wealth management deposits in the second quarter. That’s pretty typical due to the seasonal impact of clients paying income taxes and, to a lesser degree now, a continuation of balance movement seeking better yields off-balance sheet.
And, third, we just continue to expect some of the rotation of commercial deposits towards interest-bearing.Okay. Let’s go to Slide 13, we’ll talk about expense. And here what you can see is, in the first quarter, our expenses were $16.2 billion, that’s up $700 million from the fourth quarter and it’s driven by seasonal elevation from payroll taxes, mostly at $450 million, a little bit from higher FDIC insurance expense, that was another $100 million this quarter, and the cost of adding people, call that another $100 million.We ended the first quarter with a little more than 217,000 people at the company, that was 260 people more than year-end. During the quarter, we welcomed 3,000 additional people into the company in January, that’s due to outstanding offers that we extended in the fourth quarter.
That meant that our headcount peaked in January. That’s a little more than 218,000. And, at the end of last week, we were down to 216,000. We continue to expect that to move lower over time and we expect, by the end of the second quarter, our full-time equivalent headcount will be roughly 213,000, excluding our summer interns.As we look forward to the next quarter then, we would expect Q2 expense to benefit from the reduction of the seasonal elevation of payroll tax in Q1, and we would also expect to see expense reductions coming from headcount reductions through attrition over time and our operational excellence work. So, we expect expense in Q2 to be around $400 million or $500 million lower than Q1, so think of that as around $15.8 billion, plus or minus, in Q2.
And then further, we just expect continued sequential expense declines in the third quarter and then again in the fourth quarter as we benefit from continued headcount discipline and attrition through time.Now turn to asset quality on Slide 14, and I want to start the credit discussion by saying, once again, asset quality of our customers remains healthy and net charge-offs continue to rise from their near historic lows. Net charge-offs of $807 million increased $118 million from the fourth quarter. That increase was driven by credit card losses as higher late-stage delinquencies flowed through to charge-offs. For context, the credit card net charge-off rate was 2.21% in this first quarter and that compares to 3.03% in the fourth quarter of ’19 pre-pandemic.Provision expense was $931 million in Q1, and that included a $124 million reserve build.
That’s obviously less than the $403 million build we took in the fourth quarter, and it reflects modest loan growth and an ever so slightly improved macroeconomic outlook that, on a weighted basis, continues to include an unemployment rate still north of 5% as we end 2023.We included a slide in the appendix this quarter that highlights the mix and credit metrics of our commercial real estate exposure. And I just wanted to remind everyone here, we’ve been very intentional around our client selection, very intentional around portfolio concentration, and deal structure over many years and, as a result, we’ve seen NPLs and realized losses that remain quite low for this portfolio. We had a total of $66 million of commercial real estate losses in 2022.
70% of that was in office loans and that resulted in an annualized loss rate of 26 basis points.In the first quarter, to give some perspective, our office loan losses were $15 million. We have roughly $73 billion in commercial real estate loans outstanding, that’s less than 7% of our loan book. It’s highly diversified by geography, and no part of the country represents more than 22% of the book. It’s also very diversified across property type.Within property type, our office portfolio was $19 billion, it’s about 2% of our total loans. The portfolio is roughly 75% Class A properties. And when we originate, they are typically around 55% loan-to-value. Even though we’ve seen some property value declines, this exposure still remain well secured.
$3.6 billion is classified as reservable criticized. And even on the most recent refreshes on our toughest loans, we still have 75% LTVs.In our office book, $4 billion is scheduled to mature this year, another $6 billion in 2024, with the remainder spread over the following years. So, we continue to feel that the portfolio is well-positioned and adequately reserved given the current conditions.On Slide 15, for completeness, we highlight the credit quality metrics for both our consumer and commercial portfolios.And, with that, I’m going to turn it back to Brian to talk about the lines of business.Brian Moynihan Thank you, Alastair. And we’re going to begin on Slide 16.So, I want to bring us back to the things that drive the long-term value of this franchise and the value for you, our shareholders.
Every business segment grew customers and accounts organically in the quarter and use digital tools and capabilities to drive engagement even deeper and also to drive customer satisfaction to industry-leading levels.On Slide 16, we’ve highlighted some of the important elements of organic growth. I won’t go through all the line items here, but, in consumer, we saw — we opened 130,000 net new checking accounts, 1.3 million credit card accounts, and 9% more investment accounts, that aided to record quarter one consumer investment flows. Consumer also has now — have — has had 17 quarters of positive net new checking accounts.In global wealth, we had a record quarter, adding 14,500 net new wealth relationships. In global banking, we had our clients increase the number of products per relationship.
In global markets, as we said earlier, Jim DeMare and team had one of the highest quarters of sales and trading.The other elements of earnings the management team remains focused on throughout this inflationary environment is our expense management efforts and — but, even given those, we continue to make investments in the future.We continue to streak up operating leverage in our account and you can see that on Slide 17 — in our company and you can see that on Slide 17. We now had seven quarters of operating leverage. The efficiency ratio went to 62%, and the nominal dollars of expenses we have today are similar to what we had 10 — eight, nine, 10 years ago.As we go to Slide 18, let’s talk about individual businesses, and consumer banking first.
For the quarter, consumer banking earned 31 — $3.1 billion on good organic revenue growth and delivered its eighth consecutive quarter of strong operating leverage, while we continue to invest in future. Top-line revenue grew 21%. Expenses rose 11%. These results demonstrate the true value of the $1 trillion deposit franchise and the deep relationship we have with the clients in that business.The business continues to have $700 billion in excess deposits over its loan balances. And, as we said earlier, we grew checking accounts $2.5 million — 2.5 million new checking accounts, since the pandemic started. Solid earnings growth of 4% understates the success of this business as prior year included reserve releases, while we built reserves this quarter.On a pre-tax pre-provision basis PPNR grew 34% year-over-year.
I’ll also note that the revenue growth overcame a decline in service charges as a result of us lowering our NSFOD charges for customers several quarters ago.The expense in the consumers reflect the continued business investments for growth, including adding relationship associates, further develop increases in the cost of technology and implementation of new tools. As you think about this business, remember, much of the company’s minimum wage hikes during 2022, the ones we made mid-year in addition to our March of $25 an hour, impact this business more than any other business. However, it has helped drive the attrition in this business in half compared to last year this quarter.On Slide 19, you can see some of the digital statistics around consumer.
We believe that those digital tools, our customers have access to it, are the key to growing and retaining customer relationships. These tools also help us deliver more efficiently.We now have 45 million users actively engaged with our digital properties. They login 1 billion times a month. Erica, our artificial intelligence-driven personal assistant, saw usage rise 35% just in the past year. The number of our customers using Zelle grew 21% in the past year. Remember, these aren’t new functionalities just being put in place, these are growing off a high scale and showed the Bank of America impact on these products.On Zelle, remember, back in mid-2021, Zelle transactions crossed the number of checks written for our clients. Now, at 60% higher, less than two years later.
And you can see the growth in digital sales that continues.We remained focused on growing the customer base and delivering the best-in-class tools and service that make us more efficient and more important to our clients in the consumer business, and Dean Athanasia and team continue to do a good job with respect to those goals.On Slide 20, we move to wealth management. We had good results, earning about a little over $900 million after tax for the quarter. These results were down from last year, as Alastair said, as asset management fees fell with the negative market levels in equity and fixed income. Those fees were mitigated by the beneficial impact of revenue from the sizable banking business within this line of business for us.As I noted a moment ago, both Merrill and the Private Bank saw organic revenue growth and provided solid client flows at $25 billion in the quarter.
Our assets under management flows of $15 billion reflects some of the movement in deposits noted earlier, but we also saw a $33 billion of brokerage flows. Expenses reflects lower revenue related incentives, but also reflects continued investments in the business as we continue to add financial advisors. We’ve added more than 650 wealth advisors in the past year alone.As we move forward, we are excited to have Eric Schimpf and Lindsay Hans lead this business. They work closely with Katy Knox to drive our global wealth and investment management business across the company.As we go to global wealth and investment management digital on Slide 21, you can see the statistics here. Just as with the consumer business, these clients become more and more digital engaged across time.
Our advisors have led the way in driving a personal-driven advice model, supplemented by our digital tools.On Slide 21, you can see the client digital adoption rate of 84% with Merrill and the Private Bank is over 90%. More than 75% embrace digital delivery of their statements, which, as a key tool of their service, providing more convenience for them and our advisor. Erica and Zelle interactions continue to grow here also, even among these wealthy clients.On Slide 22, you see the global banking results. This business produced very strong results, growing revenue 19% year-to-year to $6.2 billion. The business earned $2.6 billion after tax. While investment banking remained sluggish, our global treasury services business has been robust, leading to strong revenue performance.
Loan activity has been good across this business also. As noted earlier, the deposit flows appear to have stabilized in March and we benefitted from some customer flows during the flight to safety during the quarter.The company’s overall investment banking fees were $1.2 billion in quarter one. And while down from quarter one ’22, we saw a modest improvement from quarter four of ’22. Provision expense declined year-over-year as prior year’s reserve builds compared to release in the current period. Credit quality of this business, again, remains very strong. Expense increased 10% year-over-year, driven by strategic investments in the business, including relationship manager hiring and technology costs.Digital engagement, as shown on Slide 23, with our global banking customers.
These commercial customers continue to grow in importance as treasuries and others appreciate the ease of doing business with us through these tools. While the volume of transactions in sheer numbers [aren’t] (ph) the same as consumer, the volume of money moved is tremendous.Next business, we’ll go towards our global markets business on Slide 24. Jim DeMare and the team had another strong quarter of results, growing year-over-year earnings to nearly $1.7 billion after tax. The continued themes of inflation due to political tensions and central banks changing monetary policies around the globe drove volatility in the bond and equity markets, which his team did a good job of managing. As a result, this quarter, we saw a strong performance in our credit trading business, particularly in mortgages and muni trading and macro trading again fared well buoyed by strong client activity and secured financing.Investments made in this business over the last few years continued to produce favorable results.
Just to focus on the sales and trading numbers alone, ex-DVA, revenue improved 9% year-over-year to $5.1 billion. FICC improved 29%, while equities were down 19% compared to quarter one of 2022. Year-over-year expense increased 8%, primarily driven by continued investments as stated in this business.Finally, on [Slide 5] (ph), you can see the all other shows a modest loss, which includes the $220 million losses in securities sold, as Alastair mentioned earlier. And last, I would note our 10% effective tax rate this quarter continues to benefit us from a strong business with clients, supporting environmental investments, in-housing investments to produce tax benefits. Excluding those and the other discrete tax benefits, our tax rate would have been 26%.So, in summary, a strong quarter by our team delivered for you, our shareholders, operating leverage, organic growth, strong credit, capital return, and strong ROTCE.With that, let’s jump to Q&A.
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Question-and-Answer Session Operator [Operator Instructions]
We’ll take our first question from Jim Mitchell with Seaport Global.
Your line is open.Jim Mitchell Hey, good morning, guys. Maybe just one question on the NII trajectory. You guys remain asset-sensitive in the banking book, but the forward curve is — I think you pointed out currently expect three rate cuts by the end of the year. If that plays out, how do you think about that impact on NII in the back half of the year? What are the puts and takes as we think about NII beyond 2Q?Alastair Borthwick So, Jim, I think, right now, the expectations for the market in terms of whether or not there’ll be another hike in May, that’s bouncing around pretty good. Similarly, you’ve got a question of whether or not there’s two cuts at the back half or three. So, we’re operating with the same information you are. We’re looking at the forward curve day-to-day thinking that through.
At the same time, we’re looking at our deposit balances. They’re performing kind of the way we would think and we’re competing for rate paid. So, I’d say, generally speaking, at this point, we feel pretty good about NII. It’s obviously going to be up this year pretty significantly.And, look, we don’t provide guidance for the full year for a very simple reason, it just comes down to — it’s very difficult to predict what the Fed is going to do six months and nine months out. But let me put it this way, we can see where our consensus is. Consensus is right around $57 billion, plus or minus. That’s sort of the number that would imply us up for the year, 7% to 8%. I mean, I think, we’re pretty comfortable there, but it’s just so many moving parts, that’s why we don’t provide the guidance.Jim Mitchell No, that’s all fair.
And maybe just pivoting to the trading business, you had another strong quarter and outperformed peers in the fixed income business. Is there anything unusually strong there? Or do you believe you guys have made some sustainable market share gains in that business given your recent investments?Alastair Borthwick Well, I think, the team has done a really good job. Brian talked about that. A couple of years ago, we made a decision as a team that it was important for us to invest more in that business and we did that. And we’ve made pretty significant investments in equities and in fixed income. And we felt like, in particular, we could continue to grow our macro businesses, which we’ve done, and that’s what has done a really good job until this quarter.This quarter, we just happen to fire on more cylinders, particularly in FICC, because this quarter we had a great quarter for our micro products and you kind of expect that, because it was a better quarter for them.
We’ve had positive returns there. So, mortgages, credit, munis, financing, futures, FX, all of them had a pretty good quarter and, I think, Jim and the team are just executing at a really high level. So, they just got to keep at it.Jim Mitchell Fair enough. Thanks for taking my questions.Operator We’ll take our next question from Erika Najarian with UBS. Your line is open.Erika Najarian Hi, good morning. Alastair, just a clarification. You gave us the quarterly expected trajectory for expenses. Do you still expect to hit $62.5 billion or so of full year expenses in ’23?Alastair Borthwick Right now, that’s our expectation. I mean, we’re 90 days into the quarter — I’d say into the year rather. Obviously, as we’re looking forward, we see — we know the headcount is coming down, so that’s going to be a tailwind all the way through the course of the year.
So, we don’t have any change in our expectations right now. We’re going to see how the year develops.We still got a little bit of a headwind in terms of something like our sales and trading business having a very good revenue year, and we’re still investing in the business. So, it’ll be a dog fight, particularly as we get into the back half of the year, but we still feel good about where we are with respect to the expense.Erika Najarian Got it. And my second question is for Brian. Brian, you’ve produced a significant amount of revenue this quarter and grew your CET1. At the same time, I think that a lot of investors are looking down the path of significant macro uncertainty. As we take that into account, how should we think about the buyback activity going forward, especially ahead of the stress test results in June?Brian Moynihan I think, you saw this quarter, we continue to adopt our basic, or apply our basic principles, which is we support the growth in our customer base, we pay the dividends that are — what we think is the rational rate, and then we use the rest to basically return to use for the share buybacks.
Yeah, we’re in the middle of stress test as you just mentioned. We’ll have to see the results of that. We also — but the good news is, we crossed 11.40% this quarter, which basically is an excess — has a cushion on top of what we need for the first quarter of next year. And so, we’ll continue to follow our basic principles.So, we’re — we feel good — very good about our capital and you should expect us to continue to follow the idea to pay the dividend or grow organic — support the organic growth, pay the dividend and buyback shares, but we’ve got to get through the near-term sort of what goes on in our business every year at this time.Erika Najarian Got it. Thank you.Operator We’ll go next to Ken Usdin with Jefferies. Your line is open.Ken Usdin Good morning.
