Cash flows remain in a good place. I think, corporate America learn something from 2009 and 2008. And so, leverage is in a good place. You add all that up, you got a decent environment overall for the economy and that’s where we are with respect to credit quality. So, we’ll have to watch that over time. But as of right now, it’s in terrific shape.Gerard Cassidy Great. Thank you very much.Operator Our next question comes from Betsy Graseck with Morgan Stanley. Your line is open.Betsy Graseck Hi. Good morning.Alastair Borthwick Good morning, Betsy.Betsy Graseck Two questions. One, just keying off the loan discussion just now, could you give us a sense as to how you’re thinking about lending standards and any changes in a post [SIVB] (ph) environment?Alastair Borthwick Well, look, we don’t really have a significant change to our risk appetite.
We haven’t changed our client selection. Those are largely speaking design to be through the cycle. We will obviously adjust on specific concerns about asset quality performance in the sector or outlook. But, I’d say, with respect to our loan growth, it — what we’re seeing at more is, as the Fed raises rates, those rates are changing our customer demand. So, we just don’t see as much demand right now for securities-based lending or mortgage, but it’s less about credit tightening or standards, it’s more about just Fed doing and having the effect that you would expect.Betsy Graseck Okay. And then two other quickies. One, on the consumer checking account balances in March, was that uptick in part a function of seasonality and end of period, end of pay cycle type of behavior, or is there something more going on there?Brian Moynihan Well, I think, as always, that’s the cohort of pre-pandemic compared to where they were then and now.
And they had been sort of bounce around and it leveled for the last six months and they moved up a little bit. This is the time they do move up, because of the tax returns and other things and year-end payments and stuff. But they clearly are going — they basically are stable from November, December, January. They started increasing in February and then they bounced up a little bit. So, we’ll see where it ends up. The clear message is, despite people having said these consumers are spending down their money, it would be out of these balances in mid-2022 or the third quarter, they clearly are still sitting with a fair amount of money in account relative to pre-pandemic times.Betsy Graseck Okay. And then just lastly, AI, it’s been a big topic recently as I’m sure you know.
You’ve got Erica. Just wondering about plans to leverage AI, maybe you are going to be leveraging Erica on that, maybe it’s a different credit strategy, but thoughts there would be helpful. Thank you.Brian Moynihan Yeah. So, Erica, obviously, the basic concept was built for us a number of years — four or five, six, seven years ago starting and came out — came into the business. It is a predictive language type of program, where you put in question and then it answers it, but we had to do a special language to make sure it would work with our business, it wasn’t a general. So, we did that. Then put us in a condition to start to deploy to our customers, because it’s captive to our data, where it’s just looking our systems, finding information and giving to clients is really a service capability.And what we’ve seen is that increase is a clear indicator of how valuable these types of artificial intelligence, natural language processing, predictive technologies can be for customer service and things like that.
We’ve also taken Erica internally and applied it to help us do work and we’ve seen it have those benefits. Ultimately, we think this has extreme benefits for our company. We think it has a lot — and you’ve seen this written about in the computer coding areas. In other words, it could speed up the process of what they used to be called object programing. That goes on. We think it has a lot to do in terms of allowing teammates to work much more quickly and efficiently with our systems and get information out and can make, even someone like me, the ability to do analytics, that I could — I’d have to send to somebody and have them put, key it in the systems. So there’s a lot of value to this.The key question will be, when can you use it without the fear of — with the — the reason why a lot of it stopped in our industry and other industries was, it wasn’t clear how it worked.
It was your data and the outside world’s data and how it would interact and pull stuff out and we have to be careful with that. And then, secondly, we have to understand how the decisions are made, being able to stand up to the — to our customers’ demand for us to be fair and, frankly, follow the laws and rules and regulations on lending.So, I think, all that is good, strong — it’s really important thing. So, we’re not a neophyte in this sense, actually operating out there, we understand the value of it, but we will carefully apply it and we see a great value. I don’t think it’s a great value in the next month, but in the overall sense, it will help us continue to manage the headcount down, which we’ve been doing this quarter. And, remember, we started this company — management team started with this company in 2010 with 285,000 and 300,000 people working here and we’re running the same size company with 216,000 people or bigger company doing more stuff and so all that’s been aided by digitization of which is a potential step function change.Betsy Graseck Thanks so much.
Appreciate it.Operator We’ll take our final question at this time. This is a follow-up from Mike Mayo with Wells Fargo. Please go ahead. Your line is open.Mike Mayo Hi. In terms of your guidance for lower expenses in the second quarter, then the third quarter, then the fourth quarter, how much of that is expectations for slower business activity and how much of that is due to expected scale benefits from technology?And I guess the bigger question too is, are you seeing evidence of a banking crisis? Are you seeing evidence of banking recession? And is that part of the reason for the expense guide?Brian Moynihan No, it not — Mike, I would say, there could be — the activity in the first quarter was actually higher in some ways, because of the volatility in the trading side and things like that.
So, we aren’t expecting — we’re expecting to get scale and operating leverage across activity taking less dollars to do it in the OpEx and the work we do. We had built-up more people, largely because the fear of last year of the turnover rate that is now gone in half in a year, requires us to be hiring a lot to stay ahead of it and then when it slowed down, we built-up people and we’re bringing that back down in line.But there is no — the expenses frankly are just managing the headcount carefully, because that’s two-thirds of the expense base and getting more leverage out of the activities. But there’s no — yeah, we’ll have more checking accounts, we will have more credit card accounts, we’ll do more wires on a given day, we’ll do more trades on a given day, and that can ebb and flow, but, overall, we’re expecting activity continue to rise.
Now, well, loan demand, i.e., people want to borrow another $10 versus the $10 ahead, that’s what we say slows down. So that doesn’t — yeah, that’s — but that’s not — that they don’t have a loan is that they borrow different amounts of money.Mike Mayo All right. So, this is really just managing the business, not your reduced investment spends, or anything like that?Brian Moynihan No, in the investment spend, we’re spending, we increase this year versus last year $300 million to $400 million in pure initiative spending and that’s going through the run rate as we speak, and we aren’t — we wouldn’t cut that, because we think to the point of Betsy’s comment, it gives us a chance to continue to leverage the franchise and nowhere is that more evidenced in our consumer business, where the numbers of branches year-over-year are down a few 100 again.
