Good day, everyone, and welcome to today’s Bank of America Earnings Announcement. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. Please note this call maybe recorded. [Operator Instructions]It is now my pleasure to turn today's conference over to Lee McEntire. Please go ahead.

Good morning. Thank you, Katherine. Thanks for joining the call to review our fourth quarter 2019 and our full-year results. By now, I hope everyone's had a chance to review the earnings release documents, which are available on the Investor Relations section of bankofamerica.com website.Before I turn the call over to our CEO, Brian Moynihan, for a few remarks, let me remind you that we may make forward-looking statements during the call. For further information on those forward-looking comments, please refer to either our earnings release documents, our website or our SEC filings. After Brian's comments, our CFO, Paul Donofrio, will review more details on the 4Q results. We'll then open up for questions. Please try to limit your questions, so that we can get to all callers.So let's get rolling. Brian?

Thank you, Lee. Good morning, everyone, and thank you for joining us to review our results. I'm going to let Paul take you through the fourth quarter, which reflected a strong finish to close out 2019. Before that, I want to give you a high level view on our results.Of course, our results continue to reflect the strength of the U.S. consumer in the biggest economy in the world. We continue to be well-positioned here in driving market share gains with great service and capabilities. This quarter is also one of transition from a period of rising rates in 2018 to one that is moving through the impact of the declining rates in the second half of 2019.How do you run a company, a big bank, and deal with lower rates? Well, we drive what we can control with our sempiternal commitment to responsible growth. We drive more loans, more deposits, more assets under management, and driving growth for the right pricing and at the right risks.We also have to manage our cost base carefully, while making the required investments, and we have to take advantage of a strong balance sheet to provide good capital return to our shareholders.At Bank of America, we checked the box on all of these in the quarter. We grew average loans by 6% in our lines of businesses. We grew the deposits by 5% with very disciplined deposit pricing. Our expenses were relatively flat again while we increased investments across our whole company.And in doing that, we earned $7 billion after tax this quarter with a return on tangible common equity of 15.4%. And due to our strong balance sheet, we returned $9.1 billion of capital to our common shareholders this quarter. At the same time, we deployed capital to support growth for our…

Thanks Brian. Good morning, everyone. You can see the summary of our Q4 results on Slide 6, and I'm going to begin on Slide 7.In the fourth quarter, we reported $7 billion in net income and $0.74 in EPS. EPS increased 6% from Q4 2018 reflecting modestly lower earnings more than offset by a 9% reduction in average diluted shares. Returns remained strong in Q4, but the return on assets of 113 basis points and a return on tangible common equity of 15%, well above the company's cost of capital. Our results were driven by our team's focus and solid progress on managing what we can control and gaining market share in an economy that grew at a low single-digit pace.In Q4, we again stayed focused on what we can control. Client activity remained solid, allowing the benefits of loan and deposit growth to aid in offsetting the negative impact of lower short-term rates over the past three quarters. We also continue to see healthy consumer trends in spending and asset quality. Lastly, we experienced a nice rebound in FICC trading from a more negative environment a year ago.So having set the stage, let's turn to the detail starting with the balance sheet on Slide 8. Overall compared to the end of Q3, the balance sheet was relatively flat at $2.4 trillion as growth of both loans and securities was modestly offset by lower Global Market assets. Deposits grew $42 billion, and were first deployed to fund $11 billion of loan growth, with most of the excess funding the growth in debt securities. Liquidity improved, as the average Global Liquidity Sources benefited from deposit growth.Shareholders' equity declined $4 billion, driven mostly by the return of excess capital. In Q4, we returned $9.1 billion in capital through net share repurchases and…

[Operator Instructions] We'll take our first question today from John McDonald with Autonomous Research. Please go ahead.

Hi, good morning. Paul, wanted to ask on the NII outlook. When you put together your commentary about the quarters, year-over-year, does that imply flat to down a little bit maybe on the NII in terms of your outlook against flat rates?

Yes. Year-over-year modestly, I would say

Down modestly?

Yes.

Okay. And then how are you feeling – I guess if we think about positive operating leverage for this year, you mentioned the stability in expenses while you continue to invest. How are you feeling on fee income growth and when you wrap it all together, the prospects for positive operating leverage into 2020?

So obviously, we talked about in the prepared remarks the transition that we're going through in the rate environment. I would just remind everybody we had 18 consecutive quarters of positive operating leverage. And admittedly, it's a little bit more difficult to achieve operating leverage given the decline in interest rates last year, and the associated impact on NII.As I said though, assuming a more stable rate environment, we would expect NII to return to growth in the second half of 2020 driven by loan and deposit growth. And remember NII is not directly linked to expenses the way other revenue is in, for example, investment banking, sales and trading, wealth management. We run and invest in the company for the long-term sustainability and for growth, and by the way these investments over many years lay the foundation for operating leverage.So having said all that, we're not blind to changes in the operating environment, but we are also not managing rigidly to quarterly financial metrics. We are focused on the things that we can control like driving like client activity, deposits, loans, investments, and efficiency improvements through our focus on operational excellence. So if things change, we'll adjust, but currently we feel our client activity and market share gains continue to support our investment plans in the near term.

Okay. Fair enough. Thank you.

We'll take our next question from Glenn Schorr with Evercore. Please go ahead.

Thank you. I have a follow-up question on your comments on the promo balances in cards and your pullback there. And I'm curious if that is a function of pricing getting tougher there, terms getting tougher there, or is that your just responsible thought process 11 years into a recovery?

I think it's more a reflection of responsible growth, and how we run, how we're focused on the customer, and how we're focused on total revenue, and not necessarily NII or fees. When you look at card balances, they certainly reflect a couple of items that we talked about, and it certainly reflects our focus more on profitability. First, we've been reevaluating some relationship prospects who are just looking to gain rewards or take a short-term – take short-term advantage of promo balances. So clearly that's affected balances a little bit.Also with less promo balances, the percentage of the portfolio paying off each month has risen a bit. I think what you see though, if you look at our risk-adjusted margin, that's up 25 basis points year-over-year to 8.7% if you adjust out the 4Q gains we had last year, and we continue to have more than million cards each month again with a focus on profitability of new accounts. So I think that line is going to start to grow from here.

I think, Glenn, just to be – with Paul's lost point – production of new customers taking the card product from us and the usage continues to grow, so we had 1 million plus new cardholders. We still have a lot of room to go from a two-thirds type of penetration of customer base and then how many people use it as a primary card. So we really focus a lot on that, and while we're focused on that, generating new customers who are surfing is not exactly the strategy. So it's a mix of profitability, but also really sticking to that core holistic customer strategy.

Appreciate that. Just one more maybe on GWIM. So market's up a lot and more people going fee-based offset lower rates, and you talked about that. So we've been hanging in this 28% to 30% range, which is great. But the question I have is can – as scale continues to build in all the investments that you've made there, can we see margins start to tick up a little bit above there? I know we are constrained by the payouts and things like that. Just curious, the bigger picture over the next couple of years.

Yes. So think about it in two dimensions. One, inside the Wealth Management business, is a very large bank. So if rates stable here from here, then the loan-to-deposit growth, which have been strong will then pick up that, and that's very leveraged to the margin – contribute to the margin. That's one point. So you are going through the same twist in that business and with the 75 basis point drop in rates in this very late part of last few months of 2019. So that's no different than many other situations, so that will mitigate and go forward.If you think about the other side of the question, which is sort of, can you get it higher, you've got the basic thing, the way that the compensation system runs from a way of presentation is you've got 50% of revenue. Round numbers goes into the compensation. So you're basically making $0.30 on the other $0.50 in profit margin, which is a pretty strong margin. So it has all the opportunities along the dimensions, which is a [indiscernible] set of things that we've got to go after, which is – if you think about the Merrill Edge assets growing in the MEGI portfolio, which is over $4 billion and growing 30%, 50% a year type of things.As they grow, and the products are available to Andy's to whole team of FAs, that provides additional efficiency. And then you think about the digitization of that customer base in both private bank and wealth in Merrill Lynch, which is the least penetrated of all the customer base in terms of digital statements and things like that, we can drive the margins that way. Then the physical plant, we continue to increase the density of the physical plant with other physical plant in various cities and towns, consolidating offices and getting people in a common space that saves money.So there is a lot of way we can work on digitization, physical plant efficiency, adding more financial advisors to have more scale in contributing the overhead which then generates more margin. So you're working – it's pretty good to make $0.60 – 60% of your margin after comp, and we're not changing the comp system, but there's a lot of things forward, and I think we can continue to improve them.It would appear to be easier or if, in fact, rates stay stable and drive loan growth, which is what our projection is, and if rates start rising again, we will look like heroes in terms of margin, but we've been able to sustain it even in a falling rate environment.

Thank you.

Our next question comes from Steven Chubak with Wolfe Research. Please go ahead.

Hey, good morning. So I wanted to ask a follow-up on fee income. So the NII resiliency has been quite impressive. Loan deposit account growth, as you noted, Paul and Brian, continues to track very well. The core fee growth was a bit softer this past year, declined modestly despite some of the strong market tailwinds. I know, Brian in the past you haven't given explicit guidance on core fee growth expectations, but you did note that it should traject in line with GDP. And just given some of the moderating U.S. and global GDP growth expectations you cited earlier, just trying to think about how we should be modeling or forecasting fee income expectations in the coming years?

I think each category – if you think about the broad categories where most of them come through, the strategy in the consumer business has been to reduce reliance over the last decade plus on penalty fees and things like that, we kind of hit status quo on that. In other words, we brought it down significantly from Reg E and all that stuff is kind of done, the interchange in the consumer fee areas, the card income stuff that's through the system at this point. The rewards impact that, but you get the benefit back in a preferred rewards system through the ability to have that stable margin.So I think we should see those fees, which have gotten to a point where they ought to grow marginally. But remember, that part of the strategy is to invest in our client base, loyalty to our company and our products. And so they’ll be modest because of the NII growth. Think about 8% growth in checking balances year-over-year in consumer. That is helped driven by people consolidating a relationship with you, which you pay back to the reward system through the card usage. So it's always going to be that.When you go to wealth management, you tell me what the market is going to do and you'll see that it will be heavily influenced there that should grow faster. As you know, trading as Paul said, isn't as volatile as people want it to – discuss it, but on the other hand, there's compression on the fee side. So each line items has a different element. Treasury services revenue is up, I think, at the high-single digits. But the fee line piece of it's flattish, that's because people are paying us through balances.So I think that Steven, a guy like me who has been around banks for a long time, the differentiation between types of revenue fee versus spread is becoming harder as the business models have morphed them together in just terms of total revenue. So we ought to go revenue slightly faster than the economy and have the expenses grow below that by couple hundred basis points, and we've been able to do that, and as this twist in rates ends this quarter, you'll see us get back on track, as we move through 2020.

Thanks for that color, Brian. And maybe just a follow-up for you Paul. You've been retaining a substantial percentage of mortgage loans on balance sheet in lieu of selling those loans, you're deploying that excess liquidity into MBS. And I'm just wondering, as we prepare for CECL, does that inform your appetite or your willingness to continue down the same path, and just separately, just given the strength of your credit position and a relatively clean balance sheet, was sort of hoping you guys could be CECL pioneers, and maybe the first bank to provide some more concrete guidance, in terms of day two provision impacts or expectations?

Well in your first point we are originating mortgages and putting 94% of them, I think this quarter on the balance sheet. That will continue to trend that we've been doing for many quarters now. We'll see how that develops over the long-term. But for now, that's our plan.Clearly, we consider the effect on liquidity, we consider the effect on capital balancing, returning capital with growing the balance sheet. Those loans don't really have a high amount of CECL impact. So but I'm not saying we're going to never change what we're doing there. In terms of CECL, I think we've given you the guidance that we're comfortable with.We would expect provision to be a little higher than net charge-offs in 2020, and due to CECL, we've been running – when you back everything out, we've been running net charge-offs at approximately $1 billion a quarter. We don't see that changing much in the future, and when you just factor CECL into that, it means that our provision's going to have to be a little bit higher than net charge-offs.

You always have to remember that the – not on the last part, but on the first part. At the end of day, the reason why we have securities and mortgage-backed securities and treasuries is simple. When you're doing $60 billion in deposit growth and your loan balances grew by $10 billion or $20 billion, the other half has to go to be invested somewhere and you're raising this money in all-in costs in the 40 basis points of deposit pricing across the whole board, and a lot of it's coming in non-interest.You're not going to turn down that good customer activity and we don't take credit risk in that part of the portfolio, because we take enough credit risk around the rest of the company. And so the strategy on the investment side, mortgage backs had put with treasuries and think that as just excess liquidity on mortgages.Paul told you that, we've been putting on the balance sheet, because they're better yielding than mortgage-backed securities and frankly, our credit risk is better than the mortgage-backed securities' availability. So why would we pay for somebody else for taking that risk.

Fair enough. And I appreciate you guys taking the day two plunge as well.

We'll take our next question from Betsy Graseck with Morgan Stanley. Please go ahead.

Hi, good morning.

Good morning, Betsy.

Brian, 10 years of excellent management here driving the bus on improving operating leverage, especially over the past three, four years? Can you give us a sense, as to how you see the rate of change go from here, because we've had obviously significant improvement in the consumer side, and the question I get from people is, is it over and by the way, how do you generate positive operating leverage in global banks and global markets, given the SKU to producers, and is there that much opportunity in the back office side? So maybe if you could hit on those that would be helpful. Thanks.

So let me paraphrase a little bit. But it's a delectation to be able to run this company with all the power and have the honor doing it for decades. So we just passed a decade with the team, and they've done a great job. But what you point out, as they've done a great job of putting the position.So if you look at the operating efficiency of the Consumer business or the Wealth Management business or the Banking business, which we show separately from the markets business, so you can see, these are 38%, 40% efficiency ratios here, 45% here. It's how can you improve.And Betsey what I'd say is, we just don't know how far this digitization of the actual processes and work goes in the company, and we just keep coming up. We had 6,000 simplified improved ideas over the last few years we've implemented. They continue to produce great savings. And so, we just don't see an end of that. And so leave aside that the economy is growing at a sub-2% level predicted at 20%, we decided that the rate environment is low, we've been able to push forward the activities that can produce more efficiency, and we think that there is a lot ahead of us.And so we'd say nice start to our team, saying thanks for all the hard work you've done. But also, we're only getting started here, and if you start thinking about – we just passed, the number of checking accounts that we had in 2007 in this company this quarter.And so, we ran off all the non-primary accounts, but on our primary accounts, the average balance of $7,000. If you think about the cost of deposits and consumer, I think it went down by 4 basis points year-over-year something…

Okay. Good forward look there, Paul, on the longer-term. Paul, maybe I could just be a little bit nearer term with a question for you. I think you mentioned a couple of times that NII expectation for 2020 being down modestly from 2019 for your full-year. But then you talked a little bit about a better second half than first half, and maybe you could give us a little bit more detail on the granularity, why you expect that to be the case? I assume it's with the forward curve and flattish rates. But I know, you some color earlier on, but maybe give a little sense more of, like what's behind that conviction level that year-on-year you get some improvement in the back half?

I think it's about loan and deposit growth and its about deposit pricing discipline. On deposit pricing, we planned some modest reductions in deposit pricing, assuming no further cuts, as we continue to bring deposit pricing to an appropriate level, given the three cuts that we've experienced.If the forward curve materializes and we get another short end cut, we expect deposit rate paid for the industry, and for us to decline even further, as higher pass-through products in Wealth Management Global Banking react relatively quickly to any rate cut. So it's about the confidence we have and how we price our products, and the confidence we have in growing deposits and growing loans.The guidance is more about – we have an one less day in Q1 we've got to deal with. We have the second quarter. Normal activity that we see in equities, which again, that's a plus, that just shows up in non-interest income instead of interest income. And by the time you get to the third quarter, we would expect, assuming the current sort of economic environment, we would expect our loan and deposit growth, the lack of that seasonality, the deposit pricing to have an effect and we'll start growing again.

I'd just add to that, your question and John's question go the same direction, which is – you've got this quarter and the first couple of quarters because of the dynamics, Paul just described that. You have to push through, but what we see is getting back on, as we move into the middle of 2020. We're back on that basic operating leverage through NII stability to growth and expense flatness. So but it just takes a lot to get underneath 75 basis point rate cut in four months.

Okay, that's helpful. Thank you.

Our next question comes from Jim Mitchell with Buckingham Research. Please go ahead.

Hey, good morning guys. Maybe I could just follow-up on that last question in a different way. Is your expectation that the net interest margin should start to stabilize in the back half of the year? Is that what gives you the confidence in the NII growth, or is it really – do we still should expect maybe a grind down of NIMs, but the balance sheet growth starts to takeover?How do we think about when, in the current rate environment, the sort of net interest margin, assuming mix is unchanged, obviously it's a big assumption, but do we assume that NIM starts to stabilize in the second half of this year?

I think that's what – you've correctly summarized succinctly what we said.

Okay. So maybe I get another question. So just on the deposit growth...

We will award you a bonus question for that one.

Just on the deposit growth, the industry, we've seen some acceleration in 4Q. We have lower short-term rates. We have the Fed balance sheet expansion, there tends to be some seasonality in 4Q. How do we – do you think this acceleration can continue into the – at least the first half of this year? I guess how do you think about the deposit growth, and if there – if we could see continued sort of above mid single-digit growth?

I think if you look at Page 9, when you have rate movement due to the types of things that are – reestablish the reserve levels by the Federal Reserve, et cetera, et cetera that's going to affect the lower – our markets business in the lower right hand, and banking, stuff like that.But it really doesn't have that much of an impact in the Wealth Management and the Consumer Banking area, and that's really what drives the value. So for the $700 billion odd dollars in the consumer business, which grew checking at 8% year-over-year, and that's fairly consistent with what they've been doing.Remember, that its 11 basis point all-in, including the interest bearing part of, which also grew year-over-year. So that $700 million a year in total interest expense for $700 million of deposits. That's what drives the economics, and then Wealth Management Global Banking, also but – and so that isn't really affected by all the sort of broad macroeconomic variables.That's just us doing a great job with consumers. The great customer satisfaction, great product capabilities, high touch, high tech and then generating more and more checking accounts, where the average balance per checking account is $7,000 plus and growing, and that's what's going to drive it.So I'd say you're absolutely right. There can be momentary things that would enhance deposit growth in some of the pure institutional businesses. But it doesn't make much difference to the general U.S. consumer.

Okay. That's helpful. Thanks.

Our next question comes from Mike Mayo with Wells Fargo. Please go ahead.

Hi.

Hi Mike.

The simple question is what is the dollar amount of tech spending and investment spending in 2019? And how does that compare to last year, and this coming one. And the backdrop to that question is, the efficient – you've gotten a lot of questions on efficiency on this call, and it was worse in the fourth quarter, and your 58% efficiency for the year is not where some other banks are targeting, like 55%.Now, we know that you're spending a lot of money. We can see Slide 3. You've pointed out that the spending is paying off. So if you could just put a wrapper around the spending and put a number to it, then we, as analysts can figure out, okay, a more core efficiency level, if you would.

So one of the things that just in our efficiency ratio compared to other people or 58% for the year, but remember that we have a lot more wealth management at 30% – or 28%, 29% profit, pre-tax margin i.e. 71% efficiency ratio than anybody else does. That changes that answer relative to some of our core banking peers.It's just a bigger, bigger number, because we have the biggest business for $3 trillion in assets, making $1 billion a quarter after tax at the best margins, but it's just the sheer math. So when you look at it by business unit by business unit, our efficiency is the tops in the class, just our mix is different. So I'll let you figure that out, Mike.But back to your tech spend, we spent $3.2 billion or $3 billion in 2018, the same in 2019, we have it scheduled to be the same this year. It's just – this constant level of spending. Now its different products obviously every year, that's pure technology initiatives. You put that on top of the backbone and everything, and the number of people could talk about be higher.But that is just to drive new products and capabilities and through the system, and we aren't changing that, because that's what's driving that ability to keep expenses flat. If you look across the chart, Paul showed you when you see 2017, 2018 and 2019 in the expenses per quarter running $13.1 billion, $13.3 billion et cetera, think about how much we've done in there, in terms of hundreds of new branches. 1,300 or so, complete redos, new buildings for our teammates in Wealth Management, et cetera, et cetera. And so that – those are tremendous investment levels that are all in the run rate, while we're chopping away, and that's coming from the operational excellence.So we're spending that much on technology, but the question isn't spend, Mike, it's are you getting the usage out of it, and that's where you got to look at things like the usage of Zelle, which we're going to 80%, 90% a year, the use of the cash per mobile which grew over 100% a year that usage what I talked about in checks written coming down.Even I talked about, that we have 4,300 branches, but in there, we've actually opened up to new markets over the last couple of years. 15 branches to 20 branches et cetera and continue to do that. So the efficiency, in the rest of markets funds that, even though your numbers of branches are relatively flattish. So we're coming down slightly. So it's a complex set of things, but hopefully that gives you some color.

Yes. I guess I'll try one more time, since it's not in your tech number, like you are expanding to new markets, you are opening new branches, you are hiring new associates, how much does this investing increase the growth rate of expenses?

It's $3.3 billion. So it's in the run rate. And last year – and it will be the like amount this year. So could you take half of that out? You could, it'd just be not the right thing to do for the Company, but it's paid for by the other – the cost takeout that supports or the mix in how the customer uses, which provides efficiencies, so more than 50% of our auto loans are originated digitally today.I think we did something like $4 billion or $5 billion of mortgage originations. So its – we're reaping the benefits of it, Mike, three years hence, is the investments we made in 2017, as you go into 2020 are produced – for example digital auto did not exist, and now you are getting 58%. Just think how much more efficient that processes is. Digital Mortgage...

Let me just try one more. And then one more time – like this tax spend to run the bank, change the bank, I assume you're spending more to change the bank today versus three or four years ago, and you – that mix goes more toward change the bank. What are the figures and where do you think they are headed?

Yes. The $3 billion plus, obviously with Brexit behind us with – by the regulatory environment rules behind us in terms of implementing the CCAR and the capital rules and then lot of modeling, and you're still spending money improving that data to make those models work. That's gone.The only thing that works against that is – so yes, if you thought about how much is going to sort of new business initiatives, the mobile banking, feature functionality, it's higher in 2020 than it was in 2019 than it was in 2018, largely around this issue that you are running off some of these long-term projects, which is good.

All right, thank you.

Our next question comes from Gerard Cassidy with RBC. Your line is open.

Good morning, Gerard.

Good morning, Brian. How are you? Brian, can you remind us, you touched on – in some of your comments already about the number of checks that were processed five years ago versus today. When you move it from the paper to the digital, can you share – remind us what the cost savings are when you do that, per unit?

So that was kind of checks written by our customers, which is this good point, because that stops the thing before it starts. But it basically, if you look at deposit, which I think is what you're referring to, Gerard, we are now more mobile than we are at the branches and have been for about five quarters, and then the ATMs are still half, the mobile is a little over like 27% or something like that, and branches are the rest. So if you think about that, that is $5 in physical movement, $0.50 and $0.05. $0.50 at the ATM and $0.05 round numbers.

Great. And then moving on with credit, can you guys give us any color – I mean, credit is strong across the board for almost all the banks, and are you guys keeping an eye on any particular sectors within your portfolio? And then as part of that question, we sensed from some of your peers that have reported that the corporates or commercial customers seem to be maybe a little more optimistic in the fourth quarter because of some of these trade issues. If you could comment on that, if you're seeing that in your customer base as well?

I'll take the second half and I’ll let Paul. Yes, you are seeing with the – leave aside what happens day-to-day, but generally companies are seeing the resolutions emerge for some of these issues. That makes – a little bit more confidence in terms of our activities, we'll hopefully see that in the first half of this year, if nothing goes backwards. The market being up, obviously gives people a good feeling. But one of the thing you have to think about is, in the first part of 2019, Gerard, you had your inventory decline recession, as people would call it. That went through the system. So you've entered a new place, right.So you come down, you hit a bottom, and then you start to grow out from there. We're kind of in that transition phase. So I think the combination of the external environment getting the deal today with China, obviously, is a resolution of one of the issues that was over people's minds. There are other USMCA. Everybody says it's going to be passed. I think that capacity would be very helpful to people. The fact that people have done what they needed to do, it was during the year 2019 to change supply chains and think about it.That's disruptive without endpoint value to the customer, so to speak, and it's like us with Brexit, we spent $400 million plus money. The customers didn't get better services out of it. We just had to create more entities and get them up and running. Those things are sort of through the system. So I think that what you're feeling is a little bit of a relief on the other side of that work, which was being done, and worry, which is being done without a lot of activity. And so even capital expenditures, which grew at a much slower rate off the high in 2018, you're starting – our experts say will stabilize and kind of come out from there.And on credit, Paul?

Sure. So on credit, I'd start by saying that we are always running through the portfolio, routinely analyzing various sectors, bringing it to senior management, discussing it. So we've got a real great process for always looking for some risks that are on the horizon. As you know, we've been running the company with strong underwriting standards for years now. You see that in our CCAR results. So I mean, I hesitate to sort of pick one sector or another because we noticed stuff out in the marketplace, but it may not affect us directly given how we've run the company for years now.But if you're looking for some sectors that we're paying attention to, not that we think we're overly concerned about them given how we've managed the company. But we're certainly paying attention to leverage loan market, leverage lending. We're certainly paying attention to energy with respect to natural gas prices. We are certainly looking at retail with respect to enclosed malls. We've got our eye on – always have our eye on spots around the world that maybe experiencing a little disruption. So that's how I'd answer that question.

Very good. Thank you.

We'll now go to Ken Usdin with Jefferies. Please go ahead.

Hey, thanks. Good morning. Just a question on the balance sheet and capital. So you're at 11.2% CET1, your stated target has been around 10%. We're still waiting for the SCB finalization. Two questions, so one, any anticipated changes to where you think your capital goal might be, depending on what we get? And then secondly, have you gotten a point where you would might rethink the mix between your dividend payout, which is lower than peers and the buyback in terms of the mix? Thanks.

I mean I'll start on I guess buffers and you can – Brian, you might want to pick up on the dividends or buybacks. But look today, as you point out, we have a meaningful cushion. So it's really not an issue for us right now. In terms of what our ultimate buffer is going to be, when we don't have as much of a cushion, we haven't really talked about that publicly, because we don't think it makes sense today to prejudge what a buffer needs to be, given the size of the current question and given – as you mentioned, regulations, SCB other things are still changing, and lots of things can affect that buffer, when we get there. But I would just emphasize, we have a sizable buffer right now.

In terms of dividend versus buyback. Yes, we will keep increasing the dividend as we move up to sort of the 30% level and earnings payout, we've been clear about that. And then the rest will go into reducing the share count. And if you look at the page we showed you earlier, part of the issue was – the share count was a lot higher than people expected sort of in the 2009 timeframe, after the Merrill transaction.So we're pushing that back down, and we think that's a good use of our capital. We don't need the capital to fund the loan growth and deposit growth, you're seeing us able to do that through continuing to fine-tune the balance sheet. And so expect us to move the dividend up, consistent with what we've done before, assuming CCAR approval and all that good stuff.But the idea is we will keep it at a level that allows us to use the share buyback, to help drive the EPS growth, and you saw the benefits of that year-over-year, in an environment where, the rate movements made earnings flatten in the second half of the year. What you saw was, EPS year-over-year was up double-digits, because we can retire the shares. And so we think that's the best thing to do for the shareholders.

Understood. Thank you, guys.

We'll take our next question from Matt O'Connor with Deutsche Bank. Please go ahead.

Hi guys. I was just wondering if you could talk about the pace of loan growth that you're expecting for 2020. Maybe both kind of within the business lines, and then net from the drive for run-off? And then maybe the drivers of growth and if that's changing at all, versus what it has been the last, kind of 6 months to 12 months, obviously commercial for the industry has slowed. Maybe that's temporary. So just talk about the pace and the drivers of loan growth this year? Thanks.

Sure. So look, growth in our Business segments should continue to be kind of mid-single-digits. As you know, we grew 6% this quarter. Both consumer and GWIM grew at 7%, driven by increased residential mortgage activity, Global Banking grew 6% year-over-year and that was driven by large corporates, middle market companies, leasing activity and solid growth in international regions. So pretty broad-based.We anticipate solid growth in consumer loans, assuming the current economic environment, as well as the sort of pull-through of applications through – mortgage application through the pipeline. With respect to card, we've already talked a little bit about that. We expect that we can start growing card over time here. With respect to residential mortgages, originations were strong this quarter. They were up significantly.So that's going to translate to solid Q1 growth. However, you have to remember that that's going be partially offset by continued run-off of the non-core portfolio. We expect our growth to be up modestly year-over-year. We expect solid growth in small business, and remember, in all these categories that I'm talking about, we remain focused on prime and super-prime and on commercial loans, our outlook remains favorable, again growth year-over-year should be in sort of mid single-digits. So that's how I'd run through it.

Okay. And then netting out the kind of mid single-digit growth in the Business segments with the run-off, do you think you kind of stay in the space of 4% growth that you saw this quarter, as some of the macro holes?

Yes.

Yes. If you look at the run-off chart on the loan page there, in the upper right hand corner, you see that – we basically have gotten really to the point where that's now natural run off, will – there won't be any sales of major impacts for purposes that we were doing before to – we continue to move loans, on which we weren't getting any income on, because of their status in terms of restructuring and things like that out and cleaning the portfolio up. So that's just smaller, so I think that helps the overall nominal growth for the company.

It's going to be $1.5 billion, $2 billion a quarter.

Okay. So it might be $1.5 billion or $2 billion of loan sales, but nothing major that's what you are saying?

No, no, not loan sales.

That run-off…

The run-off is running at about $1.5 billion, $2 billion per quarter.

Of just natural paydowns in those mortgages and home equities.

Got it. Okay, that's helpful. Thank you.

We'll take our last question today from Saul Martinez with UBS. Please go ahead. Your line is open.

Hey, good morning guys. So forgive me for beating a dead horse on the efficiency ratio question, but I guess I'll ask it in a slightly different way. I mean, you guys are out about 57%, 58% even with GWIM being a big part of the overall mix, revenue mix. But if we assume that revenue growth gets back to say, GDP growth over time.Is there any reason why you couldn't reduce your efficiency ratio below, say the mid 50s percent range into the low 50s, given some of the opportunities you talked about Brian, and just secular trends towards digitization, electronification of payments, which obviously reduce to this unit costs pretty materially. It doesn't seem like there is an obvious reason why you couldn't continue to drive that down pretty materially even from here.

That's what we're doing. If we keep expenses flat and the basis of the premise was if the revenue grows, PDP plus, that's 200 basis points of operating leverage and that will keep producing the efficiency ratio by definition. So you're stating what our job is, and we've been able to do it and we'll continue to.

Okay. So there is no obvious – is there any point at which, or any obvious point at which it becomes just much more difficult or is there is – the glide path from here is just, it seems like there is nothing really to prevent you from doing that for a while?

We'll let you know when we think we can't do it anymore. But we don't see it.

Okay, got it. All right, thanks a lot.

We have no further questions at this time. It is now my pleasure to turn the call back to Brian Moynihan for any closing remarks.

Well thank you all of you for your attention on the call. We finished another strong year in 2019 for the team, and they did a great job growing the earnings, doing it the right way, making the investments across the franchise.As we say, it's a nice start. We'll continue to focus on responsible growth. We've got a lot of room to run in this company. Every business had good client activity. The loan, deposit, underlying customer growth at the size and scale this institution, tremendous work by our teammates, and all that helped us provide stable performance, with a rate cut that came through relatively late in the year. So we feel good about that, and we feel good about working through the other side of it, as Paul described earlier.We are focused on the costs, as many of you asked about. But we're focused on continuing to develop and implement products and services, which meet the markets' needs and continue to help us grow our market share across every business at the rate we're doing it, which we think is an opportunity, which is ours to continue to take. Thank you.

This does conclude today's program. Thank you for your participation. You may disconnect at anytime.