Bank of America Corporation (BAC Quick QuoteBAC - Free Report) outlined expectations for sustained net interest income (NII) growth through 2027 during its third-quarter 2026 earnings call, supported by loan expansion, deposit growth and fixed-rate asset repricing.

Management emphasized resilient consumer activity and improving credit quality while addressing weaker trading revenues, regulatory settlement costs and expense discipline. The discussion highlighted the contrasting trends across the bank's diversified businesses.

BAC Raises Its 2027 NII Growth Expectations

Chief financial officer Alastair Borthwick projected NII growth of at least 8% for 2027, exceeding the original medium-term target of 5-7%. Management maintained its approximately 8% growth expectation for 2026.

The outlook assumes three 25-basis-point interest rate increases through June 2027. Borthwick emphasized that underlying loan and deposit growth, rather than rate increases alone, would drive improvement.

NII reached $16.6 billion on a fully taxable-equivalent basis, up 8% year over year. Net interest yield improved 15 basis points to 2.16%, approaching management's 2.3% medium-term objective.

BofA Sees Broad-Based Lending and Deposit Growth

Borthwick highlighted continued commercial lending expansion, with average commercial loans rising 8% year over year. Total ending loans reached $1.25 trillion, marking 10 consecutive quarters of growth.

Deposits exceeded $2 trillion, supported by relationship-based balances and noninterest-bearing account growth. Management expects modest deposit expansion to continue despite anticipated higher interest rates.

During the analyst discussion, a Jefferies analyst questioned the drivers behind the stronger NII outlook. Borthwick reiterated that lending demand, deposit trends and asset repricing collectively underpin management's expectations.

BAC Faces Pressure in Fixed-Income Trading

Global Markets encountered weaker activity as rising interest rates weighed on fixed-income businesses. FICC revenue, excluding valuation adjustments, declined 17% to approximately $2.5 billion.

Borthwick attributed the weakness primarily to reduced client activity in mortgages, municipals and credit. Equities provided an offset, with revenue increasing 10% to $2.5 billion, excluding valuation adjustments.

During questioning from Seaport Research Partners, Borthwick explained that the 85-basis-point increase in rates during the quarter affected client activity. He indicated that early fourth-quarter conditions had moderated, although management avoided providing specific trading guidance.

BofA Addresses Regulatory Settlement Concerns

Chief executive officer Brian Moynihan addressed the $1.2 billion regulatory settlement related to financial crime compliance. The charge reduced reported earnings by 17 cents per share.

Excluding the charge, adjusted EPS was $1.08, below the Zacks Consensus Estimate of $1.11. Revenues of $29.96 billion also missed the $30.62 billion consensus estimate.

Bank of America Corporation Price, Consensus and EPS Surprise

Bank of America Corporation price-consensus-eps-surprise-chart | Bank of America Corporation Quote

Responding to questions from Jefferies, Borthwick clarified that the consent orders impose no asset cap. Management emphasized that remediation resources and ongoing associated costs are already incorporated into the bank's operating expense structure.

BAC Targets Expense Discipline Through AI

Management expects operating leverage to return in the fourth quarter. Borthwick reaffirmed the medium-term operating leverage objective of 200-300 basis points, with more detailed 2027 guidance expected subsequently.

Moynihan highlighted automation and artificial intelligence (AI) as productivity drivers. Headcount declined by approximately 3,500 year over year despite continued investment in client-facing positions.

In response to a Wells Fargo Securities analyst, Moynihan discussed roughly 130 implemented AI projects. He outlined expectations for associated benefits to increase from $250-$300 million this year to approximately $700 million next year.

BofA Maintains Focus on Capital and Credit Quality

Management maintained its emphasis on supporting client growth while distributing excess capital. The bank returned $8.3 billion to shareholders through dividends and repurchases, while its CET1 ratio was 10.9%.

Credit trends remained favorable. The net charge-off ratio improved to 0.44%, while credit card delinquencies continued declining year over year.

Moynihan's closing remarks reinforced the importance of diversified earnings, expanding client relationships and balance-sheet efficiency. Management's priorities remain sustained NII growth, disciplined spending and regulatory remediation.

What BAC's Zacks Rank and Style Scores Indicate

BAC currently carries a Zacks Rank #4 (Sell), reflecting an unfavorable earnings estimate revision outlook. Its Growth Score of B indicates relatively attractive growth characteristics, while its Value Score of C reflects a more moderate valuation profile. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Momentum Score of F signals weak price momentum, while the VGM Score of C indicates mixed combined characteristics. Despite the favorable Growth Score, the Zacks Rank #4 warrants caution under the Zacks ranking framework. The Rank may change as analysts revise earnings estimates following the latest results.