Event: Tuesday, July 14, 2026
Focus: Whether BAC can validate that 1Q’s earnings-power step-up—stronger net interest income (NII), broad loan growth, fee momentum and positive operating leverage—is durable rather than merely a favorable first-quarter mix outcome.
BAC enters 2Q26 earnings with a favorable fundamental backdrop but a less forgiving stock setup. Shares closed at $59.52 on July 13, near a record high, up roughly 27% over the past year and about 12% since the April 14 pre-1Q earnings close. The shares have also modestly outperformed the bank ETF since 1Q earnings. This means investors likely need more than a headline EPS beat: they will want confirmation of the full-year NII outlook, disciplined expenses, stable credit, and continued momentum in capital-markets businesses.
The central question is straightforward:
Can BAC sustain growth in core NII and operating leverage while capturing strong trading/investment-banking activity—without sacrificing deposit pricing discipline or seeing credit normalization accelerate?
My expectation is that the operating setup is favorable. A higher-for-longer rate environment, continuing fixed-rate asset repricing, solid commercial loan demand, a strong deposit franchise, and robust capital-markets activity should support results. The primary risk is not likely to be the quarter itself; it is whether management’s commentary implies that funding competition, a more volatile macro environment, or a tougher credit outlook caps the earnings trajectory from here.
BAC delivered a notably strong 1Q26:
| Metric | 1Q26 | YoY change |
|---|---|---|
| Revenue | $30.3B | +7% |
| Diluted EPS | $1.11 | +25% |
| FTE NII | $15.9B | +9% |
| Operating leverage | 290 bps | — |
| ROTCE | 16.0% | +200 bps |
| Average loans | $1.19T | +9% |
| Average deposits | $2.02T | +3% |
| Provision for credit losses | $1.34B | -10% |
| CET1 ratio | 11.2% | — |
The main positive was that the earnings improvement was broad based: all four operating segments increased revenue year over year. Management also raised its 2026 NII growth outlook to +6% to +8% versus 2025 and reaffirmed its goal of more than 200 bps of operating leverage for the year.
For 2Q, investors will test whether that improved outlook is becoming more credible—not just whether it remains in place.
NII remains the core issue for BAC because its large deposit base and substantial fixed-rate securities/loan book provide meaningful sensitivity to the interest-rate environment.
The bullish outcome is not merely sequential NII growth; it is evidence that growth is coming from core client balances, asset repricing and controlled deposit costs, rather than temporary markets-related balance-sheet effects.
Watch for: - 2Q FTE NII versus 1Q’s $15.9B - Commentary on the pace of securities and loan repricing - Deposit beta and the mix of noninterest-bearing versus interest-bearing balances - Commercial loan utilization and loan growth by business - Any revision to the +6% to +8% full-year NII guide
The risk is that deposit competition becomes more expensive as loan demand strengthens across the industry. The current backdrop appears to include fewer—or no—rate cuts than investors expected earlier in the year, which helps asset yields but can also keep deposit pricing competitive. A stable NII guide accompanied by less constructive commentary on funding costs could disappoint a market that is looking for further upside.
Capital-markets activity should be a material 2Q support. Industry commentary ahead of earnings points to robust trading, healthy institutional activity, stronger lending and an improving underwriting environment. Volatility related to geopolitical developments and interest-rate uncertainty has also supported client hedging and trading activity.
BAC’s 1Q results already showed this momentum: - Sales and trading revenue rose 12% YoY excluding DVA to $6.3B - Equities revenue rose 30% - Total corporate investment-banking fees increased 21% to $1.8B - Management described investment-banking pipelines as building across products
The market will focus on whether BAC can show: - Another strong trading result, especially in FICC and equities; - Investment-banking fee growth that supports a durable capital-markets recovery; - Continued momentum in corporate lending and transaction services; - Evidence that BAC is gaining share, including in middle-market investment banking.
The company’s recent hiring of nine senior regional investment bankers across major U.S. markets reinforces the strategic emphasis on middle-market coverage and fee growth. That is strategically positive, though it is more relevant to medium-term share gains than immediate 2Q earnings.
The comparable is manageable but not trivial: in 2Q25, sales and trading revenue was $5.4B excluding DVA, while total corporate IB fees were $1.4B. Against that base, strong trading and capital-markets activity should support solid year-over-year growth. The issue is that investors increasingly expect it.
BAC’s consumer franchise is a major differentiator, and 1Q data were encouraging: - Combined debit/credit-card spending grew 7% YoY - Consumer deposits returned to growth - Credit-card delinquencies improved year over year for a fourth consecutive quarter - The card charge-off rate was 3.64%, down from 4.05% a year earlier - Consumer net charge-offs fell year over year
For 2Q, BAC’s consumer data will be closely watched for indications of whether higher energy costs, inflation pressure, or a slowing labor market are affecting lower-income households. The most important takeaway would be continued stability in early-stage delinquencies and credit-card losses rather than a large reserve release.
BAC enters the quarter from a position of strength. At the end of 1Q, nonperforming loans were only 0.49% of loans, and commercial criticized utilized exposure had declined to $24.3B. Office CRE has been improving, including no new nonperforming-asset inflows in the office portfolio in 1Q.
Still, the market is likely to press management on private-credit exposure, commercial lending standards, energy-related stress, and the durability of consumer credit. The appropriate expectation is benign-to-normalizing credit, not ever-improving credit. A modest provision increase consistent with loan growth or normal seasonal patterns should not be viewed negatively; a sharp reserve build tied to macro deterioration would be.
The 1Q operating leverage result was excellent: revenue grew 7% while expenses rose 4%, producing 290 bps of positive operating leverage and improving the efficiency ratio to 61%.
The company has several credible cost levers: - Headcount was down approximately 1,070 from year-end through 1Q; - Management continues to use attrition and productivity to control staffing; - Digital adoption is high, with 79% of consumer households digitally active; - AI and automation are increasingly embedded in internal processes and customer-service tools.
The key nuance is that a portion of expense growth is appropriately variable: stronger investment banking, trading and asset-management revenue creates higher incentive and transaction costs. Investors should therefore focus on operating leverage, not expense growth in isolation.
BAC ended 1Q with a 11.2% CET1 ratio and returned $9.3B to shareholders, including $7.2B in buybacks. Management has indicated it aims to operate with roughly a 50-bp management buffer above regulatory minimums over time, subject to final rules and business growth.
The capital story matters because BAC’s earnings growth, share repurchases and potential regulatory relief can reinforce per-share growth. Shares outstanding declined to 7.13 billion at the end of 1Q, down from 7.56 billion a year earlier.
However, investors should not expect a definitive resolution on regulatory capital rules during this report. The more relevant near-term question is whether management remains comfortable deploying capital through buybacks while supporting loan and trading-balance-sheet growth.
| Area | Constructive outcome | Potential disappointment |
|---|---|---|
| NII | Sequential growth and confidence in +6% to +8% FY outlook | Lower guide, softer funding-cost outlook, or weak core balance growth |
| Loans/deposits | Broad commercial growth and controlled deposit costs | Deposit repricing pressure or slowing utilization |
| Markets | Strong trading, especially FICC; continued client activity | Results that fall short of elevated industry expectations |
| Investment banking | Fee growth and upbeat pipeline commentary | Weak conversion of stated pipeline into revenue |
| Credit | Stable card trends, modest/contained provision | Unexpected reserve build or deterioration in consumer/CRE/private-credit commentary |
| Expenses | Positive operating leverage again | Revenue growth absorbed by compensation or investment spending |
| Capital | Continued buybacks and confidence in buffers | More conservative capital posture than expected |
At $59.52, BAC trades at a little over 2x 1Q tangible book value per share of $28.84. That is a meaningful valuation for a large U.S. bank and reflects the market’s growing confidence that BAC can sustain returns near its 16% to 18% medium-term ROTCE objective.
The valuation is supported if: 1. NII grows through the year; 2. fee businesses remain strong; 3. credit stays benign; 4. operating leverage persists; and 5. capital return continues.
But the valuation also makes the shares more sensitive to a “good but not great” print. Given the strong year-to-date move and the record-high level reached earlier in July, guidance and quality of earnings likely matter more than a modest EPS beat.
BAC has one of the more favorable large-bank setups into 2Q26. Its deposit franchise, fixed-rate asset repricing tailwind, improving commercial loan demand, capital-markets scale, expense discipline and capital-return capacity provide a credible path to sustained earnings growth.
The most important confirmation points on July 14 are:
A result that checks those boxes should reinforce the view that BAC’s 1Q performance marked a durable improvement in earnings power. Conversely, the most likely downside scenario is not a credit shock; it is a quarter where solid reported earnings are offset by caution on NII, deposits or expenses after the stock’s strong run.