Bank of America's $4 Billion AI Investment: Transforming Banking with Technology

Bank of America plans to spend $4 billion on AI and other new tech this year

Bank of America is directing $4 billion toward new technologies this year, including enhancements of its artificial intelligence tools for both clients and advisors, chief executive Brian Moynihan said Tuesday. "AI has moved from cost savings ideas to enhancing the quality of our customer interactions," Moynihan said in a call with analysts. He pointed to the bank's AI advisor and client insights tool, which it says has delivered more than six million insights this year so far to financial advisors. Major banks are going all-in on AI, from hiring talent to introducing AI-powered tools and assistants, and adopting hundreds of new use cases across their many businesses -- with more still in development. Bank of America, the second-largest U.S. bank with $3.26 trillion in assets, says it spends $12 billion annually on technology as a whole, directing a quarter of that to a swath of new technology initiatives in 2024. The bank's virtual assistant, Erica, reached 2 billion interactions in April, with bank clients engaging with it approximately two million times per day. The bank ranks 15th in the Evident AI Index, which assesses the AI-preparedness of the biggest banks around the world. That puts it behind competitors including JPMorgan Chase, Wells Fargo, Goldman Sachs, and Citigroup. Bank of America topped Wall Street estimates in the second quarter, sending its stock up on optimistic guidance for the rest of the year. Given its outsize consumer banking business, Bank of America is the most sensitive of all its peers to net interest income (NII). Its NII was $13.7 billion, a 3% decrease from $13.83 billion in the second quarter of 2023, it reported before markets opened Tuesday. But Alastair Borthwick, the bank's chief finance officer, reassured investors during Tuesday's earnings call that the second quarter was an NII "trough." The bank raised its guidance on the metric, which is the key way banks make money, to $14.5 billion for the year, as it expects NII levels to rise for the remainder of the year. Read more: Wells Fargo, Citi, and JPMorgan reported earnings. Here's what you need to know Bank of America stock climbed 3.5% on Tuesday morning. The firm saw $25.4 billion in revenue, up slightly from $25.2 billion during the same quarter last year, the company said Tuesday. That also beat analysts' revenue estimates of $25.22 billion, according to data compiled by FactSet. Net income, however, slipped almost 7% to $6.9 billion from $7.4 billion a year earlier. Despite the fall, profits surpassed Wall Street's projected $6.41 billion.

BofA Manages To Keep Expenses In Check By Going Digital -- Now The Bank Is Using AI To Take It To 'Another Level' - Bank of America (NYSE:BAC)

"What artificial intelligence does is takes that to another level," Moynihan says. Bank of America Corp BAC shares got an earnings lift on Tuesday as the company posted better-than-expected quarterly results. CEO Brian Moynihan pointed to expense management as a big part of the bank's recipe for success and suggested that it will only continue to improve with the help of AI. What Happened: Tuesday on CNBC's "Squawk On The Street," Moynihan suggested the implementation of AI is beginning to show up in the company's performance. "This is not something you can do overnight," Moynihan said. BofA digitized financial services 20 years ago when it began deploying online and mobile banking capabilities. Today, a strong majority of its business is digital and the company continues to lean into the digital transformation with the latest AI technologies, Moynihan explained. Operating expenses on a quarterly basis are still approximately where they were nearly a decade ago, despite all of the growth of BofA and the inflation that has taken hold in recent years, Moynihan said. "That's all through the implementation of digital capabilities," he said. "What artificial intelligence does is take that to another level." Don't Miss: Broadcom Has Over $150B Of AI Silicon Opportunity Over Next 5 Years, Says Analyst The BofA CEO highlighted the company's AI-powered financial assistant called "Erica," which now has more than 19 million users and is completing nearly 175 million interactions each quarter. "Each one of those would have been a text or a phone call or an email and a direct response, and now it can answer the straightforward questions," he said. Moynihan told CNBC that the same technology being used to power the company's natural language processing engine "Erica" can be applied to other areas of the business. "We think there is great hope for AI on taking models that are built for specific purposes, applying them to our data, make sure they're fed right, applying them on our premises so we make sure they are secure with our customers," Moynihan said. "Then we can use them to help us do tasks and take work away that teammates would rather not do and replace it with more work they'd rather do. And that's what we're up to." BofA beat analyst estimates on the top and bottom lines and guided for net interest income growth in the fourth quarter, which helped shares jump to 52-week highs on Tuesday. BAC Price Action: Bank of America shares were up 5.65% at $44.28 at the time of publication Tuesday, according to Benzinga Pro. Read Next: Rate-Sensitive Cyclical Stocks Poised For Rally As Fed Prepares To Cut Rates: 'We're On The Path To Goldilocks,' Says Bank Of America Photo: Shutterstock. Market News and Data brought to you by Benzinga APIs