2Q26 Earnings: Capital Markets Drive Beat, Operating Leverage Steps Higher

Research evidence excerpt

2Q26 Earnings: Capital Markets Drive Beat, Operating Leverage Steps Higher

21,945.1

supported by loan growth and balance sheet optimization. Importantly, management noted that *Adj*Rev.EPS(MM)

fixed-rate asset repricing benefits are expected to contribute more meaningfully in 2H26 than in

1H26. Credit trends remained favorable, with NCOs of 46 bp outperforming both our and consensus

estimates of 49 bp. Consumer deposit trends remained stable, with average consumer banking

deposits increasing 1% YoY to $957B. The quarter also marked another step higher in profitability,

with BAC generating 17.0% ROTCE (vs. our estimate of 16.1%) and 640 bp of POL, demonstrating

the franchise's earnings power as revenue growth continued to outpace expenses.

NII growth guidance for FY26 was reiterated at the upper end of the 6-8% range and operating

leverage guidance was raised to 300-400 bp from the prior guide of >200 bp. The NII

outlook reflects continued benefits from fixed-rate asset repricing, which management expects

to contribute more meaningfully in 2H26 than in 1H26, alongside a more favorable near-term

rate backdrop and continued moderate loan and deposit growth. Management also reiterated its

expectation for an effective tax rate of 21.5% for FY26.

Estimate changes and recommendation. We're raising our 2026/2027 core EPS estimates to

$4.60/$5.20 from $4.50/$5.10, reflecting a stronger NII outlook and expanding operating leverage

expectations. We maintain our BUY rating supported by NII-driven earnings growth, improving

profitability, and expanding investment banking and sales & trading capabilities.

David Chiaverini, CFA * | Equity Analyst

+1 (212) 778-8554 | dchiaverini@jefferies.com

Brian Violino, CFA * | Equity Analyst

+1 (212) 444-4139 | bviolino@jefferies.com