While everyone on Wall Street is busy dissecting Bank of America's (BAC) Q1 2024 earnings call, obsessing over net interest income and the ever-elusive efficiency ratio, they're missing something crucial. It's not a fancy new AI system or a daring foray into private credit. It's much simpler, and surprisingly, it's been hiding in plain sight this whole time: the humble checking account.

Yes, that's right. Bank of America's relentless focus on acquiring and deepening core checking relationships is the quiet engine driving their financial success. While analysts pore over complex models, BAC is quietly building a fortress of customer loyalty and a steady stream of low-cost funding, one checking account at a time.

The evidence is undeniable. Brian Moynihan, BAC's CEO, peppers his opening remarks with eye-opening statistics (ref 1). He proudly proclaims 21 straight quarters of net new checking account additions, a remarkable feat in a fluctuating economic landscape. And these aren't just any checking accounts. A staggering 92% of them are primary household accounts, signifying deep customer trust and engagement.

Here's where things get really interesting. Moynihan reveals that new checking accounts, on average, bring in around $4,000 in initial deposits. But don't let that modest figure fool you. These accounts rapidly deepen, doubling in size within a year. In other words, BAC isn't just acquiring customers; they're nurturing relationships that generate increasingly valuable, low-cost funding.

Think about it: that's an implied return of 100% in just one year! Where else in this volatile market can you find such a consistent, predictable return? Certainly not in the fluctuating world of investment banking fees or the interest rate-sensitive world of global markets.

Now, let's delve into the real magic of BAC's checking account strategy. These accounts are sticky. Moynihan highlights that 68% of BAC's deposit balances belong to customers who have been with the bank for over a decade (ref 1). That's customer loyalty that most companies can only dream of.

Here's another intriguing data point. A significant 60% of checking account customers actively use their debit cards, averaging an impressive 400 transactions per year (ref 1). This signals deep engagement, a crucial factor in driving the value of these relationships.

But the benefits don't stop there. These core checking accounts act as a gateway to a wider ecosystem of financial products. Moynihan reveals that new checking account customers frequently open savings accounts, with 25% doing so within months (ref 1). They also open credit card accounts, with a remarkable track record of doubling their card balances within a year (ref 1).

This, in a nutshell, is the brilliance of Bank of America's strategy. They're not chasing after the fleeting whims of the market; they're building a solid foundation of customer relationships, one checking account at a time. It's a strategy that may not grab headlines, but it's one that consistently delivers exceptional value and positions BAC for long-term success.

Hypotheses:

Checking account growth is a strong predictor of future deposit growth and net interest income (NII).

The deepening of checking accounts contributes significantly to the stabilization of BAC's deposit base despite quantitative tightening and interest rate volatility.

NII Trajectory - Bank of America (Q4 2023 - Q2 2024)

The following chart shows the projected NII trend as discussed by CFO Alastair Borthwick during the Q4 2023 and Q1 2024 earnings calls.

"Key Numbers: 21: Straight quarters of net new checking account additions. (ref 1) 92%: Of consumer checking accounts are primary household accounts. (ref 1) 68%: Of BAC's deposit balances belong to customers with over 10 years of tenure. (ref 1) $4,000: Average initial deposit in new checking accounts, doubling in size within a year, representing a 100% return. (ref 1)"

"Fun Fact: Did you know that Bank of America has over 66 million consumer and small business clients? That's more than the population of the United Kingdom!"