Bank of America Chief Executive Officer Brian Moynihan stated that trading revenue for the third quarter will be "relatively flat" compared to the same period last year, a stark contrast to the revenue surge Wall Street experienced during the first half of the year.
Speaking at a Barclays Plc conference on Monday, Moynihan projected investment banking fees would land between $1.6 billion and $1.8 billion, falling short of the roughly $2 billion analysts had anticipated.
Following these remarks, shares of Bank of America slid nearly 6% in intraday trading, marking the worst performer in the KBW Bank Index for the day. The broader banking sector also felt the pressure, with Goldman Sachs dropping 4.3% and Citigroup falling approximately 4.2%.
Analysts at Vital Knowledge noted that Moynihan appeared "relatively optimistic about the broader macroeconomic environment and consumer spending, but cautioned that trading activity in the third quarter is largely tracking sideways."
Cooling Trading Momentum: First-Half Strength Proving Difficult to Sustain
Wall Street traders had just emerged from a record-setting start to the year, with Bank of America's equity trading division posting an all-time high in revenue during the second quarter.
Market volatility has persisted, though AI-related stocks suffered a significant downturn in July, which also triggered turbulence at Leopold Aschenbrenner's hedge fund Situational Awareness. More recently, chip manufacturers' shares have faced selling pressure as AI executives proposed slowing the pace of AI development.
While these fluctuations created opportunities for some trades, they have generally failed to replicate the robust conditions seen in the first half of the year.
Despite this, Moynihan indicated that 2024 could still prove strong for Bank of America's markets business. The sales and trading team is striving to achieve growth for a 17th consecutive quarter.
"We are in a 'dog fight' for this," Moynihan remarked with a touch of humor.
Robust M&A Pipeline and Optimistic Net Interest Income Outlook
Addressing the bank's mergers and acquisitions business, Moynihan acknowledged that in certain sectors where M&A activity has been brisk in recent months, the bank may not hold the strongest position. However, he emphasized that the current pipeline remains robust, requiring only the smooth execution and closing of deals.
On Monday, he expressed feeling "very good" about the company's guidance regarding net interest income (NII)—the earnings banks derive from interest-bearing assets after accounting for costs. The company has previously stated it expects NII growth to reach the upper end of its 6% to 8% range by 2026.
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