Bank of America disclosed a significant slowdown in its investment banking and trading operations for the third quarter, contrasting sharply with the company’s performance earlier in the year. CEO Brian Moynihan indicated at a conference that investment banking fees would likely fall by more than 10% compared to the prior-year period, while trading revenue was expected to remain essentially unchanged. This marked a notable shift from the second quarter, when the bank had posted a 50% increase in investment banking fees and a 33% surge in trading revenue.
Moynihan attributed the weakness partly to broader market conditions, noting that investment banking activity across the industry had declined by approximately 10% based on Dealogic data. He added that Bank of America’s positioning in certain business segments with higher activity levels was not as strong as competitors, suggesting the bank’s performance would trail the industry average decline.
The guidance prompted a market reaction, with Bank of America shares declining 5% in afternoon trading on the day of Moynihan’s remarks. The softer outlook from the nation’s second-largest bank by assets raised questions about whether Wall Street’s recent advisory and trading momentum, which had been characterized as driven by artificial intelligence developments, might be facing headwinds.
Despite the near-term weakness, Moynihan indicated the bank maintained a robust deal pipeline, particularly in middle-market investment banking. Later the same day, Citigroup’s CFO Gonzalo Luchetti offered a somewhat less pessimistic view, stating that his bank’s investment banking revenues were tracking toward low-single-digit growth for the quarter, with trading revenue expected to achieve mid-single-digit growth. Luchetti emphasized that September performance could prove pivotal to quarterly results.
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