Muted Investment Banking To Hurt BofA's (BAC) Q2 Earnings
Zacks Investment Research | Jul 15, 2019 08:17AM ET
Performance of investment banking, one of the primary sources of revenues for Bank of America (NYSE:BAC) , is expected to be muted in second-quarter 2019. So, this will likely have an adverse impact on the bank’s results, slated on Jul 17.
Investment banking income basically comprises advisory fees (generated from M&A deals and IPOs) and underwriting revenues (equity and debt issuances). So, let’s check how these are likely to have performed in the to-be-reported quarter.
Trade jitters and fears of global economic slowdown hurt investment banking revenues. While dealmakers across the globe were active during the second quarter, M&A deal value and volume witnessed a decline owing to rise in borrowing costs and several geopolitical concerns.
Hence, this will hurt the bank’s advisory fees. However, with BofA being one of the leading players in this space, this will likely provide the company some leverage.
Now coming to underwriting fees, decent equity markets performance and the central banks’ dovish stance seem to have supported equity issuance across the globe. This also had a favorable impact on IPO activity during the quarter to some extent.
Nonetheless, relatively higher rates and several geopolitical concerns adversely impacted debt issuances in the to-be-reported quarter. Therefore, BofA’s equity and debt underwriting fees (accounting for almost 40% of total investment banking fees) are expected to improve marginally.
BofA’s investment banking revenues are accounted in its Global Banking segment. The Zacks Consensus Estimate for the segment net revenues of $5.04 billion indicates a 2.4% rise from the year-ago reported figure.
Overall Earnings & Revenue Projections
Notably for BofA, the Zacks Consensus Estimate for earnings of 70 cents suggests a 11.1% increase from the year-ago reported number. Also, the consensus estimate for sales of $23 billion indicates a marginal rise of 1.6%.
Bank of America Corporation Price and EPS Surprise
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