Bank of America is preparing for a noticeable pullback in investment banking fees in the third quarter, estimating a decline of at least 10% compared with the year-ago period, Chief Executive Brian Moynihan said on Monday. The bank put a range on third-quarter investment banking revenue of $1.6 billion to $1.8 billion, down from $2.0 billion in the third quarter a year earlier.
The comments came at the Barclays global financial services conference, where Moynihan described a broader softening in investment banking activity. "What were seeing is the market generally in investment banking is down 10% or so," he said. He added that Bank of America has trimmed positions in some businesses that previously generated more activity, and that could push the banks decline to slightly more than the market average.
Equity investors reacted swiftly to the outlook. Bank of America shares extended losses after Moynihan spoke, falling by over 5% by late afternoon trade. At the same time, the S&P 500 banking index was down 2.7%.
On the trading side, Moynihan projected that sales and trading revenue would be roughly flat in the third quarter versus the comparable period, when it totaled $5.4 billion. He said the firms deals pipeline remains strong and that pipelines are staying full at the moment. "Right now were seeing it solid, and the pipelines are staying full," he said.
However, Moynihan cautioned that a further increase in interest rates would likely slow some financing demand. Global brokerages have interpreted recent stronger-than-expected inflation readings as reinforcing expectations that the Federal Reserve may raise rates this year, increasing the risk that higher borrowing costs could cool parts of the capital markets.
Addressing the U.S. consumer, Moynihan emphasized continued spending and noted that credit quality has been as good as "its been (for) a long time." That comment suggests Bank of America sees household balance sheets and loan performance holding up despite the market shifts in investment banking.
Taken together, the bank is signaling a mixed picture for Q3: weaker fee income from investment banking, stable results from sales and trading for now, and steady consumer credit conditions. The outlook underscores how sensitivity to interest rates and shifts in deal activity can translate into near-term revenue variability across major banking businesses.