Bank of America anticipates its investment banking fees will decline by more than 10% in the third quarter compared to the same period last year, a significant reversal from the previous quarter’s performance. The outlook was provided by CEO Brian Moynihan during a Barclays Global conference on Monday, causing the bank’s shares to fall approximately 5% in afternoon trading.
Moynihan noted that trading revenue is expected to remain roughly flat. This forecast stands in stark contrast to the second quarter, where the nation’s second-largest bank by assets reported a 50% surge in investment banking fees and a 33% increase in trading revenue.
“What we’re seeing is the market generally in investment banking is down 10%,” Moynihan said, referencing Dealogic data. He added that because Bank of America is not as well-positioned in the specific segments experiencing the highest activity, its decline may exceed the industry average.
The muted guidance from Bank of America raises questions about the durability of Wall Street’s recent advisory and trading boom, which has been largely fueled by artificial intelligence. While Moynihan pointed to a strong pipeline of deals, particularly within middle-market investment banking, the projected double-digit drop in fees suggests investors may be concerned that the surge in capital markets activity could be short-lived.
The company’s outlook serves as an early indicator that the rally in investment banking may have encountered headwinds after the blockbuster results seen earlier this year.
Investment banking fees are really tied to deal volume. If the pipeline is strong, why the sudden negativity? Seems premature to panic.
A 10% drop after such a huge Q2 surge feels like the AI boom is already cooling down. Hard to believe this momentum lasts.