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Dismal Trading Performance to Hurt BofA's (BAC) Q2 Earnings

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Bank of America’s BAC trading revenues (constituting a substantial part of its top line) are not expected to have improved much in the second quarter of 2021. Unlike the prior five quarters, wherein significant market volatility and client activity supported trading revenues; market normalization and reduced volatility are expected to have dampened the same this time around. Thus, the company’s trading revenues are less likely to offer major support to its upcoming results, slated to be announced on Jul 14, before market open.

Like the past few quarters, all major indexes — the S&P 500, Dow Jones and Nasdaq — witnessed an upswing in the second quarter and touched new highs. However, low volatility is expected to have affected equity volumes to some extent. While the Federal Reserve’s bond-buying program is likely to have offered some support to fixed-income trading volumes, BofA’s equity and fixed-income trading revenues are not expected to have improved in the to-be-reported quarter.

The Zacks Consensus Estimate for equity trading revenues of $1.49 billion suggests a decline of 18.6% from the prior quarter’s reported number. The consensus estimate for fixed-income trading revenues of $2.44 billion indicates a fall of 24.8%. The consensus estimate for total trading revenues is pegged at $3.93 billion, reflecting a decline of 22.6% sequentially.

Overall Earnings & Revenue Growth Expectations

The Zacks Consensus Estimate for BofA’s earnings for the second quarter is pegged at 77 cents, which indicates a significant rise from the prior-year quarter’s reported number.

The consensus estimate for sales of $21.85 billion suggests a 2.1% decline on a year-over-year basis.

Bank of America Corporation Price and EPS Surprise

Bank of America Corporation Price and EPS Surprise
Bank of America Corporation Price and EPS Surprise

Bank of America Corporation price-eps-surprise | Bank of America Corporation Quote

Click here to know about the other factors that are likely to have impacted BofA’s overall performance.

Our Take

Decent investment banking performance is expected to have supported the Zacks Rank #3 (Hold) stock’s second-quarter performance. However, muted loan growth, dismal trading business performance and low interest rates are expected to have hurt the top line.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Competitive Landscape

For JPMorgan JPM, as projected by the CEO Jamie Dimon in mid-June, markets revenues were “north of $6 billion” at $6.8 billion, down 30% year over year in the quarter under review. Fixed income markets revenues plunged 44% due to lower revenues across products, while equity markets revenues grew 13% on the back of solid performance across products.

Trading revenues constitute a major portion of total revenues for Citigroup C and Morgan Stanley MS as well. Similar to BofA, dismal trading performance is likely to have adversely impacted these banks’ revenues and earnings in the second quarter.

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Bank of America Corporation (BAC) : Free Stock Analysis Report

JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report

Morgan Stanley (MS) : Free Stock Analysis Report

Citigroup Inc. (C) : Free Stock Analysis Report

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Zacks Investment Research