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Rebound in Trading Activity to Boost BofA (BAC) Q1 Earnings

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Volatility is back in the markets, resulting in higher trading activities. This is expected to benefit Bank of America’s (BAC - Free Report) first-quarter results, slated to be released on Apr 16, given the significant dependence of its top line on trading revenues.

After three consecutive quarters of witnessing muted activities, the markets experienced considerable volatility in the last two months of the first quarter. In fact, February was one of the most volatile months since 2008, and March 2018 was even worse.

Last year, trading activities remained weak despite several political and geopolitical developments, hike in interest rates, passage of the tax act and absence of significant progress on the regulatory reforms proposed by the Trump administration. Subdued inflation in the United States and modest rise in long-term interest rates along with lack of specific catalysts were concerns.

These factors resulted in lower fixed income trading, while equity trading also didn’t fare better.

Nonetheless, concerns over trade war between the United States and China, higher inflation expectation in the United States, further tightening of monetary policy by the Fed and a sharp sell-off in the tech sector incited significant volatility during the first quarter.

Hence, in the to-be-reported quarter, both fixed income trading and equity trading revenues are anticipated to increase.

Overall Earnings & Revenue Growth Expectations

Notably for BofA, the Zacks Consensus Estimate for earnings of 59 cents reflects 43.9% surge on a year-over-year basis. Also, the consensus estimate for sales of $22.9 billion indicates a 3% increase from the prior-year quarter.

Click here to know about the other factors that are expected influence BofA’s overall results.

Conclusion

Amid an improving operating backdrop, rebound in trading revenues is expected to benefit this Zacks Rank #3 (Hold) stock’s top-line growth. Additionally, higher interest rates and decent loan growth are likely to support BofA’s revenues in the to-be-reported quarter.

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

The Zacks Consensus Estimate for Global Markets segment’s (under which trading revenues are accounted for) revenues of $4.64 billion reflects a jump of 36.8% from the prior quarter.

Earnings Schedules of Other Major Banks

M&T Bank Corporation (MTB - Free Report) is slated to report on Apr 16 while Comerica Incorporated (CMA - Free Report) and U.S. Bancorp (USB - Free Report) will release results on Apr 17.

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