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Will Investment Banking Fees Support BofA (BAC) Q2 Earnings?

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The performance of investment banking, one of the primary source of revenues for Bank of America (BAC - Free Report) , is expected to be moderate in second-quarter 2018. This could provide some support to the bank’s results, scheduled on Monday, Jul 16.

Investment banking income basically comprises underwriting revenues and advisory fees. So, let’s check how these are likely to perform in the to-be-reported quarter.

Growth in total underwriting fees, consisting of debt and equity underwriting, is expected to be modest. Rising interest rates are likely to have slowed down corporates’ involvement in debt issuances. As debt origination fees account for roughly 40% of total investment banking fees for BofA, this will likely have an adverse impact on investment banking revenues.

However, equity issuances globally are expected to get a boost from IPOs and follow-on offerings. Thus, equity underwriting fees are anticipated to remain stable or improve marginally. This, in turn, is expected to provide some support to overall underwriting fees for BofA.

Talking about advisory fees, global M&A activity in terms of deals closed represent a strong second quarter. Thus, this will likely result in an increase in advisory fees. Also, as BofA is one of the leading players in this space, it will likely witness an improvement in advisory revenues.

This Zacks Rank #3 (Hold) company’s investment banking revenues are accounted in its Global Banking segment. The Zacks Consensus Estimate for the segment revenues of $5 billion reflects a 1.3% rise on a sequential basis.

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

Overall Earnings & Revenue Projections

Notably for BofA, the Zacks Consensus Estimate for earnings of 57 cents reflects a 23.9% increase on a year-over-year basis. However, the consensus estimate for sales of $22.5 billion indicates a 1.5% fall from the prior-year quarter.

Click here to know more about the factors that could influence BofA’s overall results.

Our Take

Amid an improving operating backdrop, modest growth in investment banking revenues is expected to lend support to BofA’s top line to some extent. Further, decent loan growth will aid revenues, while muted trading activities and dismal mortgage banking performance are expected have a slight adverse impact.

Earnings Schedules of Other Major Banks

JPMorgan (JPM - Free Report) , Citigroup (C - Free Report) and PNC Financial (PNC - Free Report) are scheduled to release second-quarter results on Jul 13.

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