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Normalized Trading Activity to Aid BofA's (BAC) Q2 Earnings

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Client activity seems to have returned to normalized levels, following the significant volatility recorded in the first quarter. Therefore, this will likely result in relatively stable trading revenues for Bank of America (BAC - Free Report) in second-quarter 2018. As trading revenues constitute a substantial part of the bank’s top line, this is expected to lend support to its results scheduled on Jul 16.

Unlike the first quarter when higher inflation expectation, tightening of monetary policy by the Fed, impending U.S.-China trade war and a sharp sell-off in the tech sector incited volatility, developments like further escalation in the trade war and some other geo-political tensions in the second quarter were not enough to lead to substantial rise in client activity.

Also, similar to the prior quarters, equity trading revenues are expected to render support to the total trading revenues in the to-be-reported quarter.

Further, at an investors’ conference in May, BofA CEO Brian Moynihan stated that the company’s trading income is expected to be flat year over year in the second quarter.

Nonetheless, the Zacks Consensus Estimate for Global Markets segment (under which trading revenues are accounted for) revenues of $4.12 billion indicates a decline of 14% from the prior quarter.

Overall Earnings & Revenue Growth Expectations

Notably for BofA, the Zacks Consensus Estimate for earnings of 56 cents reflects a 21.7% increase on a year-over-year basis. However, the consensus estimate for sales of $22.5 billion indicates a 1.5% decrease from the prior-year quarter.

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

Conclusion

Stabilizing trading revenues are expected to benefit this Zacks Rank #3 (Hold) stock’s revenue growth (to some extent) in the second quarter. Also, decent loan growth and modest investment banking performance are likely to render support, while dismal mortgage banking performance is expected to somewhat hamper growth.

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

Trading Revenue Projections for Other Companies

Other companies like Citigroup (C - Free Report) , JPMorgan (JPM - Free Report) and Morgan Stanley (MS - Free Report) expected to report flat to slight rise in trading revenues in the to-be-reported quarter.

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