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Trading, Higher Rates to Aid BofA (BAC) Q2 Earnings, IB to Ail
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The trading business is likely to have been a bright spot for Bank of America (BAC - Free Report) in the second quarter of 2022. Thus, trading revenues might have offered some support to its earnings, scheduled to be announced on Jul 18, before the opening bell.
After witnessing the gradual normalization of trading activities over the second half of 2021, the same surprisingly rebounded in the first quarter of 2022, with a similar trend continuing thereafter. The Russia-Ukraine conflict continued to disrupt supply chains, leading to global ambiguity. Further, fears of an economic slowdown, 40-year high inflation numbers and rising interest rates worldwide resulted in heightened client activities and increased trading volume.
These factors led to higher volatility in equity markets (with the S&P 500 Index recording the worst first-half performance in more than 50 years) and other asset classes, including bonds, commodities and foreign exchange. Hence, BofA is likely to have recorded decent growth in trading revenues this time.
The Zacks Consensus Estimate for trading revenues of $3.61 billion suggests an increase of 1.3% from the prior-year quarter’s reported number.
Other Major Factors
Loan Demand & Net Interest Income (NII): The lending scenario continued to improve in the second quarter. Per the Fed’s latest data, demand for commercial and industrial loans, real estate loans and consumer loans accelerated. The Zacks Consensus Estimate for BAC’s average interest earnings assets is pegged at $2.80 trillion, suggesting an 8.7% increase on a year-over-year basis.
Also, during the quarter, the Federal Reserve raised interest rates by 125 basis points. Thus, the policy rate touched 1.5-1.75%, the highest level since just before the March 2020 pandemic. Thus, this is likely to have had a favorable impact on BAC’s net interest yield and NII. Yet, the flattening of the yield curve in the second quarter is expected to have weighed on margins to some extent.
The Zacks Consensus Estimate for NII on FTE basis of $12.40 billion suggests a 19.9% jump.
Provided loans grow as expected and rates in the forward curve materialize, management projects NII in the second quarter of 2022 to rise more than $650 million sequentially.
Investment Banking (IB) Fees: After a stellar performance for almost two years, deal-making across the globe hit a record low during the second quarter. Raging inflation, equity markets rout and fears of recession dealt a blow to the business sentiments and plans for expansion through acquisitions. Thus, both deal volume and total value crashed during the quarter. So, BofA’s advisory fees are likely to have been adversely impacted.
Given the above-mentioned concerns, equity market performance was disappointing and thus, the IPOs and follow-up equity issuances dried up. Also, bond issuances are likely to have been muted as well. BAC’s underwriting fees (accounting for almost 40% of total IB fees) are expected to have been hurt during the to-be-reported quarter.
The Zacks Consensus Estimate for IB income of $1.44 billion indicates a plunge of 32% from the prior-year quarter level.
Expenses: Though the bank continues to digitize operations, upgrade technology and expand into newer markets by opening branches leading to higher related costs, its prior efforts to improve operating efficiency are likely to have resulted in manageable expense levels in the to-be-reported quarter.
Management anticipates operating expenses to be down marginally on a sequential basis, as much of the seasonal payroll tax-related costs decline, somewhat offset by investment timing, inflation and the cost of opening up more fully for travel and clone entertainment.
Asset Quality: With an increase in loan balance and expectations of economic slowdown due to geopolitical and macroeconomic concerns, BAC is expected to have built reserves in the second quarter.
The Zacks Consensus Estimate for non-performing loans of $4.97 billion implies a 1.3% increase year over year.
What the Zacks Model Unveils
Our proven model does not predict an earnings beat for BofA this time around. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or better — to increase the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for BofA is -3.42%.
Zacks Rank: BAC currently carries a Zacks Rank #3.
Bank of America Corporation Price and EPS Surprise
The Zacks Consensus Estimate for second-quarter earnings is pegged at 78 cents, which has witnessed a downward revision of 1.3% over the past seven days. Further, the estimated figure suggests a fall of 24.3% from the year-ago reported number.
The consensus estimate for sales of $23.02 billion indicates 7.3% growth.
Banks to Consider
Here are a couple of bank stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
The Earnings ESP for Truist Financial (TFC - Free Report) is +1.38% and it carries a Zacks Rank #3, at present. The company is slated to report second-quarter 2022 results on Jul 19.
Over the past 30 days, TFC’s Zacks Consensus Estimate for quarterly earnings has been unchanged.
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Trading, Higher Rates to Aid BofA (BAC) Q2 Earnings, IB to Ail
The trading business is likely to have been a bright spot for Bank of America (BAC - Free Report) in the second quarter of 2022. Thus, trading revenues might have offered some support to its earnings, scheduled to be announced on Jul 18, before the opening bell.
After witnessing the gradual normalization of trading activities over the second half of 2021, the same surprisingly rebounded in the first quarter of 2022, with a similar trend continuing thereafter. The Russia-Ukraine conflict continued to disrupt supply chains, leading to global ambiguity. Further, fears of an economic slowdown, 40-year high inflation numbers and rising interest rates worldwide resulted in heightened client activities and increased trading volume.
These factors led to higher volatility in equity markets (with the S&P 500 Index recording the worst first-half performance in more than 50 years) and other asset classes, including bonds, commodities and foreign exchange. Hence, BofA is likely to have recorded decent growth in trading revenues this time.
The Zacks Consensus Estimate for trading revenues of $3.61 billion suggests an increase of 1.3% from the prior-year quarter’s reported number.
Other Major Factors
Loan Demand & Net Interest Income (NII): The lending scenario continued to improve in the second quarter. Per the Fed’s latest data, demand for commercial and industrial loans, real estate loans and consumer loans accelerated. The Zacks Consensus Estimate for BAC’s average interest earnings assets is pegged at $2.80 trillion, suggesting an 8.7% increase on a year-over-year basis.
Also, during the quarter, the Federal Reserve raised interest rates by 125 basis points. Thus, the policy rate touched 1.5-1.75%, the highest level since just before the March 2020 pandemic. Thus, this is likely to have had a favorable impact on BAC’s net interest yield and NII. Yet, the flattening of the yield curve in the second quarter is expected to have weighed on margins to some extent.
The Zacks Consensus Estimate for NII on FTE basis of $12.40 billion suggests a 19.9% jump.
Provided loans grow as expected and rates in the forward curve materialize, management projects NII in the second quarter of 2022 to rise more than $650 million sequentially.
Investment Banking (IB) Fees: After a stellar performance for almost two years, deal-making across the globe hit a record low during the second quarter. Raging inflation, equity markets rout and fears of recession dealt a blow to the business sentiments and plans for expansion through acquisitions. Thus, both deal volume and total value crashed during the quarter. So, BofA’s advisory fees are likely to have been adversely impacted.
Given the above-mentioned concerns, equity market performance was disappointing and thus, the IPOs and follow-up equity issuances dried up. Also, bond issuances are likely to have been muted as well. BAC’s underwriting fees (accounting for almost 40% of total IB fees) are expected to have been hurt during the to-be-reported quarter.
The Zacks Consensus Estimate for IB income of $1.44 billion indicates a plunge of 32% from the prior-year quarter level.
Expenses: Though the bank continues to digitize operations, upgrade technology and expand into newer markets by opening branches leading to higher related costs, its prior efforts to improve operating efficiency are likely to have resulted in manageable expense levels in the to-be-reported quarter.
Management anticipates operating expenses to be down marginally on a sequential basis, as much of the seasonal payroll tax-related costs decline, somewhat offset by investment timing, inflation and the cost of opening up more fully for travel and clone entertainment.
Asset Quality: With an increase in loan balance and expectations of economic slowdown due to geopolitical and macroeconomic concerns, BAC is expected to have built reserves in the second quarter.
The Zacks Consensus Estimate for non-performing loans of $4.97 billion implies a 1.3% increase year over year.
What the Zacks Model Unveils
Our proven model does not predict an earnings beat for BofA this time around. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or better — to increase the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for BofA is -3.42%.
Zacks Rank: BAC currently carries a Zacks Rank #3.
Bank of America Corporation Price and EPS Surprise
Bank of America Corporation price-eps-surprise | Bank of America Corporation Quote
The Zacks Consensus Estimate for second-quarter earnings is pegged at 78 cents, which has witnessed a downward revision of 1.3% over the past seven days. Further, the estimated figure suggests a fall of 24.3% from the year-ago reported number.
The consensus estimate for sales of $23.02 billion indicates 7.3% growth.
Banks to Consider
Here are a couple of bank stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
The Earnings ESP for Truist Financial (TFC - Free Report) is +1.38% and it carries a Zacks Rank #3, at present. The company is slated to report second-quarter 2022 results on Jul 19.
Over the past 30 days, TFC’s Zacks Consensus Estimate for quarterly earnings has been unchanged.
Citizens Financial Group (CFG - Free Report) is scheduled to release second-quarter 2022 earnings on Jul 19. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +5.06%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
CFG’s quarterly earnings estimates have moved almost 1% upward over the past month.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.