We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Muted Investment Banking to Hurt BofA (BAC) in Q2 Earnings
Read MoreHide Full Article
Bank of America’s (BAC - Free Report) investment banking (IB) business, one of its major revenue sources, is not expected to have performed significantly well in the second quarter of 2023. Thus, the company’s IB revenues are not likely to have provided much support to its quarterly performance. BAC’s second-quarter results are scheduled to be announced on Jul 18.
IB revenues mainly comprise advisory fees (generated from M&As and business restructuring) and underwriting revenues (equity and debt). Let’s see how these are likely to have fared in the to-be-reported quarter.
Global deal-making continued to shrink on a year-over-year basis in second-quarter 2023, while green shoots were visible toward the end of the quarter. A host of factors like geopolitical tensions, stand-off over the U.S. debt ceiling, inflation, rising interest rates and fears of a global recession acted as major headwinds.
Thus, deal volume and total deal value numbers crashed in the quarter under review. Hence, BofA’s advisory fees are likely to have been adversely impacted.
For similar reasons, IPOs and follow-up equity issuances dried up in the to-be-reported quarter. Bond issuance volume was also muted as investors turned pessimistic. Therefore, BofA’s underwriting fees (accounting for almost 40% of total IB fees) are expected to have been affected in the June-ended quarter.
Our estimate for BAC’s IB fees is pegged at $1.13 billion, which indicates a marginal decline from the prior-year quarter’s reported level.
Management expects second-quarter IB revenues to be broadly flat on a year-over-year basis.
Q2 Earnings & Revenue Expectations
The Zacks Consensus Estimate for second-quarter earnings is pegged at 84 cents per share, which has been revised 1.2% lower over the past 30 days. The estimate reflects a rise of 15.1% from the year-ago reported number. Our estimate for the same is 83 cents.
Bank of America Corporation Price and EPS Surprise
The consensus estimate for sales of $24.97 billion indicates a rise of 10% year-over-year. Our estimate for sales is $24.77 billion.
Click here to know about other factors that are likely to have influenced BAC’s overall performance in the quarter to be reported.
Our Take
BAC is expected to have benefited from higher interest rates in the second quarter. However, the not-so-impressive trading and IB performances are likely to have hurt the Zacks Rank #3 (Hold) stock’s top-line growth.
IB revenues constitute a major part of total revenues of banks like Morgan Stanley (MS - Free Report) and Goldman Sachs (GS - Free Report) .
While MS will report quarterly results on Jul 18, GS is slated to report second-quarter numbers on Jul 19.
For MS, management expects a year-over-year decline in IB revenues in the quarter.
Goldman Sachs’ advisory fees are also expected to have been hurt in the quarter because of a decline in deal-making. We project GS’ IB fees to be $1.75 billion in the second quarter.
Image: Bigstock
Muted Investment Banking to Hurt BofA (BAC) in Q2 Earnings
Bank of America’s (BAC - Free Report) investment banking (IB) business, one of its major revenue sources, is not expected to have performed significantly well in the second quarter of 2023. Thus, the company’s IB revenues are not likely to have provided much support to its quarterly performance. BAC’s second-quarter results are scheduled to be announced on Jul 18.
IB revenues mainly comprise advisory fees (generated from M&As and business restructuring) and underwriting revenues (equity and debt). Let’s see how these are likely to have fared in the to-be-reported quarter.
Global deal-making continued to shrink on a year-over-year basis in second-quarter 2023, while green shoots were visible toward the end of the quarter. A host of factors like geopolitical tensions, stand-off over the U.S. debt ceiling, inflation, rising interest rates and fears of a global recession acted as major headwinds.
Thus, deal volume and total deal value numbers crashed in the quarter under review. Hence, BofA’s advisory fees are likely to have been adversely impacted.
For similar reasons, IPOs and follow-up equity issuances dried up in the to-be-reported quarter. Bond issuance volume was also muted as investors turned pessimistic. Therefore, BofA’s underwriting fees (accounting for almost 40% of total IB fees) are expected to have been affected in the June-ended quarter.
Our estimate for BAC’s IB fees is pegged at $1.13 billion, which indicates a marginal decline from the prior-year quarter’s reported level.
Management expects second-quarter IB revenues to be broadly flat on a year-over-year basis.
Q2 Earnings & Revenue Expectations
The Zacks Consensus Estimate for second-quarter earnings is pegged at 84 cents per share, which has been revised 1.2% lower over the past 30 days. The estimate reflects a rise of 15.1% from the year-ago reported number. Our estimate for the same is 83 cents.
Bank of America Corporation Price and EPS Surprise
Bank of America Corporation price-eps-surprise | Bank of America Corporation Quote
The consensus estimate for sales of $24.97 billion indicates a rise of 10% year-over-year. Our estimate for sales is $24.77 billion.
Click here to know about other factors that are likely to have influenced BAC’s overall performance in the quarter to be reported.
Our Take
BAC is expected to have benefited from higher interest rates in the second quarter. However, the not-so-impressive trading and IB performances are likely to have hurt the Zacks Rank #3 (Hold) stock’s top-line growth.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Competitive Landscape
IB revenues constitute a major part of total revenues of banks like Morgan Stanley (MS - Free Report) and Goldman Sachs (GS - Free Report) .
While MS will report quarterly results on Jul 18, GS is slated to report second-quarter numbers on Jul 19.
For MS, management expects a year-over-year decline in IB revenues in the quarter.
Goldman Sachs’ advisory fees are also expected to have been hurt in the quarter because of a decline in deal-making. We project GS’ IB fees to be $1.75 billion in the second quarter.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.