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BAC Warns of Q3 Capital Markets Weakness: Will Fee Income Take a Hit?
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Key Takeaways
Bank of America expects Q3 IB fees of $1.6-$1.8B, down about 15% year over year at the midpoint.
BAC's trading revenue is seen as roughly flat near $5.36B as financing and prime-brokerage activity slows.
Wealth management AUM fees are projected to rise 10-15%, helping offset weaker capital markets income.
Bank of America’s (BAC - Free Report) third-quarter 2026 capital markets outlook points to a clear slowdown in fee-driven revenues after a strong first half. CEO Brian Moynihan expects investment banking (IB) fees of $1.6-$1.8 billion, below $2 billion in third-quarter 2025. At the midpoint, IB fees would decline about 15% year over year and roughly 20% from $2.14 billion in second-quarter 2026.
Trading is also losing momentum. Moynihan expects sales and trading revenues to be relatively flat year over year, implying around $5.36 billion based on third-quarter 2025 levels. Combined, IB and trading revenues are likely to be $6.96-$7.16 billion, down from $7.36 billion a year earlier. The softer outlook reflects slower financing and prime-brokerage activity as well as unusually stronger year-ago performance.
For fee income, the impact is likely to be negative but manageable. IB fees represented nearly 15% of Bank of America’s $13.81 billion of third-quarter 2025 non-interest income, making a weaker IB print a noticeable drag. However, wealth management fees are expected to offset this, with management projecting investment management AUM fees to rise 10-15% year over year in the ongoing quarter. That mix implies pressure on capital markets income, not a broad fee income collapse.
Yet, the abrupt slowdown could make positive operating leverage difficult in the third quarter, especially with the company expecting expenses to run around $18.6 billion. Encouragingly, Moynihan called the deal pipeline “very strong,” suggesting the weakness may be timing-related rather than structural and keeping the medium-term fee income outlook constructive.
What Bank of America’s Peer Banks are Saying
Other banks that provided updated outlooks include Citigroup (C - Free Report) and KeyCorp (KEY - Free Report) .
Citigroup’s third-quarter outlook appears relatively upbeat. Management expects markets revenues to grow in the mid-single digits year over year, supported by equities, financing and foreign exchange. Citigroup also projects IB revenues to increase in the low single digits, with further upside possible if pending transactions close before quarter-end.
KeyCorp has come up with an updated full-year 2026 outlook, with revenues now projected to be up approximately 8%. Previously, the company targeted revenues to rise 7-8%. The increase is driven by higher non-interest income, which is now expected to grow 4-5% (up from the prior guidance of a 3-4% increase). KeyCorp still anticipates net interest income to be up 9-11%.
Bank of America’s Price Performance, Valuation & Estimates
In the past three months, shares of Bank of America have gained 4.6% compared with the industry’s 4.1% growth.
Image Source: Zacks Investment Research
From a valuation standpoint, BAC trades at a trailing 12-month price-to-tangible book ratio of 2.10, well below the industry average of 3.35.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for BAC’s 2026 and 2027 earnings indicates year-over-year growth of 22.8% and 12.9%, respectively. Earnings estimates for 2026 have been unchanged over the past week, while those for 2027 have moved marginally higher.
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BAC Warns of Q3 Capital Markets Weakness: Will Fee Income Take a Hit?
Key Takeaways
Bank of America’s (BAC - Free Report) third-quarter 2026 capital markets outlook points to a clear slowdown in fee-driven revenues after a strong first half. CEO Brian Moynihan expects investment banking (IB) fees of $1.6-$1.8 billion, below $2 billion in third-quarter 2025. At the midpoint, IB fees would decline about 15% year over year and roughly 20% from $2.14 billion in second-quarter 2026.
Trading is also losing momentum. Moynihan expects sales and trading revenues to be relatively flat year over year, implying around $5.36 billion based on third-quarter 2025 levels. Combined, IB and trading revenues are likely to be $6.96-$7.16 billion, down from $7.36 billion a year earlier. The softer outlook reflects slower financing and prime-brokerage activity as well as unusually stronger year-ago performance.
For fee income, the impact is likely to be negative but manageable. IB fees represented nearly 15% of Bank of America’s $13.81 billion of third-quarter 2025 non-interest income, making a weaker IB print a noticeable drag. However, wealth management fees are expected to offset this, with management projecting investment management AUM fees to rise 10-15% year over year in the ongoing quarter. That mix implies pressure on capital markets income, not a broad fee income collapse.
Yet, the abrupt slowdown could make positive operating leverage difficult in the third quarter, especially with the company expecting expenses to run around $18.6 billion. Encouragingly, Moynihan called the deal pipeline “very strong,” suggesting the weakness may be timing-related rather than structural and keeping the medium-term fee income outlook constructive.
What Bank of America’s Peer Banks are Saying
Other banks that provided updated outlooks include Citigroup (C - Free Report) and KeyCorp (KEY - Free Report) .
Citigroup’s third-quarter outlook appears relatively upbeat. Management expects markets revenues to grow in the mid-single digits year over year, supported by equities, financing and foreign exchange. Citigroup also projects IB revenues to increase in the low single digits, with further upside possible if pending transactions close before quarter-end.
KeyCorp has come up with an updated full-year 2026 outlook, with revenues now projected to be up approximately 8%. Previously, the company targeted revenues to rise 7-8%. The increase is driven by higher non-interest income, which is now expected to grow 4-5% (up from the prior guidance of a 3-4% increase). KeyCorp still anticipates net interest income to be up 9-11%.
Bank of America’s Price Performance, Valuation & Estimates
In the past three months, shares of Bank of America have gained 4.6% compared with the industry’s 4.1% growth.
Image Source: Zacks Investment Research
From a valuation standpoint, BAC trades at a trailing 12-month price-to-tangible book ratio of 2.10, well below the industry average of 3.35.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for BAC’s 2026 and 2027 earnings indicates year-over-year growth of 22.8% and 12.9%, respectively. Earnings estimates for 2026 have been unchanged over the past week, while those for 2027 have moved marginally higher.
Image Source: Zacks Investment Research
Currently, Bank of America carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.