Of late, Bank of America (BAC - Free Report) seems to be falling behind the smaller industry playersin gathering advisory fees. This probably prompted the bank to focus more on its investment banking unit. Per the Financial Times article, BofA plans to hire nearly 50 experienced deal makers as well as several mid-level staff with an aim to regain its past glory in the advisory business.
This follows the management overhaul announced in late September, when news of its corporate and investment banking head Christian Meissnerleaving BofA by this year end was announced. Matthew Koder, who replaces Meissner, in his first presentation with the division’s staff members, commented that they have sufficient resources to improve the market share and must not use the company’s lower appetite for risky deals as an excuse.
Notably, earlier this year, BofA deal markers were asked to rein in,as lending parameters were re-evaluated after incurring substantial losses involving troubled South African retailer Steinhoff International Holdings NV.
Global M&A activity continues to improve, with the expectations of it surpassing the $4.1 trillion mark achieved before the 2008 financial crisis. Despite this positive development, BofA seems to be losing out on advisory fees. Over the first nine months of 2018, the company’s advisory fees (that include fees on debt and equity advisory, and M&As) have declined more than 30% year over year.
This led BofA slipping on the league table as well, even below the smaller competitors like Barclays (BCS - Free Report) and Jefferies Financial Group Inc. (JEF - Free Report) . Not only that, the company is also losing ground compared with JPMorgan (JPM - Free Report) , which continue to dominate the investment banking business.
Thus, BofA with its focus to strengthen the investment banking division is taking step in the right direction. Also, this will support the company’s fee income growth, which is getting hampered owing to slowdown in mortgage banking operations.
Shares of BofA have rallied 7.7% over the past year outperforming the industry’s rise of 2.4%.
Currently, BofAcarries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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