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Higher Equity Trading to Support BofA's (BAC) Q4 Earnings

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Bank of America’s (BAC - Free Report) trading revenues in fourth-quarter 2018 are likely to be positively impacted by substantial volatility, which drove its performance in the first three quarters of the year as well. As trading revenues constitute a substantial part of the bank’s top line, this is expected to lend support to its results scheduled on Jan 16.

Several major developments — including the further escalation of U.S.-China trade war, Brexit-related uncertainty, fears of global economic slowdown, changing yield curve and the Federal Reserve’s stance related to interest rate hikes — rocked the markets and kept the trading desks busy. Therefore, this incited substantial volatility and resulted in a rise in client activity.

Additionally, at an investors’ conference in early December 2018, BofA’s CEO, Brian Moynihan stated that the company’s capital markets revenues are likely to rise year over year in the fourth quarter. Notably, things might turn around, depending on activities in December.

Nonetheless, since then, equity markets have witnessed a substantial rise in volatility. Like always, an increase in equity trading activities is expected to support BofA’s overall trading revenues.

Overall Earnings & Revenue Growth Expectations

For BofA, the Zacks Consensus Estimate for earnings of 63 cents reflects 34% growth on a year-over-year basis. Also, the consensus estimate for sales of $22.2 billion indicates a 8.7% increase from the prior-year quarter.

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


Amid a tough operating backdrop, improving trading revenues are expected to benefit this Zacks Rank #3 (Hold) stock’s revenue growth (to some extent) in the fourth quarter. Also, decent loan growth and higher interest rates are likely to render support. However, dismal mortgage banking business and muted growth in investment banking are 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

Among the other companies, trading revenues are a major portion of total revenues for JPMorgan (JPM - Free Report) , Citigroup (C - Free Report) and Morgan Stanley (MS - Free Report) .

At the above-mentioned conference call in December, JPMorgan’s CEO, Jamie Dimon stated that trading revenues are expected to be flat year over year in the fourth quarter.

Meanwhile, Citigroup’s chief financial officer John Gerspach said that markets revenues are likely to be low on a year-over-year basis, affected by reduced fixed-income market revenues. However, Citigroup’s equity business is on an upswing.

Notably, no such guidance has been provided by management of Morgan Stanley.

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