Back to top

Image: Bigstock

Can Improved Trading Performance Aid BofA's (BAC) Q4 Earnings?

Read MoreHide Full Article

The fourth quarter of 2019 witnessed rise in client activity. Hence, Bank of America’s (BAC - Free Report) trading revenues (constituting a substantial part of its top line) are likely to have improved in the quarter and positively impacted its overall performance. Notably, results of the company are slated to be released on Jan 15, before the market opens.

Though several lingering matters like uncertainty related to the U.S.-China trade conflict and Brexit might have negatively impacted trading activities in the fourth quarter to some extent, positive developments in the same toward the end of the quarter and improving domestic economy are likely to have provided respite, resulting in upswing in client activities.

During an investor conference in December, CEO Brian Moynihan stated that in the fourth quarter, trading revenues will likely grow 7-8% year over year.

The Zacks Consensus Estimate for the Global Markets segment’s (under which trading revenues are accounted for) net revenues also suggests the same. The consensus estimate for net revenues of $3.56 billion indicates rise of 9.8% from the year-ago reported number.

Overall Earnings & Revenue Growth Expectations

The Zacks Consensus Estimate for BofA’s earnings for the fourth quarter is pegged at 68 cents, which indicates a decline of 2.9% from the prior-year quarter’s reported number.

The consensus estimate for sales of $22 billion suggests a 3.2% decline on a year-over-year basis.

Bank of America Corporation Price and EPS Surprise


Bank of America Corporation Price and EPS Surprise

Bank of America Corporation price-eps-surprise | Bank of America Corporation Quote

Click here to know about the other factors that are likely to have impacted BofA’s overall performance.

Our Take

Slight improvement in investment banking and higher trading income are likely to have supported the Zacks Rank #2 (Buy) stock’s fourth-quarter revenues to an extent. However, weak growth in net interest income due to relatively lower rates is expected to have hurt.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Trading Revenue Projections for Other Companies

During an investor conference in December, JPMorgan’s (JPM - Free Report) CFO, Jennifer Piepszak, stated that trading revenues in the fourth quarter will likely be up “meaningfully” year over year, with gains largely driven by fixed income operation.

Similarly, Citigroup’s (C - Free Report) CFO, Mark Mason, stated, “We expect to continue to take share,” though wallets are declining. Mason said that markets revenues are expected to be up in the high teens in the fourth quarter.

Similar to the above-mentioned companies, trading revenues form a major portion of total revenues for Goldman Sachs (GS - Free Report) and Morgan Stanley as well. Thus, improved trading performance is expected to have aided these companies’ total revenues and earnings in the fourth quarter as well.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>

Published in