How Will Surging IB Business Support Bank of America's Fee Income?

Investment banking (IB) fees constitute 13.5% of Bank of America’s BAC non-interest income on average. In the first nine months of 2025, the company’s IB fees increased 9.5% year over year to $5 billion. For full-year 2025, management projects an approximate 4% increase in IB fees, suggesting the fourth quarter be “flattish to a little bit down from last year.” 

After a prolonged slump since 2022 (even BAC wasn’t untouched), advisory and underwriting activity has gathered pace. Although April volatility from tariff concerns tempered optimism, the operating backdrop has improved since then. 

Dealmaking momentum has strengthened on the back of a resilient economy, easing financing costs and renewed corporate confidence. A more business-friendly policy environment under the Trump administration, particularly faster antitrust reviews and smoother cross-border approvals, has further encouraged companies to pursue larger, strategic transactions. At the same time, a wave of high-profile IPOs in 2025 has revived investor appetite, with companies taking advantage of improving market conditions to access public capital.

These tailwinds were reinforced by the Federal Reserve’s third consecutive 25-basis-point rate cut this year in December, with interest rates now in the range of 3.50-3.75% (significantly lower than the peaks seen in 2023). Lower borrowing costs are expected to accelerate deal execution, prompting companies to revive shelved mergers & acquisitions (M&As) and capital-raising plans. With a resilient economy and easing financing costs, M&A and underwriting prospects look encouraging going into 2026. Hence, Bank of America’s IB fees are expected to grow given this industry-wide enhanced outlook for the IB business.

With an improving operating backdrop, the contribution of IB fees to BAC’s fee income will likely rise further in the coming quarters as the company leverages its position in the industry to expand market share.

How BAC’s Peers Fare in Terms of IB Fees

Similar to BAC, its close peers, JPMorgan JPM and Citigroup C, are expected to continue benefiting from industry-wide improvement in the operating environment for the IB business.

In the first nine months of 2025, JPMorgan’s IB fees rose 12.3% year over year to $7.3 billion, driven by improvements in advisory and underwriting businesses. Jeremy Barnum, executive VP and chief financial officer, noted healthy deal flow with robust pipelines, supported by a constructive market environment. JPMorgan expects IB fees to rise in the low single digits in the fourth quarter of 2025. 

For Citigroup, IB fees (within its Banking segment) jumped 15% year over year to $2.9 billion in the first nine months of 2025. Chief financial officer Mark Mason noted that the bank is seeing continued momentum in deal-making and capital markets activity, with mega deals and investment-grade activity contributing to fee growth. Citigroup expects IB fees to increase in the mid-20s (percentage) year over year in the fourth quarter.

Bank of America’s Price Performance, Valuation & Estimates

Shares of Bank of America have risen 19.2% over the past six months.

From a valuation standpoint, Bank of America trades at a 12-month trailing price-to-tangible book (P/TB) of 1.98X, below the industry.

The Zacks Consensus Estimate for Bank of America’s 2025 and 2026 earnings implies year-over-year growth of 16.2% and 13.9%, respectively. In the past week, earnings estimates for 2025 have risen marginally, while those for 2026 have been revised lower.

Bank of America currently carries 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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This article originally published on Zacks Investment Research (zacks.com).

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