How Will Dip in Q2 IB Revenues & Trading Surge Impact BAC's Fee Income?

At Morgan Stanley US Financials, Payments & CRE Conference on Wednesday, Bank of America BAC CEO Brian Moynihan warned of weakness in investment banking (IB) fees in the second quarter, while trading revenues are expected to show signs of strength.

BAC expects IB fees to decline more than 20% year over year in the second quarter as tariff-related headwinds continue to hamper deal-making sentiments. In the first quarter, IB fees of $1.52 billion million declined 3% as the plunge in equity underwriting income was more than offset by higher advisory revenues and debt underwriting income. The Zacks Consensus Estimate for IB fees is pegged at $1.53 billion for the ongoing quarter.

Meanwhile, driven by heightened market volatility and a rise in client activity, Bank of America projects trading revenues to grow in the mid-to-high single-digit range in the quarter. This will mark the 13th consecutive quarter of year-over-year growth in sales and trading revenues for the company. Last quarter, BAC’s sales and trading revenues (excluding net DVA) of $5.65 billion represented the highest number in a decade. The consensus estimate for sales and trading is pegged at $5.11 billion for second-quarter 2025, suggesting year-over-year growth of 9%. 

With sales and trading accounting for about 43% of Bank of America’s fee income, ongoing momentum in this area should help offset pressure elsewhere. As such, the consensus estimate for non-interest income is $11.87 billion, implying a rise of 2% from the prior-year quarter.

What Does BAC’s Peers Expect for IB & Trading in Q2?

Like Bank of America, JPMorgan JPM anticipates markets revenues to grow in the mid-to-high single-digits range on a year-over-year basis for the second quarter. This is likely to be driven by a significant rise in market volatility and higher client activity. Additionally, JPMorgan’s IB fees are expected to be down in the mid-teens range.

Citigroup C, on the other hand, projects second-quarter IB fees to increase by a mid-single-digit percentage on a year-over-year basis as deal-making activities rebounded and stock markets recovered from the ambiguity over the final tariff decision. Moreover, like BAC and JPMorgan, Citigroup’s trading business is showing signs of strength. Citigroup projects markets revenues to grow in the mid-to-high single-digits range.

BAC’s Price Performance, Valuation and Estimates

Shares of Bank of America have risen 12.8% in the past three months. In the same time frame, JPMorgan soared 19.1%, and Citigroup was up 16.6%.

Three-Month Price Performance
 

From a valuation standpoint, Bank of America trades at a 12-month trailing price-to-tangible book (P/TB) of 1.69X, below the industry.

P/TB Ratio
 

Moreover, the Zacks Consensus Estimate for Bank of America’s 2025 and 2026 earnings implies year-over-year growth of 12.2% and 15.3%, respectively. In the past month, earnings estimates for 2025 have moved marginally upward, while 2026 estimates have been revised slightly lower.

Earnings Estimates Trend
 

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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