Bank of America plunges 6%! CEO says Q3 trading revenue is flat and investment banking income falls short of expectations

Bank of America CEO Brian Moynihan said that compared to the same period last year, third-quarter trading revenue will be "roughly flat," which contrasts with the surge in revenue experienced by Wall Street in the first half of the year.

During a Barclays Plc conference on Monday, Moynihan stated that investment banking fees are expected to be between $1.6 billion and $1.8 billion. Previously, analysts had anticipated these fees to be close to $2 billion.

As a result of his remarks, as of press time, Bank of America shares fell nearly 6% during trading, making it the worst performer in the KBW Bank Index that day. Bank stocks overall also declined, with Goldman Sachs down 4.3% and Citigroup dropping around 4.2%.

Analysts at Vital Knowledge noted that Moynihan "remains relatively optimistic about the broader macroeconomic environment and consumer spending, but warned that the trajectory of trading activity in the third quarter is essentially flat."

Trading Business Loses Steam; Strong First Half Hard to Sustain

Wall Street traders just wrapped up a record-breaking start to the year, with Bank of America's equities trading division posting all-time high revenue in the second quarter.

The market continues to be volatile. AI stocks suffered a significant setback in July, which also triggered turbulence at the Situational Awareness hedge fund led by Leopold Aschenbrenner. Recently, with AI executives proposing to slow down AI development, shares of chip manufacturers have also been sold off.

Although these fluctuations have created some trading opportunities, overall they have failed to replicate the robust performance of the first half of the year.

Nonetheless, Moynihan stated that this year could still be a strong one for Bank of America's markets business. The bank's sales and trading team is striving to achieve growth for the seventeenth consecutive quarter.

"We are in a real 'dog fight' for this," Moynihan joked.

M&A Pipeline Remains Solid; Net Interest Income Outlook Optimistic

Regarding the bank’s M&A business, Moynihan said that in certain industries where M&A activity has been active in recent months, the bank has not been in the best position. However, he emphasized that the current business pipeline remains robust and just needs successful execution to bring deals to completion.

On Monday, he said he felt "very good" about the company’s guidance on net interest income (NII—that is, revenue the bank earns from interest-bearing assets after deducting costs). The company previously said it expects NII growth to reach the upper end of the 6% to 8% range by 2026.