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Weakness in Investment Banking to Mar BofA (BAC) Q1 Earnings
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Investment banking (IB) performance, one of the key sources of revenues for Bank of America (BAC - Free Report) , is likely to have been dismal in first-quarter 2020. Hence, this is not expected to provide much support to the bank’s results, scheduled to be announced on Apr 15.
IB income basically comprises advisory fees (generated from M&A deals and IPOs) and underwriting revenues (equity and debt issuances). Let’s check out how these are likely to have fared in the to-be-reported quarter.
As the coronavirus mayhem hampered overall business activities, which in turn resulted in slowdown of the economy, the number of announced M&As declined in the first quarter. Therefore, as global M&A activity remained weak during the quarter, BofA’s advisory fees are likely to have been adversely impacted. Nonetheless, the bank — which is one of the leading players in this space — has been focusing on improving the M&A business. This must have provided some leverage.
Decent equity market performance in the first two months of the year and the central banks’ accommodative stance are likely to have driven corporates to issue equities globally. However, following the virus outbreak, significant volatility in the equity markets dried up issuances. IPO activities also followed a similar trend.
Bond issuance volumes were solid, while debt issuances were muted owing to soft loan demand. Hence, growth in BofA’s equity underwriting fees and debt origination fees (accounting for nearly 40% of total IB fees) are likely to have been weak in the first quarter.
BofA’s IB revenues are accounted in the Global Banking segment. The Zacks Consensus Estimate for the segment’s net revenues of $4.95 billion suggests a 3.8% sequential decline.
Earnings & Revenue Expectations
The Zacks Consensus Estimate for BofA’s first-quarter earnings of 66 cents indicates a 5.7% decline from the prior-year reported number. Likewise, the consensus estimate for sales of $22.5 billion suggests a 2.1% decline on a year-over-year basis.
Bank of America Corporation Price and EPS Surprise
Apart from IB revenues, a few other factors have impacted BofA’s overall performance during the first quarter.
Our Take
Dismal IB performance and a soft lending scenario amid near-zero interest rates are expected to have hampered this Zacks Rank #5 (Strong Sell) stock’s top-line growth in the to-be-reported quarter.
IB revenues constitute a major portion of total revenues for Goldman Sachs (GS - Free Report) , Citigroup (C - Free Report) and Morgan Stanley (MS - Free Report) . Similar to BofA, muted IB performance is likely to have hampered these banks’ revenues and earnings in the first quarter.
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Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
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Weakness in Investment Banking to Mar BofA (BAC) Q1 Earnings
Investment banking (IB) performance, one of the key sources of revenues for Bank of America (BAC - Free Report) , is likely to have been dismal in first-quarter 2020. Hence, this is not expected to provide much support to the bank’s results, scheduled to be announced on Apr 15.
IB income basically comprises advisory fees (generated from M&A deals and IPOs) and underwriting revenues (equity and debt issuances). Let’s check out how these are likely to have fared in the to-be-reported quarter.
As the coronavirus mayhem hampered overall business activities, which in turn resulted in slowdown of the economy, the number of announced M&As declined in the first quarter. Therefore, as global M&A activity remained weak during the quarter, BofA’s advisory fees are likely to have been adversely impacted. Nonetheless, the bank — which is one of the leading players in this space — has been focusing on improving the M&A business. This must have provided some leverage.
Decent equity market performance in the first two months of the year and the central banks’ accommodative stance are likely to have driven corporates to issue equities globally. However, following the virus outbreak, significant volatility in the equity markets dried up issuances. IPO activities also followed a similar trend.
Bond issuance volumes were solid, while debt issuances were muted owing to soft loan demand. Hence, growth in BofA’s equity underwriting fees and debt origination fees (accounting for nearly 40% of total IB fees) are likely to have been weak in the first quarter.
BofA’s IB revenues are accounted in the Global Banking segment. The Zacks Consensus Estimate for the segment’s net revenues of $4.95 billion suggests a 3.8% sequential decline.
Earnings & Revenue Expectations
The Zacks Consensus Estimate for BofA’s first-quarter earnings of 66 cents indicates a 5.7% decline from the prior-year reported number. Likewise, the consensus estimate for sales of $22.5 billion suggests a 2.1% decline on a year-over-year basis.
Bank of America Corporation Price and EPS Surprise
Bank of America Corporation price-eps-surprise | Bank of America Corporation Quote
Apart from IB revenues, a few other factors have impacted BofA’s overall performance during the first quarter.
Our Take
Dismal IB performance and a soft lending scenario amid near-zero interest rates are expected to have hampered this Zacks Rank #5 (Strong Sell) stock’s top-line growth in the to-be-reported quarter.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
IB Fee Projections for Other Banks
IB revenues constitute a major portion of total revenues for Goldman Sachs (GS - Free Report) , Citigroup (C - Free Report) and Morgan Stanley (MS - Free Report) . Similar to BofA, muted IB performance is likely to have hampered these banks’ revenues and earnings in the first quarter.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>