Advertisement
Singapore markets closed
  • Straits Times Index

    3,224.01
    -27.70 (-0.85%)
     
  • Nikkei

    40,168.07
    -594.66 (-1.46%)
     
  • Hang Seng

    16,541.42
    +148.58 (+0.91%)
     
  • FTSE 100

    7,952.62
    +20.64 (+0.26%)
     
  • Bitcoin USD

    70,796.40
    +1,651.28 (+2.39%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • S&P 500

    5,254.35
    +5.86 (+0.11%)
     
  • Dow

    39,807.37
    +47.29 (+0.12%)
     
  • Nasdaq

    16,379.46
    -20.06 (-0.12%)
     
  • Gold

    2,254.80
    +42.10 (+1.90%)
     
  • Crude Oil

    83.11
    +1.76 (+2.16%)
     
  • 10-Yr Bond

    4.2060
    +0.0100 (+0.24%)
     
  • FTSE Bursa Malaysia

    1,530.60
    -7.82 (-0.51%)
     
  • Jakarta Composite Index

    7,288.81
    -21.28 (-0.29%)
     
  • PSE Index

    6,903.53
    +5.36 (+0.08%)
     

Will Mute Investment Banking Hurt BofA (BAC) Q1 Earnings?

Performance of investment banking, one of the primary sources of revenues for Bank of America BAC, is expected to be muted in first-quarter 2019. So, this will likely have an adverse impact on the bank’s results, slated on Apr 16.

Investment banking income basically comprises underwriting revenues (equity and debt) and advisory fees (generated from M&A deals and IPOs). So, let’s check how these are likely to have performed in the to-be-reported quarter.

Prolonged government shutdown at the beginning of the quarter and fears of economic slowdown weighed on companies’ plans to raise capital by issuing shares. Thus, BofA’s equity underwriting fees are expected to be weak.

Further, higher interest rates are likely to have slowed down companies’ involvement in debt issuance activities. Nonetheless, the Fed’s dovish stance on future rate hikes must have led to a slight increase in debt issuances during the quarter. Thus, debt underwriting fees (accounting for roughly 40% of total investment banking fees for BofA) might provide some support to the bank’s revenues.

Now coming to advisory fees, it is also not expected to be a great support to BofA’s top line. While dealmakers across the globe were active during the first quarter, global deal value and volume witnessed a fall due to higher borrowing costs and several geopolitical concerns.

Further, given the government shutdown and geopolitical ambiguity, IPO activities slowed down despite decent equity market performance during the quarter. So, these factors will have a slight adverse impact on BofA’s advisory fees. However, with the company being one of the leading players in this space, this will likely provide it some leverage.

Overall Earnings & Revenue Projections

Notably for BofA, the Zacks Consensus Estimate for earnings of 65 cents reflects a 4.8% increase on a year-over-year basis. Also, the consensus estimate for sales of $23.2 billion indicates a marginal rise of 0.5%.

Bank of America Corporation Price and EPS Surprise

 

Bank of America Corporation Price and EPS Surprise | Bank of America Corporation Quote

ADVERTISEMENT

Click here to know about the other factors that are likely to influence BofA’s overall results.

Our Take

Amid a tough operating environment, soft investment banking performance is expected to have a marginal adverse impact BofA’s revenues. Along with this, dismal trading performance remains a concern. Nonetheless, decent loan growth and higher interest rates will aid this Zacks Rank #3 (Hold) stock’s revenues.

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

Earnings Dates of Other Major Banks

U.S. Bancorp USB is slated to announce results on Apr 17, while KeyCorp KEY and BB&T Corp. BBT will come out with quarterly numbers on Apr 18.

Biggest Tech Breakthrough in a Generation

Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.

A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 7 stocks to watch. The report is only available for a limited time.

See 7 breakthrough stocks now>>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
KeyCorp (KEY) : Free Stock Analysis Report
 
Bank of America Corporation (BAC) : Free Stock Analysis Report
 
U.S. Bancorp (USB) : Free Stock Analysis Report
 
BB&T Corporation (BBT) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.