Weak Trading Activities To Hurt BofA (BAC) In Q4 Earnings?

Weak trading activities continued in the fourth quarter of 2017. This might have an adverse impact on Bank of America’s (NYSE:BAC) fourth-quarter results slated to be released tomorrow, given the significant dependence of its top line on this source.

Though there hasn’t been significant change in market volatility in the last quarter, the decline in trading revenues will primarily be due to comparison with the prior-year quarter that witnessed higher volatility following the U.S. Presidential election results. Also similar to the last couple of quarters, lower fixed income trading is expected to be largely responsible for lower trading revenues in the to-be-reported quarter.

In 2017, several political and geopolitical developments, hike in interest rates, passage of the tax act and lack of any significant progress on the regulatory reforms proposed by the Trump administration should have incited volatility. But subdued inflation in the United States and marginal increase in long-term interest rates along with absence of specific catalysts have been a drag.

At an investor conference in early December 2017, BofA CEO Brian Moynihan stated that the company’s trading business till then in the fourth quarter was down nearly 15% year over year. In fact, there has been hardly any change in the scenario since then.

Overall Earnings & Revenue Expectations

Notably, for BofA, the Zacks Consensus Estimate for earnings of 44 cents indicates 10% growth on a year-over-year basis. Also, the Zacks Consensus Estimate for sales of $21.3 billion implies a 6.5% increase from the prior-year quarter.

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

Bank of America Corporation Price and EPS Surprise

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

Conclusion

Amid a tough operating backdrop, slump in trading revenues is expected to hamper this Zacks Rank #2 (Buy) stock’s top-line growth to some extent.

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

However, the Zacks Consensus Estimate for BofA’s Global Markets segment’s (under which trading revenues are accounted for) revenues of $3.54 billion reflects an increase of 1.9% from the prior-year quarter.

Trading Revenue Projections for Other Companies

Both Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) are expected to report lower trading revenues in the to-be-reported quarter.

Notably, JPMorgan (NYSE:JPM) already reported a 26% fall in Markets revenues mainly due to a 34% plunge in fixed income trading revenues.

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