Bank of America shares sold off sharply after Chief Executive Officer Brian Moynihan issued a downbeat third-quarter revenue warning at the Barclays Global Financial Services Conference. The stock closed at $59.47 on September 14, down 5.14%, with trading volume hitting 60.8 million shares, roughly 86% above the three-month average of 32.7 million.
Moynihan flagged that investment banking fees will likely fall by at least 10% year-over-year and may drop as much as 20%, implying fee revenue between $1.6 billion and $1.8 billion for the third quarter. That compares with roughly $2 billion in the same period last year. Sales and trading revenue is expected to remain approximately flat against the year-ago baseline of $5.4 billion, with equities trading posting only marginal growth and fixed income facing unexpected volatility.
The cautious outlook marks a sharp reversal from the second quarter, when Bank of America reported a 50% year-over-year increase in investment banking fees and a 34% jump in trading revenue. Moynihan said the overall investment banking market is down about 10%, adding that Bank of America is not as well positioned in some of the more active businesses and will likely be down a bit more than the market.
The warning rippled through the financial sector. JPMorgan Chase fell 1.71% to close at $350.13, while Wells Fargo dropped 1.75% to end at $88.71. The S&P 500 banking index declined 2.7%. Broader equities also slipped, with the S&P 500 down 0.48% to 7,620 and the Nasdaq Composite off 0.56% to 26,186.
Investors also weighed the macro backdrop. The 10-year Treasury yield remains near 5%, and a potential Federal Reserve rate hike is expected within days. Higher financing costs are compressing deal economics and could further slow investment banking and trading activity. Still, Moynihan noted that consumers remain resilient, with spending intact and credit quality as strong as it has been for a long time. Bank of America is scheduled to report third-quarter results on October 14.
The guidance raises broader questions about whether the capital markets slowdown is a temporary lull or the start of a more durable cooling trend across Wall Street.
