The investment banking (IB) business, one of the major revenue sources of Bank of America (NYSE:BAC), is not expected to have performed impressively in second-quarter 2022. Thus, the same is not likely to support BAC's results, scheduled to be announced on Jul 18.
IB fees mainly comprise advisory fees (generated from M&As and business restructuring) and underwriting revenues (equity and debt). Let's see how these are likely to have fared in the to-be-reported quarter.
After an extraordinary performance for almost two years, deal-making across the globe hit a purple patch. Raging inflation, equity markets rout (with the S&P 500 Index witnessing the worst first-half performance in more than 50 years) and fears of recession dealt a huge blow to the business sentiments and plans for expansion through acquisitions. Thus, both deal volume and total value numbers crashed during the second quarter.
Hence, BofA's advisory fees are likely to have been adversely impacted.
Further, given the above-mentioned concerns, the equity market performance was disappointing in the to-be-reported quarter and thus, IPOs and follow-up equity issuances dried up. Likewise, bond issuance volume is likely to have been muted too. Thus, BofA's underwriting fees (accounting for almost 40% of total IB fees) are expected to have been hurt in the June-end quarter.
The Zacks Consensus Estimate for BAC's IB income of $1.44 billion suggests a decrease of 32% from the prior-year quarter's reported level.
