BofA leads rivals in Q2, powered by FICC

2 min read
Americas
Philip Scipio

Bank of America outperformed rivals in fixed income trading in the second quarter as trends in the market favoured the US bank’s strategy and increased tolerance for risk.

BofA's revenue from fixed income, currency and commodities in the April-June quarter were US$2.8bn, up 18% from a year ago. It was the only large bank to report so far to show an improvement over the year-ago quarter in FICC trading.

Revenue from equity trading in the quarter fell 2% from a year ago to US1.6bn, the smallest decline among its largest rivals.

BofA said expenses in its global markets group, which includes FICC and equity trading, rose 8% from a year ago, primarily driven by investments in the business.

The themes of inflation, geopolitical tensions, and central banks changing monetary policies around the globe, along with the debt ceiling debate in Washington DC, continued to impact bond and equity markets, BofA CFO Alastair Borthwick said on a call with analysts.

“As a result, it was a quarter where we saw strong performance in both our macro and micro trading businesses,” Borthwick said.

The bank also continued to benefit from investments it made in the trading and investment banking businesses over the past two years.

BofA's investment banking revenues in the April-June quarter outperformed rivals with a 6% year-on-year rise to US$1.2bn, on the strength of equity underwriting revenue, which more than doubled. Revenue from ECM rose 106% to US$287m, offseting a 9% drop in debt underwriting revenues to US$600m and a 4% fall in revenue from M&A advisory to US$375m. BofA also had the smallest decline in advisory revenue in the quarter among its peers – JP Morgan, Citigroup and Morgan Stanley have also reported.

Overall, BofA beat analysts’ earnings estimates for the second quarter. The bank earned US$7.1bn, or 88 cents a share, on revenue of US$25.2bn. Analysts were expecting EPS of 84 cents a share.

The bank has also trimmed staff numbers this year. Borthwick said headcount was down about 4,000 this year, excluding about 2,500 summer interns who started in recent months, to 213,000. "That's some good work after peaking at 218,000 in January," he said.