Key Takeaways:
Bank of America Corp. told investors its third-quarter sales and trading revenue will be roughly unchanged from a year earlier, the most conservative outlook any major U.S. bank has given for the period, and the shares fell 5.14 percent to $59.47 on Sept. 14. Volume of 60.8 million shares ran about 86 percent above the three-month average of 32.7 million, according to Yahoo Finance data.
"Second quarter was a pretty extraordinary quarter in the markets, and I'd say the third quarter won't be a repeat of the second quarter," Morgan Stanley co-president Daniel Simkowitz said at the Barclays Global Financial Services Conference.
Chief Executive Brian Moynihan, speaking at the same conference, put third-quarter investment banking fees at $1.6 billion to $1.8 billion, down 10 percent to 20 percent from about $2 billion a year earlier, according to Reuters. The guidance lands against a second quarter in which Bank of America's investment banking fees rose about 50 percent and trading revenue climbed roughly 33 percent, CNBC reported. Moynihan also said net interest income for full-year 2026 should grow toward the upper end of a 6 percent to 8 percent range, and that consumer and corporate clients remain broadly healthy.
The retreat was sector-wide. The S&P 500 banking index fell about 2.7 percent, Goldman Sachs Group Inc. dropped roughly 4 percent, Morgan Stanley shed about 3.6 percent, and Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. each lost between 1 percent and 2 percent. Jefferies calculated that investment banking revenue across eight global institutions had fallen 15 percent year over year and 27 percent quarter over quarter as of Sept. 3, while Dealogic put industry-wide activity down about 10 percent.
The comparison that matters is the one Bank of America is being measured against. JPMorgan, Goldman Sachs, Citigroup and Bank of America together booked $19.3 billion of equity trading revenue in the second quarter, up 72 percent from a year earlier — a figure that three separate drivers inflated at once. Retail enthusiasm for artificial intelligence stocks, a speculative wave through Asian semiconductor names, and the volatility surrounding SpaceX's mega-IPO all pulled volume into the second quarter and then faded.
Moynihan pointed to Asia as the clearest evidence of the turn. Financing activity in the region has cooled, he said, and prime brokerage — the lending desks that fund hedge funds, trading firms and family offices — has pulled back noticeably. That business is the most rate- and volatility-sensitive part of a markets franchise, which is why its slowdown shows up in guidance before it shows up in reported revenue.
Peers are not disputing the direction, only the depth. JPMorgan co-president Doug Petno guided third-quarter trading revenue to a seasonal quarter-over-quarter decline while still growing in the mid-teens year over year. Citigroup Chief Financial Officer Gonzalo Luchetti told the same conference that markets revenue is tracking toward mid-single-digit growth, supported by equities, financing and foreign exchange, with investment banking revenue set for low-single-digit expansion and room to improve if pending deals close before quarter-end. Goldman Sachs CEO David Solomon said equities remain strong while fixed income, currencies and commodities will be slightly softer; Goldman shares have lost about 7 percent over the past week.
Management teams used the same conference to argue that the slowdown is cyclical rather than structural. Petno said demand for prime brokerage and structured financing has increased markedly and expects that trend to run for a considerable time. Solomon framed the longer arc around market capitalization: if U.S. and global equity values compound over the next decade, the financing banks provide to clients should compound at a similar rate, though he acknowledged the path will not be a straight line.
For Bank of America specifically, the mix matters more than the headline. Trading and advisory fees are the volatile slice of revenue; net interest income, guided toward the top of a 6 percent to 8 percent growth range for 2026, is the stable one. Moynihan conceded that the third-quarter deceleration will make it harder to show positive operating leverage, the gap between revenue growth and expense growth that investors use to judge whether a bank is scaling or simply spending.
The test arrives within weeks. All four banks report results for the quarter ended Sept. 30 in October, and the guidance now on the table sets a low bar: Bank of America at flat, Citigroup at mid-single digits, JPMorgan at mid-teens, Goldman strong in equities and softer in FICC. Wall Street analysts still carry a Strong Buy consensus on Bank of America with an average price target of $68.86, implying about 15.7 percent upside from the Sept. 14 close — a target that now depends on whether the third quarter proves a pause or the start of a longer normalization in market revenue.
This article is for informational purposes only and does not constitute investment advice.
