New York — Shares of Bank of America Corp. continued lower in Tuesday trading after closing more than 5% down the previous session, as investors digested cautious third-quarter guidance from CEO Brian Moynihan.
The stock fell nearly 1% in premarket trading Tuesday, extending losses from Monday’s 5.14% decline. Broader market futures were also modestly lower.
What Moynihan said
Speaking at a Barclays industry conference on Monday, Moynihan indicated that third-quarter sales and trading revenue is expected to come in roughly flat compared with the same period a year earlier. He described it as “one of the better third quarters we’ve ever had,” but noted the comparison is tougher because last year’s third quarter reflected a strong recovery.
On investment banking, Moynihan projected fees of $1.6 billion to $1.8 billion. That range sits below Wall Street’s consensus estimate of roughly $2 billion and implies a year-over-year decline of more than 10%.
Market reaction
The comments triggered a selloff across major bank stocks on Monday. Bank of America led the declines, while peers including Goldman Sachs, Morgan Stanley, JPMorgan Chase and Citigroup also fell. Investors appeared concerned that softer capital-markets activity could signal broader pressure on Wall Street fee income heading into third-quarter earnings reports in mid-October.
Moynihan noted that equities trading has been stronger so far this quarter while fixed-income trading has been softer, resulting in the overall flat outlook for sales and trading.
Broader context
Bank of America and other large lenders have benefited from solid underlying economic conditions and earlier strength in capital markets. The latest guidance, however, has prompted investors to recalibrate near-term expectations for trading and dealmaking revenue.
The bank is scheduled to report full third-quarter results in mid-October.