BofA Reports Record Equity Trading Revenue Thanks To Q1 Vol Surge, As FICC Slides

After Friday's earnings reports from JPM and Citi suggested that, unlike most hedge funds, banks profited handsomely from the surge in Q1 volatility, this morning's results from BofA confirmed that yet another bank enjoyed bumper revenue in equity trading in the first quarter at the expense of FICC, even as the bank's generally favorable balance sheet trends persisted.

The big picture: BofA reported adjusted Q1 revenue of $23.27BN, just above the $23.1BN expected, generating EPS of $0.62, also beating consensus estimates of $0.59.

Commenting on the results, CEO Brian Moynihan said that BofA’s "strong client activity, coupled with a growing global economy and solid U.S. consumer activity, led to record quarterly earnings."

Then, going straight to the slide in the earnings presentation that all will focus on - Global Markets - BofA reported Q1 sales and trading revenue excluding DVA of $4.117 billion, just missing the consensus estimate of $4.14 billion. Just like with JPM and Citi, BofA too saw a dramatic surge in Equity sales and trading revenues, which soared from $1.1BN in Q1 2017 to a record $1.517BN, smashing estimates of $1.18BN.

This is what the bank said:

Record Equities revenue of $1.5B increased 38% from 1Q17, driven by increased client activity and a strong trading performance in derivatives

That was the good news: the bad is that just like with JPM, FICC disappointed, printing at $2.5 billion (ex DVA), down 13% Y/Y, "due to lower activity and less favorable market conditions in credit-related products, partially offset by improved activity in rates and currencies", and well below the estimate of $2.96 billion.

Another disappointment: 1Q investment banking revenue tumbled 15% Y/Y to $1.35 billion, also below the estimate of $1.48 billion.

To sum up: FICC sales and trading missed, but was almost exactly offset by the rebound in Equities S&T, even as investment banking revenue slumped in a quarter that saw few marquee M&A or bond and equity issuance deals.

Some other trading highlights:

  • Average total assets increased from 1Q17, primarily due to targeted growth in both Equities and FICC

  • Average VaR remained low at $40MM in 1Q18

Last but not least, BofA was proud to announce it had no trading loss days recorded in the first quarter.

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