$5 Billion Slump: Bank of America Shares Tank as CEO Predicts Double-Digit Investment Bank Fee Decline

The sector is recalibrating after a blockbuster quarter as energy shifts from the capital markets to regulatory hearings. Brian Moynihan, Chairman and CEO of Bank of America, testified during a Senate Banking Committee hearing at the Hart Senate Office Building on December 06, 2023. He noted the bank posted a 50% jump in investment banking fees and a 33% jump in trading revenue during the second quarter. Now the physics of the market suggest a correction is underway.

The outlook for the third quarter introduces a clear tradeoff between momentum and stability. Moynihan told analysts that investment banking fees will likely decline by more than 10% from the year-earlier period. Trading revenue is expected to be roughly flat. The CEO cited Dealogic data showing the market generally in investment banking is down 10 percent. He admitted the bank is not as well positioned in some high-activity businesses, so the decline may exceed the market average.

Market mechanics are reacting sharply to this shift in momentum. Bank of America shares were down 5% in afternoon trading following Moynihan's comments. This volatility suggests investors are questioning whether the AI-fueled advisory and trading boom has simply hit turbulence. Despite the projected double-digit decline, Moynihan pointed to a robust deal pipeline, particularly in middle-market investment banking.

Competitors are seeing a different trajectory. Gonzalo Luchetti, CFO of Citigroup, told analysts that investment banking is tracking for 'low-single-digit' revenue growth. His unit is targeting 'mid-single-digit' growth for trading revenue. Luchetti emphasized that September is a key month and these final weeks are very meaningful for closing deals.