Bank of America (NYSE:BAC) will hold its corporate earnings conference call webcast on January 19, and the report will most likely contain lackluster data despite the recent increase in the discount rate.
Other Major Banks Lag, Too
In addition, Goldman Sachs (NYSE:GS), JPMorgan Chase (NYSE:JPM), Morgan Stanley (NYSE:MS) and Citigroup (NYSE:C) will be announcing earnings as well, and the five banks are expected to announce less than exemplar results, as Wall Street experts are suggesting that the investment banks realized less revenue from trading in the fourth quarter than they did in the difficult third quarter.
The current round of weak results points to market forces and policies, such as the adoption of electronic platforms for trading and the Volcker ban on proprietary trading, have negatively impacted profitability for the large investment banks.
Together the five banks represent close to $8 billion in revenue generated from their trading units and core debt sales, according to estimates by Credit Suisse. This amounts to a measly 2% increase over the same quarter in 2014 and a significant decrease of 15% from the third quarter in 2015.
While most investment banks experience a decline in trading activity close to the end of the year, this year is expected to be weaker than previous years.
Particular Points of Meltdown
Two international developments played a critical role in the lack of activity, as investors remained wary of continuing weak oil prices and increasing fears of the meltdown in Chinese markets. In addition, the mounting political tensions created by the breakdown of diplomatic ties between Saudi Arabia and Iran, as well as the reported test of a nuclear bomb conducted by North Korea, have convinced many investors to sit on the sidelines for now.
The healthy mergers and acquisitions market could help to defray the negative trading results, yet Bank of America and others earned M&A fees that were represented approximately estimates by Credit Suisse of the revenues derived from trading and sales for the first three quarters in 2015.
