Trading Revenue Seen Rising at BofA, Citigroup in Quarter

  • BofA trading revenue up `mid-single digits,' Moynihan says
  • Revenue looks favorable compared with weak 2014 results

Fourth-quarter trading revenue at Bank of America Corp. and Citigroup Inc. is on pace to increase from a year earlier when light activity crimped revenue and led the firms to ratchet down compensation.

Bank of America’s sales and trading revenue for 2015’s final three months “ought to be up mid-single digits from last year,” Chief Executive Officer Brian T. Moynihan said Wednesday at an investor conference in New York. Citigroup Chief Financial Officer John Gerspach declined to offer a similar comparison, but provided figures that suggest revenue would increase about 12 percent if his worst case scenario plays out, according to data compiled by Bloomberg.

“Last year was so bad in the fourth quarter, I don’t have a year-over-year comparison,” Gerspach said at the same conference, which was organized by Goldman Sachs Group Inc. “I almost want to forget the fourth quarter of last year.”

Wall Street firms have struggled with lower trading revenue for years, cutting costs and jobs amid the decline. The projected results from the two firms suggest it’s possible the worst is behind them. Morgan Stanley’s investment banking and trading head Colm Kelleher said last month that the low point for bond trading has potentially been reached, and this week JPMorgan Chase & Co. CFO Marianne Lake said an expected increase in interest rates could benefit trading businesses next year.

Equities, Fixed Income

In 2014, Bank of America posted $1.74 billion in fourth-quarter sales and trading revenue, or $2.4 billion excluding accounting adjustments. On that basis, trading revenue declined 14 percent from a year earlier on a slump in fixed-income.

Citigroup reported $2.55 billion revenue from equities and fixed-income trading in last year’s fourth quarter. The New York-based firm booked $3.57 billion in this year’s third quarter, and fourth-quarter revenue will decline from 15 percent to 20 percent from there, Gerspach said.

Investors are looking forward to the Federal Reserve meeting next week, when policy makers are expected to increase interest rates. The response to comments around that decision will determine how well trading businesses finish the year, Gerspach said.

“The market reaction to what the Fed says is really going to be the determinant as to where we fall within that range,” Gerspach said.

‘Nice Rebound’

In investment banking, Citigroup enjoyed a “nice rebound” in revenue from advising on mergers and acquisitions in the fourth quarter, the CFO said. Charlotte, North Carolina-based BofA’s investment-banking revenue is “flattish to slightly up from the third quarter,” Moynihan said, adding that “there’s not as much activity.”

Citigroup reduced last year’s bonus pool for traders and salespeople after their division’s lackluster performance in the final weeks of 2014, a person briefed on the matter said in January. Bank of America also cut compensation for equities traders and sales staff by as much as 10 percent after disappointing results.

Bank of America’s stock was unchanged at $17.19 at 11:19 a.m. in New York, while Citigroup fell 0.4 percent to $53.20. The shares have slid 4 percent and 1.7 percent this year, respectively, compared with a 2.4 percent decline for the 87-company Standard & Poor’s 500 Financials Index.

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