Bank of America probably will report a 5 percent drop in third-quarter trading revenue amid volatile markets, Chief Executive Officer Brian Moynihan said.
Fixed-income, run by Bernard Mensah and James DeMare, is responsible for the decline, Moynihan said Thursday at a conference sponsored by Barclays Plc in New York. Fabrizio Gallo’s equities business will show a gain, according to Moynihan, who’s also chairman.
“Equities is up strongly,” he said. “That’s partly because of the fundamental work Fab has down repositioning the business over the last few years.”
A 5 percent decline from last year’s third quarter, when trading revenue was $3.27 billion, would be about $3.1 billion.
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The stocks-up, bonds-down dynamic would match what the Charlotte-based bank reported in the second quarter. Fixed-income revenue dropped 9.3 percent to $2.15 billion because of stagnation in credit-related products, while equities revenue rose 13 percent to $1.18 billion, the company said. The trading division’s profit slipped 9.9 percent to $993 million.
While fixed income, which makes up two-thirds of Bank of America’s trading revenue, is down from last year’s third quarter, the “real question” is what happens in the next few weeks, after the Federal Reserve announces its interest-rate decision Thursday afternoon, Moynihan said.
The CEO has repeatedly said that unless revenue rebounds in the trading division, run by Chief Operating Officer Thomas Montag, he would have to cut costs more deeply. He said Thursday that he’d continue to focus on trimming companywide expenses, while emphasizing sustainable growth.
“We have to grow, no excuses,” Moynihan said.
Citigroup Inc. Chief Financial Officer John Gerspach said Wednesday that his firm’s third-quarter trading revenue will also decline about 5 percent.