By Saabira Chaudhuri
Bank of America Corp. and Citigroup Inc. both offered weak
outlooks for trading revenue in the fourth quarter, showing a burst
of activity for trading last quarter may not carry over as much as
some investors hoped.
Bank of America's chief executive, Brian Moynihan, said at an
industry conference sponsored by Goldman Sachs Group Inc. on
Tuesday that fourth-quarter trading revenue would be lower than
both year-ago levels and the third quarter's.
Citigroup's CEO Michael Corbat estimated that the New York
bank's markets revenue would be down year-over-year by about
5%.
In particular, Mr. Corbat indicated that he expects fixed
income, currencies and commodities trading to fall, saying
Citigroup "didn't escape" sharp moves in rates, foreign exchange
and bonds early in the fourth quarter.
Bank of America's shares fell more than 2% at one point Tuesday,
but then made up some ground to finish the day down 0.57%.
Citigroup shares dropped more than 2.6% after disclosing the
trading estimates and saying it would log $2.7 billion in
fourth-quarter legal charges, before recovering to finish down
0.92%.
Shares of rivals Goldman Sachs Group Inc. and Morgan Stanley
rose on the day, while shares of J.P. Morgan Chase & Co., fell
0.35%.
Trading revenue at the nation's biggest banks has been pummeled
in recent quarters, although third-quarter results largely topped
Wall Street expectations as fixed income, currencies and
commodities trading revenue came in stronger than estimated.
Headwinds for the trading business include tighter regulations
that prevent banks from taking big risks in fixed income,
commodities and stock trading. A prolonged period of low interest
rates has also discouraged clients from switching strategies in
rates-trading businesses.
Bank of America in October reported trading revenue, excluding
adjustments to the value of the bank's debt, rose 9.2% in the third
quarter to $3.27 billion. FICC revenue was particularly strong as
the lender benefited from an easy comparison with a year-ago period
in which it fell 20%. In the third quarter, FICC trading revenue
was up 11% from the third quarter of 2013 to $2.25 billion. Equity
sales and trading rose 5.9% from the third quarter of 2013 to $1.03
billion.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
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