BofA Stung by Shadow Banks as Investment-Banking Fees Slip





(Bloomberg) -- What's shaping up to be a banner year for global mergers hasn't been enough to boost Bank of America Corp.'s investment bank.

While analysts had expected the firm to lose share to rivals in advisory fees, BofA also posted a 29 percent decline in debt-underwriting revenue, almost twice the drop that had been estimated. That drove overall investment-banking revenue down 18 percent, compared with a 1 percent slip at rival JPMorgan Chase & Co.

BofA's income from leveraged finance was pinched by regulatory constraints and increased competition from nonbank lenders, sometimes known as shadow banks, Chief Financial Officer Paul Donofrio said on a call with journalists Monday. The firm's investment bank has also been grappling with a string of senior-level departures this year, including the exit of the business's head, Christian Meissner.

"I know we can do better," Donofrio said on the media call. "I came from investment banking. I know they have built a great business, they have great bankers."

Shares of the company fell 1.6 percent to $28 at 9:47 a.m. in New York, the steepest decline in the 24-company KBW Bank Index. The decline brought this year's slide to 5.2 percent.

The fee slump, along with trading revenue that fell short of estimates, overshadowed a 25 percent jump in consumer-banking pretax profit and more progress on the firm's cost-cutting efforts.

Donofrio said the bank has a good pipeline in investment banking, which could bode well for fees in future quarters.

Chief Executive Officer Brian Moynihan has pushed a strategy of "responsible growth," which has led to a pullback from risk in some areas, bankers have said. People with knowledge of the decisions told Bloomberg this summer that some dealmakers in the U.S. and Europe departed to work at banks with less red tape because they felt constrained by the amount of risk they could take at Bank of America.

BofA's third-quarter drop was also more severe than at Citigroup Inc., where investment-banking fees fell 8 percent. In the second quarter, BofA was the only of the five major Wall Street firms not to report a jump in fees.

Companies announced about $3 trillion of mergers and acquisitions in the first nine months, according to data compiled by Bloomberg, giving 2018 a chance to beat the $4.1 trillion total set in 2007. But escalating trade tensions are starting to take a toll on business confidence, with appetite for corporate takeovers hitting a four-year low, according to a survey published earlier this month of more than 2,600 dealmakers across 45 countries by Ernst & Young LLP.

(Updates with share price in fifth paragraph.)

--With assistance from Ivan Levingston.

To contact the reporter on this story: Michelle F. Davis in New York at mdavis194@bloomberg.net

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Steve Dickson, Daniel Taub

For more articles like this, please visit us at bloomberg.com

©2018 Bloomberg L.P.

COMMENTS

More Related News

Twitter, Facebook Win Appeal in Anticonservative-Bias Suit
Twitter, Facebook Win Appeal in Anticonservative-Bias Suit

(Bloomberg) -- A federal appeals court rejected claims that tech giants Twitter Inc., Facebook Inc., Apple Inc. and Alphabet Inc.'s Google conspired to suppress conservative views online.The U.S. Court of Appeals in Washington on Wednesday affirmed the dismissal of a lawsuit by the nonprofit group Freedom

Bakery Chain Le Pain Quotidien
Bakery Chain Le Pain Quotidien's U.S. Arm Files Bankruptcy

(Bloomberg) -- The U.S. arm of bakery chain Le Pain Quotidien filed for bankruptcy in Delaware with plans to sell itself for $3 million in order to avoid shutting down for good, court papers show.The Chapter 11 petition allows Le Pain Quotidien to address its debt obligations and carry out a planned

Costly Electric Vehicles Confront a Harsh Coronavirus Reality
Costly Electric Vehicles Confront a Harsh Coronavirus Reality

(Bloomberg) -- At a factory near Germany's border with the Czech Republic, Volkswagen AG's ambitious strategy to become the global leader in electric vehicles is coming up against the reality of manufacturing during a pandemic.The Zwickau assembly lines, which produce the soon-to-be released ID.3 electric hatchback, are the centerpiece of a plan by the world's biggest automaker to spend 33 billion euros ($36 billion) by 2024 developing and building EVs. At the site, where an East German automaker built the diminutive Trabant during the Cold War, VW eventually wants to churn out as many as 330,000 cars annually. That would make Zwickau one of Europe's largest electric-car factories-and...

Sanofi to Sell Regeneron Stake Worth About $13 Billion
Sanofi to Sell Regeneron Stake Worth About $13 Billion

(Bloomberg) -- Sanofi is selling a stake in Regeneron Pharmaceuticals Inc. valued at about $13 billion, giving the French drug giant more firepower to invest in fast-growing fields such as cancer.Regeneron has agreed to repurchase $5 billion of its stock from Paris-based Sanofi, the companies said on Monday. Regeneron said that the French company also plans to sell approximately 12.8 million shares, a holding worth more than $7 billion based on Friday's closing price. That will mark the largest public equity offering in the heath-care industry on record.The announcement is part of Sanofi Chief Executive Officer Paul Hudson's revamped strategy. The company said in December that it would...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: Economy