Bank of America, Citi Give Weak Outlooks for Trading Revenue -- 2nd Update

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 [e-mail]

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