BofA Trading Unit Trails Peers As Revenue Falls

Bank of America’s revenue from fixed-income trading declined the most among peers in the first quarter, eroding the biggest profit source of the firm’s Merrill Lynch investment bank.

Bloomberg reports that fixed-income, currency and commodity revenue dropped 20% to $3.3bn from a year earlier when the firm had a gain from the sale of mortgage securities, the bank said Wednesday. Total sales and trading revenue fell 13% to $4.5bn in the quarter.

CEO Brian Moynihan, 53, has relied on investment-banking units overseen by former Goldman Sachs trading head Thomas Montag to generate income while booking more than $40bn in costs from defective mortgages. Moynihan’s mandates have been to lower risk and expenses, improve capital, and regain regulators’ trust, said Eric Wasserstrom, an analyst at SunTrust Robinson Humphrey Inc.

'Given those priorities, there’s very little incentive for them to take outsized trading risks', said Wasserstrom, who has a neutral rating on Bank of America shares. 'It may mean that their absolute levels of trading revenue may be lower than peers on a going-forward basis'.

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