What a difference a year makes. Last year CEO Brian Moynihan blamed the bank’s poor showing in M&A for its lacklustre third quarter. This year, the revamped M&A division was the star of the show, with a 72.5% fee increase to $452m compared to Q3 2018. Across the investment banking division as a whole (M&A, equity capital markets and debt capital markets), fees were up 40% to $902m.
It’s an early vindication of Moynihan’s decision to invest in hiring 27 managing directors across M&A and capital markets worldwide since the start of 2019 after replacing former global banking and markets head Christian Meissner with Matthew Koder last September. BofA's investment banking revenues were up $258m year-on-year in Q3, the equivalent of $9.6m for each new MD hired.
Of course, it may not just be the 27 new MDs that bumped-up revenues at BofA. Last year, the bank was also criticized for being excessively choosy about the deals it became involved in and it's possible those criteria have been relaxed. However, it's notable that BofA's revitalized M&A division trounced both JPMorgan and Goldman Sachs in the third quarter - JPM’s advisory revenues fell 13% to $506m and Goldman’s dropped by more than a quarter to $716m when compared with the third quarter of 2018.
Away from the investment banking division, it wasn’t all plain sailing. One blot on the copybook was the rise in credit loss provision from energy exposures from to $190m from $120m a year ago.
In global markets, Bank of America’s revenues were flat at $3.8bn, although higher expenses dragged profits down to $858m compared with $994m a year ago.
FICC revenues suffered weaker trading in FX and credit products, offset by an improvement in mortgages and municipal products and didn't budge from last year’s $2.1bn.
BofA's equities division turned a better performance with trading revenues rising 13% to $1.1bn, a bigger jump than at any of its big rivals to have reported so far. Equities were boosted by client financing activities, which suggests an uptick in its equity derivatives business.
In terms of combined revenues in global banking and markets, BAML lagged its universal banking rivals Citigroup and JP Morgan but it beat Citigroup in debt and equity underwriting and M&A. After an exceptional quarter, BofA's bankers may now wonder how much they'll get paid. Historically, the generation of $10m in revenues suggested a bonus of $2m, at least.
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