Bank of America Warns of Double-Digit Drop in Q3 Investment Banking Fees, Spurring Sector Sell-Off

Bank of America's chief executive has signaled a significant slowdown in third-quarter investment banking activity, forecasting a double-digit percentage decline in fees and triggering a broad sell-off across the banking sector. The warning raises concerns about the impact of sustained high interest rates on corporate deal-making and financing.

BofA Forecasts Weaker Quarter

Speaking at the Barclays Global Financial Services Conference, CEO Brian Moynihan said the bank's Q3 investment banking fees are on track to be between $1.6 billion and $1.8 billion. This projection represents a decline of more than 10% from the $2 billion generated in the same quarter of 2025.

In contrast, Moynihan noted that sales and trading revenue is expected to be flat compared to the $5.4 billion reported in the third quarter of last year. The primary driver for the weakness, according to the CEO, is a broad slowdown in financing activity as clients adjust to a "higher-for-longer" interest rate environment.

Market Reaction and Sector-Wide Concerns

The forecast immediately weighed on financial stocks. Shares of Bank of America (BAC) fell 5.14% to $59.47 by the market close on Monday, helping to drag the broader S&P 500 Banks Index down 2.7%.

This appears to be an industry-wide issue rather than a problem specific to one bank. According to a report from Jefferies cited by Investing.com, proxy data for eight major global banks as of September 3 already showed third-quarter investment banking revenue tracking down 15% year-over-year and 27% from the second quarter.

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Key factors pinching capital markets activity include:

• Higher Interest Rates: Slowing demand for financing and M&A.
• Asia Prime Brokerage: Deleveraging by international clients has reduced activity.
• Tough Comparisons: The current quarter is being compared against a period with elevated hedging flows.

Differentiated Performance Among Peers

While the outlook is challenging, performance is not uniform across Wall Street, with more diversified firms showing greater resilience. Data suggests that Goldman Sachs and JPMorgan have weathered the slowdown better, supported by stronger M&A advisory and debt capital markets businesses.

Firms with large wealth management divisions, such as Morgan Stanley and UBS, also have a significant buffer against the volatility in investment banking. In contrast, European banks like Barclays, which derive a substantial portion of revenue from their investment bank, are seen as more exposed to the current headwinds.