Bank of America might be the best investment bank in the world
If you try to imagine a bank that stands head and shoulders above its national and global peers, you should start imagining one based in North Carolina.
Well, Bank of America (BofA) Securities is based in New York, but you get the point. BofA’s Q2 results are out today, and the bank has outscored its opponents by nearly every metric.
Although the last major US investment banking operation – Goldman Sachs – has yet to announce its Q2 performance (it’ll do so tomorrow), BofA has already beaten out both JPMorgan and Morgan Stanley, which announced results Friday and earlier today, respectively.
When comparing the first half of 2023 to the first half of 2022, Bank of America performed significantly better in both fixed-income, currencies and commodities trading, as well as equities trading. Revenues increased (by 24% and fell by 11% respectively), compared to JPMorgan (-1% and -16%, respectively) and Morgan Stanley (-21% and -14%).
The investment bank also did well, although the gap wasn’t as stark; M&A advisory revenue fell by 19%, compared to JPM’s -11% and Morgan Stanley’s 29%, whilst equity and debt capital markets (ECM and DCM) performance was significantly above both; Bank of America registered revenue growth of 44% and 14% for ECM and DCM respectively, whilst JPMorgan registered only an 12% growth in ECM and a 22% decline in DCM fees. Morgan Stanley saw modest increases of 5% and 6% for ECM and DCM, respectively.
The numbers tell a similar story quarter by quarter, with both Morgans beaten slightly less firmly across the board (except in DCM), although BofA noted a lower fall in advisory revenue than either (8%, as opposed to 19% for JPMorgan and 24% for Morgan Stanley).
BofA also beat Citi across the board when comparing half years. Quarterly, however, Citi had a (semi-)miraculous performance in M&A revenues, which shot up by 55%, and DCM revenues, which increased by 6%. Across ten metrics however, 2-8 isn’t much of a victory.
What’s driving BofA’s people? Well, it’s hard to say. The bank doesn’t break out compensation or headcount figures for its investment bank, but as a group has “only” increased its spending on compensation around 5% since last year (both by half and quarter), and its pay per head is only up around 2.5%, which is less than inflation.
A more likely source of motivation might be its job-cut-phobic attitude. The bank was reliying on natural attrition to reduce its headcount since last year, and has recently encouraged people who might have otherwise been made redundant to look for jobs in other sections of the bank. However, this hasn't stopped it cutting a mere 4,000 jobs before the end of June.
We already crowned Bank of America the “kings of 2022” for weathering the economic storm best, and as 2023 rolls along, it looks like the bank might be on track for back-to-back championships – call it Max Verstappen, if you will.
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