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BofA Down 2.9% on Outlook of 5-6% Trading Revenue Fall

While the Federal Reserve's decision to keep interest rates unchanged in the wake of adverse global economy, heightened market volatility and low inflation at home sparked mixed reactions, the lower trading revenue outlook provided by some of the major banks indicated that the earnings picture is unlikely to improve in the third quarter earnings season.

Shares of Bank of America CorporationBAC fell nearly 3% after Chief Executive and Chairman Brian Moynihan forecasted a reduction of 5% to 6% in trading revenue in the upcoming quarter at the Barclay's Global Financial Services Conference in New York.

While revenue from bonds, currencies and commodities trading are expected to be down in the third quarter, increased revenues in the smaller equities trading group are anticipated to mitigate the downfall to some extent.

The news comes a day after another banking behemoth Citigroup Inc.'s C Chief Financial Officer John Gerspach predicted third-quarter 2015 trading revenue to drop by 5% year over year, impacted by elevated volatility. (Read more: Citigroup Anticipates Q3 Trading Revenues to Slump 5% Y/Y )

With an envisaged drop in fixed-income trading revenue, to be partly offset by higher equities trading revenue, Bank of America expects the trading revenue slump witnessed in the second quarter to continue in the third quarter as well.

On the cost control front, Moynihan said, "If the revenue environment weakens or interest-rate structures don't move up and the economy slows down, we'll have to take out more costs."

Bank of America remains focused on its cost savings plan. Also, the company continues to consolidate branches in markets where the growth potential does not meet its criteria, while expanding in markets with strong growth potential. The successful implementation of 'Project BAC' and absence of substantial legal costs have helped the bank improve its efficiency and steadily bolster the bottom-line growth.

Currently, Bank of America carries a Zacks Rank #3 (Hold). A couple of better-ranked major regional banks include Wells Fargo & Company WFC and U.S. Bancorp USB , both with a Zacks Rank #2 (Buy).

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US BANCORP (USB): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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