Bank of America leads financial services stocks lower on weak Wall Street fee forecast

Bank of America ( BAC ) stock closed roughly 5% lower on Monday after CEO Brian Moynihan delivered an underwhelming forecast for his bank's quarterly dealmaking and trading fees.

Moynihan said on Monday that investment banking fees are on pace to reach $1.6 billion to $1.8 billion in the third quarter, or down about 10%-20% from the $2 billion it earned in the third quarter of last year.

The broader investment banking market is on pace to be down roughly 10%, according to Dealogic data.

"We're not as well-positioned in some of the businesses that have more activity," Moynihan said at a financial services conference hosted by Barclays, adding that the deal pipeline remains strong and "part of it is just getting the deals through the system."

Bank of America's sales and trading business, meanwhile, is poised to be flat from a year ago, with the financing and prime brokerage activity that boosted results earlier this year cooling over the summer as investors pulled back on risk, Moynihan said.

The downshift in quarterly Wall Street revenue is expected to make it more difficult for the Charlotte, N.C.-based bank to show revenue growth outpacing expenses during the period, Moynihan acknowledged.

"There's always a quarter where the thing goes quickly," he said, adding that "it takes you a quarter or two to get back underneath it."

The pullback in trading comes after the global AI trade faced a sharp unwind in July as shares of tech giants and chipmakers faced mounting valuation scrutiny amid a capital expenditure binge to build out their AI capabilities.

During the same period, AI-focused hedge fund Situational Awareness, run by former 24-year-old OpenAI ( OPAI.PVT ) researcher Leopold Aschenbrenner, faced a dramatic wipeout.

Shares for other Wall Street banks also tumbled on Monday, with Goldman Sachs ( GS ) and Morgan Stanley ( MS ) falling 4% and 3%, respectively, while JPMorgan Chase ( JPM ), Citigroup ( C ), and Wells Fargo ( WFC ) were down between 1% and 2%.

At Citigroup, Wall Street's outlook for the quarter appears considerably stronger. CFO Gonzalo Luchetti told investors at the same conference that market revenue is tracking toward mid-single-digit growth from a year ago, helped by equities, financing, and foreign exchange. Citi also expects investment banking revenue to rise by the low single digits, with potential upside depending on deals completed before quarter-end.

Bank of America's Moynihan was far more upbeat about the bank's Main Street-focused operations. He said loans and deposits are growing, and net interest income is tracking in line with the bank's expectations.