How Will Surging IB Business Support Bank of America's Fee Income?

Core Insights - Investment banking (IB) fees represent 13.5% of Bank of America's (BAC) non-interest income on average, with a year-over-year increase of 9.5% to $5 billion in the first nine months of 2025, and a projected full-year growth of approximately 4% [1][9] - The investment banking environment is improving due to a resilient economy, easing financing costs, and renewed corporate confidence, which is expected to enhance deal-making and capital-raising activities [2][3] - Bank of America is positioned to leverage its market share in the investment banking sector as the contribution of IB fees to its fee income is anticipated to rise further in the coming quarters [4][9] Industry Performance - JPMorgan's IB fees increased by 12.3% year over year to $7.3 billion in the first nine months of 2025, with expectations of low single-digit growth in the fourth quarter [6] - Citigroup's IB fees surged 15% year over year to $2.9 billion during the same period, with projections of mid-20s percentage growth in the fourth quarter [7] - The overall investment banking landscape is benefiting from a more business-friendly policy environment, including faster antitrust reviews and smoother cross-border approvals [2] Market Conditions - The Federal Reserve's third consecutive 25-basis-point rate cut in December has lowered interest rates to a range of 3.50-3.75%, which is expected to accelerate deal execution and revive previously shelved mergers and acquisitions [3] - The improving operating backdrop is likely to enhance the prospects for M&A and underwriting activities going into 2026, positively impacting Bank of America's IB fees [3][9] Valuation and Earnings Estimates - Bank of America shares have appreciated by 19.2% over the past six months, trading at a 12-month trailing price-to-tangible book (P/TB) of 1.98X, which is below the industry average [8][11] - The Zacks Consensus Estimate indicates year-over-year earnings growth of 16.2% for 2025 and 13.9% for 2026, with recent earnings estimates for 2025 rising slightly while those for 2026 have been revised lower [12]