Bank of America's results mean bonuses won't be straightforward
It's a while until Bank of America announces its bonuses - sources at the bank say the 27th of January is the expected date this year. However, BofA's results are out today, and they suggest that Bloomberg's claims that BofA bonuses will be up by an average of 10% might an over-generalisation.
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Collectively, Bank of America's salespeople and traders had their best fourth quarter ever. As the chart below from BofA shows, they also had a pretty good 2024 as a whole. It's a growth story. As BofA points out, it's now had "11 consecutive quarters of YoY sales and trading revenue growth." This is despite lower trading related assets and lower Value at Risk.
Source: BofA
However, BofA's equities salespeople and traders underperformed the market in the fourth quarter. As the chart below shows, their revenues were up only 6% year-on-year, while equities trading teams at other banks achieved increases in solid double digits. At best in class Morgan Stanley, Q4 equities revenues were up over 50%.
Sources at BofA say the discrepancy was due to an unfavourable comparator quarter in Q3 of 2023, but it may still depress bonuses.
In fixed income sales and trading, BofA's Q4 performance also looks run-of-the-mill, even though its macro traders bucked the downward trend at Citi. For the full year, though, BofA's fixed income currencies and commodities (FICC) growth, looks less impressive versus rivals.
The people most deserving of bigger bonuses at BofA look like the equity capital markets bankers, who've increased revenues by more than rivals on both a full year and Q4 basis. BofA's debt capital markets bankers seem to have missed the party.
Our pre-Christmas bonus expectations survey suggested people at BofA were expecting a nearly 40% increase in their bonuses this year. This always seemed unlikely.
Sources at the bank say BofA in particular likes to "smooth" bonuses both across years and divisions, while others say it doesn't much like to pay. Management changes in London last year mean that Brian Carosielli is the new man to know in fixed income trading. Ex-Citi trader Derek Hafer was made global head of systematic trading in late December.
People at BofA will find out how generous the bank is being later this month, but there may be some heated internal discussions about the bonus pool in the interim.
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