Bank of America (NYSE: BAC ) isn't the swashbuckling investment bank that Goldman Sachs (NYSE: GS ) is, but B of A shareholders can still take something away from Goldman's stellar earnings report.
Goldman's profit for the final quarter of the year wowed investors and investment banking, trading, and investment management income played a part in that. On the IB side, there wasn't much of a change sequentially or year over year in merger and acquisition advising, where Goldman wears the crown. Capital raising, however, was a different matter. Goldman saw huge gains in both equity and debt-underwriting fees.
Trading didn't shine much in sequential comparisons, but on a year-over-year basis, trading income made some impressive gains. Fixed income, currency, and commodity (FICC) revenue was up 50% from the fourth quarter of 2011, and equities trading jumped 45%.
Finally, investment management revenue was up 20% year over year and 26% sequentially. That was on a $26 billion gain in assets under management.
Remember, Bank of America has Merrill Lynch baked into that big ol' pie. While there's been plenty of reason for investors to shake their fists over the acquisition, we may see some results this quarter that underscore why the pickup wasn't all bad (unlike that other acquisition that rhymes with Buntrywide Financial). With Merrill's investment banking heft, Bank of America has a much larger IB footprint -- it ranks second in both fourth-quarter and full-year 2012 IB fees. And then there is, of course, Merrill's "thundering herd" of brokers.
B of A's core banking results will almost surely show the challenge of compressing net interest spreads during the fourth quarter, but the bank derives more than half of its revenue from non-interest income. With Goldman's profits impressing, that could mean we'll see solid performance from that side of B of A when the bank reports tomorrow.
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