Banking & Finance

Weak Trading and Lower Investment Banking Revenues May Hurt These Banks

The good old days for bulge bracket banks on Wall Street are in the rear-view mirror, especially when it comes to trading revenues and proprietary desk trading. Add in a drop in investment banking revenue at four of the five major Wall Street Banks, and something may start to give when second-quarter numbers hit next month. A new report from UBS dissects all the revenue streams for the big banks, and one thing is for sure, the pie that used to be pretty huge around the street is shrinking. The question is, who will get hurt the worst?

Here are the five top banks on Wall Street when it comes to dominating revenue categories. The UBS team suspects that the soft conditions could lead to further cost cutting as the year progresses, but they doubt any cuts will lead to substantial changes to business models for the top investment banks.

Bank of America Corp. (NYSE: BAC) has not gotten much love from Wall Street lately. The company is in a much better situation than last year. Earnings are much more consistent, capital has improved and a bigger dividend and share repurchase effort seems very likely next year. Worries over more fines and sanctions still hover over the bank, and its reporting issues are a cloud as well. The dividend for investors is a paltry 0.3%. UBS rates the stock Neutral and has lowered earnings estimates for the second quarter and 2014. The price target for the stock is $16.50. The Thomson/First Call consensus target is $17.23. The stock closed Friday at $15.59 a share.

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Citigroup Inc. (NYSE: C) has been a poor performer this year for investors, down more than 10% year-to-date. The bank trades at an incredible 9.5 times forward earnings, but it is still losing the trading revenue battle. The bank’s total equity capital markets revenue has also dropped year-over-year. Investors are paid a small 0.1% dividend. UBS has a Buy rating on the stock and a $61 target. The consensus target is $58.28. Citigroup closed Friday at $48.93

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