One word from the American bank CEO erased $40 billion in an hour

Bank of America CEO Brian Moynihan signaled at a Barclays conference a moderation in capital markets activity in the third quarter, describing trading revenues as "flat". In response, the bank's stock fell about 5% within an hour, erasing approximately $40 billion in market value. The decline spread across the banking sector, with Goldman Sachs, JPMorgan, Citigroup, and Wells Fargo shares falling between 1.7% and 4%.

Bank of America CEO Brian Moynihan signaled last night (Monday) at the Barclays investor conference a moderation in capital markets activity in the third quarter. According to him, the bank's trading revenues are expected to be "flat" – similar to those recorded in the same quarter last year. The signal was met with disappointment among investors, after the bank recorded a surge of about 50% in underwriting and advisory fee revenues and a jump of about 33% in trading revenues in the second quarter. In response, the bank's stock fell about 5% within an hour, erasing approximately $40 billion in market value. The decline spread across the entire banking sector: Goldman Sachs shares fell about 4%, while JPMorgan, Citigroup, and Wells Fargo shares recorded declines of 1.7% to 4%. The sharper decline in Goldman Sachs reflects the bank's relatively high exposure to capital markets activity. The expected moderation comes against a backdrop of less favorable conditions in capital markets – high interest rates and high bond yields increase financing costs and may cause companies to delay offerings. However, the CEO did not point to significant weakness, noting that the third quarter is expected to be among the strongest in the bank's history. Investors will await the major banks' reports in mid-October.