From Slump to Surge: What Is Driving Bank of America's IB Revival?

After a prolonged slowdown, the investment banking (IB) business at Bank of America BAC is staging a notable comeback, fueled by a cyclical rebound in global dealmaking and improving capital markets conditions. Because of rising interest rates and muted corporate activity, BAC’s IB business performance was weak in 2022 and 2023 (the company’s total IB fees plunged 45.7% in 2022 and declined 2.4% in 2023).

However, in 2025, there was a resurgence in mergers and acquisitions (M&As), particularly in large, strategic transactions. Corporates started regaining confidence amid stabilizing macro conditions, leading to a pickup in advisory mandates, especially in sectors like technology, healthcare and energy, where consolidation and artificial intelligence (AI)-driven investments accelerated deal flow. This helped strengthen BofA’s advisory revenues meaningfully (advisory revenues increased 13.5% year over year in 2025), as the company benefitted from its deep relationships with large-cap clients and its ability to execute complex, cross-border deals.

Along with this, the broad-based recovery across capital markets has been boosting underwriting activity across both equity and debt segments. Equity capital markets, which were largely dormant during the rate-hike cycle, have seen renewed traction as IPO pipelines rebuild and secondary offerings increase. At the same time, debt capital markets activity has been solid, with companies refinancing existing obligations and locking in funding amid expectations that rates may gradually stabilize.

Thus, Bank of America, with its strong positioning across leveraged finance, investment-grade debt and structured products, is well-placed to capture this demand. Its scale and integrated platform, spanning corporate banking, markets and advisory, has enabled it to cross-sell effectively and deepen client engagement, translating into higher fee generation. While BAC’s equity issuance fees declined 11.6% in 2025, its debt issuance fees rose 10.7%. Overall, the company’s IB fees in the Global Banking segment increased 8.4% year over year in 2025.

However, the recovery in IB is not uniform. While large deals and capital markets activity are accelerating, private equity fundraising and smaller transactions remain sluggish, reflecting still-elevated interest rates and cautious investor sentiment. Nevertheless, with a strengthening deal pipeline and improving macro visibility, Bank of America’s IB business appears to be transitioning from a cyclical slump to a more sustainable growth phase. The durability of this rebound, however, will hinge on the trajectory of interest rates and broader geopolitical stability.

IB Business Performance of BAC’s Peers

Similar to BAC, its close peers, JPMorgan JPM and Citigroup C, are benefiting from industry-wide improvement in the operating environment.

In 2025, JPMorgan’s total IB fees rose 7% year over year to $9.7 billion. Its advisory income increased 6%. JPM witnessed a 2% rise in equity underwriting fees and 9% growth in debt underwriting fees. Looking ahead, a healthy pipeline, resilient M&A demand and JPMorgan’s leadership position set it up for stronger IB fee growth as macro conditions become more supportive.

Citigroup’s IB fees (within its Banking segment) jumped 20% year over year in 2025 to $3.9 billion. For Citigroup, a rebound in global M&A and capital markets, strategic simplification and capital reallocation, as well as improved talent and client coverage, drove the improvement in the IB business performance.

Bank of America’s Price Performance, Valuation & Estimates

In the past six months, shares of Bank of America have gained only 1% against the industry’s 1.1% decline.

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From a valuation standpoint, Bank of America trades at a 12-month trailing price-to-tangible book (P/TB) of 1.82X, below the industry average of 2.98.

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The Zacks Consensus Estimate for Bank of America’s 2026 and 2027 earnings implies year-over-year growth of 13.7% and 14.9%, respectively. In the past week, earnings estimates for 2026 have been unchanged, while those for 2027 have been revised higher.

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Bank of America currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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