Bank of America (NYSE:BAC) achieved a historic milestone in the second quarter of 2026, posting record sales and trading revenue of $7.1 billion. The figure represents a 33% surge compared to the $5.3 billion reported in the same period last year. Notably, the bank's average value-at-risk (VaR) plummeted 42% to $49 million, down from $84 million in the year-ago quarter, signaling that the earnings boost was fueled by heightened client engagement and superior execution rather than an expansion of market-risk appetite.
This development is particularly significant because trading windfalls are often viewed as lower-quality profits. VaR, a model-based metric that estimates potential trading losses, decreased even as average trading-related assets rose 7% to $746.9 billion and equities revenue soared 70%. The revenue-to-assets ratio improved to 0.95%, up 0.19 percentage point from 0.76%, underscoring enhanced efficiency.
The Global Markets unit posted a 72% jump in net income to $2.63 billion, compared with $1.53 billion a year earlier. Return on average allocated capital climbed to 20%, a 7-percentage-point increase from 13%, while the efficiency ratio improved to 56% from 64%, indicating lower costs per dollar of revenue. At the group level, net income rose 27% to $9.1 billion, with diluted earnings per share of $1.21 surpassing the analyst consensus of $1.13.
In context, Bank of America's performance stands out against peers. JPMorgan Chase (NYSE:JPM) reported a 35% increase in markets revenue, with its trading VaR rising 18%, while Citigroup (NYSE:C) saw markets revenue grow 17% and average VaR climb 4%. Although JPMorgan posted a higher equity-trading growth of 86% versus BofA's 70%, Bank of America's overall markets growth trailed by only two percentage points, all while its risk gauge dropped sharply. This suggests gains from flow capture rather than heavy balance sheet utilization, though filings do not break out contributions from pricing, volumes, hedging, or product mix.
The bank's trading performance was complemented by a more stable earnings foundation. Net interest income increased 9% to $16.0 billion, with average loans growing 8%. CFO Alastair Borthwick indicated that full-year NII growth is expected to land at the high end of the previously guided 6%-to-8% range. CEO Brian Moynihan described the quarter as "an exceptional quarter for our markets-facing businesses," while Stephen Biggar of Argus Research attributed the gains to an "AI-driven capex super cycle" that has boosted equity issuance, M&A activity, and debt financing, alongside Iran-linked volatility.
Credit costs provided less of a tailwind this quarter. The provision for credit losses decreased to $1.37 billion from $1.59 billion, but the net reserve release was only $46 million. Net charge-offs slipped to $1.41 billion from $1.53 billion, and the credit-card charge-off rate improved to 3.55% from 3.82%.
Investors should note that the decline in VaR does not necessarily reflect a 42% reduction in actual economic risk. VaR is a backward-looking measure that varies across banks due to different modeling approaches. A sudden volatility spike, weaker client flows, higher compensation, or reduced equity issuance could quickly narrow the revenue-risk gap. Bank of America's Global Markets costs rose 18% in the quarter.
Bank of America shares traded up about 1.1% to $61.30 on Wednesday afternoon. While the stock move was modest, the combination of a 20% return on allocated capital in markets, reduced modeled risk, and stronger interest income suggests investors are recognizing a more sustainable franchise improvement rather than a one-off volatility gain.
