‘Big Unknown’

While some analysts, including Kotowski, suggest banks probably focused on handling the surge in client orders without risking their own money, others are cautioning against putting too much weight on the early optimism.

“Choppiness” across markets posed dangers to trading desks before and after the referendum and means investors can’t rely much on the revenue predictions from weeks earlier, Deutsche Bank AG’s Matt O’Connor wrote in June 27 note to clients.

Trading during the last week of June remains “the big unknown,” said Atlantic Equities LLP’s Chris Wheeler. Even with preparation, at least some desks could’ve been caught on the wrong side of the market moves, he said. And firms may have funneled much of the heightened volume through low-margin electronic platforms, leading to lean returns.

Even if Brexit produced a short-term trading boon, analysts say it will soon be overtaken by other challenges wrought by the U.K. vote. Banks now face a flattening yield curve, or narrowing of the difference between short- and long-term interest rates, which makes it even harder to eke out a profit on lending

The phenomenon may cut Bank of America’s interest income by $400 million in the second quarter, according to Deutsche Bank’s O’Connor. Kotowski predicts the damage may reach $800 million.

Bright Spot

Goldman Sachs’s investing and lending segment may have been hurt by a drop in the value of equity and credit positions on Brexit. Revenue in the division could fall by $700 million to $1.1 billion, KBW’s Brian Kleinhanzl wrote in a July 5 note to clients. Still, analysts predict that companywide net income may rise 39 percent after the firm incurred costs a year earlier tied to legal claims.

One bright spot is mortgage lending. Low rates will spur new loans and refinancings, generating fees for banks such as Wells Fargo, the national leader in that business. Kotowski trimmed his estimate for its earnings per share by only 2 percent for 2016, the least among the big six banks.

To be sure, many of the largest investment banks beat analysts’ gloomy profit estimates for the first quarter by slashing costs. That included limiting funds earmarked for year-end compensation.