In This Story
Another round of big bank earnings are here, closing out the second-quarter reports of six major U.S. banks — and showing that they remain resilient as they continue to top Wall Street estimates.
Read more: Wells Fargo, Citi, and JPMorgan reported earnings. Here’s what to know
Investment banking giants Goldman Sachs and Morgan Stanley both saw their second-quarter performances boosted by an industry-wide boom in investment banking, as a more optimistic economic outlook, increasing certainty around interest rate cuts, and strong markets have revived Wall Street activity.
The U.S. M&A market saw 551 large deals worth at least $100 million apiece, totaling $758 billion through May, according to consulting firm EY. That marks an 18.5% year-over-year increase, which has created massive windfalls for banks advising the transactions.
And Bank of America, the second-largest U.S. bank by assets and an important barometer of consumer health, gave investors several positive signals despite a decline profits for the quarter.
Here are the highlights.
Bank of America’s rosy NII outlook
Bank of America had a strong second-quarter showing, beating Wall Street estimates and posting optimistic guidance for net interest income (NII).
Given its outsize consumer banking business, Bank of America is the most sensitive to NII — the difference between how much interest banks earn on loans and investments, and how much they pay out to depositors — of all its peers.
Its NII was $13.7 billion in the second quarter, a 3% decrease from $13.83 billion in the same period last year — but the bank’s management said the metric had already bottomed out for the year. It raised guidance to $14.5 billion, with the expectation that the metric will continue to increase in the latter half of 2024.
The firm saw $25.4 billion in revenue, up slightly from $25.2 billion during the same quarter last year, the company said Tuesday. That also beat analysts’ revenue estimates of $25.22 billion, according to data compiled by FactSet.
Net income, however, slipped almost 7% to $6.9 billion from $7.4 billion a year earlier. Despite the fall, profits surpassed Wall Street’s projected $6.41 billion.
Morgan Stanley rides the Wall Street rebound
Morgan Stanley’s second-quarter profits soared 41% from a year earlier to $3.08 billion, or $1.82 per share, the investment bank reported Tuesday. That landed well above analyst estimates of $2.67 billion, or $1.65 per share.
Revenue climbed 12% to $15.02 billion, bolstered by its wealth management and institutional securities businesses, it said. Shares of the investment bank rose more than 2% following the results.
Mike Taiano, a vice president of Moody’s Ratings Financial Institutions Group, said in a statement that Morgan Stanley’s strong second-quarter results were “aided by an industry-wide rebound in investment banking activity, while wealth and asset management remained steady contributors on the back of a robust equities market despite weaker net interest income.”
Morgan Stanley’s investment banking revenues soared 51% from the year-earlier period to $1.62 billion on higher advisory inflows thanks to increased M&A activity as well as fixed income growth.
A massive jump in profits at Goldman Sachs
Goldman saw second-quarter profit jump 150% year-over-year to $3.04 billion, or $8.62 per share, driven by strong performance in its global banking & markets and asset & wealth management divisions. The investment banking giant reported its second-quarter earnings early Monday.
The firm’s revenue rose 17% to $12.73 billion, topping Wall Street estimates by almost $300 million. Fixed income was also a bright spot for Goldman, jumping 17% to $3.18 billion for the quarter.
The investment banking giant’s shares climbed 2% on Monday, followed by another 3% gain in Tuesday morning trading. David Fanger, senior vice president in Moody’s Ratings Financial Institutions Group, noted that the investment bank’s performance appears to be on the right track following a number of foundational changes — a positive sign for investors and clients alike.
“Following last year’s headcount reductions and strategic pivot away from consumer lending, the firm’s cost-income ratio has improved significantly, a positive development for creditors,” Fanger said.
Despite the rebound, CEO David Solomon noted in a call with analysts that certain transaction volumes are still well below 10-year averages. But he said the bank remains “very well-positioned to benefit from a continued resurgence in activity.”