Goldman Sachs, Morgan Stanley and Bank of America Continued The Strong Trend With Their Second Quarter Financials

Author: Upwallstreet | July 18, 2024 12:17pm

On Monday, bank earnings continued with The Goldman Sachs Group Inc (NYSE:GS), also joining the trend of topped profit and revenue estimates on the back of better-than-expected fixed income results and smaller-than-expected loan loss provisions. On Tuesday, Morgan Stanley (NYSE:MS) and Bank of America (NYSE:BAC) boarded the bank earnings train. Morgan Stanley topped profit and revenue estimates with its second quarter financials on the back of stronger-than-expected trading and investment banking performance. Bank of America also topped estimates with second-quarter revenue and profit that were fueled by rising investment banking and asset management fees.

Goldman Sachs Justified The High Expectations

Out of the six biggest banks,  Goldman is the most reliant on investment banking and trading to generate revenue and therefore, expectations were high with the rebound in Wall Street activity.  For the quarter ended on June 30th, revenue grew 17% to $12.73 billion on the back of core trading, advisory, as well as asset and wealth management operations, surpassing Wall Street’s $12.46 billion estimate. Prrofit surged 150% YoY to $3.04 billion, or $8.62 per share; but last year’s financials were dragged down by hamstrung by write-downs from commercial real estate and the sale of a consumer business.

Fixed income was one of the highlights with revenue jumping 17% to $3.18 billion, surassping StreetAccount’s estimate by $220 million, along with the bank’s shrinking exposure to consumer loans as provision for credit losses went down 54% to $282 million, which is quite below StreetAccount’s estimate of $435.4 million. On other fronts, Goldman Sachs was mainly in line with estimates. Equities trading rose 7% to $3.17 billion based on strong activity in derivatives.

Asset and wealth management division reported growth of 27% as revenue amounted to $3.88 billion. Platform solutions division reported revenue grew 2% to $669 million on the back of rising credit card balances and deposits.

But the well-known investment banking business disappointed compared to rivals as investment banking fees rose only 21% to $1.73 billion, slightly brlow StreetAccount’s $1.8 billion estimate, with growth behind far behind rivals JPMOrgan Chase and Citigroup who have reported rises exceeding 50%. Goldman Sachs attributed the miss to weaker-than-expected advisory fees of $688 million.

Morgan Stanley Benefited From Rebounding Wall Street Activity

For the quarter ended on June 30th, Morgan Stanley reported revenue grew 12% YoY to $15.02 billion, topping Wall Street’s $14.3 billion estimate.

Wealth management revenue grew 2% to $6.79 billion, which was short of $6.88 billion estimate. Equity trading reported growth of 18% as revenue amounted to $3.02 billion, surpassing the StreetAccount estimate by about $330 million. Fixed income trading revenue grew by 16% to $1.99 billion, topping the Wall Street estimate by $130 million. Fueled by rising fixed income underwriting activity, investment banking revenue surged 51% to $1.62 billion, exceeding the estimate by $220 million.

The bottom line surged 41% YoY as profit amounted to $3.08 billion, or $1.82 per share, helped by a rebound in Wall Street activity..

Interest income plunged 17% YoY to $1.79 billion as the rate environment pushed rich clients to continue shifting cash into higher-yielding assets, resulting in lower deposit levels. Earnings amounted to $1.82 a share, surpassing LSEG’s estimate of $1.65 a share.

Morgan Stanley investors value the more steady nature of the wealth management business due to its more predictable nature compared to investment banking and trading. However, its usual dynamic got flupped as institutional securities division earn more revenue compared to its wealth management division.

Bank Of America Promised A NII Rebound

For the June quarter, Bank of America reported revenue grew less than 1% to $25.54 billion, surpassing LSEG’s estimate of $25.22 billion. Profit slipped 6.9% YoY to $6.9 billion, or 83 cents a share, also topping LSEG’s estimate of 80 cents.

Investment banking fees rose 29% to $1.56 billion while asset management fees grew 14% to $3.37 billion, and wealth management division reported a 6.3% revenue growth of $5.57 billion. Net interest income contracted 3% to $13.86 billion.

But net interest income fourth quarter guidance of $14.5 billion gave hope of a turnaround this year. Aided by this guidance, shares grew 5.4%.

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