Another round of significant bank earnings has been announced, wrapping up the second-quarter reports for six major U.S. banks and showing their continued resilience by surpassing Wall Street estimates.
Investment banking giants Goldman Sachs and Morgan Stanley both experienced notable second-quarter performances, driven by a booming investment banking industry. A more optimistic economic outlook, increasing certainty around interest rate cuts, and strong markets have revitalized Wall Street activity.
The U.S. M&A market saw 551 substantial deals worth at least $100 million each, totaling $758 billion through May, according to consulting firm EY, marking an 18.5% year-over-year increase and generating significant profits for banks advising these transactions.
Bank of America, the second-largest U.S. bank by assets and a key indicator of consumer health, provided several positive signals to investors despite a decline in profits for the quarter.
Here are the highlights:
### Bank of America’s Positive NII Outlook
Bank of America had a strong second quarter, surpassing Wall Street estimates and providing optimistic guidance for net interest income (NII). With its sizable consumer banking business, Bank of America is highly sensitive to NII—the difference between interest earned on loans and investments and interest paid to depositors.
Its NII was $13.7 billion in the second quarter, a 3% decrease from $13.83 billion in the same period last year. However, management indicated the metric had already bottomed out for the year and raised guidance to $14.5 billion, anticipating further increases in the latter half of 2024.
The firm reported $25.4 billion in revenue, slightly up from $25.2 billion during the same quarter last year, exceeding analysts’ expectations of $25.22 billion. Net income fell nearly 7% to $6.9 billion from $7.4 billion a year earlier but still surpassed Wall Street’s projected $6.41 billion.
### Morgan Stanley Benefits from Wall Street Recovery
Morgan Stanley’s second-quarter profits surged 41% from a year earlier to $3.08 billion, or $1.82 per share, well above analyst estimates of $2.67 billion, or $1.65 per share. Revenue increased by 12% to $15.02 billion, driven by its wealth management and institutional securities businesses. Shares of the investment bank rose more than 2% following the results.
David Fanger, a senior vice president of Moody’s Ratings Financial Institutions Group, noted that Morgan Stanley’s strong second-quarter results were bolstered by a rebound in investment banking activity, with wealth and asset management remaining steady contributors.
Morgan Stanley’s investment banking revenues soared 51% from the year-earlier period to $1.62 billion on increased advisory inflows due to heightened M&A activity and fixed income growth.
### Goldman Sachs’ Significant Profit Increase
Goldman Sachs saw its second-quarter profit jump 150% year-over-year to $3.04 billion, or $8.62 per share, driven by strong performances 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, surpassing Wall Street estimates by nearly $300 million. Fixed income was also a standout area, increasing 17% to $3.18 billion for the quarter. Goldman Sachs’ shares climbed 2% on Monday, followed by another 3% gain in Tuesday morning trading.
Moody’s Fanger highlighted that Goldman Sachs’ performance is on a positive trajectory after significant strategic changes, a good sign for investors and clients.
Despite the rebound, CEO David Solomon mentioned in a call with analysts that certain transaction volumes remain below 10-year averages, but expressed confidence that the bank is “very well-positioned to benefit from a continued resurgence in activity.”