Another round of major U.S. bank earnings has been released, closing out the second-quarter reports for six prominent banks, demonstrating their continued resilience and ability to surpass Wall Street estimates.
Investment banking giants Goldman Sachs and Morgan Stanley experienced boosted second-quarter performances due to a boom in investment banking. This surge has been driven by a more optimistic economic outlook, increasing certainty around interest rate cuts, and strong market conditions reviving Wall Street activity.
The U.S. mergers and acquisitions market recorded 551 large deals worth at least $100 million each, totaling $758 billion through May, according to consulting firm EY. This marks an 18.5% year-over-year increase, creating substantial windfalls for the banks advising these transactions.
Meanwhile, Bank of America, the second-largest U.S. bank by assets and an important indicator of consumer health, provided several positive signals despite a decline in quarterly profits.
Bank of America had a strong second-quarter performance, beating Wall Street estimates and offering optimistic guidance for net interest income (NII). The bank, which is highly sensitive to NII—the difference between how much interest it earns on loans and investments versus what it pays on deposits—reported an NII of $13.7 billion for the quarter, a 3% decrease from $13.83 billion in the same period last year. However, management indicated that NII had bottomed out for the year and raised guidance to $14.5 billion, expecting growth in the latter half of 2024.
Revenue for the firm was $25.4 billion, slightly up from $25.2 billion in the same quarter last year, exceeding analysts’ estimates of $25.22 billion. Despite a nearly 7% drop in net income to $6.9 billion from $7.4 billion a year earlier, the profits surpassed Wall Street’s forecasts of $6.41 billion.
Morgan Stanley’s second-quarter profits soared 41% year-over-year to $3.08 billion, or $1.82 per share, well above analysts’ expectations of $2.67 billion, or $1.65 per share. Revenue increased 12% to $15.02 billion, driven by its wealth management and institutional securities businesses. This strong performance was attributed to a rebound in investment banking activity and steady contributions from wealth and asset management.
Morgan Stanley’s investment banking revenues surged 51% to $1.62 billion, fueled by higher advisory inflows due to increased M&A activity and fixed income growth.
Goldman Sachs posted a 150% year-over-year increase in second-quarter profits to $3.04 billion, or $8.62 per share, boosted by strong performance in its global banking, markets, and asset & wealth management divisions. Revenue rose 17% to $12.73 billion, surpassing Wall Street estimates by nearly $300 million. The firm’s shares increased 2% on Monday, followed by another 3% gain in Tuesday trading.
Moody’s David Fanger noted that Goldman Sachs’ improved performance follows significant foundational changes, including headcount reductions and a strategic shift away from consumer lending, which have led to a better cost-income ratio. Despite the rebound, CEO David Solomon commented that certain transaction volumes remain below 10-year averages, but the bank is well-positioned for future activity growth.