Another round of major bank earnings has concluded, closing out the second-quarter reports for six prominent U.S. banks, demonstrating their resilience as they continue to surpass Wall Street estimates.
Investment banking giants Goldman Sachs and Morgan Stanley reported second-quarter boosts due to a surge in investment banking. A more positive economic outlook, greater certainty around interest rate cuts, and robust markets have revived Wall Street activity.
In the U.S. M&A market, there were 551 large deals, each worth at least $100 million, totaling $758 billion through May, according to consulting firm EY. This marks an 18.5% year-over-year increase, significantly benefiting banks advising these transactions.
Bank of America, the second-largest U.S. bank by assets, signaled several positives to investors despite a decline in quarterly profits.
Here are the highlights:
Bank of America’s NII Outlook
Bank of America had a strong second quarter, exceeding Wall Street estimates and providing optimistic net interest income (NII) guidance.
The bank’s NII was $13.7 billion in the second quarter, a 3% decrease from $13.83 billion last year. However, management stated that the metric had reached its lowest for the year and projected it to increase to $14.5 billion, continuing to rise in the latter half of 2024.
The firm reported $25.4 billion in revenue, a slight increase from $25.2 billion in the same quarter last year, beating analysts’ estimates of $25.22 billion. Net income fell almost 7% to $6.9 billion from $7.4 billion, though this still surpassed Wall Street’s projection of $6.41 billion.
Morgan Stanley Benefits from Wall Street Rebound
Morgan Stanley’s second-quarter profits increased by 41% from the previous year to $3.08 billion, or $1.82 per share, surpassing analyst estimates of $2.67 billion, or $1.65 per share.
Revenue rose 12% to $15.02 billion, driven by its wealth management and institutional securities divisions. Shares of Morgan Stanley rose more than 2% following these results.
David Fanger, senior vice president of Moody’s Ratings Financial Institutions Group, noted that Morgan Stanley’s strong performance was due to the industry-wide rebound in investment banking activity, with steady contributions from wealth and asset management despite weaker net interest income.
Morgan Stanley’s investment banking revenues surged 51% from the previous year to $1.62 billion, boosted by higher advisory inflows and increased M&A activity.
Goldman Sachs Sees Profit Surge
Goldman Sachs’ second-quarter profit soared 150% year-over-year to $3.04 billion, or $8.62 per share, fueled by strong performance in global banking, markets, and asset management divisions.
Revenue increased 17% to $12.73 billion, surpassing Wall Street estimates by nearly $300 million. The firm’s fixed income sector also saw a 17% rise to $3.18 billion for the quarter.
Goldman Sachs’ shares rose 2% on Monday, with an additional 3% gain in Tuesday morning trading. Moody’s Fanger commented on the firm’s improved cost-income ratio following last year’s headcount reductions and strategic shifts away from consumer lending.
Despite the overall positive rebound, CEO David Solomon mentioned on an analyst call that some transaction volumes remain below 10-year averages but stated the bank is well-positioned for continued resurgence in activity.