Morgan Stanley and Bank of America Corp. reported mixed third-quarter results on Wednesday, highlighting diverging performances across trading businesses at major US banks amid market volatility, elevated oil prices and geopolitical uncertainty.
Morgan Stanley posted higher profits, supported by stronger-than-expected equity trading revenue and record inflows into its wealth-management business. Bank of America, however, reported a decline in profit after setting aside $1.2 billion to cover regulatory penalties related to alleged failures to detect potential money laundering and other illicit activities.
The results completed the third-quarter earnings announcements of the six largest US banks, following reports from four lenders on Tuesday. Goldman Sachs, Citigroup and Wells Fargo exceeded Wall Street’s estimates, while JPMorgan Chase reported profits below analysts’ expectations for the first time in nearly three years.
The earnings season unfolded against a turbulent backdrop, with the conflict in Iran, elevated energy prices and a global bond-market selloff affecting financial markets and dealmaking activity.
Morgan Stanley profit rises on strong equity trading
Morgan Stanley reported net income of $4.97 billion for the third quarter, up from $4.66 billion a year earlier.
Revenue from its equity-trading business reached $5.8 billion, significantly exceeding analysts’ expectations of $4.9 billion. Total revenue from trading operations stood at $7.81 billion, compared with estimates of $7.31 billion.
The bank’s wealth-management business also delivered strong growth. Revenue from the division increased to $9.1 billion from $8.2 billion a year earlier, while net new assets reached a record $232 billion during the quarter.
The strong performance reflects the contribution of Morgan Stanley’s wealth-management operations and trading activities amid changing market conditions.
Chief Financial Officer Sharon Yeshaya said the bank expected to benefit if the initial public offering (IPO) market remained active over the next 12 months. She added that she did not anticipate a slowdown in new public listings.
Despite the earnings performance, Morgan Stanley shares fell 2.2% in early New York trading on Wednesday. The stock had gained 5.1% through Tuesday.
Bank of America profit hit by regulatory charge
Bank of America’s third-quarter earnings were weighed down by a $1.2 billion non-tax-deductible charge associated with regulatory penalties over money laundering and sanctions violations.
The provision reduced earnings by 17 cents per share and contributed to a 17% decline in net income. The bank’s total revenue was nearly $30 billion, below analysts’ consensus estimates.
Its trading businesses also delivered weaker-than-expected results. Fixed-income trading revenue declined 17% to $2.55 billion, while equity-trading revenue increased 10% to $2.51 billion.
Bank of America shares slumped 7.2% at 9:32 a.m. in New York following the results.
Despite the earnings pressure, Bank of America’s loan balances increased 6.3% year-on-year to $1.23 trillion at the end of the third quarter, matching analysts’ estimates.
Investment-banking revenue fell 11% to $1.82 billion, although the figure exceeded market expectations. Fees from merger-and-acquisition advisory services declined 19%.
Equity-issuance revenue rose 9.1%, while revenue from debt issuance fell nearly 14%.
The contrasting results underscore differences in trading performance, regulatory costs and investment-banking activity across major US lenders.