Morgan Stanley, Wells Fargo, Citigroup and Bank of America all posted stronger-than-expected earnings on Thursday, with the financial sector continuing to benefit from increased economic activity as the impact from the COVID 19 pandemic started to recede.
Morgan Stanley /zigman2/quotes/209104354/composite MS -0.74% provided the cleanest beat as its investment banking and asset management units benefited from a boost in the net worth of its wealthy clients and a flurry of capital raising and M&A on Wall Street. The bank also got a boost from its acquisitions of wealth manager Eaton Vance and online broker ETrade which closed in March and in the fourth quarter of 2020 respectively.
By comparison, earnings by Wells Fargo & Co. /zigman2/quotes/203790192/composite WFC -0.79% , Citigroup Inc. /zigman2/quotes/207741460/composite C -0.06% and Bank of America Corp. /zigman2/quotes/200894270/composite BAC -1.71% benefited from the release of loan loss reserves, as they worked to address loan growth as a key metric for their lending businesses.
Shares of Morgan Stanley rose 2.4%, Citi added 0.7%, Wells Fargo dipped 1.2%, and Bank of America moved up by 4% in Thursday afternoon trades.
Morgan Stanley investment banking revenue boosts results
Morgan Stanley’s third-quarter net income rose to $3.7 billion or $1.98 a share, from $2.7 billion, or $1.66 a share, in the year-ago period. Revenue increased to $14.8 billion from $11.7 billion a year ago.
Analysts expected the investment bank to earn $1.69 a share on revenue of $13.93 billion.Chairman and CEO James P. Gorman said Morgan Stanley “delivered another very strong quarter, with robust revenues and improved efficiency,” producing a return on average tangible common shareholders’ equity (ROTCE) of 20%, highlighted by its “standout performance” in its investment bank and record net new assets of $135 billion in wealth management.
The firm’s investment banking revenue rose about 68% to $2.85 billion from $1.7 billion. Before Thursday’s gains, the stock was up 43.8% this year, compared with a rise of 16.2% by the S&P 500 index. /zigman2/quotes/210599714/realtime SPX +0.01%
Citigroup earnings climb after breaking out reserve boost
Citigroup’s net income climbed 48% to $4.6 billion, or $2.15 per share, from $3.1 billion, or $1.36 a share, in the year-ago quarter. Revenue fell 1% to $17.2 billion, including a pre-tax loss of about $680 million tied to the sale of its Australia consumer business unit. Excluding this item, revenue increased 3% amid growth in its institutional clients unit.
The bank released $1.1 billion in loan loss reserves. Net interest revenue dropped 3% to $1.85 billion from $1.91 billion.
Analysts expected Citi to earn $1.71 a share on revenue of $16.98 billion, according to a survey by FactSet.
Citigroup said its loan portfolio remained flat at $665 billion, but fell 1% excluding the impact of foreign exchange translation, mostly reflecting the impact of the sale of the consumer business in Australia.
The bank’s deposits rose 7% to $1.3 trillion.
Before Thursday’s trades, Citigroup shares were up 14% this year, compared with a rise of 16.2% by the S&P 500.
Bank of America grows earnings by 57%
Bank of America’s third-quarter earnings rose to $7.7 billion, or 85 cents a share, from $4.9 billion, or 51 cents a share, in the year-ago period. Revenue increased to $22.8 billion from $20.3 billion. Net interest income rose 10% to $11.1 billion.