Overall, credit quality remains solid, and trading desks have benefited greatly from volatility and investor appetite. All exceeded earnings per share expectations... but opened the day lower. "So far, so good" could sum up the message from executives.
Goldman Sachs
Goldman Sachs, with $14.58bn in revenue, exceeded revenue estimates by more than $1bn, including $600m from trading desks. Net income climbed 22% to $4.72bn ($10.91 per share), well above the consensus estimate of $9.77. The bank, which is highly exposed to the markets, once again drew its performance from its trading activities, which account for more than two-thirds of its revenues and grew by 24%.
Equity trading reached a record high, up 36% y-o-y to $4.3bn. Assets under management now exceed $3.2 trillion, marking the 30th consecutive quarter of net inflows. $120 billion was added this quarter, including $115bn related to market movements and only $5bn in net inflows.
The quality of the bank's results in times of volatility is now a recurring feature.
Bank of America
BofA, which is more focused on retail customers, remains more stable and predictable. Customer appetite remains strong, with personal investments up 13% and customer numbers increasing in both retail and investment banking. The loan portfolio is growing, as are transaction volumes.
Assets under management reached $2 trillion, up 10%, for a total of $4.4 trillion in client assets. Net inflows were $19bn at Bank of America this quarter.
However, the group benefited from market turbulence, with a 9.6% increase in equity trading and a 17% increase in fixed income, currencies and commodities. Even in its core business, the group outperformed, with net interest income rising by more than 7%, compared with a forecast of 6.5%.
Net income rose more than expected (+3.2%) to $7.1bn, or 89 cents per share (compared with 83 cents a year earlier), but still exceeded analysts' expectations (86 cents).
Morgan Stanley
Morgan Stanley posted EPS of $2.13, outperforming forecasts by 7.58%. Trading activities rose sharply: +23% on equities and +9% on fixed income securities, with large clients benefiting from market declines, according to the bank.
Advisory business declined due to a lack of large corporate transactions, but IPOs picked up. Unlike Goldman Sachs, whose wealth management business slowed, Morgan Stanley posted a 14% increase in this segment, although it was already comfortably established in this area of its business. Wealth management generated revenue of $7.8bn with a comfortable pre-tax margin of 28.3%. The group remains the leader in assets under management, at $8.2 trillion.
In summary
The three banks posted solid profitability ratios (double-digit ROE) and comfortable capital levels: CET1 at 11.5% for BofA, 15% for Morgan Stanley and 14.5% for Goldman Sachs.
All exceeded expectations, buoyed by equity trading, with record revenues for BofA and Goldman Sachs. The more hybrid and market-oriented models – Morgan Stanley and Goldman Sachs – benefited particularly from volatility, posting double-digit growth.
Finally, the three banks achieved record assets under management and have significant room for maneuver to continue redistributing capital to shareholders.
