Bank of America and Morgan Stanley Post Another Strong Quarter

Key Talking Points:

• Bank of America reports earnings per share of $0.85, up 66% year on year
• Morgan Stanley trumps expectations with M&As seeing the biggest quarterly gain on record

Bank of America: net income for the third quarter was $7.7 billion, with earnings per share coming in at $0.85 beating estimates of $0.71. Net interest income for the quarter was up 10% to $11.1 billion driven by strong deposit growth. The bank posted mixed results in the second quarter, with the revenues missing the mark, but Q3 revenues have picked up once again, increasing 12% to $22.8 billion, above estimates of $21.6 billion. Provisions for credit losses added $624 million on the back of reserve releases given improving economic conditions

Non-interest income was also a key contributor to earnings in the third quarter, up 14% to $11.7 billion, driven by record asset management fees, strong investment banking, and higher trading revenues. Q3 fixed income revenues were down 5%, driven by a weaker trading environment for mortgages and interest rate products, whilst equities revenue increased 33%, driven by growth in client financing activities, stronger trading performance and increased client activity.

Bank of America shares are trading 2.2% higher at $44.07 in the pre-market after the earnings release. Shares are up 83% year on year after a strong rebound from the pandemic lows, but they are still below their all-time highs ($54.70) seen in the years before the great financial crisis in 2008. Forecasts are still positive with most brokerages rating it a buy or hold, but short-term headwinds could keep the stock trading below recent highs into the last quarter of the year.

Bank of AmericaDaily Chart

Source: Refinitiv

Morgan Stanley: net revenue in the third quarter was $14.8 billion, up from $11.7 billion this time last year. Revenues were higher for key departments, including wealth management, investment banking and institutional securities. Quarterly adjusted EPS was $2.04 versus $1.69 estimated, with diluted earnings per shares coming in at $1,98, up from $1.66 this time last year. The bank benefited from global mergers and acquisitions, with deals reaching new highs at $1.52 trillion in the three months ended Sept. 27. This represents the highest quarterly growth ever, jumping 38% year-over-year.

MS stock is trading up 1.35% in the pre-market at $99.9, but is still 9% down from the highs seen at the end of September. Momentum continues to be strong but the recent pullback is resting on its ascending trendline which means bullish support could start to falter in the short term. We’re likely to see consolidation around current levels with a slightly bearish tilt before the stock achieves a new all-time high.

Morgan Stanley Daily Chart

Source: Refinitiv

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— Written by Daniela Sabin Hathorn, Market Analyst

Follow Daniela on Twitter @HathornSabin