Bac stock Wall Street boom boosts profits at Bank of America, Morgan Stanley
Third-quarter profits at Bank of America (BAC) and Morgan Stanley (MS) rose 23% and 45%, respectively, making these two banking giants the first to benefit from the Wall Street dealmaking boom.
Bank of America reported net income of $8.47 billion, while Morgan Stanley reported $4.6 billion. Both figures exceeded analysts’ estimates by $1 billion.
This performance was largely due to the summer’s spate of mergers and IPOs. Dealmaking fees at Bank of America and Morgan Stanley rose 43% and 44%, respectively, from a year earlier, to $2 billion and $2.1 billion, respectively.
Trading was also strong, with the market rally. Fees from Bank of America’s client trading divisions rose 8% to $5.3 billion, while Morgan Stanley’s stock trading group saw a 24% increase.
Morgan Stanley generated $6.28 billion in combined equity, fixed income, currency, and commodity trading for its clients.
Morgan Stanley CEO Ted Pick described his bank’s quarter as “excellent,” and in his earnings report, Bank of America CEO Brian Moynihan cited “strong fee performance from our markets-focused businesses.”
These results confirm that the third quarter is going to be strong for large U.S. banks with significant Wall Street operations.
Bank of America played the highest-paid investment banking role in Union Pacific’s (UNP) agreement to acquire Norfolk Southern (NSC) for $71 billion, announced in July. This massive combination of two major U.S. rail operators was the largest deal so far this year.
Morgan Stanley also advised on that deal. It also assisted in Keurig Dr. Pepper’s (KDP) $18 billion acquisition of JDEP.AS.
Following the release of its results, Bank of America shares rose 5% in pre-market trading. Morgan Stanley shares rose more than 4%.
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Rivals Goldman Sachs (GS), JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC) released their quarterly results a day earlier. All also reported better-than-Wall Street expectations in profits, transaction fees, and trading.
Goldman’s investment banking fees rose 42% from a year earlier to $2.65 billion, while JPMorgan’s rose 17% to $2.61 billion, Citigroup’s rose 17% to $1.17 billion, and Wells Fargo’s transaction fees rose 25% to $840 million.
All these lenders are benefiting from the Trump administration’s accelerated merger approval process and will also benefit from the easing of capital and supervisory requirements promised by Trump’s Washington regulators.