Goldman Sachs, Bank Of America And Morgan Stanley Continue Last Week's Momentum Of Exceeding Estimates Despite The Macroeconomic Turmoil

This week, The Goldman Sachs Group Inc GS, Bank of America Corporation BAC and Morgan Stanley MS joined their big bank peers in releasing their earnings reports, continuing to exceed estimates as banks showed how well they can do even amid challenging times. 

Despite A Profit Drop And A Messy Quarter, Goldman Sachs Still Exceeded Expectations

Goldman Sachs reported its profit dropped 33% to $2.058 billion but earnings per share of $5.47 still topped estimates of $5.31 that LSEG’s survey of analysts estimated. Revenue also contracted 1% to $11.82 billion but also still topped the estimated $11.19 billion. Bond trading brought in $3.38 billion to the revenue table, exceeding analyst estimates by about $600 million but it still fell 6% YoY. The efforts that Goldman Sacks made to boost lending activities in the trading division helped offset declines in trading of currencies, commodities and credit, along with strength in interest rate products and mortgages. As a result, fixed income financing revenue reached a record $730 million. Equities trading revenue expanded 8% YoY to $2.96 billion due to higher activity in derivatives, exceeding analyst estimates by about $200 million.

Among its banking peers, Goldman Sachs is the most dependent from investment banking and trading revenue, although it has made efforts to diversify its revenue. This year came with a headwind as IPOs and mergers have been muted with interest rates going up to slow the economy down. Goldman has also been hit by its strategically pull away from retail banking and its exposure to commercial real-estate that resulted in write-downs.

Bank Of America Topped Profit Estimates Fueled By Better-Than-Expected NII

On Tuesday, Bank of America topped third quarter estimates as its profit rose 10% YoY to $7.8 billion with adjusted earnings amounting to 90 cents, topping LSEG’s expectation of 82 cents on the back of revenue that grew 2.9% to $25.32 billion, which also topped the expected $25.14 billion. With higher interest rates and loan growth, interest income rose 4% to $14.4 billion, which is about $300 million higher compared to what analysts were expecting. Moreover, the bank’s provision for credit losses was also better than $1.3 billion that was expected as it amounted to $1.2 billion.

Morgan Stanley Topped Profit And Revenue Estimates, But Disappointed With Its Wealth Management Performance

On Wednesday, Morgan Stanley reported that its third quarter revenue rose 2% YoY to $13.27 billion, barely topping LSEG’s estimates of $13.23 billion as trading activities helped offset revenue misses from other categories. Net income contracted 9% YoY to $2.41 billion, with earnings per share of $1.38 topping the estimated $1.28.

Morgan Stanley reported its bond traders brought in $1.95 billion to the revenue table, which is about $200 more than what StreetAccount analysts expected. Equity traders brought in $2.51 billion which was $100 million more than expected. But its star wealth-management division brough in revenue of $6.4 billion which is about more than $200 less than estimates due to increased compensation costs. Net interest income tanked 9% from the previous, second, quarter, and is expected to continue falling in the undergoing, fourth, quarter. Another miss was investment banking that brought in $938 million in revenue and came short of $1.11 billion estimate due to the weak activity of mergers and IPOs. Yet, executives find that Morgan Stanley is in a good position compared to its rivals like Goldman Sachs who is undergoing turbulence after bidding farewell to its push in retail banking. But like all of its peers, it is navigating the global macroeconomic turmoil. It's just that some are doing it even better than others, although all big banks showed they are doing just fine amid these challenging times.

DISCLAIMER: This content is for informational purposes only. It is not intended as investing advice.