BofA, Morgan Stanley, Schwab Post Solid Numbers In Challenging Environment: Bank Earnings Roundup

A mixed second-quarter earnings for financial sector stocks continued on Thursday with reports from Bank of America Corp BAC, Morgan Stanley MS and Charles Schwab Corporation SCHW.

The trend of strong trading revenue and large loan losses continued Thursday.

Here’s what investors should know.

Bank of America Adds $4B In Reserves: Bank of America reported adjusted EPS of 37 cents on revenue of $22.5 billion. Both numbers exceeded consensus analyst estimates of $27 and $22 billion, respectively.

The earnings beat was driven in large part by $3.2 billion in bond trading revenue, up 50% from a year ago. Equities trading revenue was also up 7% to $1.2 billion.

Despite the top- and bottom-line beats, the bank also increased credit loss reserves by $4 billion.

“In the most tumultuous period since the Great Depression, we delivered for our clients, our employees, our communities and our shareholders,” said CEO Brian Moynihan. 

Bank of America shares were trading lower by 3.1% Thursday morning.

Morgan Stanley Reports Impressive Profits: Morgan Stanley reported adjusted EPS of $1.96 on $13.4 billion in revenue. Both numbers exceeded analyst expectations of $1.12 and $10.3 billion, respectively. Revenue was up 30% from a year ago.

Morgan Stanley’s fixed-income trading revenue skyrocketed 170% to $3.03 billion. Equities trading revenue was up 23% from a year ago to $2.62 billion. Both numbers exceeded analyst estimates of $1.81 billion and $2.35 billion, respectively.

Investment banking revenue was up 39% to $2.05 billion.

Rising transaction fees help drive a 6% increase in wealth management revenue, which came in at $4.68 billion.

“The second quarter tested the model and we performed exceedingly well, delivering record results,” CEO James Gorman said.

Morgan Stanley shares were higher by 0.7%. 

Schwab Misses The Trading Party: Charles Schwab reported second-quarter adjusted EPS of 54 cents, beating analyst estimates by 1 cent. Yet revenue was down 8.6% to $2.45 billion, missing analyst estimates by about $30 million.

Schwab wasn’t able to capitalize on the boom in trading revenue like the big banks were. The company reported $193 million in trading revenue, missing analyst estimates of $196.8 million.

Schwab added $46.6 billion in core net new assets in the quarter, not including its USAA acquisition.

“Throughout the second quarter, the COVID-19 pandemic and its effects continued to dominate the macroeconomic environment, presenting myriad challenges for our clients and Schwab alike,” CEO Walt Bettinger said.

Schwab shares traded lower by 3.2%.

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