Wall Street’s biggest banks are proving their resilience in the face of economic uncertainty. Following strong results from JPMorgan Chase and Wells Fargo last week, Morgan Stanley, Citigroup, and Goldman Sachs have all reported better-than-expected earnings for the third quarter, painting a positive picture for the financial sector.
Morgan Stanley: Dealmaking Revival Drives Growth
Morgan Stanley’s success can be attributed to a surge in investment banking activity. Net revenue climbed 16% to $15.4 billion, fueled by a 56% year-over-year jump in investment banking fees. This impressive performance makes Morgan Stanley the leader in investment banking growth among major banks, with JPMorgan Chase, Wells Fargo, Goldman Sachs, Bank of America, and Citigroup also reporting increases in revenue from both equities and investment banking fees. Trading revenue also saw a boost, with fixed income and equities trading revenue increasing 13% to $5 billion. Wealth management, another key driver of growth, witnessed a 79% year-over-year increase in net new assets, reaching $64 billion. This translates to a 13.5% year-over-year rise in revenue to $7.3 billion.
Citigroup: Strong Results Despite Credit Losses
Citigroup’s third-quarter results mirror the trend seen at Morgan Stanley, showcasing strong growth in investment banking and wealth management. However, the bank has set aside more funds to cover potential loan losses, impacting its overall profitability. Revenue for the quarter grew a modest 1% year-over-year to $20.32 billion, exceeding LSEG’s estimate of $19.84 billion. Banking revenue surged 18%, with investment banking revenue rising 31% and wealth revenue increasing 9%. While equity markets revenue saw a 32% increase, fixed income revenue dipped by 6%. Despite this, Citigroup remains on track to achieve its full-year expense target range of $53.5 billion to $53.8 billion, excluding regulatory costs. Earnings per share of $1.51 surpassed LSEG’s consensus estimate of $1.31, but net income fell to $3.2 billion due to higher credit costs.
Goldman Sachs: Profits Leap on Steady Economy
Goldman Sachs also exceeded both revenue and profit estimates for the third quarter. Revenue rose 7% to $12.70 billion, surpassing LSEG’s estimate of $11.8 billion, while profit soared 45% year-over-year to $2.99 billion, or $8.40 per share. This also topped LSEG’s consensus estimate of $6.89 per share. Investment banking revenue increased by 20% to $1.87 billion, followed by an 18% rise in equities trading revenue to $3.5 billion. The asset and wealth management division also reported a 16% increase in revenue to $3.75 billion. However, fixed income trading revenue declined 12% year-over-year to $2.96 billion.
A Positive Outlook for Wall Street
The strong third-quarter earnings reported by these major banks continue the trend set by JPMorgan Chase and Wells Fargo, suggesting a positive and improving macroenvironment for the financial sector. These results demonstrate the resilience of the banking industry and its ability to navigate the current economic landscape, highlighting the strength of investment banking, wealth management, and trading activities.