Third-quarter profits at Bank of America (BAC) and Morgan Stanley (MS) surged 23% and 45%, becoming the latest banking giants to benefit from a Wall Street dealmaking boom.
Bank of America posted net income of $8.47 billion while Morgan Stanley reported $4.6 billion. Both figures were more than $1 billion higher than what analysts saw coming.
A big reason for that performance is a frenzy of mergers and IPOs that surged through the summer. Dealmaking fees at Bank of America and Morgan Stanley surged 43% and 44% from a year ago to $2 billion and $2.1 billion.
Trading also did well as markets moved higher. Fees from Bank of America’s client trading divisions rose 8% to $5.3 billion while Morgan Stanley’s soared 24%, driven by its stock transactions group.
Morgan Stanley’s haul from its combined equity, fixed income, currency and commodity trading for clients ballooned to $6.28 billion.
Morgan Stanley CEO Ted Pick called his bank’s quarter “outstanding” in a earnings statement. Bank of America CEO Brian Moynihan noted “strong fee performance from our market-facing businesses.”
Chairman and CEO of Bank of America Brian Moynihan. (Photo by John Lamparski/Getty Images) · John Lamparski via Getty Images
The results reinforce what is shaping up to be a robust third quarter for big US banks with sizable Wall Street operations.
Bank of America took the highest-paid investment banking role in Union Pacific’s (UNP) agreement to purchase Norfolk Southern (NSC) for $71 billion, which was announced in July. This mega-combination of two major US railroad operators was the single largest deal so far this year.
Morgan Stanley also advised on that deal. It also co-facilitated the Keurig Dr Pepper (KDP) $18 billion acquisition of JDE Peet’s (JDEP.AS).
Bank of America’s stock rose 5% in pre-market trading following the release of its results. Morgan Stanley’s climbed more than 4%.
Their rivals Goldman Sachs (GS), JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC), shared their quarterly results a day earlier. They too all reported a rise in profits, dealmaking and trading that outperformed Wall Street’s expectations.
Goldman’s fees from investment banking climbed 42% from a year ago to $2.65 billion while JPMorgan’s rose 17% to $2.61, Citigroup’s increased 17% to $1.17 billion and Wells Fargo’s dealmaking fees rose 25% to $840 million.
These lenders are all benefiting from a speedier merger approval process from the Trump administration, and they also stand to gain from a loosening of capital and supervisory requirements promised by Trump’s Washington regulators.
Morgan Stanley CEO Ted Pick. REUTERS/Jeenah Moon · REUTERS / Reuters
Even Main Street lending showed some improvements during the third quarter. Bank of America’s core lending margin, net interest income, jumped 9% to $15.38 billion compared to the third quarter of last year.