Bank of America, Bank of New York Mellon on Monday morning continued the string of bank and financial stocks reporting earnings. Both Bank of America and BNY Mellon managed to top predictions for the quarter. And Goldman Sachs followed up Tuesday with its own earnings beat. BAC stock, BK stock and GS stock are all rising premarket Tuesday following the results.
Wells Fargo, JPMorgan Chase and Morgan Stanley kicked off results on Friday with mixed performances for the quarter.
Banks face greater liquidity constraints, forcing them to fund loan growth with higher cost deposits, debt and securities portfolio runoffs, Morgan Stanley analyst Betsy Graseck wrote in an early October note. Rapidly-rising interest rates and higher capital requirements have accelerated the upturn in the credit cycle — a period when loans are increasingly costly and difficult to obtain. That puts financial institutions with excess capital, liquidity and positive operating leverage in the best position long-term, she says.
Bank Of America Earnings
Expectations: Wall Street predicted Bank of America's earnings to slide 8.2% to 78 cents per share. Revenue was expected to climb 3.4% to $23.5 billion.
Results: BofA reported earnings of 81 cents per share on 7.5% revenue growth to $24.5 billion.
The company's net interest income jumped 24% to $13.8 billion, driven by higher rates and solid loan growth of 12% across the bank. Noninterest income fell 8% to $10.7 billion as higher sales and trading revenue were offset by lower service charges, investment banking and asset management fees. Investment banking fees fell 46% to $1.2 billion
BofA added 418,000 new consumer checking accounts in the quarter to a record 35.6 million, and consumer client balances increased 1% to $1.6 trillion.
In the earnings call, Bank of America said it had zero trading loss days during the quarter. The bank added $378 million to its reserves for credit losses, compared to a release of $1.1 billion last year.
BAC stock rose 3.82% Tuesday after jumping 6% on Monday following its report.
Bank Of New York Mellon
Expectations: Analysts saw BNY Mellon's earnings rising more than 5% to $1.10 per share on 4.2% revenue growth, to $4.2 billion.
Results: BNY Mellon's adjusted earnings jumped to $1.21 per share while revenue rose to $4.28 billion.
BNY Mellon's net interest revenue spiked 44% to $926 million thanks to higher interest rates. While its securities services business revenue rose 13% to $2.07 billion and its market and wealth services revenue climbed 17% to $1.37 billion.
However, investment and wealth management revenues fell 16% to $862 million due to lower market values and negative impacts from the stronger dollar. And BNY Mellon's total assets under management tumbled 23% to $1.8 trillion caused by the market downturn.
BK stock edged down slightly Tuesday after surging 5% on Monday's results.
Goldman Sachs
Expectations: Analysts forecast Goldman's earnings will fall even harder than Bank of America. Forecasts see earnings nearly halving in the report Tuesday, falling 47% to $7.75 per share. Revenue is seen dropping 15% to $11.5 billion, according to the FactSet consensus.
Results: Goldman reported earnings dropped to $8.25 per share, down 44%, and revenue fell to $11.98 billion, sliding 12% over the year.
Goldman Sachs' investment banking revenue fell 57% over the year to $1.58 billion as the company saw significant decreases in corporate lending, financial advisory and underwriting revenue. But Global Markets revenue rose 11% to $6.2 billion, driven by growth from its Fixed Income, Currency and Commodities (FICC) segment.
FICC sales leapt 44% to $3.53 billion on substantial increases in revenue for interest rate products, currencies, commodities and credit products. However, Goldman noted significant declines in mortgage revenue but saw increases in financing and mortgage lending revenue.
On Monday, the Wall Street Journal reported Goldman Sachs is restructuring its biggest business segments into three divisions. Goldman's investment banking and trading businesses will combine into one unit. While consumer banking, asset and wealth management will merge into another unit. The third division will contain transaction banking and Goldman's portfolio of fintech platforms.
GS stock rose 2.5% Tuesday following its report after gaining 2.3% on Monday leading up to its announcement.
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