Investment-management giant BlackRock and custody banks Bank of New York Mellon State Street offered up a mixed bag of second-quarter earnings on Friday, as the industry attempts to steer their investor clients through bumpy markets and rising interest rates.
"The first half of 2022 brought an investment environment that we have not seen in decades," BlackRock CEO Larry Fink said in a statement on Friday. "Investors are simultaneously navigating high inflation, rising rates and the worst start to the year for both stocks and bonds in half a century, with global equity and fixed income indexes down 20% and 10%, respectively."
The earnings arrived after banking giants JPMorgan Chase and Morgan Stanley missed expectations. JPMorgan said it planned to suspend stock buybacks following the results.
JPMorga CEO Jamie Dimon said the U.S. economy was still growing, and that the consumer spending power remained solid. But he also said "waning consumer confidence," along with rising prices, geopolitical tension and the Fed's efforts to combat inflation "are very likely to have negative consequences on the global economy sometime down the road."
Bank Stocks: BlackRock Earnings
Estimates: Wall Street expected BlackRock to earn $8.05 per share, down 20%. Revenue was expected to fall 5% to $4.583 billion.
Results: Adjusted earnings came in at $7.36 per share. Revenue was $4.526 billion.
BlackRock stock rose 0.2% to 589.93 on the stock market today. Shares have lodged a five-day decline, ending Thursday 40% below a November high.
The stock has a 61 Composite Rating. Its EPS Rating is 88.
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BlackRock, in a recent midyear report, warned of a new era of "heightened macro volatility," along with "higher risk premia for both bonds and equities."
"We ultimately expect central banks to live with inflation, but only after stalling growth," the report said. "The result? Persistent inflation amid sharp and short swings in economic activity." Portfolio decisions, it said, "will need to become more granular and nimble."
The report, titled "Back to a volatile future," said the current backdrop had similarities to the early 1980s.
That volatility will arrive on the back of the pandemic and limited labor availability, as people reconsider their line of work and demand more from their employers. Meanwhile, garbled supply chains and geopolitical strife, including Russia's war in Ukraine have driven up production costs, it noted. An increasingly politicized landscape, it said, would further roil markets, with realistic policy solutions in short supply.
"The tragic war in Ukraine, a global energy shock and the Fed's more hawkish pivot to confront rising inflation all in the space of a few months has sparked a reassessment of growth, profitability and risk, which are playing out in the markets," Fink said in May.
Bank Of New York Mellon Earnings
Estimates: Wall Street projected Bank of New York Mellon to earn $1.13 per share, unchanged from a year ago. Revenue was seen up 5% to $4.172 billion.
Results: Friday's results showed earnings of $1.03 per share. Revenue rose more than 7% to $4.254 billion. Higher interest rates were a key driver, according to president Robin Vince, who takes over the bank's chief executive post when Todd Gibbons retires at the end of August.
Bank of New York Mellon handles trades for clients, as well as investment and wealth-management services. It has $2.3 trillion in assets under management.
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CFO Emily Portney, during a conference in June, said she hadn't "seen anything unusual yet" as the Fed moves more aggressively to ward off inflation.
Shares jumped 5.6% on Friday, hitting resistance at their 50-day line.
But as with other bank stocks reporting earnings, shares of the company have mediocre ratings. Bank of New York Mellon's Composite Rating is 33. Its EPS Rating is 67.
State Street Earnings
Estimates: Analysts expect State Street to earn $1.74 per share, down 12%, as revenue creeps 0.3% higher to $2.992 billion.
Results: State Street earned $1.94 per share. Revenue came in at $2.95 billion.
The company said strong foreign-exchange trading "partially offset significant fee revenue headwinds from weaker equity and fixed income markets."
State Street jumped 4.4% on the news. The stock was also meeting resistance at its 50-day line. Similar to other bank stocks, its Composite Rating is 33. Its EPS Rating is 75.
State Street, whose customers include mutual funds and insurance companies, handles clearing and settlements and other services for financial transactions. Its advisors also help with investment strategies.
