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.”
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.
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.
That set a new high for the bank’s quarterly lending revenue, breaking the previous record set last quarter.
