Morgan Stanley and Bank of America Q1 financial results 🏛️

Morgan Stanley (MS.US):

Morgan Stanley reported an increase in quarterly earnings, driven by a rebound in investment banking and strong performance in the fixed income trading sector. Prior to the Wall Street market opening, the bank's shares rose by over 3.5%.

Q1 2024 Results:

• Adjusted earnings per share: $2.02 (estimated $1.66)
• Revenue: $15.1 billion (estimated $14.16 billion; 4.1% YoY increase)
• Equities sales and trading revenue: $2.84 billion (estimated $2.65 billion)
• Fixed income sales and trading revenue: $2.49 billion (estimated $2.33 billion)
• Wealth Management sector also reported growth, with net revenues of $6.9 billion, up from $6.6 billion the previous year.
• Net interest income: $1.80 billion (estimated $1.96 billion)
• Non-interest expenses: $10.75 billion (estimated $10.75 billion)
• Compensation expenses: $6.70 billion (estimated $6.45 billion)

Other Metrics:

• Book value per share: $55.60
• Tangible book value per share: $41.07
• Return on tangible equity: 14.5% (estimated 11.9%)
• Expense efficiency ratio: 71% (estimated 74.3%)

CEO Ted Pick highlighted the strong performance, attributing it to the growth in client assets in the Wealth and Investment Management division, which now total $7 trillion, and the strong trends in securities and underwriting.

What to pay attention to?

Investors will likely focus on the reports of regulatory investigations into Morgan Stanley's client screening practices in its wealth management division during discussions with management following the results. These investigations have raised concerns about potential money laundering activities.

Currently, Morgan Stanley's shares are up 3.5% before the opening of the Wall Street session

Bank of America Corporation (BAC.US): 

Q1 2024 Results:

• Revenue: $25.8 billion (2% YoY decrease) (estimated $25.4 billion)
• Equities sales and trading revenue: $1.87 billion (estimated $1.71 billion)
• Fixed income sales and trading revenue: $3.31 billion (estimated $3.3 billion)
• Investment banking fees: $1.62 billion (estimated $1.3 billion)
• Net interest income: $14.2 billion (estimated $13.95 billion)
• Adjusted earnings per share: $0.83 (2% YoY decrease) (estimated $0.77)

Bank of America (BAC.US) exceeded market expectations in Q1 2024. The company improved its revenues compared to the previous quarter, both in net interest income and investment banking. The latter segment particularly contributed to the improvement in results.

CEO Brian Moynihan emphasized that the team responsible for managing client assets generated record revenues in this quarter. As a result, BofA continued the strong growth trend from 2023 and reported its best first quarter in a decade.

Similar to other banks, Bank of America continues to perform well in segments related to investment banking. Non-interest revenues increased to $11.8 billion, representing over a 40% QoQ growth

Overall loan value remains stable at around $1.048 trillion since Q1 2023, while there is a slight increase in interest-bearing deposits (+2% YoY). This may put pressure on future interest income results. Maintaining positive dynamics in the investment banking and trading segments appears particularly important from the bank's perspective.

The market has neutrally received the results, with the stock price down approximately -0.45% before the US open.

Bank revenues are slightly decreasing, which, combined with the dominance of deposits over loans in a "higher for longer" scenario, may deepen in the future.