Bank of America and Morgan Stanley on Wednesday reported sharply higher first-quarter profits, as market turmoil fueled in part by the ongoing war in Iran drove surging activity on Wall Street trading desks.
Morgan Stanley posted a record quarter across its entire business, with net income of $5.6 billion and earnings per share of $3.43 — both up 30% from the same period last year, the bank reported. Equity trading revenues rose 25% to $5.15 billion, while bond-trading revenues climbed 29% to $3.36 billion.
Bank of America said first-quarter stock trading revenues reached $2.8 billion, a 30% increase from a year earlier. Executives said in a call with reporters that the bank did not post a single daily loss on its trading desk during the quarter — its largest quarter for equity sales and trading in the bank’s history.
The results extend a pattern across the largest U.S. banks this earnings season: market gyrations that unsettle ordinary investors tend to generate fee and commission revenue for high-speed institutional trading desks, which profit from heightened volume and volatility. Goldman Sachs and JPMorgan Chase reported similar gains earlier in the week.
Investment banking
Investment banking activity was also strong at both firms. Morgan Stanley’s advisory revenues nearly doubled year over year, rising from $563 million to $978 million, according to the bank. Both Bank of America and Morgan Stanley are advising on some of the largest anticipated public offerings of the year, including SpaceX, the rocket company controlled by Elon Musk.
Consumer banking and energy spending
Bank of America’s consumer banking division, historically the bank’s largest business by revenue, posted a first-quarter profit of $3.1 billion. Deposits and loans grew during the quarter, and customers spent 7% more on credit and debit cards compared to the same period last year, the bank said.
The bank also reported double-digit increases in debit card spending on gasoline and energy — a pattern Wells Fargo executives described in a separate call with reporters on Tuesday.
Despite the rise in energy prices, Bank of America executives said they are not seeing signs of stress among U.S. consumers. Bank of America CEO Brian Moynihan said the bank is “watchful of evolving risks,” citing geopolitical tensions in the Middle East, Ukraine and elsewhere, along with the surge in energy costs.
Chief Financial Officer Alastair Borthwick said the bank’s primary measure of consumer health remains stable. “The main thing that we’re always looking for is unemployment, and that remains at 4.3%,” Borthwick said. “So that’s supporting the consumer at this point.”