Tuesday's Earnings Report: US Banks Beat Estimates As Higher Interest Rates, Fees Offer Profit Boost

On Tuesday, major U.S. banks released their second-quarter financial results, surpassing both earnings and revenue estimates provided by the Street. This positive outcome has reinforced market confidence in the strength and stability of the banking system.

Let’s delve into how each major U.S. bank performed:

Bank of America Surpasses Expectations, Stock Rises 3% as Q2 Earnings Soar

Bank of America Corp. BAC disclosed earnings per share (EPS) of $0.88 in the second quarter, exceeding expectations of $0.84 and experiencing an increase of 19% compared to the $0.73 EPS reported in the corresponding quarter of the previous year.

Revenues climbed to $25.2 billion, slightly surpassing expectations of $25.02 billion and reflecting an 11% rise from the $22.69 billion recorded in the same quarter a year ago.

Bank of America’s net interest income (NII) increased by $1.7 billion, or 14%, to $14.2 billion due to higher interest rates and loan growth. However, average deposit balances declined by $18 billion, or 1% and 7%, from the first quarter of 2023 and the first quarter of 2022, respectively.

Read Now: Bank of America Clocks 19% Q2 Net Income Growth: Performance By The Numbers

“We delivered one of the strongest quarters and first half net income periods in the company's history. Continued organic client growth and client activity across our businesses complemented beneficial impacts of higher interest rates and produced an 11% increase in revenue,” Bank of America’s CEO Brian Moynihan said. “We continue to see a healthy U.S. economy that is growing at a slower pace, with a resilient job market. All businesses performed well, and we saw improved market shares, particularly in our Sales and Trading and Investment Banking businesses.”

Shares of Bank of America jumped 4.2%, the strongest daily performance since mid-May, hitting highs last seen on April 18, 2023.

Morgan Stanley’s Earnings And Revenues Decline in Q2 But Less Than Expected; Stock Rises

Morgan Stanley MS reported EPS of $1.24 in the second quarter, narrowly surpassing expectations of $1.23, but declining 14% from the $1.44 EPS reported in the second quarter of 2022. Revenues reached $13.5 billion, slightly exceeding expectations of $13.03 billion, yet indicating a 7% decrease from the $14.46 billion recorded in the second quarter of 2022.

Morgan Stanley’s wealth management business saw strong net new client assets of $90 billion and record net revenues of $6.7 billion, up from $5.7 billion in the second quarter 2022. However, Institutional Securities’ net revenues declined to $5.7 billion from $6.1 billion in the second quarter 2022.

“The Firm delivered solid results in a challenging market environment. The quarter started with macroeconomic uncertainties and subdued client activity, but ended with a more constructive tone. Consistent with our strategy, we continued to attract client assets,” Chairman and CEO James P. Gorman said.

Shares of Morgan Stanley rocketed 6.6%, the strongest daily performance since November 2022, reaching mid-March levels.

Charles Schwab Beats Estimates Despite Annual Declines; Stock Jumps Over 10%

Charles Schwab Corp. SCHW announced EPS of $0.75, slightly surpassing expectations of $0.75, but experiencing a 29% decline from the $0.97 EPS reported in the second quarter of 2022. Revenues were $4.66 billion, slightly surpassing expectations of $5.63 billion, yet indicating a 13% decrease from the $5.26 billion recorded in the same quarter a year ago.

Charles Schwab experienced a 12% increase in asset management and administration fees to $1.17 billion. On the downside, net interest revenue fell 10% to $2.29 billion.

Read Now: Why Charles Schwab Shares Are Surging Today

“Against an improving, yet still somewhat unsettled backdrop, clients increased their utilization of help and advice at Schwab during the quarter, reflecting investors' continued trust in us to support them on their journey towards a better financial future," co-Chairman and CEO Walt Bettinger said.

Shares of Charles Schwab Corp rose over 12% to $65, marking the best daily session in over three years, recovering levels last seen on March 10, 2023.