Morgan Stanley (NYSE: MS) thumped analysts’ EPS estimates of $0.46 and $7.93 billion in revenues, reporting this morning that it’s second quarter EPS reached $1.09 on revenues of $7.95 billion. The bank posted earnings from continuing operations of $0.80/share. Wells Fargo & Co. (NYSE: WFC) also beat EPS estimates of $0.48 with EPS of $0.55 and essentially matched revenue estimates of $21.4 billion.
Like Bank of America Corp. (NYSE: BAC), Citigroup Inc. (NYSE: C
), and JP Morgan Chase & Co. (NYSE: JPM), Wells Fargo reported that a significant portion of its earnings, some $500 million, is the result of a lower provision for loan losses. Morgan Stanley’s results for its sales and trading operations allowed it to best rival Goldman Sachs Group Inc.’s (NYSE: GS) earnings.
Morgan Stanley also noted that it has not received any “material” indication that the SEC is investigating the bank. Take that Goldman!
Wells Fargo cut its loan losses for the quarter by 16%, and the bank’s CFO said that he believes that “credit quality has indeed turned the corner.” The bank also got an earnings boost of $626 million from its hedging position on mortgage-servicing rights.
For the first time this year, Wells Fargo experienced an increase in commercial lending and greater use of approved lines of credit. The increased use of credit lines could signal that businesses are borrowing again to finance expansion, hiring, and inventory build-ups.
On a more social note, JP Morgan chief Jamie Dimon and Goldman boss Lloyd Blankfein were left off the invitation list for today’s presidential signing of the financial reform bill. One Wall Street executive quoted at CNBC snarked, “[T]he White House made the decision to invite only the banks that were most sycophantic in the run-up to the passage of [financial reform bill].”
Be that as it may, the effects of the financial reform legislation are sure to have an impact on the future earnings at the nation’s biggest banks. Neither Wells Fargo nor Morgan Stanley offered an estimate of the size of that impact, but Bank of America offered an estimate when it reported earnings last week. BofA estimates that the rules changes will cost the bank up to $4.3 billion in lost revenue and $7-$10 billion in one-time charges. The only glimmer of good news in those numbers is that they are spread out over several years.
Wells Fargo shares are trading up about 2.5% today, while Morgan Stanley shares are up about 8.5%.
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