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Bank of America and Morgan Stanley each reported the highest annual earnings in their history on Wednesday, as investment bankers pulled in record revenue for arranging deals. That helped the banks report higher fourth-quarter profits versus a year ago, bucking the trend at most of their rivals.
Bank of America, the country’s second-biggest lender, said its latest quarterly profit rose 28 percent, to $7 billion, exceeding analyst expectations. Its full-year profit rose to $32 billion, an increase of nearly 80 percent from 2020.
“Client activity across the board was strong,” Brian T. Moynihan, the bank’s chief executive, told analysts on a conference call. Profits were fueled by an improving economy in which the company added loans and deposits, while “investment banking had its best year ever, and global markets had its highest sales and trading revenue in a decade,” he said in a statement.
Morgan Stanley, the investment-banking heavyweight, reported a 9 percent increase in fourth-quarter profit, to $3.7 billion, which also beat expectations. For the full year, the bank’s profit rose by 37 percent, to $15 billion.
“The year has started off well, pipelines are healthy,” Sharon Yeshaya, Morgan Stanley’s chief financial officer, said in an interview. “There are risks on the horizon, but right now, things look good and C.E.O.s are still optimistic to do deals.”
Morgan Stanley’s chief executive, James P. Gorman, who in his 12th year at the helm, also addressed his own future, reiterating plans to prepare his successor. “I’m not leaving now, and I’m not going to be here in five years,” he said.
The company named Ted Pick, who runs its investment bank, and Andy Saperstein, its wealth-management head, as co-presidents last year — part of movements that Mr. Gorman said at the time represented “the next generation of leadership” at Morgan Stanley.
With the Federal Reserve predicted to raise interest rates three or four times this year, banks are poised to profit because they can charge customers more in interest. Households and businesses are starting to borrow more, and consumer finances are in good shape, according to Alastair Borthwick, the bank’s new chief financial officer. He cited charge-off rates, a measure of defaults, which are at the lowest since the 1960s.
“We’re pretty optimistic,” Mr. Borthwick told journalists on a conference call.
Shares of Bank of America rose almost 1 percent and Morgan Stanley gained more than 2 percent.
Bank stocks had come under pressure in recent days as other banks, including Citigroup, Goldman Sachs and JPMorgan Chase, reported lower profits for the fourth quarter. Investors worried about rising costs as banks competed for high-priced talent and the uncertain economic outlook marked by surging coronavirus cases, high inflation and snarled supply chains.
The earnings out on Wednesday painted a brighter picture for at least a couple of the country’s biggest banks.
Article source: https://www.nytimes.com/live/2022/01/19/business/stock-market-economy-news