Morgan Stanley, Bank of America Beat Estimates as Trading Activity Surges

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00:00Let's get back to those bank earnings. I want to bring in our Wall Street, Chief Wall Street

00:04Correspondent Sridhar Natharajani joins us here at the desk. So Sri, I was looking at the chart of

00:09Morgan Stanley trading revenue versus Goldman Sachs over the past couple of years and they've

00:14been trying and trying and trying. They finally overcame their biggest rival. And that's important

00:19and I know you don't think you don't hold much value to banks beating analysts estimates. That's

00:24true. But in this case, significantly beat estimates, notched more than $4 billion in the

00:30quarter again and were roughly $400 million ahead of Goldman Sachs. And that's important

00:34because in the last two or three years, Goldman Sachs has had a stranglehold on this business

00:38as the dominant player there. It was a crown that Morgan Stanley held for many of the years

00:44after the global financial crisis. And when they lost it, it did hurt inside Morgan Stanley

00:48and it has been a sore point for CEO Ted Pick. So he will have a pep in his step with the

00:54numbers out today. But not just that, investment banking fees up 44 percent, great performance

00:59acquired advisory, debt capital markets, equity capital markets. And in their wealth and asset

01:05management business, the wealth management business that they love to call the ballast

01:09of their business, known for its stability, revenue significantly higher. They pulled in

01:14roughly $80 billion in net new assets, which matches the target they've set, quarterly target

01:19that they need to meet to get that roughly trillion dollars in net new assets every three years.

01:23And pre-tax margin up to roughly 30 percent. It's something that Ted Pick had promised to

01:28analysts and investors when he became CEO. So hitting that mark and staying at that mark

01:32will be important.

01:34What about Bank of America? They also came out, I heard Alison Williams on Bloomberg Radio

01:38this morning saying the net interest income beat. How key is that?

01:41It is important for Bank of America for multiple reasons. One, the stock has been languishing all year.

01:46In fact, has been languishing since the Fed started hiking rates back in 2022.

01:51So it will be a big fillip for the bank to be able to beat expectations.

01:55Also, remember that the thing that has been weighing down on this bank has been its,

01:59you know, held to maturity treasuries at low rates. That has not been a big boon to its net

02:05interest income. As those securities start to roll off and they replace them with higher yielding

02:11securities, that will benefit NII. And Alison has said that will be a tailwind for the bank.

02:16When you match that with some strength in the investment banking business,

02:21that will be a big help for Bank of America. And I point this out also because at Citigroup,

02:26which is their closest rival, at least in the investment banking space, not JP Morgan or Goldman Sachs

02:30or Morgan Stanley, Citigroup had been making some good strides with their new banking head,

02:35getting ahead of Bank of America for much of this year to now post a number in the third quarter

02:40where they're significantly ahead of Viz Raghavan's crew at Citigroup. That will make them happy

02:45out at BOA.