Goldman Sachs, Bank of America earnings shrink but offer some bright spots

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Goldman Sachs Group Inc. and Bank of America Corp. Shares rose Monday on stronger-than-expected second-quarter results, while Bank of America Corp. shares fell back on an earnings miss.

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The two megabanks marked the last two of the six megabanks reporting lower profit amid stark changes in financial markets, which swung to the current bear market from a bull market a year ago.

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Citigroup Inc. C,
+13.23%
reported better-than-expected results on Friday, while Wells Fargo & Co. WFC,
+6.17%
missed. On Thursday, JPMorgan Chase & Co. JPM,
+4.58%
and Morgan Stanley MS,
+4.50%
both fell short of analyst estimates.

Goldman Sachs shares GS,
+4.36%
rose handily, advancing 3.7% in premarket trading on Monday, after it said its net income for the three months ended June 30 fell to $2.77 billion, or $7.73 a share, from $5.35 billion, or $15.02 a share, in the year-ago quarter .

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Revenue dropped to $11.86 billion from $15.39 billion in the year-ago quarter.

Goldman Sachs was expected to earn $6.56 a share on revenue of $10.78 billion, according to FactSet.

Goldman said it booked a 79% drop in asset management revenue to $1.08 billion, while its investment banking revenue fell back by 41% to $2.14 billion as deal-making slowed drastically from a strong year-ago quarter.

These weak spots were partially offset by a 32% increase in global markets revenue to $6.47 billion and a 25% boost in consumer and wealth management revenue to $2.18 billion.

Goldman Sachs CEO David Solomon echoed comments from other bank chieftains by flagging “increased volatility and uncertainty” in markets, rocked by inflation, interest rates hikes and Russia’s invasion of Ukraine.

“We delivered solid results in the second quarter as clients turned to us for our expertise and execution in these challenging markets,” Solomon said.

Goldman Sachs shares have fallen 23.2% in 2022 as of Friday’s close, compared with a drop of 13.9% by the Dow Jones Industrial Average DJIA,
+2.15%
and a loss of 19.0% by the S&P 500 SPX,
+1.92%,
The Financial Select SPDR ETF XLF,
+3.38%
has lost 18.6% so far this year. Goldman is a component of the Dow Jones Industrial Average, along with JPMorgan Chase.

Bank of America profit drops

Bank of America BAC,
+7.04%
Shares fell 1% in Monday’s premarket after the bank missed Wall Street’s profit estimate, but revenue matched the analyst view.

Bank of America’s second-quarter profit fell by about one-third to $6.2 billion, or 73 cents a share, from $9.2 billion, or $1.03 a share, in the year-ago quarter. Revenue increased to $22.7 billion from $21.5 billion.

Bank of America was expected to earn 75 cents a share on revenue of $22.7 billion, according to estimates compiled by FactSet.

“We believe our earnings generation over the next 18 months will provide ample capital to support growth, pay dividends, buy back shares and continue to invest in our people, platforms and communities as we grow into new regulatory capital level requirements,” said CFO Alastair Borthwick.

Net interest income increased by 22% to $12.44 billion, up from $10.23 billion in the year-ago quarter and ahead of the FactSet estimate of $12.32 billion. The company said it benefited from higher interest rates and loan growth

Providing a snapshot of still-healthy American spending patterns, Bank of America said consumer spending rose 13% to $2.1 trillion.

Breaking out its major business units, Bank of America said its consumer banking revenue rose 12% to $9.1 billion; global wealth and investment management revenue increased 7% to $5.4 billion and global banking revenue fell by $100 million to $5 billion. Global markets revenue fell 5% to $4.5 billion in the wake of lower investment banking fees and mark-to-market losses related to leveraged finance positions, partially offset by higher sales and trading revenue, the bank said.

Bank of America stock is down 27.5% in 2022.

,

Credit: www.marketwatch.com /

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