Charles Schwab, BofA Extend Good Earnings Season for Banks

Following strong earnings reports from JPMorgan (JPM:US) and Wells Fargo (WFC:US) last week, the bank stocks have continued to move higher this week following solid results from Bank of America (BAC:US) and Charles Schwab (SCHW:US).

Here’s the recap of Bank of America, Morgan Stanley (MS:US), and Schwab’s earnings reports.

Bank of America

Bank of America (BAC:US), a member of the “Big Four” in the U.S. when it comes to the banking sector, reported good Q2 results to send its share trading over 4% higher on Tuesday.

BAC reported earnings per share of $0.88, ahead of the consensus for a profit per share of $0.84. Revenue increased 11% year-over-year to $25.2 billion, ahead of the consensus that was looking for a figure near $25 billion. 

“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,” said Chairman and CEO Bryan Moynihan.  

“All businesses performed well, and we saw improved market shares, particularly in our Sales and Trading and Investment Banking businesses. A strong balance sheet and ample liquidity allowed us to continue investments in our franchise to drive long-term value for stakeholders.”

The Q2 outperformance was driven by the stronger-than-expected performance of the trading division, which topped analyst estimates by over $400 million. Net interest income FTE came in line with the consensus at around $14.2 billion. 

Bank of America said it set aside $1.1 billion for credit losses as CEO Moynihan continues “to see a healthy U.S. economy that is growing at a slower pace, with a resilient job market.” 

Representative Ro Khanna disclosed recently he was an active buyer of BAC stock in May and June.

Morgan Stanley

Morgan Stanley (MS:US) also saw its stock travel higher on Tuesday following the release of second-quarter results. Net revenues came in at $13.46 billion, ahead of the Street at $13.11 billion.

The wealth management business unit saw its sales surge 16% YoY, offsetting a 14% YoY drop in equities sales and trading revenue. Net interest income was reported at $2.01 billion, lower than the expected $2.28 billion.

“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 – Wealth and Investment Management added $100 billion in net new assets, bringing in over $200 billion year-to-date,” commented James P. Gorman, Chairman and Chief Executive Officer.

Return on equity was 8.9% for the second quarter, while the return on tangible equity was 12.1%. Morgan Stanley’s provision for credit losses was $161 million. 

At the end of Q2, the bank had $1.41 trillion in assets under management. 

Congressman Michael McCaul disclosed in late June that he sold $15,000 - $50,000 worth of MS shares on two occasions on May 10, when the stock closed at $83.72 apiece. 

Shares were seen trading above the $90 mark on Tuesday.

Charles Schwab 

Charles Schwab (SCHW:US) shares surged around 13% on Tuesday after the financial company reported deposits for the second quarter that topped the average analyst estimate. Scwab attracted $304.4 million in Q2 bank deposits, while the Street was looking for a number below the $300 million mark.

Total net new assets stood at $72 billion while the total client assets were $8.02 trillion at the end of the quarter. The company attracted $52 billion in core net new assets in Q2, bringing year-to-date (YTD) asset gathering to over $180 billion.

On the bottom line, the bank reported an adjusted profit per share of $0.75, topping the consensus for $0.71. Both revenue ($4.66 billion) and net interest revenue ($2.29) came in line with analyst targets. 

Co-Chairman and CEO Walt Bettinger noted, “Schwab’s modern approach to wealth management continues to resonate with investors, helping to sustain our strong client momentum.”

“While we observed signs of typical tax seasonality, as well as softer investor sentiment at the beginning of the quarter, we still attracted nearly 1 million new brokerage accounts and finished the period serving $8.02 trillion in total client assets across 34 million accounts.”

Congressmen Ro Khanna and Josh Gottheimer were both buying the stock in recent months after their colleague Michael McCaul was aggressively selling SCHW shares in April, in response to the regional banking turmoil.

Rep. McCaul was mostly selling the stock while it traded around the $50 per share mark. SCHW shares were seen trading above $65 apiece on Tuesday.