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Morgan Stanley’s CEO James Gorman: “We produced strong results across the franchise”. Net income is up to 20 percent.. (image: REUTERS/Lucas Jackson)
Morgan Stanley’s CEO James Gorman: “We produced strong results across the franchise”. Net income is up to 20 percent.. (image: REUTERS/Lucas Jackson)

3Q 2018: American Banks Show Strength

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Morgan Stanley’s CEO James Gorman: “We produced strong results across the franchise”. Net income is up to 20 percent.. (image: REUTERS/Lucas Jackson)

Goldman Sachs and Morgan Stanley, the two rock stars of the financial institutions, have surpassed shareholders and analysts prediction for this year’s third quarter.

While sharing their results on Tuesday, numbers showed investment banking revenue is up more than 15% compared with last year, at $1.5 billion.

As confirmed by many analysts, side products were the secret ingredient of this success, as both institutions are bracing for a fourth challenging quarter, very influenced by a diplomatic uncertainty, between Brexit and China Tariffs. 

Strong, despite uncertainty

As many analysts confirmed, the results shared by the two giants were a relief for many of them – the international political scene having cause a lot of stress to Wall Street and shareholders.

Before earnings season began, analysts were only projecting one percent on boosted revenue from debt and equity issuance. Now, “analysts said Morgan Stanley’s revenue from trading and investment banking may have climbed 3 percent and 1 percent, respectively, the biggest increase expected among the five largest banks on Wall Street”, according to Bloomberg.

At the end of the day, Goldman Sachs’ stock gained nearly three percent, selling for USD $221.70 dollars.

Morgan Stanley: Franchise helped a lot

According to Morgan Stanley’s CEO James Gorman, “We produced strong results across the franchise”, he shared with CNBC. Net income is up to 20 percent.

Needless to say that summer is usually a slow period for banks – which is why Gorman justified this successful quarter by the solid franchise. “Despite the seasonal summer slowdown in the third quarter, we reported solid revenue and earnings growth demonstrating the stability of the franchise.”

As per its counterpart JP Morgan, the results impressed way less analysts.

J.P Morgan and the weak link

On the surface, news look good. J.P Morgan reports better-than-expected results for the third-quarter with a share valued at $2.34 per share, versus analysts expectations of $2.25 and revenues come in at $27.8 billion – while expectations were set for $27.5 billion.

However, it seems that the banking institution has been undergoing difficulties regarding its bonds. “The U.S. and the global economy continue to show strength, despite increasing economic and geopolitical uncertainties, which at some point in the future may have negative effects on the economy,” CEO Jamie Dimon said in his latest press release.

And while it seems that Wall Street has manage to avoid a tragic tenth year anniversary crash, analysts are wary about the next quarter, as industry experts think that profitability has peaked. A new crisis might just be around the corner…

Note: The opinions expressed in this article are the author's own and do not necessarily reflect the view of Alvexo on the matter.