Bank of America rises, Morgan Stanley falls on Q2 earnings

Bank of America (BAC) and Morgan Stanley (MS) both reported their second quarter results with shares of Bank of America moving to the upside in pre-market trading as it expects net interest income to rise in the fourth quarter. Shares of Morgan Stanley are falling in pre-market trading on Tuesday as the firm's wealth management net revenue missed estimates by $70 million.

The Morning Brief anchors Brad Smith and Seana Smith break down the latest earnings figures for these major banks and what it could mean for their stocks moving forward.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Nicholas Jacobino

Video Transcript

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Today we are watching shares of two top trending tickers on Yahoo, Finance, Bank of America and Morgan Stanley, both out with second quarter results.

Let's take a look at some of the highlights here, and we're taking a look at this market action here beginning the day.

The biggest mover that we're seeing right now, Morgan Stanley as of right now and then, additionally, you've got Bank of America moving to the upside by about 8/10 of a percent.

Let's just briefly hit on Bank of America a few of the takeaways that I was able to peruse through this report and ultimately kind of pen down as some of the bullet points that investors may be thinking about this morning.

Number one.

Looking at some of the year over year comparisons.

Even though you did get a beat on top and bottom expectations, there was an overall lower performance versus last year.

Revenue, they did say, was hit by some lower deposit balances.

You also saw the provision for credit losses up annually and sequentially here.

Now that could mean that they're just kind of trying to get ahead of where they could see some weakening in the consumer but ultimately thinking about that consumer as well.

On the digital front, for all you zelle users out there, you're powering some of these new records.

Digital usage strengthening for the bank.

New Zel uh, records.

Here they they did note, of 22.6 million active users.

That's up 11% and then ultimately some sent and received 382 million transactions worth 100 $15 billion.

Both of those markers up 26% here, Sean.

Yeah, I think the big move or the big reason why we're seeing this reaction in Bank of America has everything to do with net interest income and where exactly Bank of America sees that going here for the remainder of the year does net interest income when it comes to that Bank of America saying that they expected to hit a trough here in the second quarter of the quarter.

The second quarter net interest income will probably hit a trough here for 2024 and then looking ahead.

The company, saying that net interest income on a fully taxable equivalent basis is probably going to climb to about 14.5 billion in the fourth quarter.

So some improvement down the line.

I think that's giving Wall Street a bit of confidence and why we're seeing Bank of America shares up just over 1% here in early trade or in pre market trading.

Now let's flip over to Morgan Stanley because a different reaction going on there.

You've got that bank under some pressure here, following the result that we got out this morning.

We're looking at losses of just around 3.5%.

The big reason for that is some of the weakness that we are seeing in the wealth management business.

Revenue there missing expectations coming in at 6.79 billion.

Now, the bank has really been under a tremendous amount of pressure to show that it could keep some of the momentum alive within the, uh, wealth management business.

It's going to be able to keep expanding.

It's already, uh, market leading share that it does have here under their new CEO Ted pick.

So some weakness.

There is a bit of a, uh, cau.

So I guess some red flags here for Wall Street.

So why we're seeing that stock under a bit of pressure.

Also, the company here provision for credit losses coming in more than expected.

On the flip side, though, there are some areas some bright spots within this report that top line they are trading and net interest income at least beating the street's expectations.

So able to maybe question some of the fears that we are seeing play out on the street.

But again, a lot of this movement that we are seeing in pre market in direct reaction to this report is related to some of the weakness.

Or, uh, I guess loss of momentum that Morgan Stanley is seeing within its wealth management arm.

Yeah, it ultimately seems like and and kind of continuing trying to get the read on where the executive officers for both of these banks are kind of remarking on what they're seeing in the broader environment right now.

Uh, Ted pick as we were talking about Morgan Stanley, the chief executive officer over at Morgan Stanley, really remarking on this as a strong quarter improving capital markets environment, which is actually something that many of the banks that we've heard, uh, as a through line for many of the banks have performed well because of the stronger capital markets, environment and and equity markets as well.

Um, is something that's been a boon for many of the banks at this juncture.

But just to come back to that figure that you were mentioning on the wealth management side here, uh, because that came in lighter than expectations and ultimately here it was the equities in sales trading revenue that outpaced some of the expectations or estimates coming in to this quarter.

And so where they're able to retain some of the wealthier clients, some of those who are looking to kind of rely on the services of the larger banks.

I think that's been one of the other common denominator that we've heard over the course of this earnings season, at least for the financial services industry thus far.

Yeah, you're exactly right.

We'll see where these two banks open here at the opening bell in just about 24 minutes from now.