Oct 16, 2020 - Economy

Bank earnings soar again, even as their stock prices remain stagnant

Data: FactSet; Chart: Axios Visuals
Data: FactSet; Chart: Axios Visuals

JPMorgan, Goldman Sachs and Morgan Stanley all saw trading revenue rise more than 20% in the third quarter, with Morgan Stanley's earnings report Thursday showing profits jumped 25% from a year earlier to $2.72 billion and a 16% increase in revenue, which rose to $11.7 billion.

The big picture: Even after lackluster headline earnings from Bank of America and Wells Fargo, the five biggest U.S. investment banks are on pace to rake in $100 billion in trading revenue this year.

  • The trend follows Q2's record for modern Wall Street’s trading and dealmaking units.
  • They’ve already generated almost $84 billion, more than any full year since 2010, per Financial Advisor.
  • The finance sector’s current earnings decline of 10.5% is less than half the 23.1% decline expected before the banks started reporting results last week.

Yes, but: The banks remain unloved on the stock market. State Street's financial sector ETF is down nearly 20% year to date and its bank-specific ETF, KBE, is down 30%.

  • Even after its searing earnings results on Wednesday, Goldman gave back all of its stock gains and then some yesterday.
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