After a deluge of big bank earnings delivered over what certainly felt like a compressed timeframe, one thing stuck out: IB was strong in Q3.
On Thursday, Morgan Stanley reported $2.85 billion in IB revenue, breezing past estimates for a $2.1 billion haul.
It was a record quarter for the firm’s investment bankers (figure below). Advisory fees tripled from Q3 2020 — and then some.
The bank’s characteristically spartan press release said simply, “Institutional Securities net revenues of $7.5 billion reflect record Investment Banking revenues, led by advisory, continued strong performance in Equity and solid results in Fixed Income.”
In an interview with Bloomberg, CFO Sharon Yeshaya adopted a more lively cadence. “We’re firing on all cylinders again,” she said.
Indeed. A quick look at the bank’s trading results showed sizable beats in both FICC ($1.64 billion versus consensus $1.54 billion) and equities ($2.88 billion versus $2.42 billion). The bank’s top and bottom line results were blowouts. Revenue of $14.8 billion topped consensus by nearly a billion, and EPS was a country mile ahead of estimates.
Gorman called it “another very strong quarter.”
In any event, the point isn’t to highlight how much money Morgan made, but rather to emphasize the Q3 theme. Note that BofA’s results also reflected record advisory revenue, and JPMorgan on Tuesday reported a 52% jump in IB fees.
Meanwhile, Citi managed a stick save (of sorts) thanks to market volatility in September, when the S&P finally rolled over after a maddeningly tedious trek to new highs over the summer. Both FICC and equities trading were better than expected, with the latter topping $1 billion for a third straight quarter (figure below).
That’s no small feat for a unit that carries the “underdog” label.
It was a mere four weeks ago when CFO Mark Mason said Q3 trading revenue would likely fall low- to mid-teens. Ultimately, total markets and securities services revenue for Q3 was down just 4% YoY, Thursday’s report showed.
Coming full circle (and rather quickly considering my penchant for verbosity), Citi logged a 39% YoY gain in investment banking revenue (figure below).
M&A was “particularly” strong, the bank said.
Like Morgan Stanley, advisory fees more than tripled, exceeding a half-billion dollars.
What will Darth Vader(GS) report tomorrow?
The vampire squid will report all legs and tentacles are squeezing margins at better than expected levels.
Best article ever written in Rolling Stone.
H-Man, the investment world has turned to “managed money” which means shooting ducks in a barrel. Spit out an asset allocation of 60/40 or 80/20, slide in some mutual funds and ETF’s and collect the quarterly fee. All great for the bottom line with little to no risk.
By March/April, I expect YoY inflation reads to come in at 2% or lower. From a higher base than pre-pandemic, for sure, but over 2022-23, the cost of most goods and many services should moderate.