Interactive Investor

US reporting season: interactive investor bank comment

14th October 2021 15:22

Jemma Jackson from interactive investor


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interactive investor's head of investment comments on forecast-topping third-quarter results.

Victoria Scholar, Head of Investment, interactive investor, says: “US banks are trading higher at the US equity market open after reporting forecast-topping third-quarter results with Morgan Stanley (NYSE:MS) and Bank of America (NYSE:BAC) leading the charge. The boom in M&A and IPO activity helped drive a surge in investment banking revenue, offsetting higher costs from technology and wages. Morgan Stanley reported record IB revenues in the third quarter, up 67% to $2.85 billion.

“Better-than-expected loan losses are also providing a tailwind this quarter with Bank of America’s quarterly provision for credit losses creating a benefit of $624 million, reflecting a reserve release of $1.1 billion. This was similarly reflected in JPMorgan’s earnings yesterday, which saw profit beat expectations on better-than-expected loan losses. However, its net interest margins fell 11% year-on-year amid the low interest rate environment, sending shares lower. For Bank of America, investors largely shrugged off a drop in FICC revenue, which fell 5% driven by a weaker trading environment for interest rate products.

“It is an upbeat day for markets so far with Dow jumping more than 300 points. The latest US weekly jobless claims fell to 293,000, the lowest level since the start of the pandemic and much better than analysts’ expectations, pointing to a potential pick-up in the labour market after last Friday’s disappointing non-farm payrolls report.

“Meanwhile, US producer inflation hit a nine-month low, with producer prices up 0.5% month-on-month, the smallest increase so far in 2021 and below forecasts. However, the annual producer inflation continued to rise, hitting 8.6% the highest since November 2010, stoking concerns about elevated price levels.”

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