Citi, Morgan Stanley, BofA, and Goldman Sachs’ Q2 results: All you need to know

Citi, Morgan Stanley, BofA, and Goldman Sachs' Q2 results: All you need to know

Here's our rundown of the second installment of big bank earnings last week.

by SARA KHAIRI

CITI: Net income dropped like a stone

Citi's profit took a hit in the second quarter and was at odds with higher profits reported by peers JPMorgan Chase and Wells Fargo last to last Friday.

For the second quarter ending 30 June, Citigroup reported:

• Net income fell 36% to $2.9 billion, or $1.33 per share, from $4.5 billion, or $2.19 per share, last year
• Revenue fell 1% from a year ago and came in at $19.4 billion for the quarter
• Total allowance for credit losses on loans was $17.5 billion at quarter end compared to $16 billion at the end of the prior year period

The slump in Citi's net income was primarily driven by higher expenses, higher cost of credit, and lower revenue. Higher costs for layoffs and increased provisions for credit losses also played their part in impacting profits. Revenue decreased sharply on account of the decline in markets and investment banking businesses amid slowing client activity. However, revenue from personal banking and wealth management increased 6% in the quarter to $6.4 billion partly fueled by loan income.

“Markets revenues were down from a strong second quarter last year, as clients stood on the sidelines starting in April while the U.S. debt limit played out,” said Jane Fraser, Citi's CEO. “In banking, the long-awaited rebound in Investment Banking has yet to materialize, making for a disappointing quarter.” 

Shares of Citigroup tumbled 4% last to last Friday.

MORGAN STANLEY: Wealth Management saved the day yet again

Earnings driven by the wealth management unit were Morgan Stanley's saving grace for the second quarter.

Morgan Stanley reported:

• Net income decreased 13% from a year ago to $2.18 billion, or $1.24 a share, compared with net income of $2.5 billion, or $1.39 per diluted share for the same period a year ago
• Revenue increased 2% to $13.46 billion from $13.1 billion a year ago
• Provision for credit losses was $161 million from $101 million in Q2'22

The jump in provisions for credit losses was primarily driven by credit deteriorations in the commercial real estate sector as well as slow growth across the portfolio. On the bright side, second-quarter wealth management revenue rose 16% to $6.66 billion on higher interest income, compared with $5.7 billion from a year ago. 

"The Firm delivered solid results in a challenging market environment. The quarter started with macroeconomic uncertainties and subdued client activity but ended with a more constructive tone," said James Gorman, CEO of Morgan Stanley. "Consistent with our strategy, we continued to attract client assets – Wealth and Investment Management added $100 billion in net new assets, bringing in over $200 billion year-to-date."

Morgan Stanley shares climbed more than 6% following the earnings results on Tuesday. 

BANK OF AMERICA: Significant gains in Trading and Investment Banking

Bank of America delivered better-than-expected results in the second quarter riding high on strong gains in the investment banking business.

Bank of America reported:

• Net income rose 19% to $7.4 billion, or $0.88 per diluted share, compared to $6.2 billion, or $0.73 per diluted share for Q2'22
• Revenue increased 11% to $25.2 billion
• Provision for credit losses was $1.1 billion, a significant increase from $602 million a year ago

The average deposit balances for the bank declined by 7% to $1.9 trillion. Recently, the firm was fined $250 million by US federal regulators for allegedly hurting customers by double-dipping on fees, withholding credit card rewards, and opening fake accounts. This number will also add up to the bank's expenses for the next quarter. However, Bank of America's Q2 results continued to benefit from higher rates on consumer loans. The investment banking sector also saw gains with net income jumping as much as 76% to $2.7 billion, fueled by higher interest payments and leasing revenue. 

"We continue to see a healthy US economy that is growing at a slower pace, with a resilient job market," said Brian Moynihan, CEO of Bank of America. "All businesses performed well and we saw improved market shares, particularly in our Sales and Trading and Investment Banking businesses."

Bank of America shares climbed more than 4% after the earnings release on Tuesday.

GOLDMAN SACHS: Earnings hit rock bottom

While Citigroup and Morgan Stanley also saw their profit decline, Goldman reported the largest drop among its peers on Wednesday.

Goldman Sachs reported:

• Net income fell 58% to $1.22 billion, or $3.08 a share, compared with $7.73 for the second quarter of 2022
• Revenue fell 8% to $10.9 billion from $11.8 billion in Q2'22
• Provision for credit losses was at $615 million

Goldman faced a strong blow in net income due to dealmaking and trading grappling with the macroeconomic climate and eventually drying up -- the major revenue driver for the bank. The firm also incurred $504 million in losses related to the fintech unit GreenSky. Furthermore, the firm suffered a loss from its consumer and real estate businesses, which added $485 million to the damage.

“Our results were impacted by the challenging macro environment and in particular headwinds facing our specific mix of businesses,” said David Solomon, CEO of Goldman Sachs. “Activity levels in many areas of investment banking hover near decade-long lows and clients largely maintained a risk-off posture over the course of the quarter.”

Shares of the bank were trading nearly 0.9% higher following the earnings call on Wednesday.

Market recap

The stock market saw a mix of losses and gains last week

Upstart (UPST) - up 17% to $55.39 per share

• A better-than-expected inflation report last week showing that inflation may be coming down continued to benefit the Upstart stock this week.
• Additionally, a pause in rate hikes and long-term funding deals seem to work in favor of the stock. While many think that the Federal Reserve is nearly done with its federal funds rate hikes, it's not certain as the Fed indicated that rates may rise again if inflation proves to be stickier.

Morgan Stanley (MS) - up 9% to $93.80 per share

• Shares of Morgan Stanley rose after the bank released its Q2 earnings. 
• The profit surpassed analysts' estimates as its wealth management business supported its overall earnings in the second quarter, and executives expressed optimism about the economic environment. 
• The wealth management unit's net revenue climbed 16% to $6.7 billion for the quarter, and it gained nearly $90 billion in new assets.

Wells Fargo (WFC) - up 8% to $47.13 per share

• Wells Fargo Q2 earnings benefited from strong net interest income.
• The bank’s net interest income jumped 29% to $13.16 billion. The earnings in the consumer and small business banking division also increased reaching $6.6 billion, a 19% rise compared to the previous year. 

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