BofA's trading desk avoided a single daily loss in Q1 amid market turmoil
NEW YORK (AP) — The market volatility of the last three months, caused partly by the war in Iran, has been a boon to Wall Street, as another set of banks reported strong profits helped by wild swings in markets and companies looking to make deals while the economy remains resilient.
Bank of America said on Wednesday that first-quarter stock trading revenues were $2.8 billion, a 30% jump from last year, while Morgan Stanley's much larger trading desk saw its equity trading revenues rise 25% to $5.15 billion. Morgan Stanley also had a very strong performance on its bond-trading desk, posting a 29% jump in revenues to $3.36 billion.
Morgan Stanley had a record quarter across its entire business. The bank reported net income of $5.6 billion and earnings per share of $3.43, a 30% jump in both of those metrics from the previous year.
The results from BofA and Morgan Stanley reflect the results posted by the other big banks this week, including Goldman Sachs and JPMorgan Chase. While market gyrations can be nauseating for average investors, high-speed Wall Street trading desks can take advantage of such market movements. Further, wild market swings tend to increase activity on trading desks, which leads to commissions and fee revenue for the banks.
Bank of America CEO Brian Moynihan said that, despite the strong quarter, the bank is “watchful of evolving risks,” noting the geopolitical tensions in the Middle East, Ukraine and elsewhere, plus the sudden rise in energy prices.
In a call with reporters, Bank of America executives said that despite the quarterly volatility, the bank did not post a single daily loss on its trading desk during that time. It was also the bank's biggest quarter for equity sales and trading in its history.
Like their counterparts, Bank of America and Morgan Stanley had strong performances in their investment banking businesses as well. Advisory revenues at Morgan Stanley nearly doubled from $563 million to $978 million, year over year. Both banks are advising some of the largest public companies set to go public this year, including Elon Musk's SpaceX.
Bank of America's consumer banking business, historically the bank's biggest revenue and profit center, posted a profit of $3.1 billion. Deposits and loans grew in the quarter, and its customers spent 7% more on their credit and debit cards compared to last year. Notably the bank also noted that it saw double-digit increases in debit card spending on gasoline and energy, similar to what Wells Fargo executives shared with reporters on Tuesday.
Despite the rise in energy prices, Bank of America executives said they are seeing no deterioration in the U.S. consumer.
“The main thing that we’re always looking for is unemployment, and that remains at 4.3%," said Alastair Borthwick, the bank's CFO. ”So that’s supporting the consumer at this point."
