The bulls are raging on Wall Street — and so are powerhouses Goldman Sachs and Morgan Stanley.
The two investment banks reported combined revenue of $17.5 billion and a total profit of nearly $4 billion in the third quarter. Earnings from both firms topped forecasts.
Maybe the ’80s really are back: Goldman and Morgan are living up to their old Masters of the Universe nickname.
The results come a few days after fellow bank behemoths JPMorgan Chase, Citigroup and Bank of America posted solid third quarter earnings of their own.
All five companies had something else in common: They did well even though trading activity, a big source of revenue for these banks, was ho-hum because of low interest rates and a calm stock market.
Goldman Sachs reported revenue of $8.3 billion and profit of $2.1 billion, thanks largely to a big increase in revenue from its merger advisory unit and its investing and lending business. That helped offset the decline in bond and stock trading.
Nonetheless, investors still prefer Morgan Stanley over Goldman Sachs this year. Shares of Goldman Sachs fell 2% Tuesday morning despite the earnings beat. The stock is now down slightly in 2017.
Morgan Stanley rose nearly 2%, though. Shares are now up about 18% this year.
Morgan Stanley’s solid results were led by a jump in its wealth management business, which handles things like investment advice and retirement and estate planning. Revenue was up 9% in that business and profits rose 24% from a year ago.
The wealth management unit accounted for more than a third of Morgan Stanley’s $9.2 billion in total sales and nearly 40% of the company’s $1.8 billion in net income.
Most banks have thrived this year despite concerns about whether President Trump and Republicans in Congress can pass a tax reform bill and roll back the Obama-era Dodd-Frank financial reform law.
Trump has stacked his administration with Goldman alums, most notably Treasury Secretary Steven Mnuchin and National Economic Council director Gary Cohn.
But Goldman Sachs CEO Lloyd Blankfein does not appear to be a big fan of the president. While never mentioning Trump by name, Blankfein has made pointed critiques of Trump policies on Twitter in the past few months.
Blankfein steered clear of politics in the company’s earnings announcement, merely pointing out the obvious — how well the bank is doing.
“Our overall performance this year has been solid and provides a good foundation on which to execute and deliver our growth initiatives,” Blankfein said.
Morgan Stanley CEO James Gorman also avoided talk about Washington, simply noting that the trading business was “subdued” but that the bank did well thanks to its “balanced business model.”
Still, Goldman and Morgan — as well as other big banks — face many questions.
Who will be the next Fed chair? Can the bull market that started during President Obama’s first term and has picked up steam under Trump keep going if tax reform and bank deregulation efforts stall? Will businesses and consumers continue to spend?
But none of these concerns seem to be significant issues for the big banks — or their shareholders — just yet. The Main Street consumer economy remains resilient, and that’s the main reason tepid trading results aren’t hurting Wall Street.