Reacting to Earnings From Our 2 Big Bank Holdings
We have a few things to get to on Wednesday, but following that hotter-than-the-market-expected CPI report, the next thing for us to address are the earnings reports out from Morgan Stanley ($MS) and Bank of America ($BAC).
The one from Morgan Stanley is fairly straightforward as it bested Q3 2026 consensus expectations on its top and bottom lines, driven by investment banking, equity trading and further share gains at its Wealth Management business. Bank of America’s results, which missed consensus expectations by a modest amount once adjusted for the Treasury Department’s $1.2 billion anti-money laundering (AML) related fine, are a bit more complicated.
In addition to allegedly failing to mitigate and report priority national security risks, including Chinese money laundering networks and illicit finance along the southwest border, BofA was also found to be deficient in AML compliance programs.
Ouch, to say the least and a development that is going to, at least in the near term, raise credibility questions and a concern that there are other Treasury Department AML fines coming at other banks.
Excluding that fine, BofA missed consensus EPS for Q3 2026 by $0.02, not a massive miss on a $1.08 figure, but enough in the current environment to weigh on the shares. Coming off of Tuesday’s results from JPMorgan ($JPM) and what those results showed, BofA’s results aren’t quite as surprising. There were some bright spots in BofA’s results including growth in client deposits, wealth flows and consumer activity.
For us, the real question is what’s to come on the investment banking front and if that bodes well for a rebound in that highly profitable business for both BofA and Morgan Stanely. With BofA, loan growth prospects will be another question given the growing likelihood of higher interest rates ahead.
We’ll have more to say on both once we’ve digested Wednesday morning’s earnings calls from both companies. But with the relative strength index level for BAC shares below a reading of 20, you should not expect us to pull the plug on the shares. And if we were asked, between MS and BAC positions, which one would be likely added to first, the answer subject to those earnings calls is MS.
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At the time of publication, TheStreet Pro was long BAC and MS.
