Morgan Stanley continues down the road to recovery
WALL Street lapped up a solid set of second-quarter results from Morgan Stanley yesterday, buoying market sentiment after a disappointing performance over the same period from some of the bank’s peers, notably Goldman Sachs.
Morgan Stanley beat analyst expectations with post-tax profit of $1.4bn (£921m) for the three months to June, swinging back into the black after posting a loss of $138m in the second quarter of 2009. Net revenue came in at $8bn, boosted by a positive contribution from the bank’s debt-related credit spreads.
The figures come after a particularly torrid time for the bank over the financial crisis and were welcomed by analysts as a sign that new chief executive James Gorman has begun to turn its fortunes around.
“While markets were challenging this quarter, Morgan Stanley benefited from a deliberate and disciplined focus on execution,” Gorman said, though he acknowledged that the bank still has “a great deal of work to do” across its global franchise.
Morgan Stanley poured $3.9bn into its employee compensation pot over the period, equivalent to 49 per cent of its revenue. Like its peers, the bank took a substantial hit from the UK government’s payroll tax, for which it coughed up $361m over the quarter. Morgan Stanley’s investment bank saw revenues ease to $885m, hit by a 30 per cent decline in underwriting revenues to $597m as fears of a double dip and a crisis in the Eurozone caused market activity to dry up.
But this was offset by a seven per cent increase in the advisory fees raked in by the bank, reflecting a surge in completed M&A deals. Analysts were also encouraged by the performance of Morgan Stanley’s wealth management division, which turned a loss last year into a pre-tax profit of $207m.
Wells Fargo tops expectations thanks to declining loan losses
Wells Fargo, the fourth-largest US bank, posted higher-than-expected quarterly earnings, helped by declining losses on commercial and consumer loans.
While suffering higher credit losses than in the year-ago quarter, Wells said it saw signs that the worst was over in terms of loan write-downs, even as its outstanding loans continued to shrink.
“We believe credit quality has indeed turned the corner with net charge-offs declining to $4.5bn (£3bn), down 16 per cent from first quarter and down 17 per cent from last year’s peak quarter, and we expect this positive trend will continue over the coming year,” said chief financial officer Howard Atkins.
Wells Fargo, which is in the process of integrating Wachovia, acquired during the 2008 financial crisis, reported a five per cent drop in revenue to $21.39bn, but managed to eke out an improved net interest margin, which investors saw as a positive sign.
Net charge offs were 3.27 per cent of total loans, up from 2.86 per cent a year ago but down slightly from the first quarter.
Wells Fargo reported second-quarter earnings of $3.06bn, or 55 cents a share, compared with $3.17bn, or 57 cents a share, a year earlier.
US Bancorp cheers after profit rises on back of new lending
Minneapolis-based US Bancorp said profit soared as new lending boosted revenue.
Bucking a trend among its larger rivals, US Bancorp said it made more new loans in the second quarter compared with a year earlier.
Its loan book grew four per cent from the 2009 quarter to $191.2bn (£126.5bn) as credit card issuance and residential mortgages rose. Quarterly revenue climbed almost nine per cent to $4.5bn.
Loan losses increased slightly, to $1.11bn from $929m, but losses on commercial loans, home equity and residential mortgages broadly fell. The bank put aside $1.13bn against bad loans, down from $1.4bn a year earlier.
“We believe the company has reached the inflection point in credit quality and we expect net charge-offs and nonperforming assets to be lower in the third quarter than the current quarter,” chief executive Richard Davis said.
US Bancorp’s second-quarter profit was $766m, or 45 cents a share, compared with $471m, or 12 cents a share, a year earlier. Excluding one-off items, it earned 40 cents a share.
But Davis warned that President Barack Obama’s Wall Street reform bill could hurt the group in the future, “by either lowering revenue, increasing expense and/or raising capital requirements”.
Fidelity notches up a 52pc rise in net income on back of Sedgwick sale
FIDELITY National Financial posted a 52 per cent rise in quarterly profit as the number one US title insurer gained from a recent sale of its stake in Sedgwick Claims Management Services.
Net income attributable to shareholders for the second quarter was $139.6m (£92m), or 61c a share, compared with $91.9m, or 40c a share, a year ago. Analysts were looking for a profit of 35c a share.
Fidelity booked a pre-tax gain of about $98m from the sale of Sedgwick, which was bought over by private equity firms Stone Point Capital and Hellman & Friedman for about $1.1bn in April.
Title insurance guarantees that property owners have title to property and can legally transfer that title. Many lenders require that buyers have the insurance before extending loans.
Shares of the Florida-based company closed at $13.54 yesterday on the New York Stock Exchange. They have fallen 20 per cent since hitting a 52-week high of $17 last October.
Earlier this month, Fidelity agreed to sell some assets to settle allegations that a 2008 acquisition violated antitrust law.
Fidelity agreed to sell assets in Oregon and Michigan as part of the settlement.
BlackRock boosts profits but fails to soothe investor nerves
BLACKROCK failed to impress investors with better-than-expected second-quarter profits, amid continuing concerns that founder and chief executive Laurence Fink’s big move into exchange-traded funds is making the firm more dependent on low-fee products.
Shares of the world’s largest asset manager were down 2.4 per cent in afternoon trading as the firm’s results showed clients were picking up passively managed products, like its iShares ETFs, and getting out of more-lucrative actively managed stock and bond funds.
Still, BlackRock’s profits rose sharply in the quarter, boosted by a comparatively stronger market and the $13.5bn (£11.4bn) buyout of Barclays Global Investors last year, with its iShares ETF business.
Net income rose to $432m or $2.21 per share for the quarter, compared with $218m, or $1.59 per share, a year earlier. Revenue rose 97 per cent to $2.03bn, while analysts expected $2.01bn.
Northern Trust reports profit drop but beats forecasts
Northern Trust said second-quarter profit dropped amid lower servicing fees and waivers on money funds, but still beat analyst expectations. Chicago-based Northern Trust, whose services include both asset management and record-keeping, reported profit of $199.6m (£131.5m) or 82 cents per share, versus $314.2m or 95 cents per share, for the same period a year earlier. Revenue in the quarter was $974m.