Bank of America Corp (NYSE:BAC) and Goldman Sachs (NYSE:GS) both topped consensus estimates for their second-quarter earnings results despite tumbling numbers. Goldman reported a 48% decline in profits to $7.73 per share or $2.8 billion on the back of tumbling investment banking revenue across the industry. However, Goldman’s earnings still came in over $1 higher than the average analyst estimate from Refinitiv.
Meanwhile, Bank of America reported a 32% drop in earnings at 73 cents per share or $6.25 billion. The firm recorded a $523 million provision due to credit losses.
Goldman Sachs Q2 2022 Earnings Results
Analysts had estimated $6.58 per share for Goldman Sachs' earnings, compared to the actual result of $7.73 per share. Revenue came in at $11.86 billion, compared to the consensus of $10.86 billion.
Despite the tumbling investment banking revenue industrywide, fixed-income traders generated about $700 million more revenue than had been expected. Goldman Sachs reported $3.6 billion in fixed-income revenue, compared to the $2.9 billion that had been estimated via StreetAccount.
The firm cited "significantly higher" trading activity in interest rates, commodities and currencies for the outperformance. Goldman posted an 11% increase in equities revenue, which rose to $2.86 billion versus the $2.68 billion that had been expected. Asset management revenue tumbled 79% to $1.08 billion on the back of losses in publicly traded stocks and smaller private equity gains. However, it came out slightly ahead of the estimate of $924.4 million.
Investment banking plunged 41% to $2.14 billion, similar to the results reported by Morgan Stanley and JPMorgan Chase, although it topped the estimate of $2.07 billion. Goldman Sachs blamed a steep drop in equity and debt issuance for the division's plummeting revenue. The firm added that its deals backlog also shrank quarter over quarter, suggesting that potential initial public offerings and mergers are being killed instead of delayed.
Goldman Sachs stock rose more than 2% in midday trading.
Bank Of America Q2 2022 Earnings Results
Bank of America's earnings of 78 cents per share compared to the consensus estimate of 75 cents per share. However, $425 million in regulatory-related expenses took a bite out of the firm's profits. In the same quarter a year ago, Bank of America enjoyed a $1.6 billion boost as borrowers were more creditworthy than expected.
Revenue came in at $22.8 billion versus the estimated $22.67 billion. Net interest income rose 22% to $12.4 billion on the back of rising interest rates and loan growth. Chief Financial Officer Alastair Borthwick told analysts on the firm's earnings call Monday morning that they could see an additional $900 million to $1 billion boost from those same factors in the third quarter and at least as much from them in the fourth.
Noninterest expenses rose 2% year over year, including $425 million costs related to regulatory matters. About half of the amount pertained to fines revealed last week. Regulators fined Bank of America in connection with how it handled unemployment benefits during the pandemic and an industrywide probe into the use of messaging apps by trading personnel.
Investment banking fees plunged 47% to $1.1 billion, barely missing the consensus of $1.7 billion. Fixed-income trading revenue rose 19% to $2.3 billion, while equities revenue rose 2% to $1.7 billion, with both coming in at around the consensus.
Bank of America stock rose by about 0.5% in midday trading.