Big Banks Beat Earnings Again

Make that six for six.

Bank of America (NYSE: BAC) and Morgan Stanley (NYSE: MS) reported first-quarter earnings this morning that topped consensus analyst projections, rounding out the year’s first earnings season for the six major financial institutions in the U.S. All six of the big banks reported earnings that were better than the experts expected.

Neither of the banks reporting today had very good quarters, however. Like most of the big banks this season, Bank of America’s and Morgan Stanley’s earnings were only managed to beat estimates because expectations were once again laughably low.

Bank of America had an especially rough quarter. Profits fell 68% from the first quarter of 2011, weighed down by a sizable debt-related charge. Per-share earnings fell to three cents from 17 cents a year ago, though the number would have risen to 31 cents a share if it weren’t for the debt charges. Revenue declined 17%.

Morgan Stanley didn’t fare much better. The investment bank reported a loss of $94 million, well off the $968 million in profit the company made a year ago. The difference was even more pronounced on a per-share basis; Morgan Stanley reported a loss of six cents a share, versus 50-cents-a-share profit a year earlier.

Like Bank of America, however, Morgan Stanley was dragged down by a debt-related charge. $2 billion worth of changes in the value of the bank’s debt wiped away what would have otherwise been 71 cents a share in profit, well ahead of the 44 cents a share most analysts had forecast.

Because both banks beat low estimates, their stocks are rising in early trading. BAC is up 0.7%, while MS has jumped 3% after earnings.

That’s a reversal from how the other big bank stocks behaved after their first-quarter earnings were released. Last Friday, shares of JPMorgan Chase (NYSE: JPM) and Wells Fargo (NYSE: WFC) fell after each bank reported better-than-expected earnings. Goldman Sachs (NYSE: GS) followed that same pattern after reporting earnings on Tuesday.

So first-quarter earnings season is now complete for the big banks. That all six of them beat earnings estimates is certainly encouraging. But debt is still weighing most of them down, serving as a roadblock to any meaningful progress. 

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