Banks’ Earnings Beat Expectations in 3Q17
Mounting losses in insurance
According to FactSet, of the companies that reported earnings so far, the financial sector (XLF) has reported the highest year-over-year earnings decline of all 11 sectors at -10.1%. The insurance industry’s earnings will likely fall 66% due to the hurricanes. Lower earnings in the financials sector (C) (BAC) are largely led by the insurance industry. FactSet data revealed that the financial sector’s blended earnings would likely rise to 4.7% from -10.1% if the insurance industry’s earnings are excluded.
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Upbeat earnings from Goldman Sachs
Goldman Sachs (GS) posted EPS (earnings per share) of $5.02 for 3Q17, which easily beat Thomson Reuters’ consensus estimate of $4.17. The bank posted revenue of $8.33 billion—compared to the estimate of $7.54 billion. Goldman Sachs’ bond trading revenue fell 26% to $1.45 billion. The bank declared a dividend of $0.75 per share. It repurchased 9.6 million shares for $2.17 billion after repurchasing $6.1 billion in 2016.
Morgan Stanley on the right track
Morgan Stanley’s (MS) EPS for 3Q17 was $0.93—compared to the consensus estimate of $0.81. Its revenue was at $9.20 billion—compared to the expectation of $9.02 billion. Morgan Stanley reported a 9% increase in its net wealth management revenue to $4.22 billion, while its trading revenue fell 8% to $2.9 billion. Morgan Stanley’s healthy earnings growth is the result of its strategy to focus on businesses like wealth and asset management while de-emphasizing other businesses like stock and bond trading.