Earnings wrap: big banks top estimates as i-banking surges and spending stays solid

🏦 Wall Street POV… Investment-banking biggies including Morgan Stanley and Goldman Sachs unloaded sturdy Q3 results after rate cuts boosted dealmaking optimism (think: acquisitions, IPOs). Morgan Stanley shares hit a record high after a surge of M&A activity pushed its investment-banking revenue up 56%. Goldman’s profit jumped 45% to $3B, fueled by its i-banking biz. While IPO volumes are still below their 2021 peak, the lure of lower interest rates and this year’s market rally have pushed more companies to go deal hunting.

🏦 Main Street POV… JPMorgan Chase, Citibank, Bank of America, and Wells Fargo beat estimates as consumer spending stayed strong. Citi said high earners led splurging for the quarter, while middle- and lower-income customers cut back. Bank of America added 360K new consumer checking accounts and 1M new credit-card accounts. But as Americans rack up record debt, Chase, Bank of America, and Wells Fargo wrote off more unpaid loans as losses.

➡️ Forward POV… Falling interest rates are a double-edged sword for banks. On the one hand, they tend to boost spending and dealmaking. On the other, they can reduce the $$ banks make on loans like mortgages and credit cards. Net interest income is expected to dip next year as rates drop.