NEW YORK – First-half revenue at the six biggest U.S. banks climbed for the first time in four years, fueling profits and vindicating Bank of America Corp. and Morgan Stanley leaders who presided over stock slumps.
Revenue through June climbed to $215 billion from $208 billion a year earlier, excluding some accounting charges, according to data compiled by Bloomberg. The increase, the first since 2009, propelled Bank of America and Morgan Stanley’s shares close to where they were when Brian Moynihan and James Gorman became their respective CEOs in January 2010.
Rising revenue marks a pivot point in a U.S. banking- industry recovery that has relied on cost-cutting to bolster earnings since the 2008 global credit crisis. Unlike 2009’s gains driven by bond trading, growth this year came from more businesses, generated by stronger consumer confidence, a housing rebound and record highs for the stock market.
“Big banks are absolutely back,” said Greg Donaldson, chairman of Donaldson Capital Management, an Evansville, Ind.-based investment firm that oversees $750 million in assets. “The bleeding has stopped, and now they can spend time on figuring out how to make more money.”
Goldman Sachs Group Inc., the world’s most profitable securities firm before the financial crisis, led the biggest U.S. lenders with a 13 percent increase in first-half revenue. Morgan Stanley’s rose 8.4 percent, Citigroup Inc.’s 4.3 percent, JPMorgan Chase & Co.’s 3 percent and Bank of America’s 0.2 percent. Wells Fargo & Co.’s first-half revenue fell 0.7 percent from a year earlier. The figures exclude reported accounting gains and losses tied to the value of the banks’ own debt.
Second-half revenue probably will climb 7.1 percent to $230.9 billion combined, according to analyst estimates compiled by Bloomberg. JPMorgan, the biggest U.S. bank by assets, may reach $45.7 billion, as Bank of America, the second-biggest, reaps $43.6 billion, the estimates show.
The six banks reported $43.3 billion in total first-half profit, the most since 2007, and may struggle to top that in the second half of the year. Profit for the group is seen falling 5.1 percent to $41.1 billion, according to the average of analysts’ estimates, as loan-loss reserves that helped boost returns become depleted.
“There is definitely more health to the industry,” David Konrad, Macquarie Group Ltd.’s head of U.S. bank research, said in a phone interview. “The third quarter will be a little more challenging” because of shrinking reserve releases.
Among the largest lenders, the turnaround in investor perception was sharpest for New York-based Morgan Stanley and Bank of America, owners of the two biggest wealth-management businesses.
Gorman, 55, has presided over a 44 percent gain in Morgan Stanley’s shares this year after they plunged to an intraday low of $11.58 on Oct. 4, 2011, from $29.60 when he took over as CEO. Moynihan, 53, who took over with Bank of America trading at $15.06 a share, weathered a tumble to $4.92 as almost all of that decline has been erased.
Of the U.S. banks that reported second-quarter results before July 19, more than 90 percent beat analysts’ estimates, Goldman Sachs’s Richard Ramsden wrote in a report last week. Revenue surpassed forecasts in 70 percent of cases, compared with 20 percent in the first quarter.