Q2 EPS down at most US capital markets firms, up at most asset managers

Most US capital markets companies posted declines in their earnings for the second calendar quarter, while the majority of asset managers recorded higher earnings in the period.

Capital markets companies

Out of the 14 capital markets companies that qualified for this S&P Global Market Intelligence analysis, only two managed to grow earnings per share quarter over quarter. On a year-over-year basis, only four logged higher earnings.

Nine of the 14 companies reported lower earnings both quarter over quarter and year over year, including the largest one on the list by market capitalization, Morgan Stanley.

Morgan Stanley's EPS for the second quarter was $1.24, compared with $1.70 in the first quarter and $1.39 in the second quarter of 2022.

While its investment banking revenues were flat year over year in the second quarter, the company saw positive client activity trends as the quarter progressed, CFO Sharon Yeshaya said on Morgan Stanley's earnings call.

Goldman Sachs Group Inc.'s second-quarter EPS was $3.08, compared with $8.79 a quarter ago and $7.73 a year ago. In the second quarter, the company saw activity levels in many investment banking areas linger near decadelong lows, with clients keeping "a risk-off posture."

"At this point in time, given the lack of investment banking activity, our investment banking business is performing at a lower level of return and a lower level of activity than we've seen in nearly a decade. We don't believe that's constant," Goldman Sachs Chairman and CEO David Solomon said on the company's earnings call.

– Set email alerts for future Data Dispatch articles. – Read some of the day's top news and insights from S&P Global Market Intelligence.

Some of the other companies that recorded lower earnings sequentially and year over year were Charles Schwab Corp., Jefferies Financial Group Inc. and Stifel Financial Corp.

Only PJT Partners Inc. reported higher earnings on both quarter-over-quarter and year-over-year bases. The company's EPS was 86 cents, compared with 67 cents in the first quarter and 74 cents in the second quarter of 2022.

Raymond James Financial Inc.'s second-quarter EPS was $1.71, down from $1.93 in the prior quarter but up from $1.38 in the year-ago period. The company's capital markets segment is being negatively impacted by the challenging market environment, according to Chairman and CEO Paul Reilly.

"In the capital markets segment, there are some signs of improvement in investment banking, and we continue to have a healthy M&A pipeline and good engagement levels. But while there is reason for optimism, we expect the pace and timing of transactions to be heavily influenced by market conditions and would more likely pick up over the next six to 12 months," Reilly said on the company's earnings call.

Asset managers

Of the 15 asset management companies included in the analysis, 11 booked sequential EPS increases, and 11 posted higher earnings year over year.

Nine asset managers saw their earnings climb quarter over quarter and year over year, including the largest, BlackRock Inc. The company's EPS was $9.06, compared to $7.64 in the previous quarter and $7.06 in the prior-year period.

"Our strong investment performance and deep partnerships with clients have led to sustained organic growth, which when combined with improving market and currency movements has resulted in an $831 billion increase in BlackRock's [assets under management] since year-end 2022," Chairman and CEO Laurence Fink said in the company's earnings release.

Only one asset manager on the list, AllianceBernstein Holding LP, logged a decline in earnings both quarter over quarter and year over year. The company's EPS was 53 cents, compared with 59 cents a quarter ago and 69 cents a year earlier.