Apr 19 - Strong results from Morgan Stanley and Bank of America are more evidence the banking sector is benefitting from signs of relative strength in the U.S. economy as fears about the European debt crisis eased. Bobbi Rebell reports.
The clouds seem to be clearing for a number of top U.S. banks. Bank of America and Morgan Stanley reporting better-than-expected quarterly results. They join rivals JP Morgan Chase and Citigroup, which also reported well received results. The sector is benefitting from signs of strength in the U.S. economy and more activity in the capital markets, as fears about the European debt crisis ease. That makes their stocks a good value despite recent gains- according to Gary Townsend, President and CEO of Hill-Townsend Capital. SOUNDBITE: GARY TOWNSEND, PRESIDENT AND CEO, HILL-TOWNSEND CAPITAL (ENGLISH) SAYING: "This is an improving environment. I think we ought to recognize that and the valuations are really near historical lows even with the rising of stock prices in the past 3 and 4 months." Shares of Bank of America have surged almost 60 percent year-to-date, while Morgan Stanley shares have gained 18 percent since January. Because of an accounting charge- Morgan Stanley actually lost money for the quarter, but excluding that, the investment bank's earnings rose to 71 cents a share- far better than the 59 cents of a year ago. The company cut expenses and made more money in its bond trading and wealth management businesses. Results at Bank of America - the number 2 bank in the U.S. were also hurt by an accounting charge. But the company saw its sales and trading revenue more than double. The earnings also show progress in recovering from mortgage related losses it racked up during the financial crisis- with credit quality improving. But they may not be out of the woods just yet. Reuters' Breakingviews Antony Currie: SOUNDBITE: ANTONY CURRIE, COLUMNIST, BREAKINGVIEWS (ENGLISH) SAYING: "There is this concern there has been for the past two years as well, every first quarter for the last two or three years has been good and then it trails off as other concerns come back." And banks continue to focus on cutting costs to boost profits. Bank of America is working towards its goal of eliminating 30,000 jobs, and reduce annual expenses by $5 billion over the next few years. And Morgan Stanley says it will save about half-a-billion dollars a year after it completes a technology integration program this summer. Bobbi Rebell, Reuters.