Major banks Morgan Stanley (MS) and Bank of America (BAC) announced earnings for the final three months of 2011 and continued the wave of good news for Wall Street. Morgan Stanley reported a loss, but one that was far less than expected, while Bank of America shifted into the black on a series of one-time gains.
Morgan Stanley Outpaces Expectations
Morgan Stanley did post a loss for the fourth quarter of 2011, but one wouldn't know it by looking at the company's share prices, which gained almost 6 pecent in early trading. The company's balance sheet took a serious hit due to a settlement paid to insurer MBIA (MBI), which accused the banking giant of being misleading in its characterization of the value of certain mortgage-backed securities for which Morgan Stanley bought insurance.
The settlement cost Morgan Stanley $0.59 per share. Overall, Morgan Stanley posted a loss of $275 million, or $0.15 per share, its first since 2009. However, when compared to the loss of $0.43 per share expected by analysts, Morgan Stanley's report looked downright sunny. The company's relative success, and the settlement of the MBIA issue, have the bank looking forward.
"For the first time in two years, our to-do list is not our problem list," CEO James Gorman said.
Bank of America Shows a Profit
Looks like Warren Buffett might have been right. Again. The Omaha-based billionaire investor's Berkshire Hathaway (BRK.A) sank $5 billion into the troubled investment bank last year. Now, with the company reporting a profit in Q4 of 2011, the bank's shares are up 7 percent in the early morning before settling into a gain around 3 percent as the afternoon wore on. All told, Bank of America's shares are up over 25 percent since the start of the year.
Bank of America posted a profit of just under $2 billion for an EPS of $0.15 per share, a major shift from last year's $1.24 billion or $0.16 per share loss. The company managed to improve its balance sheet with a variety of one-time gains and asset sales, posting revenues of $25.1 billion, an 11 percent year-over-year increase and beating analyst expectations of $24 billion. Over the course of the quarter, Bank of America manages to increase its Tier 1 Capital from 8.65 percent to 9.86 percent.
"We enter 2012 stronger and more efficient," Chief Executive Brian Moynihan said in a statement.
Bad News is Good News?
All three major indices posted marginal gains Thursday, continuing the trend of banks posting year-over-year losses but beating market expectations and pushing up share prices, with Goldman Sachs (GS) posting similar results yesterday.
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