Private Assets Meet Public Markets
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Private markets are becoming the public markets. This is Motley Fool Money.
Welcome to Motley Fool Money! I'm Tyler Crowe, joined by longtime Fool contributors John Quast and Matt Frankel. Now, we're going to cover the market buzz around private assets that are looking to make their way into retirement accounts and cover stocks on our radar like we do on every Thursday. But first, earnings season is heating up. Yesterday, our colleagues discussed ASML's results, and we were tempted to also discuss Taiwan Semiconductor's strong earnings report and outlook. But I feel like we've discussed AI and the picks and shovels plays a lot lately on our episode of Motley Fool Money. We wanted to look at some of the non-AI parts of the markets, and what better way to do that than with the big banks.
The results from JPMorgan, Bank of America, Wells Fargo, and several others came out earlier this week. We don't want to rehash the numbers too much. Instead, I want to really focus on some of the big takeaways. from either the outlooks or commentary that we saw in the market. Matt, what stood out to you on this most recent round of updates?
First of all, all the big banks, including all the ones you mentioned and others, beat expectations for earnings. Strong numbers so far, but there are some big winners among the group. I'd say, in order, my biggest winners of earnings season so far among the banks are Wells Fargo, Morgan Stanley, and Bank of America. With the latter two, Bank of America and Morgan Stanley, they both benefited from a robust IPO and M&A market, which I think John's going to talk about more in a second. This led to investment banking fee growth of 43% and 44% year-over-year, respectively. for those two. Equities trading revenue was really strong. It beat expectations. And not only that, but Bank of America reported a surprise decline in their credit loss provision, which is going to come into play a little later in our conversation.
But in general, investment banking was really strong. And Wells Fargo, is particularly interesting because they don't depend as much on investment banking. We're a big winner. Their stock's up 10% since earnings. One major thing is that management is now expecting 17% to 18% returns on tangible common equity. over the medium-term, up from the previous estimates, after the Federal Reserve lifted their asset cap finally after seven years. The bank is now going on offense. Charlie Scharf, the CEO, said that Wells Fargo aims to be the No. 1 consumer bank, a lofty goal, and a top-five investment bank. I don't even think they're a top-10 investment bank right now. Plus, like Bank of America, Wells Fargo decreased their loan loss provision significantly.
Some really big surprises so far.
Yeah. As Matt points out here, the investment banking market right now is just red hot. Accounting firm Ernst & Young just released a report that showed that merger and acquisition deal values in September up over 110% year over year. Those were some big deals in there. Volume was a little bit lower, but even still, the activity in September was up 41%. That capped off a third quarter here, where value for M&A was up 239% from the third quarter of 2024, and volume was up 164%, nearly tripling. Things are clearly heating up in this space. That was reflected in the banking numbers that Matt was just talking about. And just to drill down into these things a little bit further, JPMorgan CFO Jeremy Barnum said that there have been some IPO deals sitting in the pipes ready to go, and they've just been waiting for better valuation and lower volatility, and the third quarter delivered on that.
The same applies to merger and acquisition activity. You also look at some of the comments from Bank of America CFO Alistair Borthwick. He said that the fourth quarter is shaping up nicely. Then Morgan Stanley comes out and says they're actually building their business with expectations that the next three to five years are going to show positive trends in this investment banking market.
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