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Morgan Stanley Jumps After B of A Reports Improved Earnings

NEW YORK ( TheStreet) -- Morgan Stanley (MS) led the banking sector higher on Wednesday, with shares jumping 3.6% to close at $32.18.

The investment bank will announce its fourth-quarter results on Friday, with analysts polled by Thomson Reuters estimating earnings of $927 billion, or 45 cents a share, on revenue of $8.012 billion.  In comparison, Morgan Stanley during the fourth quarter of 2012 earned $867 million, or 45 cents a share, on revenue of $7.477 billion. 

The 19% increase in fourth-quarter trading revenue (excluding accounting adjustments) reported by Bank of America (BAC - Get Report) may have investors expecting a huge earnings beat for Morgan Stanley.

The broad indices all showed strong gains on Wednesday, with the S&P 500 (^GSPC) hitting a new intraday high, after the Federal Reserve Bank of New York said manufacturing activity in the state of New York expanded at an accelerated, but still modest, rate during December.  The bank's general conditions index for New  York rose by 10 points to 12.5, which was the highest level since May 2012.

Banks led the market higher, with the KBW Bank index (I:BKX) rising 1.4% to 70.18.  All but two of the 24 index components ended with gains.

Shares of Bank of America were up 2.3% to close at $17.16, after the company reported fourth-quarter earnings applicable to common shareholders of $3.183 billion, or 29 cents a share, increasing from $2.218 billion, or 20 cents a share, in the third quarter, and $367 million, or three cents a share during the fourth quarter of 2012.  The year-earlier results reflected the company's $10.3 billion mortgage putback settlement with Fannie Mae (FNMA) at the beginning of 2013.

Please see TheStreet's earnings coverage for a detailed discussion of Bank of America's results.

Goldman Sachs analyst Richard Ramsden called Bank of America's results a "very strong end to 2013... with solid revenue in key business lines and continued core expense and credit leverage."  The analyst in a note to clients wrote that Bank of America's results make the consensus 2014 EPS estimate of $1.32 "look very achievable."

Next Up: Citigroup, Goldman and Regionals

Along with Citigroup (C - Get Report) and Goldman Sachs (GS), several large regional banks will announce their fourth-quarter results on Thursday, including Huntington Bancshares (HBAN) of Columbus, Ohio, BB&T Corp. (BBT) of Winston-Salem, N.C., and PNC Financial Services Group (PNC) of Pittsburgh.

  • Analysts polled by Thomson Reuters estimate Citi will post fourth-quarter earnings of $2.990 billion, or 95 cents a share, on revenue of $18.182 billion.  This would be a significant increase from operating earnings of $2.150 billion, or 69 cents a share, excluding debit valuation (CVA) and debit valuation adjustments (DVA) during the fourth quarter of 2012.  Please see TheStreet's earnings preview for more on what to expect from Citigroup.
  • The consensus fourth-quarter earnings estimate for Goldman Sachs is $2.102 billion, or $4.21 cents a share, on revenue of $7.713 billion.  A year earlier, Goldman earned $1.01 billion, or $1.84 a share, on revenue of $6.05 billion.  Please see Antoine Gara's in-depth analysis for pointers on how to interpret Goldman's earnings report.
  • Huntington Bancshares is expected by analysts to report fourth-quarter earnings of $142.8 million, or 17 cents a share, declining from $167.3 million, or 19 cents a share during the fourth quarter of 2012, when earnings were boosted by a $10 million gain on mortgage servicing rights hedge trades, as well as $14.1 million in gains from a securitization of auto loans.
  • Analysts expect BB&T to post fourth-quarter earnings of $515 million, or 71 cents a share, on revenue of $2.374 billion, compared to $506 million, or 71 cents a share, a year earlier, when revenue totaled $2.533 billion.
  • For PNC, the consensus fourth-quarter earnings estimate is $888 million, or $1.65 a share, on revenue of $3.834 billion.  This compares to earnings of $719 million, or $1.24 a share, on revenue of $4.069 billion, during the fourth quarter of 2012.

The following chart shows the performance of the three regional banks listed above, against the KBW Bank Index and the  S&P 500 since the end of 2011:

HBAN Chart data by YCharts


-- Written by Philip van Doorn in Jupiter, Fla.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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