Pre-provision, pre-tax profits for U.S. banks are expected to fall 7 percent this year, a far worse result than the companies’ underlying businesses. The banks are adding bad loan reserves to their books, as companies are borrowing more and consumers are using their credit cards again. But the fact is, actual loan losses and delinquency rates are still near record lows.

Morgan Stanley’s profit plunged 29 percent from 2021 to $2.5 billion

As markets prepare for the impending recession and rising interest rates, Morgan Stanley is trying to minimize the impact of rising bad loan reserves on its bottom line. It has repurchased $2.7 billion of its own stock this quarter and has a new $20 billion buyback plan approved by its board. Wells Fargo, Citigroup, and Goldman Sachs are due to report results Friday and Monday. Morgan Stanley’s profit declined 24% year-to-date through Wednesday, far more than the KBW bank index, as it reported disappointing second-quarter results.

Goldman Sachs’ profit plunged 51 percent

The biggest independent investment bank on Wall Street has posted the worst profit drop in almost two decades, tumbling 71 percent in the third quarter. While forbrukslån has long been considered one of the smartest around, the slump in profit reflects the continuing credit crisis. The company’s results are likely to be disappointing to investors, but investors will be relieved to hear that its profits did not fall much more.

Citibanamex’s profit fell 29%

The fall in profit is linked to higher bad loan reserves and increased provisions. While the ratio of operating profit to risk weighted assets continued to improve as of the end of YE19, it materially decreased in the first quarter of this year due to higher loan provisions and trading losses. While the profits fell, the company is still in a good position and its strong franchise will benefit from flight to quality, according to Fitch. It also remains the leader in credit cards, personal loans, and corporate loans. And despite its recent downgrade, Citibanamex’s profit is still strong and its debt maturity is covered by its current liquidity.

Bank of America’s profit fell 29%

After adjusting for higher expenses and higher tax rates, Bank of America’s second-quarter profit fell 29% on higher bad loan reserves. The bank posted a revenue of $22.7 billion, 4% lower than its expectations, but its net interest income grew 22% to $12.4 billion. The company’s profit per share (EPS) fell 29% year over year to $0.73. However, the profit per share decline is less than the net income drop because the company had a provision for credit losses of $500 million. This compares to a benefit of $1.6 billion a year ago.

Morgan Stanley’s exposure to leveraged loans increased

As the technology industry grows, banks like Morgan Stanley are getting involved in more deals involving leveraged loans. At the end of the third quarter of this year, the firm had more than $8 billion in non-investment grade loan commitments, up from less than $8 billion a year earlier. Morgan Stanley’s exposure to leveraged loans increased as the firm’s business model shifted towards debt financing for startups.

Morgan Stanley’s exposure to overnight lending increased

The recent downfall of the Wall Street giant has left the city with fewer than five independent investment banks. Goldman Sachs and Morgan Stanley have converted to the Federal Reserve’s discount window with terms of 90 days. Wall Street is now dominated by two giants: Goldman Sachs and Morgan Stanley. However, despite their combined assets, they are still far from independent. Morgan Stanley’s exposure to overnight lending increased, and many investors are nervous.