Profits slid at Wall Street's biggest banks in the third quarter as they braced for a weaker economy while investment banking was hit hard, but investors saw a silver lining with some banks beating estimates.
"Most of these banks are making more spread income now than ever because of the change in interest rates," said Chris Marinac, Director of Research at Janney Montgomery Scott. "And this was the first quarter where you had the full effect of the Fed, because the Fed increased a little bit in May.
Corporations' interest in mergers, acquisitions and initial public offerings dried up, particularly hitting banks strong in investment banking. Global M&Ain the third quarter with volumes in the United States plummeting nearly 63% as the rising cost of debt forced companies to postpone big buyouts. “Against the backdrop of economic headwinds, the solid earnings reports from this morning will quickly pass into the rearview mirror," said Peter Torrente, KPMG US National Sector Leader for Banking and Capital Markets. "Worries of inflation, which shows little sign of slowing down, are casting a long shadow on future outlook."
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