Morgan Stanley, BofA cash in on M&A wave

Morgan Stanley and Bank of America ended a mixed earnings season for the major banks Wednesday on a high note. They're cashing in on the M&A wave, producing quarterly profit that beat Wall Street's expectations.

At Morgan Stanley, the dealmaking boom boosted its investment banking revenue 6%. But like its peers, its trading revenue fell.

Morgan Stanley and rival Goldman Sachs have focused on their strength in investment banking and trading. They lack big consumer lending units unlike the commercial banks, and that limits their exposure to pandemic-related loan defaults.

Over at Bank of America, record-breaking M&A volumes and loan growth fattened its bottom line by 30%. Billions of dollars' worth of deals pushed advisory fees up by more than half to a record, while strong commercial loan growth and higher credit card balances drove average loans and leases higher.

But like other banks, it saw higher expenses from bonuses and other incentive compensation. Cut-throat competition has forced investment banks to pay more to recruit and keep talent. But while other banks project expenses will rise further this year, BofA expects to hold the line.

Shares of BofA and Morgan Stanley rose in early trading Wednesday.