Based on the weak performance of investment bank stocks over the past year, you could be forgiven for assuming that the Wall Street giants had developed temporary amnesia and forgotten how to make money. But based on the earnings reports BlackRock (NYSE:BLK), Goldman Sachs (NYSE:GS), and Morgan Stanley (NYSE:MS) just delivered, they are as profitable as ever -- even if BlackRock missed on revenue.

In this segment from MarketFoolery, host Chris Hill and Motley Fool Asset Management's Bill Barker try to put those reports into context, and consider why the financial institutions' valuations don't seem to fully reflect their performance.

A full transcript follows the video.

This video was recorded on Oct. 16, 2018.

Chris Hill: Let's start with the banks really quick. For anyone worried about Goldman Sachs and Morgan Stanley, I'm here to say, relax. They're doing fine!

Bill Barker: They're going to make it.

Hill: [laughs] We were worried that, given last week's drop in the market, gosh, maybe Goldman Sachs and Morgan Stanley and the people running those two large financial institutions have forgotten how to make money. And I'm here to say, based on their latest quarterly results, they haven't.

Barker: No, they have not forgotten how to make money. People have kind of forgotten that these places do make a lot of money. The stocks are all down quite a bit this year, down around 20% for the group, reporting between BlackRock and Goldman Sachs and Morgan Stanley, 15-20%. The rest of the market up 5-8%, depending on exactly where we are at the moment you're listening to this. It's moving around again today.

It's kind of a time of at least perceived or expected transition for the heavyweight Wall Street banks. There's fee compression. That's a big part of why there is not that high level of enthusiasm for the stocks right now. At least in the case of BlackRock and Morgan Stanley, they're more profitable than ever. Goldman Sachs has been bouncing around a little bit further behind, in adopting the more passive management approaches, and a little bit more, I think, skepticism about their business model at the moment.

Hill: Is that what it is with BlackRock in particular? You say they're more profitable than ever. The stock's down 3-4% this morning. To your point about the year this group has had, over the past month, we've seen stocks pulled back from all-time highs. That's not the case, certainly, with BlackRock.

Barker: No. They're making about $35 a share over the last 12 months. That's up from $30 a share for the 12 months ending last December. Decent improvement, that's about 11-12% improvement. The thing that appears to be worrying the market today regarding BlackRock is that their institutional funds were down over the quarter, and they are very good at attracting very, very low-cost funds that are invested in their low-cost ETFs. They're the market leader by far in that. That's a good place to be, but not a wildly profitable place to be. There's some concern, I suppose, that the institutional money maybe looking elsewhere.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.