Morgan Stanley on Wednesday reported outsize third-quarter earnings that blew past Wall Street’s forecasts — as revenue from its stock trading desk surpassed even the eye-popping results from its archrivals at Goldman Sachs.
Equities trading revenue jumped 35% to $4.12 billion – obliterating expectations of a 6.6% increase. The bank’s stock traders brought in $720 million more than analysts had expected, just after recording their best second quarter ever.
That beat $3.74 billion from Goldman Sachs, which has dominated equities trading in recent years. Ted Pick – Morgan Stanley’s notoriously foul-mouthed boss – has been eager to usurp the Wall Street rival.
Profit at the bank jumped 45% from a year earlier to $4.61 billion, or $2.80 a share, above expectations of $2.10 a share.
Revenue rose 18% to a record $18.22 billion, up from $15.4 billion last year and above estimates.
An especially active trading and dealmaking environment – with stocks near record highs and a resurgence in mergers and IPOs – has helped Wall Street banks deliver upbeat earnings.
Shares in Morgan Stanley jumped 4.6% Wednesday morning, and are up 30.2% so far this year.
The revenue beat came with higher costs, though, as compensation expenses reached $7.44 billion, pushing total non-interest expenses to $12.2 billion – up 10% from last year. Analysts had expected just a 6.8% increase.
Fixed income trading rose 8% to $2.17 billion. Morgan Stanley reported a total trading haul of $6.29 billion, well above estimates of $5.5 billion.
Investment banking revenue jumped 44% from the year before to $2.11 billion – about $430 million more than expected thanks to more completed mergers, IPOs and fixed income fundraising.
Wealth management revenue increased 13% to $8.23 billion, about $500 million more than expected due to rising asset levels and transaction fees.
“Our Integrated Firm delivered an outstanding quarter with strong performance in each of our businesses globally,” Pick said in a statement Wednesday.
“Across our global footprint, we remain committed to generating durable growth to drive long-term value for our shareholders.”
An increased level of dealmaking, high trading volumes, anticipation around lower interest rates and improved lending margins created an ideal environment for Wall Street banks.
Also on Wednesday, Bank of America reported third-quarter earnings that topped estimates on stronger-than-expected investment banking revenue.
JPMorgan Chase, Goldman, Citigroup and Wells Fargo all reported earnings that beat expectations on Tuesday.
