Morgan Stanley earnings beat estimates as stock trading and investment banking top expectations

Morgan Stanley on Thursday posted second-quarter profit and revenue that exceeded analysts’ expectations on strength in equities trading and investment banking.

Here’s how the bank did:

Earnings: $1.85 a share, vs the $1.65 estimate of analysts surveyed by Refinitiv.

Revenue: $14.8 billion, vs the $13.98 billion estimate.

While rival banks reported a steep slowdown in fixed income trading revenue — a dynamic that ensnared Morgan Stanley’s bond traders as well — the bank’s strength has traditionally been in its equities trading franchise, the biggest in the world.

That business outperformed in the second quarter, producing $2.83 billion in revenue, more than $400 million over what analysts had expected. It made up for the shortfall in fixed income, which produced $1.68 billion in revenue, below the $2 billion estimate.

Stock trading has thrived in the second quarter for Wall Street, as have wealth management businesses, both of which have benefited from high asset values and robust IPO activity. Another area that has flourished is investment banking, propelled by robust mergers activity and related financings.

Like rival Goldman Sachs, Morgan Stanley posted strong investment banking results, with revenue of $2.38 billion exceeding the $2.1 billion estimate.

That helped the firm’s institutional securities business, which houses its trading and advisory operations, post $7.1 billion in revenues, about $350 million more than expected.

But the other two major divisions at New York-based Morgan Stanley also exceeded expectations in the quarter.

The bank’s massive wealth management business, bolstered by the E-Trade acquisition last year, posted $6.1 billion in revenue, edging out the $5.9 billion estimate.

Its investment management division, helped in part by the purchase of Eaton Vance last year, posted $1.7 billion in revenue, topping the $1.53 billion estimate.

Through a series of savvy acquisitions, Gorman has built up the bank’s wealth management franchise to be one of the largest in the world. He also helped rehabilitate the firm’s trading operations and maintained its leading merger advisory practice.

“The Firm delivered another very strong quarter, with contributions from all of our businesses,” Gorman said in the release. “With our transformed business model providing more stable and durable earnings, we have doubled our dividend and announced a $12 billion buyback as we move to return our excess capital to shareholders. Our global franchise is very well positioned to drive further growth.”

Shares of the bank dipped 1.1% in premarket trading amid a broader selloff. Before Thursday, Morgan Stanley shares have climbed 35% this year, compared to the 26% rise of the KBW Bank Index.

Morgan Stanley is the last of the six largest U.S. banks to report second-quarter earnings.

JPMorgan Chase, Bank of America, Wells Fargo and Citigroup all beat analysts’ profit expectations by releasing money set aside earlier for loan losses. Goldman beat estimates on strong advisory results.  

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