Morgan Stanley profit crushes estimates on trading strength

  • Morgan Stanley profit crushes estimates on trading strength

Morgan Stanley profit crushes estimates on trading strength

Morgan Stanley eased past Wall Street estimates for profit yesterday, wrapping up mixed third-quarter earnings for big USA banks that saw those focused on trading clocking big gains while retail banks took a hit from the pandemic. "We delivered strong quarterly earnings as markets remained active through the summer months, and our balanced business model continued to deliver consistent, high returns", said Chief Executive James Gorman.

Within sales and trading, revenue from equity jumped 13.4% in the third quarter to £1.75 billion. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

As Gorman mentioned in his note Thursday morning, he has spent more than $20 billion to bulk up that business through his recent acquisition of E*Trade and his recently announced purchase of bond trading giant Eaton Vance. Firms like Morgan Stanley, with little exposure to consumer credit woes, have fared best.

Net income applicable to common shareholders rose to $2.60 billion in the quarter ended September 30, from $2.06 billion a year ago. Earnings per share were US$1.66, or US$1.59 excluding a tax benefit. Its trading operation - helping clients chop and change their portfolios - was responsible for the lion's share of the outperformance, bringing in nearly half a billion dollars more than expected.

Fixed-income trading revenue at Morgan Stanley was US$1.92 billion, compared with the US$1.7 billion analysts were predicting, based on estimates compiled by Bloomberg.

Trading revenue played a huge role in Morgan Stanley's increasing profits by 25 percent in the quarter despite the economic impact of the coronavirus.

Revenue from investment banking saw an 11.2% growth in Q3 to £1.32 billion that matched the analysts' estimates.

Revenue from Morgan Stanley's institutional securities division, which is the bank's largest breadwinner and houses its investment banking and trading businesses, rose 21% to $6.06bn.

The new Morgan Stanley will rely on its beefed-up wealth- and money-management businesses for a majority of its revenue, while also trying to maintain its standing in the markets and dealmaking world.