Morgan Stanley reported record revenue for its wealth management business in the third quarter, with earnings significantly exceeding expectations. The bank’s wealth management revenue reached $7.27 billion, a 13.5% increase from the previous year and surpassing the FactSet consensus estimate of $6.88 billion. Key drivers of this growth included a 17.6% increase in asset management revenue, totaling $4.27 billion, and a substantial 58.7% rise in transactional revenue to $1.08 billion.
However, net interest income saw a decline of 9.1% to $1.77 billion. During the quarter, Morgan Stanley added $63.9 billion in new assets, a notable increase compared to the $35.7 billion added in the previous quarter, bringing the total client assets to $6 trillion. This robust performance has had a positive impact on Morgan Stanley’s stock, reflecting confidence in the bank’s wealth management strategies and operations.
An investment banking surge at Morgan Stanley solidified its position on Wall Street as the firm’s profits in the third quarter exceeded analyst expectations. Fees from investment banking jumped 56% from a year ago, the largest leap among big banks, to nearly $1.4 billion. The pick-up in investment banking and an increase in trading helped Morgan Stanley push its net profit up by 32% from a year earlier, to $3.2 billion.
The results cement a broad rebound across the Wall Street operations of the country’s biggest banks. Investment banking fees and equity trading revenue also jumped at JPMorgan Chase, Wells Fargo, Goldman Sachs, Bank of America, and Citigroup. Executives at these banks have been optimistic that the start of an interest rate-cutting cycle at the Federal Reserve — which last month reduced its benchmark rate by 50 basis points — will mean more deals in the near future.
Morgan Stanley CEO Ted Pick said in a statement, “The firm reported a strong third quarter in a constructive environment across our global footprint,” citing “momentum in the markets and underwriting businesses on solid client engagement.”
Morgan Stanley beat analyst expectations in dealmaking fees from its bond underwriting and M&A advisory unit as well as revenues for its trading and wealth management divisions. Its total net revenue of $15.4 billion rose 16%. Fixed income and equities trading revenue surged 13% to $5 billion, driven largely by equities.
The stock rose by more than 7% as of market close, and has risen 29% since the beginning of January, putting it ahead of rivals Bank of America and Citigroup. One area of the company’s investment banking franchise that proved softer than analysts were hoping was its equity capital markets desk, which posted revenue of $362 million. Analysts were hoping for $12 million more.
Another bright spot that emerged Tuesday was Morgan Stanley’s recent performance in wealth management, which provides financial advice to higher-net-worth individuals.
Strong third-quarter profit growth
Net new assets in that division rose 79% from a year ago and 76% from the last quarter, to $64 billion.
Revenues were $7.3 billion, a 13.5% increase from a year ago and a 7% rise from the last quarter. The third quarter performance bodes well for Pick, who is still in his first year as the top boss. Since the announcement that Pick would take over for longtime CEO James Gorman, the firm’s stock has outperformed major stock indexes, up 57% for that period.
Gorman plans to step down from the executive chairman role at the end of this year. “Our management continues to be focused on driving durable growth and realizing long-term returns for our shareholders,” Pick added in the release. Morgan Stanley topped analysts’ estimates for third-quarter profit as each of its three main divisions generated more revenue than expected.
The bank said profit rose 32% to $3.2 billion, or $1.88 per share, and revenue jumped 16% to $15.38 billion. In this quarter, Morgan Stanley experienced several favorable conditions, starting with buoyant markets that lifted its massive wealth management business, a rebound in investment banking after a challenging 2023, and strong trading activity. The Federal Reserve began lowering rates in the quarter, which is expected to encourage more financing and merger activities that Wall Street firms rely on.
Shares of the bank rose 7.5% in early trading. Quarterly Performance Breakdown:
– Wealth Management: Revenue soared 14% from a year earlier to $7.27 billion, surpassing the StreetAccount estimate by nearly $400 million. – Equity Trading: Revenue increased 21% to $3.05 billion, compared to the $2.77 billion estimate.
– Fixed Income Trading: Revenue saw a 3% increase to $2 billion, exceeding the $1.85 billion estimate. – Investment Banking: Revenue surged 56% from a year ago to $1.46 billion, above the $1.36 billion estimate. – Investment Management: This division, the firm’s smallest, also exceeded expectations with a 9% increase in revenue to $1.46 billion, slightly higher than the $1.42 billion estimate.
Morgan Stanley’s results came in better-than-expected, fueled by strong revenue from trading and investment banking. This is a developing story. Please check back for updates.
