Morgan Stanley profits lifted by trading and deal-making boom

Morgan Stanley has rounded off the US banks earnings season on a high, as a trading and deal-making boom helped boost quarterly net income by 39 per cent surge while its wealth management division also improved profitability.

Shares rose 3 per cent in pre-market trading as investors gave Morgan Stanley’s $2.4 billion (€2 billion) in net income a warmer welcome than some of the bumper profits reported by rivals in recent days.

"We reported robust revenue and earnings growth this quarter with strength across all businesses and geographies," said the bank's chief executive James Gorman.

“The second quarter performance reflected active markets and healthy client engagement. Our strong global franchise positions us well to continue to grow organically across each of our businesses and to deliver operating leverage.”

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Institutional securities, home to Morgan Stanley’s trading and investment banking businesses, was the standout performer with revenues up 20 per cent to $5.7 billion and pretax profits rising 26 per cent to $1.8 billion.

Big four

Sales and trading revenues were $3.8 billion, up 18 per cent on a year earlier, far better than the average 9 per cent rise reported across the other big four US banks.

Morgan Stanley’s fixed income revenues grew 12 per cent to $1.4 billion, putting the bank well ahead of the $1 billion quarterly fixed income target it set for itself just two years ago. Equity sales and trading remains almost twice as big, with revenues of $2.5 billion in the most recent quarter, up 15 per cent year-on-year.

Investment banking also put in a strong performance, with revenues of $1.7 billion in the three months to end June versus $1.4 billion a year earlier.

Wealth management

Growth was smaller in wealth management, where Morgan Stanley posted revenues of $4.3 billion for the quarter versus $4.2 billion a year earlier but the division’s pretax profit margins improved to 26.8 per cent from 25 per cent in the second quarter of 2017.

Most of the other big US banks produced big rises in second quarter net income, including Goldman Sachs, which on Monday said its net income rose 44 per cent year on year.

Net revenues were $10.6 billion for the quarter, versus expectations of $10.1 billion and $9.5 billion a year earlier. – Copyright The Financial Times Limited 2018