Morgan Stanley capped off a mixed earnings season for Wall Street banks by reporting its strongest third quarter of the past decade, as a surge in bond trading revenue more than compensated for falling wealth management revenues*.
The smallest of Wall Street’s “Big Six” reported net income of $2.17bn, comfortably above the $1.8bn predicted by analysts and 3 per cent better than the third quarter of 2018.
Revenues grew 2 per cent year-on-year, to $10bn, beating median expectations for $9.6bn among analysts in a Refinitiv poll and marking the highest level in more than a decade. It also allowed Morgan Stanley to claim revenues above $10bn for the third quarter in a row.
“Our consistent performance shows the stability of our business model,” chairman and chief executive James Gorman said. “We remain committed to controlling our expenses and are well positioned to pursue our growth initiatives.”
Fixed income sales and trading was the powerhouse, delivering an extra $251m of revenues in a quarter when equity sales and trading revenues were flat.
Morgan Stanley said clients demonstrated strong engagement “despite seasonality and volatile markets.”
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Investment banking revenues grew 5 per cent yearon-year, fuelled by higher fees in advisory and debt capital markets.
Revenues in wealth management — Morgan Stanley’s second biggest division after its investment bank — fell 1 per cent to $4.36bn. The bank said its net interest income decreased 3 per cent year on year. At its previous earnings call in July, analysts fretted over how that business would be affected by falling interest rates and an inverted yield curve.
The results capped off a mixed earnings season, where Jpmorgan Chase shot the lights out with an 8 per cent rise in net income, while Citigroup and Bank of America posted more modest increases, and Goldman Sachs and Wells Fargo both posted big falls.
Morgan Stanley shares were 4 per cent higher in premarket trade on Thursday morning.
