A surging equity market and increased client activity has helped Morgan Stanley report an 87% rise in third quarter earnings. The shares of the bank rose by 2.7 percent at $33.40 in morning trading on Friday. The Banks shares surged and beat the analysts who were forecasting an average performance.
After the financial crisis Morgan Stanley has been focusing on its wealth management business. However its traditional investment banking operation could still have a big impact on its earnings.
Morgan Stanley came on top of the list of underwriters globally in the first nine months of the current financial year. It has been the busiest months for stock offerings since 2007. Morgan Stanley’s equity underwriting revenue almost doubled to $464 million.
In all institutional securities revenue which includes trading and investment banking, surged by 22 percent to $4.52 billion.
Morgan Stanley’s bond operation got a shot in the arm after the release of an upbeat US Economic data. Revenues
Excluding accounting adjustments, bond trading revenue surged by 19.4 percent to $997 million. These figures are trivial if we look at the 53% growth reported by arch rival Goldman Sachs Group Inc.
Morgan Stanley is following the path of other big banks and reducing its presence in the bond market in the face of tougher capital requirements as risky trading becomes more common.
42.5 percent of Morgan Stanley’s total revenue came from Wealth Management and it rose by 9% to stand at $3.79 billion. Trading and investment banking business accounted for 50.7 percent of the total revenues. Pretax profit margin of 22 percent was well within Chief Executive James Gorman’s minimum target of 20 percent
Despite strong results in the quarter, the adjusted return-on-equity fell to 9 percent, below both the 10 percent minimum Gorman had specified and the 10.7 percent return in the second quarter.
Gorman added that the bank was looking at other avenues to improve its revenues and return-on-equity beyond previously announced plans.