Oct 15 (Reuters) - Morgan Stanley eased past Wall
Street estimates for profit on Thursday, wrapping up mixed
third-quarter earnings for big U.S. banks that saw those focused
on trading clocking big gains while retail banks took a hit from
Like fellow Wall Street trading powerhouse Goldman Sachs,
Morgan Stanley capitalized on a flurry of activity in financial
markets. Clients bought and sold securities in response to the
coronavirus pandemic, and many companies went public or raised
While Morgan Stanley's trading unit did not hit the record
highs of the previous quarter, the latest performance was still
good enough to help the bank comfortably beat expectations.
Striking an upbeat tone about future growth, Chief Financial
Officer Jonathan Pruzan said the bank was encouraged by client
engagement across all its businesses in the first few weeks of
the fourth quarter.
Even as trading returns to the spotlight amid the pandemic,
Chief Executive James Gorman has been taking steps to shore up
Morgan Stanley's asset and wealth management businesses to
insulate the bank from weak periods for trading and investment
Gorman engineered two large back-to-back acquisitions
recently - a $7 billion deal to buy Eaton Vance Corp to expand
its investment-management business immediately after closing its
$13 billion acquisition of discount brokerage E*Trade Financial
Corp. Executives said they are done with deals for awhile as
they integrate those companies.
"We clearly have our plate full," Pruzan said in an
Morgan Stanley shares rose 1.5% to $51.40 in afternoon
The bank's wealth management arm also turned in a solid
quarter with a 7% jump in revenue to $4.7 billion.
Its return on tangible common equity (ROTCE), a measure of
how well a bank uses shareholder money to produce profits, came
in at 15%, in line with the target Gorman had set out earlier
In contrast to Morgan Stanley and Goldman Sachs, other big
banks like JPMorgan Chase & Co, Citigroup, Bank of
America and Wells Fargo & Co are more exposed to
weak activity in the real economy, plus historically low
interest rates. They have collectively set aside tens of
billions of dollars' worth of provisions this year to cover bad
Even so, most large banks beat profit estimates this
quarter, partly due to muted expectations.
ANOTHER STRONG QUARTER
Revenue from Morgan Stanley's institutional securities
division, which is houses its investment banking and trading
businesses, rose 21% to $6.1 billion.
Equities underwriting revenue more than doubled to $874
million due to handsome fees from a number of high-profile
initial public offerings such as Snowflake Inc, Royalty
Pharma, KE Holdings Inc and Warner Music
But revenue from underwriting bonds dropped from last year
due to declines in loan issuances and muted dealmaking activity.
Net income applicable to common shareholders rose 26% to
$2.60 billion in the quarter ended Sept. 30. Earnings per share
rose to $1.66, compared with the average analyst estimate of
$1.28 per share, according to IBES data from Refinitiv.
Revenue also comfortably beat estimates, rising 16% to $11.7
billion, as all three of its main businesses posted gains. (https://mgstn.ly/3dvUT5T)
(Reporting by Ambar Warrick in Bengaluru and Matt Scuffham in
New York; Writing by Anirban Sen; Editing by Saumyadeb
Chakrabarty and Nick Zieminski)