Morgan Stanley's third-quarter earnings exceeded expectations as its core business divisions-wealth management, investment banking, and trading-outperformed analysts' estimates. The firm reported a profit increase of 32% to $3.2 billion, or $1.88 per share, with revenues rising 16% to $15.38 billion. These results highlight a broad resurgence across Wall Street, where major banks are witnessing a revival in investment banking and trading.
The earnings per share of $1.88 surpassed the LSEG estimate of $1.58, while the revenue figure of $15.38 billion beat the $14.41 billion forecast. "The firm reported a strong third quarter in a constructive environment across our global footprint," said Morgan Stanley CEO Ted Pick, citing "momentum in the markets and underwriting businesses on solid client engagement." Shares of Morgan Stanley rose 3.6% in premarket trading following the earnings release.
The bank's wealth management division emerged as a standout performer, generating $7.27 billion in revenue-a 14% increase from the previous year and nearly $400 million above StreetAccount estimates. This surge in performance reflects the bank's expanding capabilities in managing assets for high-net-worth individuals, a crucial growth area for Morgan Stanley.
Trading operations also exceeded expectations, with equity trading revenue climbing 21% to $3.05 billion, surpassing the estimated $2.77 billion. Fixed income trading edged up by 3% to reach $2 billion, again beating projections of $1.85 billion. The bank's diverse trading strategies appear to have capitalized on market volatility and favorable economic conditions during the quarter.
Morgan Stanley's investment banking division saw a remarkable 56% rise in revenue from the same period last year, reaching $1.46 billion. This surge was primarily driven by increased fees from bond underwriting and mergers and acquisitions (M&A) advisory services. As Wall Street regains its appetite for deals, Morgan Stanley's capabilities in executing high-profile transactions have proven critical to its financial rebound.
Investment management, Morgan Stanley's smallest business segment, also posted gains. The division reported a 9% increase in revenue to $1.46 billion, slightly above the anticipated $1.42 billion. This growth, while modest compared to other segments, highlights the firm's ability to maintain diverse revenue streams amid fluctuating market conditions.
The broader Wall Street revival has seen other major financial institutions like JPMorgan Chase, Goldman Sachs, and Citigroup also report stronger-than-expected earnings in trading and investment banking. Analysts attribute part of this recovery to the Federal Reserve's recent rate cuts, which have stimulated market activity and opened up opportunities for financing and mergers. The Fed's decision to lower its benchmark rate by 50 basis points has created optimism among Wall Street executives for a sustained increase in deal-making activities.
A key development for Morgan Stanley in the third quarter was the surge in net new assets within its wealth management division, which rose by 79% year-over-year to $64 billion. This substantial growth underscores the division's importance in driving the firm's overall profitability. Revenues in wealth management climbed to $7.3 billion, marking a 13.5% increase from the previous year and a 7% rise from the last quarter. The firm's strategic focus on expanding its client base and enhancing its advisory services is paying off, reflecting a robust pipeline of client engagement and asset growth.
Despite the positive results, not all segments met expectations. The equity capital markets desk generated $362 million in revenue, falling short of analyst projections by $12 million. This softer performance highlights the challenges facing equity underwriting amid a volatile market environment, even as other divisions exceed targets.
Ted Pick's leadership, now in its first year, continues to gain momentum. Since taking over from former CEO James Gorman, who plans to step down as executive chairman at the end of the year, Morgan Stanley's stock has outperformed major indices, rising 57% in the period. Pick emphasized the bank's commitment to "driving durable growth and realizing long-term returns for our shareholders."
