Morgan Stanley profit beats estimates on dealmaking boost, shares soar
Oct 15 (Reuters) – Morgan Stanley’s profit beat estimates in the third quarter as a surge in dealmaking drove revenue to records, and the company’s finance chief said its investment banking pipeline is at “all-time highs.”
Shares were last up 6.7% after earlier touching a record high. They have risen 32% this year.
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“Our equities business affirmed its number one position with a standout quarter,” CEO Ted Pick told analysts on a conference call. “A rebound in the investment banking environment reopened the door to strategic M&A and renewed financing activity.”
“It is certainly possible that next year we could break 2021 deal volume records,” Chief Financial Officer Sharon Yeshaya told Reuters in a phone interview on Wednesday. The IPO pipeline, in particular, shows a lot of activity coming from financial sponsors, she added.
Pick said the bank reviewed potential acquisitions recently, but decided that it would be better to build up the businesses internally.
The wealth management business reached $8.9 trillion in assets under management, closer to the long-standing goal of $10 trillion, and reached a pre-tax margin of 30.3%.
“We had very strong results in the investment banking, and we’re number one again in the equities business, an area we have been investing,” Yeshaya said, adding the bank is seeing better macroeconomic conditions.
“This is a great quarter for MS with beats across the board, and we expect the reaction to be supportive,” Keith Horowitz, an analyst at Citigroup, wrote in a note.
The bank’s profit surged to $4.6 billion, or $2.80 per share, for the three months ended September 30, beating expectations of $2.10 per share, according to estimates compiled by LSEG. Total quarterly revenue was a record $18.2 billion, surpassing expectations of $16.7 billion.
DEALMAKING BOOST
Fixed income underwriting revenue surged 39% to $772 million in the quarter, driven by higher loan issuances.
TRADING BOOST
Trading, too, was a bright spot as the benchmark S&P 500 index gained roughly 8% in the third quarter and hit multiple record closing highs in September, historically a weak month for stock markets. Equities revenue surged 35% to $4.12 billion, driven by record results in prime brokerage.
WEALTH MARGINS
Revenue from wealth management – a key focus for Morgan Stanley – jumped 13% to a record $8.2 billion in the quarter, buoyed by rising market valuations.
Reporting by Arasu Kannagi Basil in Bengaluru and Tatiana Bautzer in New York, additional reporting by Manya Saini and Prakhar Srivastava; Editing by Lananh Nguyen, Arun Koyyur and Nick Zieminski
Our Standards: The Thomson Reuters Trust Principles.
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