Morgan Stanley profit beats estimates as traders shine
Equities trading revenue surged 23%, while it jumped 9% in fixed income, as the turbulence also spilled into bond markets.
Equity markets swung sharply during the quarter after U.S. President Donald Trump announced sweeping tariffs against major economies. This spurred trading as investors repositioned their portfolios and hedged risks.
Institutional Securities, which houses Morgan Stanley's Wall Street operations, posted revenue of $7.6 billion, compared with $7 billion, a year ago.
"Institutional Securities saw strength and balance across businesses and geographies. Wealth continues to deliver," CEO Ted Pick said in a statement.
Goldman Sachs (GS.N), opens new tab, Citigroup (C.N), opens new tab and JPMorgan Chase (JPM.N), opens new tab all reported trading windfall in the second quarter.
Morgan Stanley posted net income of $3.5 billion, or $2.13 per share, for the three months ended June 30. That compares with $3.1 billion, or $1.82 per share, a year earlier.
Analysts on average had expected $1.96 per share, according to estimates compiled by LSEG.
Morgan Stanley's revenue reached $16.8 billion in the second quarter, topping estimates of $16.1 billion.
Shares of the bank were last flat following the results.
Morgan Stanley's investment banking revenue fell 5% in the quarter, lagging rivals including Goldman and JPMorgan Chase.
Advisory revenue slid to $508 million, compared with $592 million, a year ago, due to lower completed M&A transactions.
CEO Pick has maintained a positive view for the year, telling investors in June that deal discussions were persistent and ramping up.
In line with his view, dealmaking rebounded at the end of the quarter as some companies looked past tariff uncertainty and gained confidence to carry out IPOs, mergers and acquisitions.
Industry executives also held up that optimism this week, anticipating that deals and stock market listings will pick up in the second half of the year.
Among prominent deals in the quarter, Morgan Stanley advised Elon Musk's xAI on a $5 billion debt raise and a separate $5 billion strategic equity investment. It also advised TJC on the $5 billion sale of Silvus Technologies to Motorola.
The concern about U.S. tariff policies has also abated since Trump's initial "Liberation Day" announcement on April 2 spurred market volatility.
Morgan Stanley was the lead underwriter of fintech giant Chime's $864 million June IPO. The bank also led IPOs for Hinge Health, raising $437.3 million, and marketing tech firm MNTN, which raised $187.2 million, in May.
The investment bank's equity underwriting surged 42% to $500 million, driven by higher follow-on and convertibles deals, as well as IPOs. Fixed-income underwriting fell 21% to $532 million on lower non-investment grade issuances.
Wealth management revenue increased to $7.8 billion in the second quarter, from $6.8 billion a year earlier. It posted net new assets of $59 billion and fee-based asset flows of $43 billion for the period.
Morgan Stanley has focused on growing its wealth management business by deepening relationships with existing clients and attracting new ones, aiming to build a more stable revenue base less exposed to market swings. It has a target of managing $10 trillion in client assets.
"Total client assets across Wealth and Investment Management reached $8.2 trillion," Pick said.
Attracting net new assets is critical for wealth and investment management, as it drives fee-based revenue and supports long-term growth in assets under management.
Pick became the CEO of Morgan Stanley in January 2024. He took on the additional role of chairman at the start of this year.
He replaced long-time CEO James Gorman, who is credited with turning Morgan Stanley into a wealth management behemoth, raising profits and making the bank's results more predictable.
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