Stock Exchange :

Morgan Stanley beats profit estimates as rising stocks benefit wealth management and fund divisions

Key Points
  • Morgan Stanley reports second-quarter earnings of $2.2 billion, or $1.23 a share, exceeding the $1.14 estimate of analysts surveyed by Refinitiv.
  • Revenue of $10.24 billion exceeded the consensus estimate by almost $250 million on better-than-expected results in the firm's wealth management and investment management divisions.
  • Rising markets helped in "both the wealth business, in terms of the assets we manage, as well as our investment management business," Chief Financial Officer Jonathan Pruzan says.

James Gorman, chief executive of Morgan Stanley.
Qilai Shen | Bloomberg | Getty Images

Morgan Stanley on Thursday beat analysts' estimates for second-quarter profit as a buoyant stock market helped two of the investment bank's three main businesses.

The bank posted earnings of $2.2 billion, or $1.23 a share, exceeding the $1.14 estimate of analysts surveyed by Refinitiv. Revenue of $10.24 billion exceeded the consensus estimate by almost $250 million on better-than-expected results in the firm's wealth management and investment management divisions.

Morgan Stanley's wealth management division, one of the biggest in the world, posted a record $4.41 billion in revenue, exceeding analyst's estimate by $60 million. Its investment management division, an asset manager that creates mutual funds, posted $839 million in revenue, exceeding estimates by about $130 million. The business benefited from "higher assets under management" across asset classes, according to the firm.

Rising markets helped in "both the wealth business, in terms of the assets we manage, as well as our investment management business," Chief Financial Officer Jonathan Pruzan said in a phone interview. "It's fee times the balances — if the markets go down, you'd expect to see pressure in that area."

Under CEO James Gorman, Morgan Stanley has emphasized its wealth management division, a far steadier business than its trading operations. The brokerage benefits from rising markets as fees typically climb along with assets under management.

Results were more mixed in the firm's biggest business, institutional securities, which houses its Wall Street investment banking and trading operations. Equities trading produced $2.13 billion in revenue, under the $2.2 billion estimate of analysts surveyed by FactSet. Fixed income trading made $1.13 billion in revenue, missing the $1.32 billion estimate. Investment banking generated $1.47 billion in revenue, edging out the $1.4 billion estimate.

Morgan Stanley shares fell 1.4% in premarket trading.

Shares of the firm have climbed 10% this year before the earnings report, trailing the KBW Bank Index and competitors including Goldman Sachs and J.P. Morgan Chase.

The firm said last month it won permission from the Federal Reserve to increase its quarterly dividend to 35 cents a share from 30 cents and repurchase $6 billion in shares.

Morgan Stanley is the last of the six largest U.S. banks to report second-quarter earnings. Citigroup, J.P. Morgan, Wells Fargo, Goldman Sachs and Bank of America all beat analysts' profit expectations as most of the firms benefited from one-time items including a gain on the IPO of electronic trading platform Tradeweb.

Here's what Wall Street expected:

  • Earnings: $1.14 a share, 12% lower than a year earlier, according to Refinitiv
  • Revenue: $9.99 billion, 5.8% lower than a year earlier
  • Wealth management: $4.35 billion, according to FactSet
  • Trading: Equities $2.2 billion, fixed Income $1.32 billion

With reporting from CNBC's Leslie Picker.

source: CNBC

zyedusrPanel

Read Previous

These 2020 Dems want ‘Medicare for All’ – without ditching private insurance

Read Next

Thirty feared killed in arson attack on Japanese animation studio