Morgan Stanley Crushes Earnings

Morgan Stanley crushed Wall Street expectations for third-quarter results Tuesday, thanks to strong performance from its dealmakers and its wealth-management unit.

The investment bank reported earnings of $0.93 a share, while analysts were expecting earnings of $0.81 a share.

"Our third quarter results reflected the stability our Wealth Management, Investment Banking and Investment Management businesses bring when our Sales and Trading business faces a subdued environment," Morgan Stanley CEO James Gorman said. "Our balanced business model and the consistent performance of our franchise enabled us to deliver solid returns for our shareholders."

Here are the other key figures:

  • Revenue: $9.2 billion, beating expectations of $9.04 billion and up from down from $8.9 billion in the third quarter of 2016.
  • Net income: $1.8 billion, beating estimates of $1.5 billion and up from $1.6 billion in the third quarter of 2016.
  • Wealth management: $4.2 billion in revenues, up from $3.9 billion a year ago. Fee-based assets under management hit a record of $1 trillion.
  • Investment banking revenues: $1.3 billion, up from $1.1 billion a year ago.
  • Trading revenues: $2.9 billion, missing estimates of $3.01 billion and down from $3.2 billion a year ago.
  • FICC: $1.2 billion, down from $1.5 billion a year ago. 

Morgan Stanley produced strong results despite the heavy, but not unexpected, hit to its trading business. While fixed income, currencies, and commodities (FICC) trading declined 20%, equities trading was relatively even compared to last year with revenues coming in at $1.9 billion.

Through the first nine months, though, trading at the firm is up to $8.9 billion compared with $7.4 billion last year, despite a steep reduction in FICC headcount. 

FICC trading revenues have particularly suffered at the big banks, withreporting a 22% drop, Citi reporting a 16% drop, and JPMorgan reporting a 27% drop.

Nonetheless, each of the three competing banks beat earnings estimates handily last week and produced otherwise positive results.

Morgan Stanley was buoyed by strong wealth management and investment banking performances.

Wealth management revenues were up nearly 9% to $4.22 billion, with revenue per advisor growing to $1.1 million.

Investment banking climbed 15% to $1.3 billion in revenues, thanks primarily to strong performance in underwriting, which increased third-quarter revenues to $715 million from $600 million last year.