Morgan Stanley profit crushes estimates on trading strength

In this news, we discuss the Morgan Stanley profit crushes estimates on trading strength.

(Reuters) – Morgan Stanley topped Wall Street profit estimates on Thursday, concluding mixed third-quarter earnings for major US banks which saw those that focused on trading make big gains while retail banks have been affected by the pandemic.

Wall Street trading powers Morgan Stanley and Goldman Sachs capitalized on a wave of activity in the financial markets as clients bought and sold stocks in response to the coronavirus pandemic, as many companies went public or raised new capital.

In contrast, retail-focused banks like Citigroup and Bank of America struggled with historically low interest rates, provisions to cover bad debts and declining consumer spending.

Although Morgan Stanley’s trading unit did not hit the record highs of the previous quarter, the latest performance was still good enough to help the bank beat expectations.

Revenue from Morgan Stanley’s institutional securities division, which is the bank’s main breadwinner and home to its investment banking and trading business, rose 21% to $ 6.06 billion.

Equity subscription income more than doubled due to high fees from a number of top initial public offerings such as Snowflake Inc, Royalty Pharma, KE Holdings Inc and Warner Music.

But income from bond underwriting fell from a year ago due to lower loan issuance and subdued trading activity.

“Large investment banks are the easiest financial stocks to hold because they have relatively small loan portfolios (which present the greatest risk) but have upward leverage in currently active financial markets. Like GS yesterday, today’s MS printing proves this thesis, ”said Chris Kotowski, analyst at Oppenheimer.

Net income applicable to common shareholders rose to $ 2.60 billion in the quarter ended September 30, from $ 2.06 billion a year ago. Earnings per share rose to $ 1.66 from $ 1.27 a year ago. (mgstn.ly/3dvUT5T)

Analysts were looking for earnings of $ 1.28 per share, according to IBES data from Refinitiv. Revenue also far exceeded estimates, rising 16% to $ 11.7 billion.

Goldman Sachs posted its best quarterly performance in a decade by some metrics on Wednesday as trading returned to the limelight.

Reporting by Ambar Warrick in Bengaluru and Matt Scuffham in New York; Written by Anirban Sen; Edited by Saumyadeb Chakrabarty

Original © Thomson Reuters

Originally posted 2020-10-15 07:26:09.

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