BUSINESS-ECONOMY
Morgan Stanley beat second-quarter profit expectations on Tuesday due to its massive rise in investment banking revenues, even with the muted growth of its wealth management division. Morgan Stanley beat second-quarter profit expectations on Tuesday due to its massive rise in investment banking revenues, even with the muted growth of its wealth management division. Shares of the bank rose 1.4 per cent in morning trading after earlier losses in the premarket. Wealth management revenue growth slowed to 2 per cent in the second quarter from a year earlier when it rose 16 per cent. Net new assets were $36.4 billion, well below $89.5 billion a year earlier. Unit revenue of $6.79 billion fell just shy of Wall Street expectations, LSEG data cited by Reuters showed. In contrast, institutional securities revenue jumped 23 per cent to $7 billion, with investment banking revenue becoming 51 per cent higher. Chief Financial Officer Sharon Yeshaya said the investment banking sector was "in the early innings of recovery" and added that broad-based growth has been witnessed across sectors and regions. "Investment banking pipelines are healthy and diverse, dialogues are active, and markets are open," Yeshaya said on a conference call with analysts. Growth in net new assets within the wealth management business can be lumpy and was impacted by higher client tax payments, though annual growth remains within the company's guidance of 5 per cent to 7 per cent, she added. Citigroup analysts, led by Keith Horowitz, termed the results an "overall solid quarter," pumping up their confidence in Morgan Stanley's wealth management trajectory despite uneven net new asset growth. Wealth management has been in its prime for Morgan Stanley under former Chief Executive Officer James Gorman and is now engaged in the generation of stable revenue as opposed to the more volatile investment banking and trading businesses. The bank has eyes on the management of $10 trillion in client assets. The bank's net income rose to $3.1 billion, or $1.82 per share, in the three months ended June 30, from $2.2 billion, or $1.24 per share, a year earlier. Analysts surveyed by LSEG had expected $1.65 per share on average. Total quarterly revenue of $15.02 billion at Morgan Stanley also exceeded Wall Street expectations, and the bank increased its quarterly dividend by 7.5 cents to $0.925 a share. With a better outlook in the economy, expectations of interest rate cuts by the US, and rocketing equity markets, buyouts, debt sales, and stock offerings are getting a new lease of life after the nearly two-year drought for activity on Wall Street. Morgan Stanley's investment banking revenues leapt 51 per cent to $1.62 billion in the second quarter. "The firm delivered another strong quarter in an improving capital markets environment," said Chief Executive Officer Ted Pick. Equity underwriting revenue rose 56 per cent to $352 million as initial public offerings and private stock sales rebounded, while fixed income underwriting jumped 71 per cent to $675 million. Yeshaya noted that there was fast growth in non-investment grade issues. Advisory revenues rose 30 per cent to $592 million as completed deals rose. Other major banks, including Goldman Sachs, JPMorgan Chase, and Citi, also post strong investment banking revenue. The equities and bond trading desks of Morgan Stanley did better than expected for the April-June quarter. Revenues from equities were up 18 per cent year-on-year, with revenues from fixed income 16 per cent higher, mirroring strong results across the Street. Revenues at the institutional securities unit rose to $7 billion from $5.7 billion a year ago. A journalist, writing for the WION Business desk. Bringing you insightful business news with a touch of creativity and simplicity. Find me on Instagram as Zihvee, tr None
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