Morgan Stanley's Earnings, Revenue Beat Expectations -- 2nd Update
July 19 2017 - 8:01AM
Dow Jones News
By Liz Hoffman
Morgan Stanley said its second-quarter profit rose to $1.76
billion as the Wall Street firm's traders delivered strong results,
topping rival Goldman Sachs Group Inc. for the second straight
quarter.
Shares rose 2.1% premarket as earnings and revenue beat the
expectations of Wall Street analysts.
The New York investment bank reported earnings of 87 cents a
share. Analysts had expected 76 cents, up from 75 cents a year ago.
Revenue of $9.5 billion was up from $8.91 billion in the second
quarter of last year, and ahead of analyst expectations of $9.09
billion.
During the second quarter, a three-month stretch of calm markets
that has done little to jolt Wall Street businesses, big banks
including J.P. Morgan Chase & Co., Goldman Sachs Group Inc. and
Citigroup Inc. offset trading declines with gains in other
businesses such as commercial lending or private-equity
investing.
Morgan Stanley's antidote is its huge wealth-management
business, which churns out steady profits even when markets snooze
or climb slowly and methodically higher.
That business, which manages about $2.2 trillion in client
assets, took in $4.15 billion in revenue last quarter, its best
second quarter on record as it continues to sweep in client cash
and find more profitable uses for it, like lending.
Loans to wealth clients hit a record $74 billion as of June 30,
up from $70 billion three months ago. As interest rates rise,
Morgan Stanley is hustling to lend out a surfeit of deposits it
picked up in the multiyear acquisition of retail brokerage
SmithBarney.
The bank's return on equity, a key measure of how profitably it
invests shareholders' money, stood at 9.1% in the quarter. A 10%
level is one of Chief Executive James Gorman's key objectives.
Morgan Stanley reported a 2.1% decrease in trading revenue, the
smallest decline reported by any big bank this quarter. At Goldman,
whose securities business most closely resembles -- and competes
with -- Morgan Stanley's, trading revenue was off by 17%.
The figure that stands out is $1.24 billion from trading debt,
currencies and other fixed-income products. That business is
traditionally a laggard for Morgan Stanley, with its smaller
balance sheet and history of bungling risk.
But it has been performing better over the past year following a
leadership shake-up that saw its top stock trader, Ted Pick, take
over all of sales and trading. This marks the fifth straight
quarter of $1 billion-plus revenue, a bar set by Mr. Gorman last
year, and once again tops Goldman Sachs, which continues to
struggle in fixed-income trading and posted a 40% decline in that
business Tuesday.
Revenue was flat in stock trading, Morgan Stanley's strength.
The firm has outmaneuvered peers in courting business from
so-called "quant" hedge funds that trade huge volumes of stocks in
fractions of a second.
In investment banking, where Morgan Stanley is generally a
top-three player, revenue rose 28%, as big gains in stock and debt
underwriting overcame flat merger fees.
Write to Liz Hoffman at liz.hoffman@wsj.com
(END) Dow Jones Newswires
July 19, 2017 07:46 ET (11:46 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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