Morgan Stanley Q3 profit up 6.5% as equities trading beats estimates by $909M

Morgan Stanley beat Wall Street expectations in the third quarter, helped by a 41% jump in equities trading revenue to $5.8 billion, CNBC reported. That figure came in about $909 million above the StreetAccount estimate.

The bank posted profit of $4.91 billion, or $3.03 a share, up 6.5%, while revenue rose 12% to $20.34 billion, according to CNBC. Equities gains offset weaker results elsewhere, and the shares fell about 3% in midday trading.

Also read: Bank of America Profit Falls 17% on $1.2 Billion Penalty

Key facts

• Equities trading revenue climbed 41% to $5.8 billion, roughly $909 million ahead of the StreetAccount estimate, with Asia singled out as a particular source of strength and gains spread across products and regions.
• Fixed income trading revenue fell 7% to $2.01 billion, about $260 million below expectations, on declines in credit and commodities.
• Investment banking revenue edged 2% higher to $2.16 billion, about $110 million below expectations, as more completed mergers lifted advisory revenue while equity and fixed income underwriting declined.
• Profit rose 6.5% to $4.91 billion, or $3.03 a share, and revenue rose 12% to $20.34 billion.
• Wells Fargo analyst Mike Mayo called the quarter “good, but not great,” pointing to slower improvement in some business metrics.

Mixed results behind the headline beat

Morgan Stanley’s equities franchise, long a marquee business for the firm, carried the quarter. The gains there were large enough to absorb shortfalls in fixed income trading and investment banking, where the bank pointed to lower IPO activity and weaker underwriting.

CNBC reported that the bank attributed the equities strength to broad demand rather than a single product line. Asia stood out in a quarter that the firm said was uneven by region and business.

Also read: JPMorgan Q3 Profit Misses Estimates as Dimon Warns on Inflation

Pick on AI, geopolitics and slowing activity

Chief executive Ted Pick told CNBC’s Leslie Picker that the economy is being pulled by two forces at once: the boost from the AI buildout and the drag from geopolitical strife. He said the interaction of the AI phenomenon and geopolitics has been the dominant reality all year, describing them as two very different stories, and added that he would like to see the positive narrative prevail if the geopolitics come under control.

Pick said that starting in early September, concerns about overseas conflict, inflation and surging yields slowed activity across Wall Street. He also said he is cautiously optimistic about markets in the fourth quarter.

Why it matters

The quarter shows how dependent Morgan Stanley’s results have become on its trading desks, particularly equities, while the advisory and underwriting businesses that generate steadier fees remain soft. For investors, a beat driven by one division raises the question of how repeatable that strength is if market activity stays subdued. The muted share reaction suggests the market weighed the fixed income and investment banking misses against the equities win and found the balance unconvincing.

What to watch

Fourth-quarter trading volumes and whether the geopolitical pressures Pick described ease will determine if the equities momentum holds. Any pickup in completed mergers or IPO activity would also be central to closing the investment banking gap.

Pick’s outlook for the quarter is an expectation, not a guarantee, and this is not financial advice; markets can move sharply in either direction.

Written by

Benjamin

Benjamin Carter covers business, finance, and the stock market for StockPil, focusing on the trends and data that matter to everyday investors.

Source: CNBC