A surge in investment banking at Morgan Stanley (MS) solidified a revival in deals across Wall Street, as the firm’s third-quarter earnings exceeded analysts’ expectations.
Investment banking fees rose 56% from a year earlier, the biggest jump among large banks, to nearly $1.4 billion.
The rebound in investment banking and increased trading helped Morgan Stanley increase its net profit 32% from a year earlier, to $3.2 billion.
The results consolidate a broad rebound in the Wall Street operations of the country’s largest banks. Investment banking fees and stock trading income also rose at JPMorgan Chase (JPM), Wells Fargo (WFC), Goldman Sachs (GS), Bank of America (BAC), and Citigroup (C).
Executives at these banks have been optimistic that the start of a cycle of interest rate cuts at the Federal Reserve (which last month cut its benchmark rate by 50 basis points) will mean more deals in the near future. .
“The firm reported a strong third quarter amid a constructive environment across our global footprint,” Morgan Stanley CEO Ted Pick said in a statement, citing “momentum in the markets and underwriting businesses thanks to a strong commitment with clients.”
Morgan Stanley beat analyst expectations on trading fees for its bond underwriting and M&A advisory unit, as well as revenue for its trading and wealth management divisions.
Its total net income of $15.4 billion increased 16%. Fixed income and equity trading revenue rose 13% to $5 billion, driven largely by equities.
The stock rose more than 3% in early morning trading. As of early Wednesday, it was up more than 20% since early January, lagging gains by some of its other big rival banks.
One area of the company’s investment banking franchise that proved weaker than analysts expected was its equity capital markets desk, which posted revenue of $362 million. Analysts expected $12 million more.
Another bright spot that emerged Tuesday was Morgan Stanley’s recent performance in wealth management, which provides financial advice to higher net worth individuals.
Net new assets in that division increased 79% from a year ago and 76% from the last quarter, to $64 billion. Revenue was $7.3 billion, an increase of 13.5% year-over-year and a 7% increase over the last quarter.
The third-quarter performance bodes well for Pick, who is still in his first year as top boss.
Since the announcement that Pick would replace longtime CEO James Gorman, the company’s shares have outperformed major stock indexes. That’s a 57% increase for that period. Gorman plans to step down as CEO at the end of this year.
“Our management continues to focus on driving sustainable growth and achieving long-term returns for our shareholders,” Pick added in the statement.
David Hollerith is a senior reporter at Yahoo Finance covering banking, cryptocurrencies, and other financial areas.
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