Morgan Stanley beat earnings estimates as stock trading, investment banking top expectations

Morgan Stanley posted second-quarter profit and revenue that exceeded analysts’ expectations on strength in equities trading and investment banking.

Here’s how the bank did:

Earnings: $1.85 a share, vs the $1.65 estimate of analysts surveyed by Refinitiv.

Revenue: $14.8 billion, vs the $13.98 billion estimate.

While rival banks reported a steep slowdown in fixed income trading revenue — a slowdown that ensnared Morgan Stanley’s bond traders as well — the bank’s strength has traditionally been in its equities trading franchise, the biggest in the world.

That stock trading business outperformed in the second quarter, producing $2.83 billion in revenue, more than $400 million over what analysts had expected. It made up for the shortfall in fixed income, which produced $1.68 billion in revenue, below the $2 billion estimate.

That corner of Wall Street has thrived in the second quarter, as have wealth management businesses, both of which have benefited from high stock values and robust IPO activity. Another area that has flourished is investment banking, propelled by robust mergers activity and related financings.

Like rival Goldman Sachs, Morgan Stanley posted strong investment banking results, with revenue of $2.38 billion exceeding the $2.1 billion estimate.

All of which should play to CEO James Gorman’s advantage. Through a series of savvy acquisitions, Gorman has built up the bank’s wealth management franchise to be one of the largest in the world. He also helped rehabilitate the firm’s trading operations and maintained its leading merger advisory practice.

Shares of the bank have climbed 35% this year, compared to the 26% rise of the KBW Bank Index.

Morgan Stanley is the last of the six largest U.S. banks to report second-quarter earnings.

JPMorgan Chase, Bank of America, Wells Fargo and Citigroup all beat analysts’ profit expectations by releasing money set aside earlier for loan losses. Goldman beat estimates on strong advisory results.  

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