On the strength of higher-than-anticipated trading revenue, Morgan Stanley reported third-quarter results on Wednesday that above profit projections.
- ESSENTIAL POINTS
- On Wednesday, Morgan Stanley released its third-quarter profits.
- The bank exceeded forecasts for profit while basically meeting them for revenue.
- Morgan Stanley stock declined.
What the business reported is as follows: Earnings per share: $1.38, compared to LSEG’s ($previously Refinitiv) estimate of $1.28. Compared to expectations, revenue came in at $13.27 billion. Profit decreased 9% from a year ago to $2.41 billion, or $1.38 per share, according to a statement from the New York-based bank. Revenue increased by 2% to $13.27 billion, roughly in line with estimates.
Early trading saw a more than 5% decline in the bank’s stock. Trading at Morgan Stanley aided in balancing out other areas of the company’s income shortfalls. Bond traders at the bank generated revenue of $1.95 billion, or around $200 million more than the StreetAccount estimate, while equities traders generated income of $2.51 billion, or $100 million more than the projection.
However, as compensation expenditures in the sector increased and net interest income dropped 9% from the second quarter, the bank’s crucial wealth management division made $6.4 billion in revenue, which was more than $200 million less than the projection.
Investment banking saw another miss in the quarter, with revenue of $938 million falling short of the $1.11 billion projection due to weakness in acquisitions and IPO listings, according to the business. With $1.34 billion in income, the bank’s investment management sector largely met expectations.
CEO James Gorman noted that the wealth management segment of the company acquired less new assets than in previous quarters but cited a “mixed” environment for his businesses. He explained to analysts on Wednesday that this is the result of rising interest rates making money market funds and Treasury securities appealing. He said that the wealth management company was still on schedule to achieve his three-year target of creating $1 trillion in fresh assets. “People won’t be trading in the markets when they have the option of making a 4%, 5% return by doing nothing,” said Gorman.
‘Clean slate’
Since Gorman has been in charge since 2010, Morgan Stanley has avoided the recent turmoil that has beset several of its competitors. While Citigroup struggles to increase its stock price and Goldman Sachs was forced to change course after forays into retail banking, the major concern at Morgan Stanley is an orderly CEO succession.
Gorman concluded a fruitful stint defined by significant acquisitions in wealth and asset management in May when he revealed his intention to step down in a year. He indicated at the time that the board of Morgan Stanley has focused its hunt for his replacement on three inside employees.
Gorman reaffirmed his intention to appoint a replacement as CEO within a few months. Despite the geopolitical and market uncertainty, Gorman asserted that the company was doing quite well. “My hope and expectation is to turn over Morgan Stanley with as clean of a slate as possible and take care of a few of our outstanding issues in the next couple of months,” the CEO said.
Low credit costs helped JPMorgan Chase, Wells Fargo, and Citigroup each beat third-quarter profit projections last week. On the strength of better than anticipated bond trading earnings, Goldman Sachs and Bank of America also outperformed expectations.
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Also Read: Bank Of America Outperforms Profit Forecasts Due To Higher-Than-Expected Interest Income
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