Morgan Stanley (MS) - Get Report posted higher quarterly profit than analysts projected as growth in wealth management made up for the tumbling bond-trading revenue that plagued firms across Wall Street.
Earnings of 93 cents a share in the three months through September compared with the 81-cent average of estimates from analysts surveyed by FactSet. Net income climbed 6% to $1.69 billion in the three months through June, the New York-based company said in a statement on Tuesday, Oct. 17.
"While the third quarter was impacted by the typical summer slowdown across many of our businesses, our results reaffirmed that we can generate solid returns against a more subdued backdrop," CEO James Gorman said on a call with investors.
Investment banking revenue at the firm climbed 15% to $1.27 billion, while wealth management expanded 8.7% to a record $4.22 billion -- a payoff from Gorman's emphasis on the business while streamlining trading. Like its rivals, Morgan Stanley stands to benefit from rising interest rates and the Republican-controlled U.S. government's push to cut corporate taxes and loosen some of the tighter regulations imposed after the 2008 financial crisis.
"While the degree of these changes will become clearer only over time, they should not go unnoted," Gorman said.
Fixed-income trading revenue -- which had seen dramatic growth last year amid Britain's decision to leave the European Union and the U.S. presidential campaign -- dropped 21% to $1.17 billion, the firm said. That's slightly above Gorman's goal of generating at least $1 billion each quarter -- a target the firm has met for the past six quarters.
"We could drive revenues in that business harder, but we'd use more balance sheet, and we wouldn't necessarily have the same risk profile we've got," Gorman said. "At this point, we're really happy with what the team has done. They've taken a business that was really on its heels, and it's clearly become competitive."
Comparable businesses at JPMorgan Chase & Co. (JPM) - Get Report , Bank of America Corp. (BAC) - Get Report and Citigroup Inc. (C) - Get Report also reported double-digit declines in the three months through September.
Revenue in JPMorgan's bond-trading division tumbled 27% from a year earlier to $3.2 billion, while Citigroup's slid 16% to $2.9 billion, Bank of America's fell 19% to $2.15 billion and Goldman Sachs Group Inc.'s (GS) - Get Report dropped 26% to $1.45 billion.
Morgan Stanley inched up less than 1% to $49.12 at the close of New York trading on Tuesday. Its shares have gained 44% since Donald Trump's surprise victory in the U.S. presidential race, outperforming both the KBW Bank Index and the broader S&P 500.
Morgan Stanley's return on equity, a gauge of how well companies use shareholders' money, climbed 50 basis points to 9.6% as of Sept. 30, in line with Gorman's goal of 9% to 11% by year's end. The benchmark was 8% in 2016.
The lender's purchase of about $1.25 billion of its own stock during the quarter represented about 25% of the total buyback approved by the Federal Reserve through June 2018, Barclays analyst Jason Goldberg said in a note to clients.
Updated from 7:23 a.m. ET on Tuesday, Oct. 17, 2017.
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