Morgan Stanley: profit of $5.58 billion (+58 per cent), revenue of $21.34 billion (+27 per cent)

Morgan Stanley’s second-quarter results were up and exceeded Wall Street’s expectations, thanks in part to strong activity in the M&A sector and despite ongoing macroeconomic uncertainty. In the three months ending 30 June, the New York-based bank reported a 27 per cent rise in net revenue to $21.34 billion, compared with $16.8 billion in the same period last year, and above market forecasts.

The four analysts consulted by Zacks Investment Research had in fact expected revenue of $19.6 billion. Net profit stood at $5.58 billion (+58%), or $3.46 per share, compared with $3.5 billion, or $2.13 per share, recorded in the same period of the previous year, whilst the average estimate of six analysts surveyed by Zacks Investment Research was for earnings of $2.89 per share.

“Dynamic markets and consistent execution across all three regions have led to exceptional results for our integrated bank, enabling us to post record revenues of over 21 billion dollars and a record earnings per share (EPS) of 3.46 dollars,” commented CEO Ted Pick, highlighting “the excellent results of the Institutional Securities division” and the Wealth Management division, which “recorded a record $148 billion in net new assets, bringing the total client assets managed by the Wealth Management and Investment Management divisions to the $10,000 billion mark”. “We continue to build our capital, gaining greater flexibility to invest in our core businesses, whilst maintaining a strong ability to generate value for shareholders,” concluded the CEO.

The bank achieved a return on average tangible equity (ROTCE) of 26.6 per cent, whilst the expense efficiency ratio stood at 65% in the first half of the year, demonstrating the operational leverage achieved, whilst continuing to invest in its business. The standardised Common Equity Tier 1 (CET1) ratio stood at 14.8%. Looking at the various business areas, the Institutional Securities division recorded record net revenue of $11 billion, thanks to the solid performance of the Equity division, underpinned by strong client engagement, and the strength of the Investment Banking division, driven by growing momentum in capital raising and strategic advisory activities.

The Wealth Management division achieved record net revenue of 8.9 billion, driven by high asset management fees, robust client activity and a higher net interest margin, generating a pre-tax margin of 30.5 per cent. During the quarter, the division attracted 148 billion in new net assets and 39 billion dollars in new fee-based assets under management. Finally, the Investment Management division reported net revenue of $1.6 billion, mainly due to higher management fees, driven by a higher average level of assets under management (AUM). It also recorded positive long-term net inflows of $7.5 billion during the quarter.