There’s something to be said about the magic of better-than-predicted trading revenue. Just ask Morgan Stanley, who recently posted third-quarter results that danced over profit estimates, thanks to an unexpected boost in this area. According to LSEG (once upon a time known as Refinitiv), earnings per share clocked in at $1.38, a full 10 cents higher than expected.
Revenue-wise, the New York-based bank reported a tidy sum of $13.27 billion. Now, this might not sound like much more than the anticipated $13.23 billion, but it represents a growth of 2% from last year – and in these tumultuous times, every little bit counts.
However, it’s not all sunshine and rainbows for Morgan Stanley. Despite the promising numbers, the bank’s share price took a tumble, ending more than 6% lower. You see, while trading operations had been strutting their stuff with bond traders pulling in roughly $200 million more than estimated and equity traders adding an extra $100 million to the pot, other areas seemed to stumble.
The wealth management division in particular seems to have had a rough quarter. The division saw its revenue slide under expectations by over $200 million due to rising compensation costs. To add insult to injury, net interest income found itself on a downward slope as well, sinking 9% from the second quarter with predictions of further falls in Q4.
Investment banking didn’t fare too well either. A cool $938 million might not sound too shabby until you realize that it’s nearly $200 million less than expected due to weaknesses in mergers and IPO listings.
CEO James Gorman was candid about the “mixed” business environment and acknowledged that fewer new assets were gathered by the wealth management division in recent quarters – partly because attractive rates on money market funds and Treasuries have been luring investors away from trading.
But let’s not get too gloomy here. Gorman has been steering the Morgan Stanley ship since 2010, and despite the rollercoaster ride that is the finance world, he’s kept it on a relatively even keel. In fact, the bank has managed to sidestep the turbulence that has plagued rivals like Goldman Sachs and Citigroup.
Gorman, who announced plans to resign within a year back in May, has led a successful tenure characterized by significant acquisitions in wealth and asset management. As he prepares to pass on the CEO baton, he