Morgan Stanley profit
jumps 61.7 percent on trading comeback
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[October 19, 2016]
(Reuters) -
Morgan
Stanley reported a better-than-expected quarterly profit on Wednesday,
boosted by a surge in bond trading that followed Britain's surprise vote
to leave the European Union and bouts of anxiety about monetary policy
around the world.
Earnings applicable to shareholders rose 61.7 percent to $1.52 billion
from $939 million for the quarter ended Sept. 30, while earnings per
shares rose to 81 cents from 48 cents.
Earnings per share from continuing operations was 80 cents, far above
the average analyst estimate of 63 cents, according to Thomson Reuters
I/B/E/S.
Adjusted revenue from sales and trading of fixed-income securities and
commodities more than doubled to $1.5 billion, boosting total revenue by
14.7 percent to $8.91 billion. Analysts had expected revenue of $8.17
billion.
Morgan Stanley wraps up a surprisingly strong quarter for big U.S.
banks. Goldman Sachs Group Inc, Morgan Stanley's closest rival, reported
a stronger-than-expected 58 percent rise in third-quarter profit on
Tuesday, driven by a 34 percent rise in revenue from trading bonds,
currencies and commodities.
Morgan Stanley's shares were up 0.7 percent at $32.55 in premarket
trading.
"This quarter we saw record revenues in wealth management and a strong
performance in our sales and trading business," Chief Executive James
Gorman said in a statement.
The bank's compensation costs rose 19.2 percent to $4.10 billion in the
quarter, while non-compensation costs fell 14.9 percent to $2.43
billion.
Morgan Stanley is in the midst of a cost-cutting program that it hopes
will save $1 billion by 2017.
Revenue from wealth management, an area Gorman has been focusing on,
rose 6.6 percent to $3.88 billion, accounting for nearly 44 percent of
total revenue.
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Equities sales and trading revenue, a traditional bright spot for the bank, rose
to $1.9 billion from $1.8 billion.
Revenue from investment banking, which includes fees from mergers and for
underwriting equity and debt offerings, fell about 7 percent to $1.23 billion.
Morgan Stanley's annualized return on average common equity - showing how well
it is using shareholder money to generate profit - was 8.7 percent in the
quarter, compared with 8.3 percent in the second quarter.
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Gorman, who took the helm at the bank in 2010, has an ROE target of 9-11 percent
by the end of 2017.
Morgan Stanley ranked third to Goldman Sachs and JPMorgan Chase & Co in M&A fees
collected during the quarter and fourth behind and JPMorgan, Bank of America
Corp and Goldman in fees from investment banking, which includes equity and debt
underwriting, according to Thomson Reuters data.
The bank was exclusive financial adviser to Microsoft Corp in its $26.2 billion
deal to buy LinkedIn Corp.
Up to Tuesday's close, Morgan Stanley's shares had risen 1.6 percent since the
start of the year, outperforming those of Goldman Sachs, which fell 4.2 percent.
(Reporting by Sweta Singh and Sudarshan Varadhan in Bengaluru; Editing by Ted
Kerr)
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