Morgan Stanley profit jumps 61.7 percent
on trading comeback
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[October 19, 2016]
(Reuters) - Morgan Stanley <MS.N>
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 <GS.N>, 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.
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"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.
Equities sales and trading revenue, a traditional bright spot for the
bank, rose to $1.9 billion from $1.8 billion.
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The logo of Morgan Stanley is seen at an office building in Zurich,
Switzerland September 22, 2016. REUTERS/Arnd Wiegmann/File Photo
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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.
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
<JPM.N> in M&A fees collected during the quarter and fourth behind
and JPMorgan, Bank of America Corp <BAC.N> 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 <MSFT.O>
in its $26.2 billion deal to buy LinkedIn Corp <LNKD.N>.
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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