<\/p>\n
Morgan Stanley\u2019s second-quarter profit beat expectations, driven by a surge in investment banking and trading revenues that overcame muted results in wealth management.<\/p>\n
The bank joined other Wall Street lenders, including Bank of America and JPMorgan, in reporting higher investment banking revenue, fuelled by growing confidence in the US economy that prompted companies to raise more money and strike deals.<\/p>\n
Morgan Stanley shares rose almost 2 percent, reversing earlier losses, as chief executive Ted Pick expressed confidence in its dealmaking prospects. He said the bank is on track to reaching its goal of a 30 percent pre-tax margin in the wealth business, a key performance target.<\/p>\n
Institutional securities revenue grew 23 per cent in the quarter to US$7 billion, buoyed by investment banking revenue, which soared 51 per cent to US$1.62 billion.<\/p>\n
\u201cWe\u2019re in the early stages of a multi-year investment banking-led cycle,\u201d Mr Pick told analysts on a conference call.<\/p>\n
Chief financial officer Sharon Yeshaya reinforced his view, saying \u201cpipelines are healthy and diverse, dialogues are active, and markets are open\u201d.<\/p>\n
Equity underwriting revenue jumped 56 per cent to US$352 million, driven by a rebound in initial public offerings and private stock sales, while fixed income underwriting surged 71 per cent to US$675 million.<\/p>\n
Advisory revenues climbed 30 per cent to US$592 million as the company closed more deals.<\/p>\n
Mr Pick was optimistic about Morgan Stanley\u2019s equity trading business, citing a key milestone of revenue exceeding US$3 billion, growing 18 per cent from a year earlier.<\/p>\n
The company is investing in trading in Asia and Britain, he said, adding that macroeconomic and geopolitical uncertainties are creating opportunities for clients.<\/p>\n
Revenue growth in wealth management slowed to 2 per cent in the second quarter, compared with a 16 per cent jump a year earlier. Net new assets came in at US$36.4 billion, below last year\u2019s US$89.5 billion.<\/p>\n
Net income rose to US$3.1 billion, or US$1.82 per share, in the three months ended June 30, from US$2.2 billion, or US$1.24 per share, a year earlier. Analysts on average had expected US$1.65, according to LSEG.<\/p>\n
Morgan Stanley said it would raise its quarterly dividend to 92.5 US cents per share, up 7.5 US cents. Dividend payments were the bank\u2019s highest-priority use of capital, Mr Pick said.<\/p>\n
Analysts were generally upbeat on the results, although some underscored weaker growth in wealth.<\/p>\n
\u201cMorgan Stanley\u2019s strong Q2 results were primarily driven by an industry-wide rebound in investment banking activity, while wealth and asset management remained steady contributors on the back of a robust equities market,\u201d said Mr Mike Taiano, senior analyst at Moody\u2019s Ratings.<\/p>\n
UBS analyst Brennan Hawken wrote that the earnings were a \u201ctale of two segments\u201d, with impressive results in institutional securities offset by a mixed performance in wealth.<\/p>\n
Wealth management flourished under Morgan Stanley\u2019s former CEO James Gorman, generating stable revenue from fees when markets were volatile. He set a target of managing US$10 trillion in client assets, which stood at US$7.2 trillion in the second quarter.<\/p>\n
Morgan Stanley executives told analysts the wealth unit is growing within the bank\u2019s expected range of 5 per cent to 7 per cent annually, even as net asset inflows slowed.<\/p>\n
While the bank is not considering acquisitions in the short term, it could consider opportunities in two to four years, Mr Pick said.<\/p>\n
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