Morgan Stanley waltzes past Wall Street's estimates for Q3 earnings

Morgan Stanley's net income climbs to £2.11 billion in the fiscal third quarter.

The trading division topped analysts' estimates, driven by a 35 per cent jump in fixed-income revenue that was second-best among the big banks.

Even as trading returns to the spotlight amid the pandemic, chief executive James Gorman has been taking steps to shore up Morgan Stanley's asset and wealth management businesses to insulate the bank from weak periods for trading and investment banking.

As Gorman talked about in his observe Thursday morning, he has spent greater than $20 billion to bulk up that enterprise by his latest acquisition of E*Commerce and his just lately introduced buy of bond buying and selling large Eaton Vance.

The third quarter also continued a stark contrast between how the largest US banks are seeing big gains in their capital markets businesses even as the broader economy struggles to recover. Firms like Morgan Stanley, with little exposure to consumer credit woes, have fared best. The £71.58 billion company that has a price to earnings ratio of 9.23 is now only 1% down year to date in the stock market.

Net income applicable to common shareholders rose 26% to $2.60bn in the quarter ended September 30. Its trading operation - helping clients chop and change their portfolios - was responsible for the lion's share of the outperformance, bringing in nearly half a billion dollars more than expected. Among the business segments, investment banking revenue rose 11.2% to $1.71 billion to top the FactSet consensus of $1.70 billion, and sales and trading revenue grew 20.2% to $4.15 billion to beat expectations of $3.35 billion. Morgan Stanley's stock trading division - the firm's specialty - saw next revenues increase to $2.26 billion from $1.99 billion a year earlier.

Trading revenue played a huge role in Morgan Stanley's increasing profits by 25 percent in the quarter despite the economic impact of the coronavirus. Equity underwriting more than doubled from a year earlier.

Bank of America, in contrast, saw its VAR edge higher over Q3, by 5% to $22 million. The results included a one-time tax benefit of $113 million. Fixed-income revenue, Morgan Stanley said, registered at £1.49 billion.