Morgan Stanley’s investment bankers and traders have helped to boost the company’s quarterly profits, which has offset a decline in its wealth management business.
The bank’s CEO, Ted Pick, said that the trading of equities, and fixed income, was “back” as the second-quarter revenue for the equities division rose by 18% to $3.02billion, while the fees in the fixed income division increased by 16 percent to $2 billion.
Investment banking fees grew by more than 50% from the previous year, reaching $1.6 billion.
The net income of $3.1billion was up 41 per cent from $2.2billion the year before and above analysts’ expectations.
Pick stated: “We are navigating well the continued uncertainty surrounding forward rate paths, geopolitics, and now the US Political Cycle.” The bank’s shares rose $0.96 or 0.9 percent to close at $106.22 in New York.
The positive market reaction was despite worries about the wealth management sector, which saw revenue growth of only 2% compared to 16 % a year earlier. The $36 billion in net new assets was below the $89.5 million reported last year.
Pick did say, however, that the quarter had been “strong” for wealth-management. He said that “strong fee-based flows” support the daily revenue which, on average, continues to be around $100 million per day throughout this year. This shows the stability and growth of the wealth franchise.
As investors re-allocate their investments in response to geopolitical uncertainty and elections around the globe, equity traders have boosted earnings for American banks during the second quarter.
A recovery on the capital markets has also boosted investment banks. The positive sentiment surrounding the US economy has encouraged businesses to raise capital through stock sales and bond issuance.
Bank of America reported its second-quarter results on Tuesday. The company said revenue from the equities business was up 20 percent compared to a year earlier, reaching $1.9 billion. The bank said that fees rose due to “strong client activities” and improved performance on cash and derivatives.
Bank of America Chief Financial Officer Alastair B. Borthwick said, “There is a lot of geopolitical uncertainty and election uncertainty in the world. But this tends be a good environment for clients to reposition and it tends be a fairly good environment for our trading and sales business.” Investment banking fees at the bank increased by 29 percent to $1.6 billion during the third quarter.
The overall net income was $6.9 billion, down from $7.4 million a year earlier as higher deposits costs affected interest income. The profit, however, was higher than analysts’ expectations, which helped lift the shares by $2.24 or 5.4 percent to close at $44.13 in Wall Street.
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