Solid Trading Results Spark 1Q Beat at Morgan Stanley
Morgan Stanley (NYSE:MS) impressed Wall Street with a stronger-than-expected 57% surge in first-quarter earnings on Thursday as the investment bank enjoyed surprisingly strong growth in trading and wealth management.
Investors applauded the upbeat results, nudging Morgan’s shares almost 3% higher in premarket action.
The investment bank said it earned $1.51 billion, or 74 cents a share, last quarter, compared with a profit of $962 million, or 68 cents a share, a year earlier. Analysts had been calling for EPS of just 59 cents.
Revenue climbed 10% to $8.93 billion, or 4% excluding accounting items to $8.8 billion. Wall Street had been modeling for revenue of $8.52 billion.
"This quarter we generated higher year-over-year revenues in all three of our business segments, demonstrating the momentum we have built across the firm,” Morgan CEO James Gorman said in a statement.
Morgan logged a 12% jump in institutional securities revenue as advisory revenue jumped to $336 million amid higher levels of M&A activity and equity sales and trading net revenue ticked up 6% to $1.7 billion.
Despite a tough environment, the bank’s fixed income and commodities sales and trading revenue jumped 13% to $1.7 billion thanks to strong gains in commodities and growth in credit and securities products. Morgan said it suffered lower volumes across most fixed income businesses.
In wealth management, Morgan’s revenue ticked up 3% to $3.6 billion as fees grew to $2 billion, offsetting lower transaction revenue. Client assets in fee based accounts jumped 17% to $724 billion.
Compensation expenses rose to $4.3 billion from $4.2 billion, while non-compensation expenses dipped to $2.3 billion from $2.4 billion.
During a conference call with analysts, Morgan also addressed increased concerns about high-frequency trading sparked by Michael Lewis’s recent claims that the controversial practice has “rigged” the U.S. stock market.
“We welcome ongoing enhancement” to the equity market structure, said Ruth Porat, the bank’s chief financial officer.
“We’ve been a leading voice in this area for a long time,” Porat said, adding that the bank has implemented its own governance and protocol and high-frequency trading is not a “meaningful driver of our business.”
Shares of New York-based Morgan advanced 2.51% to $30.64 in premarket trading on Thursday, setting them up to trim their 2014 slide of 4.7%.
Earlier on Thursday, Goldman Sachs (NYSE:GS) logged a big first-quarter earnings beat despite continued weakness in trading that stands in contrast with Morgan’s results.