Morgan Stanley’s profit beats estimates on boost from dealmaking, stock trading
[BENGALURU / NEW YORK] Morgan Stanley’s third-quarter profit beat market expectations as investment bankers brought in more fees from advising on deals and by underwriting stock and debt sales, lifting revenue to a record.
Shares of the bank rose 3.9 per cent in premarket trading on Wednesday. They have gained 23.6 per cent this year as at their last closing price.
A string of large deals pushed global mergers and acquisitions (M&A) activity past the US$3 trillion mark this year. A resilient US economy, optimism around interest-rate cuts, and lighter regulations under the Trump administration have spurred businesses to do deals or tap capital markets.
“Our integrated firm delivered an outstanding quarter with strong performance in each of our businesses globally,” chief executive officer Ted Pick said in a statement.
Total revenue was a record of US$18.2 billion in the quarter.
The bank posted a net income of US$4.6 billion, or US$2.80 per share, for the three months ended Sep 30, it said on Wednesday (Oct 15). That compares with US$3.2 billion, or US$1.88 per share, the year before.
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Analysts expected a profit of US$2.10 per share, based on estimates compiled by LSEG.
Dealmaking boost
With markets hovering near record highs and the US Federal Reserve resuming its rate-cutting cycle in September, bankers are optimistic that the momentum will continue through the fourth quarter and into 2026.
Morgan Stanley’s investment banking revenue jumped 44 per cent to US$2.11 billion from the year before. Advisory revenue surged 25 per cent to US$684 million, driven by higher completed M&A transactions.
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The bank landed key roles in major deals, including advising freight rail giant Union Pacific on its US$85 billion acquisition of smaller rival Norfolk Southern – the largest transaction announced globally this year.
Wall Street rivals, including JPMorgan Chase and Goldman Sachs, also benefited from a surge in M&A and initial public offerings (IPOs).
Investment banking fees rose 16 per cent at JPMorgan Chase, 42 per cent at Goldman Sachs, and 43 per cent at Bank of America.
Equity capital markets roared back during the quarter, led by a wave of high-profile IPOs. Record-breaking stock market levels also emboldened companies to pursue follow-on equity offerings and convertible bond deals.
Morgan Stanley’s equity underwriting revenue jumped 35 per cent to US$652 million from a year earlier, thanks to higher IPOs and convertible offerings.
The bank was among the joint book runners on large IPOs during the quarter, including design software maker Figma and Swedish fintech Klarna.
Trading boost
Trading too was a bright spot as stocks reached new highs, buoyed by strong corporate earnings and optimism around potential rate cuts.
The benchmark S&P 500 index gained roughly 8 per cent in the third quarter and hit multiple record closing highs in September, historically a weak month for stock markets.
Equities revenue surged 35 per cent to US$4.12 billion, driven by record results in prime brokerage. Fixed income revenue rose 8 per cent.
Wealth margins
Revenue from wealth management, a key focus for Morgan Stanley, jumped to a record US$8.2 billion in the quarter, buoyed by rising market valuations.
The unit’s pre-tax margin was 30.3 per cent in the quarter, meeting its long-term goal.
Wealth management provides Morgan Stanley with stable revenues, that provide a cushion against the volatility of trading and investment banking.
The business added net new assets of US$81 billion in the quarter, while fee-based asset flows were US$42 billion.
Total client assets across wealth and investment management reached US$8.9 trillion in the quarter, getting closer to the bank’s target of managing US$10 trillion in client assets. REUTERS
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