Morgan Stanley bankers crush estimates in record quarter for M&A

[NEW YORK] Morgan Stanley's investment bankers scored their best quarter ever, boosted by a torrid pace of dealmaking.

The division hauled in US$2.85 billion in the third quarter, a 67 per cent jump that topped analysts' estimates and helped drive firmwide profitability higher. Equity-trading revenue surged 24 per cent to US$2.9 billion.

"We had standout performance of our integrated investment bank and record net new assets of US$135 billion in wealth management," chief executive officer James Gorman said in a statement on Thursday (Oct 14).

Wall Street's top firms have been capitalising on a golden era for dealmaking and trading since the start of the pandemic. Now, as a trading slowdown takes hold, investment bankers have been picking up the slack, with booming capital markets and merger-advisory businesses generating record fees.

Bank of America said earlier on Thursday that its third-quarter results got a boost from higher fees at the dealmaking unit. JPMorgan Chase said on Tuesday its mergers and acquisitions (M&A) business posted its best quarter ever.

Shares of Morgan Stanley, which have advanced 44 per cent this year, climbed 1.6 per cent to US$100.10 at 7.55 am in early New York trading. The New York-based firm's gains throughout the pandemic have been outpacing rivals with consumer operations, which suffered during the crisis.

Morgan Stanley's investment-banking revenue surpassed the average estimate of US$2.1 billion. Advisory fees more than tripled to US$1.27 billion, and equity underwriting climbed 16 per cent to US$1 billion.

The bank's advisory business had a less stellar first half of 2021, when it gave up ground to some of the firm's closest rivals and got off to its weakest start in at least a decade. Morgan Stanley boosted pay for its junior bankers for a second time in August, a sign of its resolve to fight for talent amid more intense competition.

Trading revenue surpassed last year's figures, with the division pulling in US$4.52 billion, higher than last year's third-quarter figure of US$4.27 billion.

Wealth management revenue totalled US$5.94 billion, an increasingly growing share of the bank's overall revenue pool that is less volatile than its institutional-securities business, which houses traders and dealmakers.

The bank's only major hiccup was in its investment management business, where it had asset outflows tied to an asset manager's redemption. It also had a US$17 million loss on performance-based income tied to an investment in Asia, according to the statement.

BLOOMBERG