Tuesday 16 October 2018 3:13 pm | Updated: Tuesday 21 May 2019 4:22 pm

Morgan Stanley profits jump as investment banking surges and trading holds up

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Morgan Stanley today reported profits well above expectations on Wall Street as its equity underwriting revenues surged and it avoided the trading weakness experienced by some rivals.

Net income rose by 17 per cent to $2.1bn for the quarter, driven by a 26 per cent jump in profits in Morgan Stanley's institutional securities arm, which includes trading and investment banking.

The bank reported $9.9bn in overall revenues for the three months ending in September, a seven per cent year-on-year increase.

Institutional securities revenues rose by 13 per cent thanks to "strong results" in underwriting, the bank said.

Morgan Stanley benefited from a booming market for US initial public offerings, with equity underwriting revenues rising by 62 per cent year-on-year to hit $441m. However, advisory revenues declined by eight per cent to $510m.

Revenues also rose in the bank's massive sales and trading arm, with fixed income sales bucking the trend of some Wall Street rivals to remain flat year-on-year, despite lower demand for interest rate products.

Wealth management profits rose year-on-year to $1.2bn thanks to higher revenues in asset management.

James Gorman, the bank's chairman and chief executive, said, “Despite the seasonal summer slowdown in the third quarter, we reported solid revenue and earnings growth demonstrating the stability of the franchise."

The bank is "well positioned and optimistic for the remainder of the year,” he added.

Morgan Stanley also managed to keep a lid on costs, which rose by five per cent compared with the third quarter of 2017 to $7.02bn.

The annualised return on average common equity, a measure of profitability for shareholders, was 11.5 per cent for the third quarter, although Gorman pointed to a 13 per cent annualised return for the year as a whole.