Morgan Stanley profits rise by a third as Wall Street booms

Shares in Morgan Stanley jumped more than 7 per cent on Wednesday after the US investment bank reported a sharp rise in profit following a bumper quarter for investment banking and stock trading.
Profit rose 32 per cent to $3.2 billion in the third quarter, making it the latest Wall Street bank to beat analysts’ expectations.
American banks have been bolstered by a revival in mergers, initial public offerings and corporate debt issuance this year, as well as a rise in equity trading.
Revenue from investment banking at Morgan Stanley climbed 56 per cent to $1.46 billion in the third quarter. Its rivals Goldman Sachs and JP Morgan Chase have reported gains of 20 per cent and 31 per cent respectively. Equity trading revenue grew 21 per cent to $3 billion, while fixed income revenue rose 3 per cent to $2 billion.
Wall Street chiefs, buoyed by hopes that the US Federal Reserve will continue to cut interest rates, are optimistic that a revival in mergers and acquisitions will continue after a two-year dry spell.
Ted Pick, 55, chief executive of Morgan Stanley, said: “Improved underwriting markets, combined with increasing participation among financial sponsors and corporates across investment banking, support a constructive outlook.
“A broadening equity market and evolving interest rate policy are favourable backdrops for our markets.”
Morgan Stanley’s shares were up $8.17, or 7.3 per cent, at $120.39 in mid-morning trading in New York.
Across the industry, global investment banking revenue rose 21 per cent in the first nine months of the year, led by a 31 per cent rise in North America, according to data from Dealogic. Morgan Stanley earned the fourth highest fees globally over the period.
Sharon Yeshaya, chief financial officer at Morgan Stanley, said: “We are seeing a rise in equity capital markets activity led by financial sponsors, not only for initial public offerings in the US but also in Europe.”
The bank was a lead underwriter on a number of significant initial public offerings in the quarter, including by Lineage, the cold storage group based in Michigan, and StandardAero, the aeroplane engine maintenance services provider.
Morgan Stanley expanded into wealth management under its former chief executive and current chairman James Gorman, 66, who wanted to even out volatility from trading and investment banking.
Wealth management revenue in the third quarter increased to $7.27 billion, compared with $6.40 billion, a year ago. The business added $64 billion in net new assets and total client assets reached $6 trillion.
“Total client assets have surpassed $7.5 trillion across wealth and investment management supported by buoyant equity markets and net asset inflows,” Pick said.
Investment management revenue climbed 8.9 per cent to $1.5 billion, helped by higher asset management and related fees.
Pick, who was named chief executive a year ago, is the former head of Morgan Stanley’s investment banking division. He joined the bank in 1990 and rose through the ranks, becoming a managing director in 2002 and joining its management committee six years later.
Macrae Sykes, portfolio manager at Gabelli Funds, said the bank is “executing very well across all the segments”. He added: “Ted Pick has quickly built a leadership presence and confidence from investors.”