Morgan Stanley profit beats on wealth management strength

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[1/2]People take photos by the Morgan Stanley building in Times Square in New York City, New York U.S., February 20, 2020. REUTERS/Brendan McDermid/File Photo Acquire Licensing Rights Oct 18 (Reuters) – Morgan Stanley’s (MS.N) third-quarter profit dropped less than expected as a strong performance in the bank’s wealth management division offset a hit from lethargic dealmaking. The wealth management business, which has been a bright spot for Morgan Stanley in recent quarters, has reduced the lender’s reliance on trading and investment banking, which are largely tied to economic cycles. “While the market environment remained mixed this quarter, the firm delivered solid results,” CEO James Gorman said in a statement. “Our equity and fixed income businesses navigated markets well, and both wealth and investment management produced higher revenues.” Net revenue from wealth management rose nearly 5% to $6.4 billion, while its net new assets shrank to $35.7 billion from $64.8 billion a year earlier. Morgan Stanley’s profit dropped about 9% to $2.4 billion, or $1.38 per diluted share, for the three months ended Sept. 30. Analysts had expected a figure of $1.28 per share, according to LSEG IBES data. INVESTMENT BANKING Revenue from investment banking fell 27% to $938 million, as global mergers and acquisitions activity showed few signs of improvement due to rising interest rates, antitrust scrutiny and an uncertain economic and geopolitical outlook. The company’s shares were down 2.7% at $78.15 before the bell. Commenting on lower investment banking revenues, specially in debt capital markets, Morgan Stanley CFO Sharon Yeshaya said they cannot be compared to rivals due to different considerations of allocation of capital. “It is not a decision purely on fees, but capital allocation.” Revenue from initial public offerings also fell for Morgan Stanley. The bank was not an underwriter for the two high-profile IPOs in the quarter – SoftBank-backed chip designer Arm Holdings and grocery delivery app Instacart (CART.O). Investment banking revenue is expected to improve over the next quarters considering a strong pipeline of M&A transactions in industries such as finance, energy, technology and artificial intelligence, Yeshaya said. The bank is not seeing an impact at the moment of geopolitical uncertainties on the M&A pipeline, she added. Lower activity took fixed income revenues down 11%. Equity revenues, however, inched up 2% driven by gains on investments. CRE WEAKNESS Morgan Stanley also set aside $134 million in provisions for credit losses, surging from $35 million in the same quarter last year, driven by worsening conditions in commercial real estate (CRE). The bank has been proactive in provisioning for CRE losses and the total exposure is less than 5% of the credit portfolio, Yeshaya said, adding that most of the credit has collateral. The results round out a largely upbeat reporting season for Wall Street’s biggest banks, which benefited from rising income from interest payments. Profit at rival Goldman Sachs also dropped less than expected in the third quarter. Read Next article with video Marketscategory Country Garden default talk swirls as offshore debt deadline passes 1:18 PM UTC article with gallery Financecategory Bank of America’s unrealized losses on securities rose to $131.6 bln October 17, 2023 Marketscategory Morning Bid: US growth topping China as megacaps report 10:10 AM UTC article with gallery Financecategory Canada’s Scotiabank to cut 3% of its global workforce, take charge 2:56 PM UTC · Updated ago Reporting by Manya Saini, Noor Zainab Hussain and Niket Nishant in Bengaluru and Tatiana Bautzer in New York; Editing by Lananh Nguyen and Shounak Dasgupta Our Standards: The Thomson Reuters Trust Principles. Acquire Licensing Rights, opens new tab Niket Nishant Thomson Reuters Niket Nishant reports on breaking news and the quarterly earnings of Wall Street’s largest banks, card companies, financial technology upstarts and asset managers. He also covers the biggest IPOs on U.S. exchanges, and late-stage venture capital funding alongside news and regulatory developments in the cryptocurrency industry. His writing appears on the finance, business, markets and future of money sections of the website. He did his post-graduation from the Indian Institute of Journalism and New Media (IIJNM) in Bengaluru. Tatiana Bautzer Thomson Reuters Tatiana Bautzer is a U.S. banking correspondent at Reuters in New York. She previously covered banks in Brazil, breaking news on deals by major global corporations, initial public offerings and bankruptcies. She has also delved into corruption scandals at Brazilian conglomerates and business disputes between billionaires. Prior to joining Reuters in 2015, Bautzer worked for business magazines Exame and Istoe Dinheiro and newspapers Valor Economico and O Estado de S. Paulo. She previously served as international correspondent for Valor Economico in Washington, D.C., covering multilateral institutions and trade. Bautzer holds a B.A. in Journalism and an MBA from the University of Sao Paulo. Contact: +646-2397968 Manya Saini Thomson Reuters Manya Saini reports on prominent publicly listed U.S. financial firms including Wall Street’s biggest banks, card companies, asset managers and fintechs. Also covers late-stage venture capital funding, initial public offerings on U.S. exchanges alongside news and regulatory developments in the cryptocurrency industry. Her work usually appears in the finance, markets, business and future of money sections of the website. Contact: 9958867986

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