While Morgan Stanley's trading unit did not hit the record highs of the previous quarter, the latest performance was still good enough to help the bank handily beat expectations.
Gorman might also be suffering from great expectations as Wall Street has come to realize that banks with larger consumer businesses are faring much worse as eight months of COVID-19 have taken a massive toll on the credit market, creating a wave of defaults on loans that has yet to crest.
The gains brought the trading total for the five biggest USA investment banks to US$23.3 billion, a windfall that helped them counteract credit losses and other negative impacts of the pandemic.
As Gorman mentioned in his note Thursday morning, he has spent more than $20 billion to bulk up that business through his recent acquisition of E*Trade and his recently announced purchase of bond trading giant Eaton Vance.
The bank had already warned that the division would not perform as well in the third quarter as it had in the second, when it had benefited from huge swings in financial markets due to the coronavirus outbreak. Like GS yesterday, today's MS print proves out that thesis, said Oppenheimer analyst Chris Kotowski.
However Gorman's imaginative and prescient for Morgan Stanley's future was buoyed by a powerful efficiency by the financial institution's asset administration division, which posted 20 % development year-over-year.
Wealth-management revenue climbed seven per cent to US$4.66 billion, while investment management brought in US$1.06 billion. Net income rose to $2.72 billion, or $1.66 a share, from $2.17 billion, or $1.27 a share, in the year-ago period, beating the FactSet earnings consensus of $1.28 a share.
Equities underwriting revenue more than doubled to $874mn due to handsome fees from a number of high-profile initial public offerings such as Snowflake Inc, Royalty Pharma, KE Holdings Inc and Warner Music.
Net income applicable to common shareholders rose to $2.60 billion in the quarter ended September 30, from $2.06 billion a year ago. Its revenue net of interest expense was $11.66 billion, which also beat Street forecasts.
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