Morgan Stanley (NYSE:MS) brought upbeat news to Wall Street Friday as the investment bank reported third quarter profit surged on strong performance across investment banking, wealth management and trading.
For the period ending September 30, the company posted net income from continuing operations of $1.71 billion, or 84 cents per share, compared with a net profit of $889 million, or 44 cents per share, in the same quarter last year.
The company said the results in the latest period were supported by a tax benefit of $237 million, or 12 cents per share. Stripping out accounting adjustments and the tax benefit, earnings were 65 cents per share, topping the 54 cents expected by analysts.
Revenues came to $8.91 billion compared with $8.0 billion a year ago. Excluding debt valuation adjustment, net revenues were $8.69 billion. The debt valuation adjustment is tied to the change in the fair value of certain of the firm's long-term and short-term borrowings resulting from the fluctuation in its credit spreads and other factors.
“Morgan Stanley has delivered another quarter of earnings growth and strong performance based on consistent execution for our clients," said chief executive officer, James P. Gorman.
"We are well positioned to create superior returns for our shareholders, particularly as the U.S. economy continues to strengthen.”
Morgan Stanley said institutional securities net revenue, excluding DVA, was $4.3 billion, up from $3.88 billion a year ago, reflecting continued strength in investment banking and equity sales and trading, as well as improved results in fixed income and commodities sales and trading. Equities trading revenue climbed over 4 percent in the quarter to $1.78 billion, topping the $1.6 billion reported by rival Goldman Sachs (NYSE:GS) on Thursday.
Advisory revenues of $392 million also increased from $275 million a year ago on higher levels of completed M&A activity. Equity underwriting revenue was $464 million from $236 million a year earlier, while debt underwriting was steady at $484 million.
The wealth management unit reported net revenues of $3.78 billion versus $3.48 billion in the third quarter of 2013 as asset management fee revenues increased while transactional sales declined. Pre-tax income from the unit rose to $836 million from $668 million, while pre-tax margin, a closely-tracked measure, reached 22.4 percent.
The company said fee based asset flows for the quarter were $6.5 billion, with total client assets above $2.0 trillion at quarter end.
Investment management revenues, meanwhile, totaled $655 million, down from $828 million in the prior year period, reflecting lower investment gains and carried interest in the merchant banking and real estate investing businesses. This was partly offset by higher results in traditional asset management. Pre-tax income from the unit fell to $188 million from $300 million in the same quarter last year.
Assets under management or supervision at September 30 were $398 billion, increased from $360 billion a year ago primarily due to market appreciation and positive flows, Morgan Stanley said.
The company reported slightly higher compensation expense of $4.2 billion for the quarter on account of higher revenues, but said non-compensation expenses dropped to $2.4 billion from $2.6 billion due to lower litigation fees.
Shares were last up 2.1 percent at US$33.23 in afternoon trading in New York, rising to as high as US$34.00 earlier in the session. The stock has a 52-week high of US$36.44.