Morgan Stanley beats estimates, but shares management disappointed

Morgan Stanley beats estimates, but shares management disappointed

Morgan Stanley reported its third-quarter financial results on Wednesday, which exceeded profit expectations, thanks to trading revenue that outperformed predictions.

Morgan Stanley announced a 9% decrease in profit, amounting to $2.41 billion, or $1.38 per share, compared to the previous year. However, the bank’s revenue witnessed a 2% growth, reaching $13.27 billion, closely aligning with expectations.

Morgan Stanley’s trading operations played a crucial role in offsetting revenue shortfalls in other areas of the firm. Bond traders at the bank contributed $1.95 billion in revenue, surpassing the StreetAccount estimate by around $200 million. Similarly, equity traders brought in $2.51 billion in revenue, exceeding expectations by $100 million.

Conversely, the bank’s vital wealth management division fell short, generating $6.4 billion in revenue, missing estimates by over $200 million due to increased compensation costs in the division.

Investment banking also had a subpar quarter, generating $938 million in revenue, which was below the estimated $1.11 billion, with the company attributing this to weaknesses in mergers and IPO listings. On the other hand, the bank’s investment management division more or less met expectations with $1.34 billion in revenue.

    Here’s the company’s report:

  • Earnings per share:    $1.38, surpassing the estimated $1.28 by LSEG, previously known as Refinitiv.
  • Revenue:                    $13.27 billion, slightly exceeding the anticipated $13.23 billion.

 

Morgan Stanley beats estimates, but shares management disappointed

 

Morgan Stanley’s shares experienced a 3.2% decline in premarket trading.

CEO James Gorman acknowledged a “mixed” business environment and stated that the wealth management division attracted fewer net assets compared to previous quarters. Nevertheless, Gorman reassured analysts that the wealth management business remained on track to achieve his three-year goal of generating $1 trillion in new assets.

Under the leadership of Gorman since 2010, Morgan Stanley has managed to avoid the upheavals faced by some of its competitors. While Goldman Sachs had to make strategic adjustments after entering retail banking, and Citigroup struggled to boost its stock price, Morgan Stanley’s primary concern has shifted to the orderly succession of its CEO.

In May, Gorman disclosed his plan to step down within a year, concluding a successful tenure marked by significant acquisitions in wealth and asset management. He mentioned that the board had narrowed down the search for his successor to three internal executives.

Analysts will eagerly await any updates Gorman has on the progress of the CEO succession process.

Last week, JPMorgan Chase, Wells Fargo, and Citigroup all exceeded expectations for third-quarter profits, benefiting from low credit costs. Goldman Sachs and Bank of America also outperformed estimates due to stronger-than-anticipated bond trading results.

Stock futures slightly declined, while oil prices saw an increase. This was driven by investors keeping a close watch on earnings reports from major companies and the escalating conflict in Gaza.

Morgan Stanley’s stock experienced a premarket drop after reporting a decrease in quarterly net income. On the other hand, Procter & Gamble reported an increase in quarterly profit, which was bolstered by price hikes. Post-market, Tesla and Netflix were also on the agenda for their earnings reports.

Tensions in the region heightened due to an explosion at a Gaza hospital, raising concerns about a broader regional conflict. As a result, a summit between President Biden and Arab leaders was canceled, reducing the prospects of an imminent diplomatic solution.

In China, economic data presented a mixed picture, with a slowdown in economic growth in the last quarter but stronger-than-expected retail sales in September.

    Here’s a snapshot of recent market activity:

  • Treasury yields remained near multiyear highs, with the benchmark 10-year note yield staying above 4.8%, the highest since 2007.
  • Stock-index futures declined, with contracts linked to the S&P 500, the Nasdaq-100, and the Dow industrials all showing slight decreases.
  • Oil prices rose, with the most actively traded contract for Brent crude climbing about 1.5% to over $91 a barrel, primarily driven by concerns related to the Israel-Hamas conflict and hopes for increased Chinese demand.
  • British bonds dipped in price, and yields on shorter-dated U.K. debt increased after data indicated that the country’s annual inflation rate remained stable last month, falling short of economist expectations.
  • Chinese stocks slightly decreased, with the Shanghai Composite Index retreating following the release of Chinese economic data.

 ( By Anna Hirtenstein )