Profit at Morgan Stanley jumped 41% in the second quarter, to $3.1 billion, from $2.2 billion a year earlier, the bank reported Tuesday.
Investment-banking fees, up 51% to $1.6 billion, drove some of the success.
Unless there’s a recession, “I think you will see over the next number of quarters, and really over the next number of years, a resumption of more normalized [merger and acquisition] activity,” Morgan Stanley CEO Ted Pick said, according to the Financial Times.
Morgan Stanley’s gains on fees mirror those of its investment-bank rivals. JPMorgan saw a 46% increase on that front in the second quarter. Citi’s fees jumped 60%. Goldman Sachs’s fees rose 21%.
"We're in the early stages of a multi-year investment banking-led cycle," Pick said, according to Reuters.
CFO Sharon Yeshaya echoed that, saying Morgan Stanley’s investment-banking business is in the "early innings of recovery."
"Investment banking pipelines are healthy and diverse, dialogs are active, and markets are open," she told analysts on the bank’s earnings call Tuesday.
Overall, Morgan Stanley saw a 12% jump in revenue, to just over $15 billion. But, broken down by segment, disappointment — arguably — came from an area in which the bank is usually a powerhouse.
Revenue at Morgan Stanley’s wealth management unit grew 2%, to $6.8 billion, in the second quarter — down from 16% a year earlier. The bank reported $36.4 billion in net new assets — far below the $89.5 billion Morgan Stanley drew in 2023’s second quarter. Wall Street, too, had expected more — roughly $57.5 billion.
Combined with totals from the first quarter, Morgan Stanley has generated its lowest net new assets in wealth across the first half of any year since 2020, the Financial Times reported.
Yeshaya jumped to the bank’s defense. “We have both sides working,” she said of wealth and investment banking.
“It’s really about the balanced business model,” Yeshaya said, according to Bloomberg. “I don’t know how one can apologize for [a return on tangible common equity of] 17.5%.”
Within wealth management, interest income fell 17% from a year earlier to $1.79 billion.
Yeshaya said higher client tax payments during the quarter — the tax deadline for U.S. customers was in April — served as a disruptor for the bank.
“We believe both tax-related outflows and increased spending, particularly among high-net-worth clients, impacted flows this quarter,” Yeshaya told analysts.
Elsewhere, fixed-income trading jumped 16% to $2 billion, and the equity business as a whole rose 18% to just over $3 billion.
Morgan Stanley earned $592 million in fees from advising on deals, a 30% increase. The bank notched $352 million in equity underwriting fees — a 56% jump — as initial public offerings and private stock sales saw a comeback.
Debt underwriting increased 71% to $675 million.
"We saw fast growth in non-investment-grade issues," Yeshaya said.
