Morgan Stanley Bankers Crush Estimates in Record M&A Quarter
(Bloomberg) -- Morgan Stanley’s investment bankers scored their best quarter ever, boosted by a torrid pace of dealmaking.
The division hauled in $2.85 billion in the third quarter, a 67% jump that topped analysts’ estimates and helped drive firmwide profitability higher. Equity-trading revenue surged 24% to $2.9 billion, the firm said in a statement Thursday.
“We are firing on all cylinders again,” Chief Financial Officer Sharon Yeshaya said in an interview.
Wall Street’s top firms have been capitalizing on a golden era for dealmaking and trading since the start of the pandemic. Now, as a trading slowdown takes hold, investment bankers have been picking up the slack, with booming capital markets and merger-advisory businesses generating record fees.
Bank of America Corp. said earlier Thursday that its third-quarter results got a boost from higher fees at the dealmaking unit. JPMorgan Chase & Co. said Wednesday its mergers-and-acquisitions business posted its best quarter ever.
Shares of Morgan Stanley, which are up 46% this year, climbed 1.3% to $99.82 at 9:34 a.m. in New York. The New York-based firm’s gains throughout the pandemic have been outpacing rivals with consumer operations, which suffered during the Covid-19 crisis.
Morgan Stanley’s investment-banking revenue surpassed the average estimate of $2.1 billion. Advisory fees more than tripled to $1.27 billion and equity underwriting climbed 16% to $1 billion.
“The near-term continues to be very healthy,” Yeshaya said. The bank is “not seeing degradation in the activity level.”
The bank’s advisory business had a less stellar first half of 2021, when it gave up ground to some of the firm’s closest rivals and got off to its weakest start in at least a decade.
Morgan Stanley boosted pay for its junior bankers for a second time in August, a sign of its resolve to fight for talent amid more intense competition.
Trading revenue surpassed last year’s figures, with the division pulling in $4.52 billion, higher than last year’s third quarter figure of $4.27 billion.
Wealth-management revenue totaled $5.94 billion, an increasingly growing share of the bank’s overall revenue pool that’s less volatile than its institutional-securities business, which houses traders and dealmakers.
Despite a slowdown in activity at E*Trade, the retail broker Morgan Stanley acquired in 2020, it’s still on pace with last year and triple the pre-pandemic level, indicating retail trading investments haven’t waned, Yeshaya said.
The bank’s only major hiccup was in its investment-management business, where it had asset outflows tied to an asset manager’s redemption. It also had a $17 million loss on performance-based income tied to an investment in Asia, according to the statement.
Here’s a quick summary of other key numbers:
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