Morgan Stanley's earnings jump, helped by trading

NEW YORK, N.Y. – Morgan Stanley’s earnings soared 62 per cent in the third quarter, thanks to big gains in bond trading.

The New York-based investment bank said Wednesday it earned $1.52 billion after payments to preferred shareholders, up from $939 million in the same period a year earlier. Earnings per share, excluding an accounting adjustment, were 81 cents versus 34 cents a year earlier.

The results beat forecasts. Analysts surveyed by FactSet expected the bank to earn 63 cents per share.

Like its major competitor Goldman Sachs, and other major banks like JPMorgan Chase, Morgan Stanley had a strong quarter on its trading desks, particularly bond trading. Morgan Stanley’s investment bank and trading division reported revenue of $4.6 billion compared with $3.5 billion a year earlier, excluding an accounting adjustment.

Bond sales and trading revenue jumped to $1.5 billion, nearly triple the $583 million figure from a year earlier. Stock trading revenue edged up to $1.9 billion from $1.8 billion.

Revenue from Morgan Stanley’s wealth management arm rose to $3.9 billion from $3.6 billion. Assets under management increased $13.5 billion in the quarter. Morgan Stanley has been building up its wealth management business, previously known as Morgan Stanley Smith Barney, as a more stable driver of earnings compared with trading, which can ebb and flow with market volatility.

“Overall the results reflect steady progress against our long term strategic goals,” said Morgan Stanley CEO James Gorman said in a prepared statement.

Return on common equity, a closely watched metric for investment banks, rose to 8.7 per cent, a big improvement from 5.6 per cent in the same period a year earlier.

Like Goldman, Morgan set aside much more money to cover its employee’s compensation this quarter. Salaries and benefits rose to $4.1 billion from $3.44 billion a year earlier. Both Morgan and Goldman employees are heavily compensated in year-end bonuses tied to performance.

Overall, firm-wide revenue rose to $8.91 billion from $7.77 billion.

Morgan Stanley’s stock rose 27 cents, or 0.9 per cent, to $32.60 in morning trading.