Morgan Stanley beats estimates on record wealth management revenue

On Tuesday, Morgan Stanley reported its second-quarter financial results, surpassing analysts’ expectations in both earnings and revenue. The remarkable performance was attributed to record-breaking results in their wealth management division. Morgan Stanley reported a 13% decrease in profit to $2.18 billion, equivalent to $1.24 per share. This decline was attributed to lower trading results compared to the previous year and the impact of a round of layoffs, which incurred $308 million in severance costs. Despite the profit dip, the company’s revenue demonstrated resilience, rising by 2% to reach $13.46 billion. Consequently, Morgan Stanley’s shares surged by over 6%. During CEO James Gorman’s tenure, Morgan Stanley has strategically relied on wealth management, leading to consistent earnings and an enhanced valuation compared to its competitors. Gorman, who assumed the firm’s leadership in 2010, announced in May his intention to step down within a year, sparking a succession race at the prominent Wall Street institution. “The firm delivered solid results in a challenging market environment,” Gorman said in the earnings release. “The quarter started with macroeconomic uncertainties and subdued client activity, but ended with a more constructive tone.”

Despite facing lower market levels that led to some fee reductions compared to the previous year, the second-quarter wealth management revenue experienced a remarkable 16% increase, reaching $6.66 billion. According to FactSet, this growth was primarily driven by higher interest income, surpassing analysts’ estimates of $6.5 billion. Additionally, the division attracted $90 billion in net new client assets during the quarter. Conversely, the bank’s Wall Street division encountered less favorable results. The institutional securities business witnessed an 8% decline in revenue, amounting to $5.65 billion, mainly due to decreases in trading activities. Although equities trading performed well and generated $2.55 billion in revenue, surpassing the $2.37 billion FactSet estimate, fixed income revenue fell significantly short at $1.72 billion, well below the estimated $1.99 billion. The investment banking revenue remained relatively steady at $1.08 billion, similar to the figures from a year ago, and closely aligned with analysts’ expectations.