Morgan Stanley’s (MS) reported revenue of $14.8 billion for Q3 of 2021 compared to $11.7 billion for Q3 of 2020 (increase of 26%), beating analysts’ expectations of $13.9 billion.
Net income also improved by 37% to $3.7 billion compared to $2.7 billion last year, and previous forecasts of $3 billion. The bank took advantage of the post-covid economy with companies scrambling to get an IPO along with mergers and acquisitions. The company’s investment banking segment boosted its earnings by 67% raising $2.8 billion in revenue from 94 IPOs. Looking forward, the bank has a healthy balance sheet as well as a diversified investment-banking pipeline that points to an optimistic outlook over the coming quarters.
Earnings per share increased 7.93% from the second quarter to $2.04 surpassing analyst estimates of $1.68 with the share price gaining 3% to $101.02 after the announcement. Looking ahead for the coming quarter earnings is expected to decline 11% to $1.815 with revenue also expected to decline 3.5% to $12.238 billion.
Prior acquisitions are also showing benefits, following the acquisitions of investment manager Eaton Vance and trading platform E*TRADE in late 2020 which supported $400 billion in net new client funds across the Wealth and Investment Management business. E*TRADE helped boost wealth management revenue by 28%, while Eaton Vance helped increase investment management revenue by 38%.
Chairman and Chief Executive Officer James Gorman, said, “The Firm delivered another very strong quarter, with robust revenues and improved efficiency producing an ROTCE of 20%. We had standout performance of our integrated Investment Bank and record net new assets of $135 billion in Wealth Management. Year-to-date, our successful integrations of E*TRADE and Eaton Vance have supported growth of $400 billion in net new client assets across Wealth and Investment Management, bringing our total combined client assets to $6.2 trillion.”
The wealth management division earned $5.94 billion in revenue for Q3 2021 compared to $4.6 billion for Q3 2020 (an increase of 29%), and brought in a record breaking $135 billion in net new asset flows. This is in line with the bank’s strategy to aim for a less volatile source of revenue.
The advisory business gave an impressive contribution to the bank’s revenue with an increase of 3x to $1.27 billion in Q3 2021, compared to $357 million in Q3 2020.
Contributions from the equity underwriting and debt underwriting divisions also helped push revenue. The equity underwriting division reported $1 billion for Q3 2021 compared to previous year’s $874 million for Q3 2020 (increase of 16%), while the debt underwriting division reported $567 million for Q3 2021 compared to $476 in Q3 2020 (increase of 19%). The company’s trading business earned $4.5 billion in revenue.
In terms of losses, the company suffered $17 million loss in Asia and a decrease in asset’s attributable to an asset manager’s redemption. The company invested in its youth assets, raising wage rates for its bankers for a second time in August to retain its talent.
