The corporate logo of financial firm Morgan Stanley is pictured on the company's world headquarters in the Manhattan borough of New York City, January 20, 2015. REUTERS/Mike Segar
NEW YORK: Wall Street bank Morgan Stanley’s profit doubled in the last quarter of the year, far exceeding expectations, as trading activity surged following the US presidential election.
Earnings applicable to the bank’s common shareholders soared to US$1.51bil (RM6.74bil) in the three months ended Dec 31 from US$753mil (RM3.36bil) a year earlier, while earnings per share increased to 81 cents from 39 cents.
Analysts on average had expected a profit of 65 cents per share, according to Thomson Reuters I/B/E/S.
Trading in debt securities and stocks shot up in the wake of Donald Trump’s surprise election victory on Nov 8 as investors took the view that he would push policies that would boost the US economy and kindle inflation.
Revenue in the bank’s fixed-income business jumped to US$1.5bil (RM6.69bil) in the quarter from US$550mil (RM2.45bil) in the same period last year, an increase of about 173%.
JPMorgan Chase & Co, the No. 1 US bank by assets, reported a 31% rise fixed-income revenue last week, while second-ranked Bank of America Corp said its revenue from trading fixed-income securities, currencies and commodities rose 12%.
Goldman Sachs Group Inc, Morgan Stanley’s traditional rival, reports on Wednesday.
Morgan Stanley’s shares were up 1.6% at US$44.49 in premarket trading, having risen 28.5% since the election.
Investors hope Trump will usher in a new era of looser bank regulations along with economic growth.
“We reported solid results in sales and trading and advisory and record revenues in wealth management, while managing expenses prudently”, chief executive officer James Gorman said in a statement.
Revenue from equities trading, a business in which Morgan Stanley is typically strong, rose to US$2bil (RM8.93bil) from US$1.8bil (RM8.03bil).
Revenue from wealth management, which Morgan Stanley has been building for several years, rose 6.4% to US$3.99bil (RM17.81bil). The pretax margin in the business increased to 22% from 20% a year earlier.
Total revenue jumped 16.6% to US$9.02bil (RM40.25bil), beating the average estimate US$8.47bil (RM37.80bil).
The bank’s return on equity was 8.7% in the quarter, short of Gorman’s target of 9% to 11% by the end of 2017.
Investment banking revenue, which includes income from advising on mergers and acquisitions as well as underwriting bond and share offerings, rose 5.1% to US$1.38bil (RM6.16bil).
The bank, which has said it wants to cut costs by US$1bil this year, said non-interest expenses rose 7.6% to US$6.78bil in the latest quarter. Total compensation and benefits expenses rose 11.9% to US$4.08bil.
Morgan Stanley ranked second in worldwide announced M&A deals during 2016, according to Thomson Reuters data.
The bank laid off a number of senior investment bankers earlier this month and cut bonuses by roughly 15%, according to sources familiar with the matter. - Reuters
Limited time offer:
Just RM5 per month.
