Morgan Stanley’s record deal-making quarter lifts profit

Morgan Stanley’s investment bankers scored their best quarter ever, boosted by a torrid pace of deal-making.

The division hauled in $2.85bn in the third quarter, a 67% jump that topped analysts’ estimates and helped drive firmwide profitability higher. Equity-trading revenue surged 24% to $2.9bn.

“We had standout performance of our integrated investment bank and record net new assets of $135bn in wealth management,” CEO  James Gorman said in a statement on Thursday.

Gorman said investment banking pipelines remained healthy across sectors and regions and the current deal momentum is expected to continue.

Wall Street’s top firms have been capitalising on a golden era for deal-making 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 said earlier Thursday that its third-quarter results got a boost from higher fees at the deal-making unit. JPMorgan Chase said Wednesday its mergers & acquisitions business posted its best quarter ever. 

Citigroup on Thursday reported a 48% jump in third-quarter profit that comfortably beat market estimates.

Shares of Morgan Stanley, which have advanced 44% in 2021, climbed 1.6% to $100.10 in New York trading. The New York-based firm’s gains throughout the pandemic have been outpacing rivals with consumer operations, which suffered during the crisis.

Morgan Stanley’s investment-banking revenue surpassed the average estimate of $2.1bn. Advisory fees more than tripled to $1.27bn and equity underwriting climbed 16% to $1bn.

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 $4.52bn, higher than last year’s third quarter figure of $4.27bn.

Wealth-management revenue totalled $5.94bn, 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. 

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 $17m loss on performance-based income tied to an investment in Asia, according to the statement.

Bloomberg News. More stories like this are available on bloomberg.com