Ms stock Morgan Stanley overtakes arch-rival Goldman Sachs in equities trading
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Morgan Stanley outperformed its arch-rival Goldman Sachs in equity trading in the third quarter for the first time since 2022, nearly halving the investment bank’s profits.
Morgan Stanley said on Wednesday that net income for the three months to the end of September was $4.6 billion, $1 billion more than analysts had expected.
Wall Street’s core businesses of investment banking and trading have delivered better-than-forecast results for America’s largest banks.
Goldman, JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo have all exceeded expectations in the past two days, bolstered by their investment banks.
In equity trading, Morgan Stanley generated revenue of $4.1 billion, up 35 percent from a year earlier and exceeding the $3.7 billion Goldman reported on Tuesday.
Equity trading has been a major point of rivalry between the two investment banks, and this quarter marks the first time Morgan Stanley earned more than Goldman in this business since the last quarter of 2022.
Morgan Stanley has traditionally been the dominant force in stock trading on Wall Street.
But after heavy losses associated with investment firm Archegos Capital Management, it ceded this position to Goldman, and has made a concerted effort to regain its top spot under the leadership of Chief Executive Officer Ted Pick, who took over from James Gorman at the beginning of 2024.
“We’re trying to build a more sustainable business,” Morgan Stanley Chief Financial Officer Sharon Yeshaya told the Financial Times.
“Part of that comes from equity-linked lending and prime brokerage business. And part of it comes from the relationships we’re continually building on the corporate side.”
Investment banking generated revenue of $2.1 billion, a 44 percent improvement over the same quarter last year, which was in line with Goldman.
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Goldman reported a 43 percent increase in investment banking revenue on Tuesday, reaching $2.7 billion, while JPMorgan posted a more modest 16 percent increase to $2.6 billion, and Citigroup reported a 17 percent increase to $1.2 billion.
Yashaya said that “given the pipeline and backlog of potential deals, the bank is at record levels.”
Morgan Stanley’s wealth management business also performed much better than expected, generating $81 billion in net new assets in the quarter, while investors were expecting $67 billion.
Investors closely monitor this figure as it serves as a measure of the pace of business growth, as Morgan Stanley’s revenue is relatively evenly split between its investment bank and wealth management divisions.
Morgan Stanley’s earnings came on the same day Bank of America also beat expectations for its investment bank. Bank of America reported a 43 percent increase in investment banking fees to just over $2 billion. Analysts had expected only $1.6 billion in revenue from this business.
BofA reported an 11 percent increase in revenue in its markets division to $6.2 billion, boosting the bank’s profit by nearly a quarter compared to a year earlier, to $8.5 billion.
Shares of both Morgan Stanley and BofA rose more than 4 percent in pre-market trading.
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