A surge in investment banking activity at Morgan Stanley (MS) fueled a resurgence in dealmaking on Wall Street as the company’s third-quarter earnings beat analysts’ expectations.
Investment banking fees rose 56% from a year ago, the biggest jump among big banks, to nearly $1.4 billion.
The recovery in investment banking and an increase in trading helped Morgan Stanley increase its net profit 32% from a year earlier to $3.2 billion.
The results reinforce a broad recovery in the Wall Street business of the nation’s largest banks. Investment banking fees and stock trading revenue also rose at JPMorgan Chase (JPM), Wells Fargo (WFC), Goldman Sachs (GS), Bank of America (BAC) and Citigroup (C).
Executives at these banks have been optimistic that the start of a rate-cutting cycle at the Federal Reserve — which cut its benchmark rate by 50 basis points last month — will mean more deals in the near future.
“The company reported a strong third quarter in a constructive environment across our global footprint,” Morgan Stanley CEO Ted Pick said in a statement, citing “the momentum in the markets and ensuring companies have solid customer engagement.”
Morgan Stanley exceeded analyst expectations on dealmaking fees from its bond underwriting and M&A advisory divisions, as well as revenues for its trading and asset management divisions.
Total net sales of $15.4 billion increased 16%. Fixed income and equity trading revenues rose 13% to $5 billion, largely driven by equities.
The stock rose more than 3% in early morning trading. As of early Wednesday, the stock had risen more than 20% since early January, trailing the gains of some of its other major bank rivals.
One part of the company’s investment banking franchise that turned out to be weaker than analysts had hoped was its equity capital markets unit, which posted revenue of $362 million. Analysts had hoped for $12 million more.
Another bright spot that emerged Tuesday was the recent performance of Morgan Stanley in wealth management, which provides financial advice to high-net-worth individuals.
Net new assets in that division rose 79% from a year ago and 76% from the last quarter to $64 billion. Revenue was $7.3 billion, up 13.5% from a year ago and up 7% from the last quarter.
The third quarter performance bodes well for Pick, who is still in his first year as top boss.
Since the announcement that Pick is taking over from former CEO James Gorman, the company’s shares have outperformed major stock indexes. It is up 57% for that period. Gorman plans to step down as executive chairman at the end of this year.
“Our management remains focused on driving sustainable growth and delivering long-term returns for our shareholders,” Pick said in the press release.
David Hollerith is a senior reporter for Yahoo Finance, covering banking, cryptocurrency and other areas of finance.
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