Morgan Stanley’s dealmakers post biggest Wall Street gains

Firm was the only one to post double-digit growth in both trading businesses for 2Q and was the No 1 advisor on mergers in 1H

NEW YORK • Morgan Stanley is putting Ted Pick in charge of the firm’s investment bank with momentum in his favour.

The business posted the biggest second-quarter revenue increase on Wall Street yesterday, and the firm’s trading operation topped analysts’ estimates. That drove a 39% jump in earnings that was also better than expected.

CEO James Gorman named Pick, 49, head of the banking and trading division earlier this month after he led the equities business to a top rating for the past four years and helped turn around the fixed-income unit.

The firm was the only one to post double-digit increases in both trading businesses for the second quarter and was the No 1 advisor on mergers in the first half (1H).

Deal backlogs are “very, very healthy”, CFO Jonathan Pruzan said in a telephone interview. “We are No 1 today according to the league tables that we look at. We would like to keep that position.”

Advisory revenue of US$618 million (RM2.49 billion) jumped 23% from a year earlier on higher levels of completed mergers, the company said.

Stock-trading revenue rose 15% to US$2.47 billion, compared to a US$2.3 billion estimate of eight analysts surveyed by Bloomberg.

Fixed-income trading climbed 12% to US$1.39 billion. “It is very hard to find anything to criticise in Morgan Stanley’s latest earnings,” Octavio Marenzi, an analyst at Opimas, said in a note. The “performance in sales and trading was particularly impressive”.

Shares of the company advanced 3% to US$50.66 in early trading at 8:02am yesterday in New York. They were down 6.3% this year through Tuesday.

Large banks benefitted from market turmoil and interestrate increases during the 1H, with Goldman Sachs Group Inc, JPMorgan Chase & Co and Bank of America Corp all posting better than anticipated fixed-income gains.

Pruzan said trade tensions and a fear of an inverted yield curve hasn’t yet affected investor and client sentiment, but could have an impact in the 2H if investors decide to take “riskoff” positions.

“We’ve seen a few deals delayed here and there,” he said. “There are others who are saying we should go now because we don’t know if it’ll be worse in the future.”

Investment banking generated US$1.7 billion, above the US$1.42 billion estimate, helped by both merger and equity-underwriting fee gains.

Per share earnings were US$1.30, beating the US$1.11 estimate of 21 analysts surveyed by Bloomberg.

Revenue advanced 12% to US$10.6 billion, above the US$10.1 billion estimate.

Return on equity was 13%, dropping from 14.9% at the end of March. In wealth-management, revenue rose 4% to US$4.33 billion as client assets surpassed US$2.4 trillion, Morgan Stanley said in a statement. — Bloomberg