Another quarter, another impressive beat from Morgan Stanley.
On the bottom line, net income was $2.4 billion, a near 40% YoY increase and easily ahead of consensus. Revenue of $10.61 billion handily topped consensus ($10.08 billion), coming in ahead of even the highest estimate, which as far as I can tell was $10.5 billion.
IB revenue was $1.79 billion, well ahead of the expected $1.42 billion and also an improvement from an already solid Q1. Corporate activity was strong, with advisory revenues rising to $618 million versus $504 million a year ago. On Tuesday, Goldman’s M&A results showed an improvement from a lackluster Q1, but this is two quarters in a row of solid results on that front from Morgan.
Throw in equity underwriting revenues of $541 million (up from $405 million in Q2 2017) and FI underwriting revenues of $540 million, and you come up with IB revenue that’s the highest it’s been in at least a decade.
Trading was also strong for James Gorman. Sales and trading revenue in equities – where the bank dominates – clocked in at $2.5 billion in Q1, up from $2.2 billion a year ago. That comes on the heels of a Q1 during which the equities unit contributed $2.6 billion in revenue against the consensus of just $2.15 billion. Consensus was looking for $2.3 billion from the equities division in Q2, so again, that’s a beat.
The real surprise for Morgan in Q1 was FICC, where revenue came in at $1.9 billion, again well ahead of estimates ($1.7b) and in Q2, the number was $1.4 billion, versus $1.2 billion a year ago. Like last quarter, Morgan cites strength in commodities, but unlike Q1, revenue in credit products seemed to have exceeded expectations.
So basically, things are looking good for Ted Pick.
As far as wealth management goes, net revenues were $4.3 billion in Q2, and pre-tax margin was 26.8%, that latter figure is an improvement from an already solid Q1 (26.5%) and is also considerably better than expectations. But the headline looks like it might be just shy of what some folks were expecting.
