Morgan Stanley said its third quarter profit surged 32% as it joined other bank titans in reporting a revival of dealmaking.
The Wall Street giant posted net income for the three-month period ending Sept. 30 of $3.2 billion or $1.88 per share — up from $2.4 billion, or $1.38 a share, year-on-year.
That beat analyst estimates complied by the London Stock Exchange Group, which predicted earnings per share of $1.58 and revenues of $15.38 billion.
The price of share in Morgan Stanley climbed by more than 7% to $120.34 in the hour after the opening bell on Wall Street on Wednesday morning.
Results were boosted by a 56% surge in investment banking revenue from a year earlier to $1.46 billion, exceeding the $1.36 billion estimate.
“I am bullish on IPOs and M&A coming back,” said CEO Ted Pick. “It may take some time…I think these are going to be global, mature companies that are very much going to need our advice.”
The bank advised on big IPOs in the past three months that included cold storage giant Lineage (and airplane engine maintenance services firm Standard Aero.
Pick, appointed to the bank’s top job on Jan. 1, succeeding James Gorman, also cited the firm’s investment banking presence in Europe and Asia as a possible driver of future growth.
“Running a global investment bank is going to pay for years to come,” he told Wall Street analysts.
Competitors Goldman Sachs reported a 20% surge in fees on Tuesday, while Citi saw a 31% investment banking gain in its Q3 results on Friday.
It follows a string of strong earnings from their US rivals after two years of high interest rates slammed the brakes on mergers and acquisitions.
Higher interest rates makes it more expensive for major corporations to secure the financing they need to sign megabucks M&A deals.
“We are seeing a rise in equity capital markets activity led by financial sponsors, not only for IPOs in the US but also in Europe”, Morgan Stanley CFO Sharon Yeshaya told investors in an early morning conference call. “Corporate activity is gaining momentum.”
That revival of dealmaking activity comes after the bank reshuffled its top brass at its investment banking unit earlier this year.
In July, it promoted Mo Assomull to become a new co-head of investment banking alongside Eli Gross and Simon Smith.
It also named Evan Damast and Henrik Gobel as new leaders of the global capital-markets unit.
Pick, a lifelong employee who joined the firm after college, added that Morgan Stanley’s results were also boosted by its wealth management business.
“Total client assets have surpassed $7.5 trillion across wealth and investment management supported by buoyant equity markets and net asset inflows,” Pick said.
Morgan Stanley entered the segment under former CEO James Gorman and the firm has set a goal of $10 trillion of assets.
Wealth management revenue – a key area of focus – increased to $7.27 billion, compared with $6.40 billion, a year ago, the bank said.
“The company is executing very well across all the segments. Ted Pick has quickly built a leadership presence and confidence from investors,” said Macrae Sykes, a portfolio manager at Gabelli Funds.
Mike Taiano, vice president of the financial institutions group at Moody’s Ratings said the results “reflected strong earnings contributions from both its investing banking and wealth management franchises.”
