Morgan Stanley beat Wall Street's profit expectations today, reporting gains across most of its businesses and producing more trading revenue than rival Goldman Sachs, a rare feat.
The sixth-largest US bank by assets reported an 11% rise in second-quarter profit, with higher revenue from giving corporations advice, underwriting securities, trading equities and managing customers' wealth.
The one dark spot, bond trading, fell 4%, much less than at Wall Street rivals that reported earnings in recent days. The $1.3 billion in revenue from that business topped Chief Executive Officer James Gorman's $1 billion quarterly target and beat Goldman's $1.16 billion.
""We think we've made the right decisions and the results over the last five quarters in a row show we're credible and critically sized" in bond trading, Chief Financial Officer Jonathan Pruzan said in an interview.
Morgan Stanley shares rose 2.8% to $46.41 in premarket trading.
Through yesterday's close, Morgan Stanley's shares had risen about 6.8% this year, outpacing a 4.2% rise in the KBW Bank index.
For years, Morgan Stanley struggled to convince Wall Street that its plan to remain a major player in trading while growing wealth management was going to succeed. Its results were choppy following the 2007-2009 financial crisis, and it took time for pieces of Gorman's plan to fall into place.
But lately the bank has been hitting or exceeding the targets Gorman laid out.
It was the fifth quarter in which Morgan Stanley hit Gorman's bond trading revenue target and the second straight quarter that it surpassed Goldman's trading revenue.
Morgan Stanley's 4% revenue dip in that business compares with a 40% drop at Goldman and declines of 6% to 19% at Citigroup, Bank of America and JPMorgan Chase & Co.
Overall, Morgan Stanley's trading revenue fell a more modest 2%, to $3.2 billion, due to a small gain in equities trading, where it is has a strong franchise.
Goldman's trading revenue was $3.1 billion.
Morgan Stanley's wealth management business logged its best quarter on record. Revenue rose to $4.2 billion, up 9% from the year-ago quarter, and its profit margin hit 25%, at the high end of Gorman's targeted range.
Morgan Stanley's smallest business, investment management, reported a 14% rise in revenue, to $665m.
The bank's 9.1% return on equity, a measure of profitability, was within the 9% to 11% target Gorman set out to hit by the end of 2017.
It was higher than Goldman's 8.7% return during the same period.
The two banks are fierce rivals in many businesses, but it has been rare for Morgan Stanley to beat Goldman in trading or be broadly more profitable.
