Morgan Stanley beats estimates on record wealth management revenue

Morgan Stanley on Tuesday posted second-quarter earnings and revenue that topped analysts’ expectations, helped by record wealth management results.

Here’s what the company reported:

• Earnings: $1.24 a share vs $1.15 per share Refinitiv estimate
• Revenue: $13.46 billion vs. expected $13.08 billion

The bank said profit declined 13% to $2.18 billion, or $1.24 a share, on lower trading results from a year ago and a round of layoffs that triggered $308 million in severance costs. Revenue climbed 2% to $13.46 billion.

Under CEO James Gorman, Morgan Stanley’s reliance on wealth management has helped its steady earnings and boosted its valuation relative to peers. Gorman, who took over the firm in 2010, said in May he was preparing to step down within a year, setting off a succession race at the Wall Street powerhouse.

“The firm delivered solid results in a challenging market environment,” Gorman said in the earnings release. “The quarter started with macroeconomic uncertainties and subdued client activity, but ended with a more constructive tone.”

Despite lower market levels that caused some fees to dip from a year ago, second-quarter wealth management revenue rose 16% to $6.66 billion on higher interest income, exceeding the $6.5 billion estimate of analysts surveyed by FactSet. The division took in $90 billion in net new client assets.

The bank’s Wall Street division fared less well. The institutional securities business posted an 8% drop in revenue to $5.65 billion, driven by declines in trading. While equities trading generated $2.55 billion in revenue, topping the $2.37 billion FactSet estimate, fixed income produced $1.72 billion, which was well below the $1.99 billion estimate.

Investment banking revenue of $1.08 billion was roughly unchanged from a year ago and essentially matched analysts’ expectations.

Morgan Stanley shares are up slightly this year, compared with the about 20% decline of the KBW Bank Index.

On Friday, JPMorgan Chase, Citigroup and Wells Fargo each posted earnings that topped analysts’ expectations amid higher interest rates. Goldman Sachs wraps up big bank earnings Wednesday.