Morgan Stanley beats 3rd-quarter earnings estimates as surge in investment banking eclipses wealth management growth

• Morgan Stanley reported third-quarter earnings that beat analyst expectations as equity trading drove growth.
• The bank's wealth management business continued to benefit from its acquisitions of E-Trade and Eaton Vance, but missed expectations.
• "We had standout performance of our integrated Investment Bank and record net new assets of $135 billion in wealth management." CEO James Gorman said.
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Morgan Stanley posted third quarter earnings that beat analyst expectations in revenue and net income, driven by a boom in investment banking revenue and equity trading.

Strong growth in Morgan Stanley's trading business helped add to a pre-market stock increase of about 2% in early Thursday trading. The wealth management business saw $400 billion in new client assets year-to-date, driven by its E-Trade and Eaton Vance acquisitions.

Overall revenue grew 26%, with gains in all of its business units, including institutional securities, wealth management, and investment management services. The bank now has $6.2 trillion in assets.

Here are the key numbers:

Revenue: $14.8 billion, versus the $13.95 billion estimate
Adjusted EPS: $1.98, versus the $1.68 estimate

Morgan Stanley's wealth management unit reported net revenues of $5.9 billion for the quarter, representing year-over-year growth of 26%. Results were led by the stock market sitting near record highs for much of the quarter, a surge in new client assets, and strong fees from its advisor-led channel. Transactional revenues jumped 38%.

Investment banking revenues surged 67% to $2.8 billion driven by equity underwriting activity from IPOs and large trade blocks driven by more corporate secondary offerings. Fixed income revenues fell 16% due to a decrease in Morgan Stanley's macro business and a less volatile environment.

The firm's provision for credit losses on loans and lending commitments continued to fall since its pandemic peak to $24 million in the quarter, compared with $111 million for the third quarter of 2020. The drop was due to continued improvement in the macroeconomic environment, the bank said.

"We had standout performance of our integrated Investment Bank and record net new assets of $135 billion in Wealth Management. Year-to-date, our successful integrations of E*TRADE and Eaton Vance have supported growth of $400 billion in net new client assets across Wealth and Investment Management, bringing our total combined client assets to $6.2 trillion," CEO James Gorman said.

Morgan Stanley said it repurchased $3.6 billion of its shares during the quarter, as part of its stock buyback program. Shares of Morgan Stanley are up 47% year-to-date.