Morgan Stanley posts earnings beat driven by strong trading revenue

• Morgan Stanley reported third quarter earnings that beat analyst revenue and income expectations.
• The 17% surge in revenue comes amid an acquisition spree by the firm, as it acquired both E-Trade and Eaton Vance so far this year.
• "We delivered strong quarterly earnings as markets remained active through the summer months, and our balanced business model continued to deliver consistent, high returns," CEO James Gorman said.
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Morgan Stanley posted third quarter earnings that beat analyst expectation in revenue and net income, amid a series of acquisitions that includes a just-completed takeover of E-Trade, and a just-announced buyout of Eaton Vance.

Those two acquisitions and a recent upgrade from Moody's will "significantly strengthen our Firm and position us well for future growth," CEO James Gorman said.

Strong growth of 20% in sales and trading revenue helped boost earnings as the firm benefited from strong client engagement across a number of its products.

Here are the key numbers:

Revenue: $11.7 billion, versus the $10.6 billion estimate
Adjusted EPS: $1.59, versus the $1.28 estimate
GAAP EPS: $1.66, versus the $1.26 estimate

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Morgan Stanley's wealth management unit reported net revenues of $4.7 billion for the quarter, representing year-over-year growth of 7%. "Results reflect strong fee-based flows and significant increase in bank lending and deposits," Morgan Stanley said.

Investment banking revenues surged 11% year-over-year despite advisory revenues related to M&A activity falling. But a surge in equity underwriting revenues helped spur growth in the segment, with Morgan Stanley benefiting from IPOs, follow-on offerings, and blocks as clients continued to access capital markets.

The firm's provision for credit losses on loans and lending commitments was $111 million for the third quarter of 2020, compared with $51 million for the third quarter of 2019 and $239 million for the second quarter of 2020.

"We delivered strong quarterly earnings as markets remained active through the summer months, and our balanced business model continued to deliver consistent, high returns," CEO James Gorman said.