Morgan Stanley's fixed-income sales and trading miss overshadows 2nd-quarter earnings beat

Morgan Stanley's fixed-income sales and trading miss overshadows 2nd-quarter earnings beat
Chairman and CEO of Morgan Stanley James P. Gorman participates in a panel discussion at the New York Times 2015 DealBook Conference at the Whitney Museum of American Art on November 3, 2015 in New York City. Neilson Barnard/Getty Images

Morgan Stanley posted second quarter earnings that beat analyst expectations in revenue and net income, as its wealth management business began to see the impact of its recent acquisitions of E-Trade and Eaton Vance.

But a miss in Morgan Stanley's fixed income and trading business helped add to a pre-market stock decline of about 2% in early Thursday trading.

Overall revenue growth of 8% was driven by growth in all of its business units, including institutional securities, wealth management, and investment management services.

Here are the key numbers:

Revenue: $14.8 billion, versus the $14.0 billion estimate
Adjusted EPS:
$1.89, versus the $1.65 estimate


Morgan Stanley's wealth management unit reported net revenues of $6.1 billion for the quarter, representing year-over-year growth of 30%. Results were driven by record high levels for the stock market, and a surge in transactional revenues from its E-Trade unit as more clients were active in the markets.

Investment banking revenues surged 16% year-over-year to $2.4 billion, despite fixed income revenues falling slightly due to tighter credit spreads and heightened volatility. But a surge in equity underwriting revenues helped spur growth in the segment, with Morgan Stanley benefiting from IPOs, follow-on offerings, and large block trading as clients continued to access capital markets.

The firm's provision for credit losses on loans and lending commitments continued to fall since its pandemic peak to $73 million in the quarter, compared with $239 million for the second quarter of 2020. The fall was driven by continued improvement in the macroeconomic environment, the bank said.

"With our transformed business model providing more stable and durable earnings, we have doubled our dividend and announced a $12 billion buyback as we move to return our excess capital to shareholders. Our global franchise is very well positioned to drive further growth."CEO James Gorman said.