Key points:

  • Institutional securities trading revenues rose 23% to $7 billion.
  • Investment banking revenues jumped 51% to $1.62 billion.
  • Asset management revenue growth slowed to 2%, down from 16% a year earlier.

Morgan Stanley on Tuesday announced second-quarter results that beat analysts’ expectations. The company’s investment banking and trading operations posted strong growth, offsetting weaker-than-expected performance in its asset management business.

Morgan Stanley sees investment banking business grow in second quarter

Morgan Stanley joined a number of other large Wall Street banks such as Goldman Sachs, Citigroup, Bank of America and JPMorgan in reporting higher earnings in the investment banking sector in the second quarter. Positive sentiment in the US economy has encouraged companies to raise capital and make deals, leading to increased activity in these areas.

Morgan Stanley shares rose nearly 2%, erasing earlier losses, as Chief Executive James Gorman was upbeat about deal prospects. He noted that the bank is on track to achieve its target of 30% pre-tax profitability in asset management, a key performance indicator.

Strong results from its investment banking business were the main driver of Morgan Stanley’s growth in the second quarter. Institutional securities trading revenue rose 23% to $7 billion, while investment banking revenue jumped 51% to $1.62 billion.

Equity underwriting saw strong growth, with a 56% increase in revenue to $352 million. Fixed income underwriting revenue rose 71% to $675 million.

The advisory services business also saw growth, with revenue rising 30% to $592 million, driven by an increase in deal closings.

Asset management growth slowed, but earnings per share rose

Thus, Morgan Stanley showed strong results in the second quarter. The main driver is the growth of investment banking business. The company also announced plans to increase its dividend and invest in equity trading in Asia and the UK.

CEO James Gorman is optimistic about the future of Morgan Stanley’s equity trading business, noting that revenue, at more than $3 billion, was up 18% from last year. He noted that the company is investing in trade in Asia and the UK, seeing macroeconomic and geopolitical uncertainty as an opportunity for its clients.

The pace of asset management revenue growth slowed in the second quarter, rising just 2% compared with a 16% jump a year earlier. Net new assets totaled $36.4 billion, down from $89.5 billion generated last year.

However, the company’s net income rose to $3.1 billion, or $1.82 per share, in the three months ended June 30, up from $2.2 billion, or $1.24 per share, a year earlier. Analysts surveyed by LSEG had an average forecast of $1.65.

Morgan Stanley announced it was raising its quarterly dividend to $0.925 per share, an increase of 7.5 cents. Payment of dividends remains the bank’s priority use of capital.

Morgan Stanley executives assured analysts that the bank’s wealth growth rate was in line with the expected range of 5% to 7% a year, despite the slowdown in net asset inflows.