Morgan Stanley profit beats estimates on dealmaking boost, shares soar
By Arasu Kannagi Basil
(Reuters) -Morgan Stanley's profit beat estimates in the third quarter as a surge in dealmaking drove revenue to records, and the company's finance chief said its investment banking pipeline is at "all-time highs."
Shares were last up 6.7% after earlier touching a record high. They have risen 32% this year.
"Our equities business affirmed its number one position with a standout quarter," CEO Ted Pick told analysts on a conference call. "A rebound in the investment banking environment reopened the door to strategic M&A and renewed financing activity."
"It is certainly possible that next year we could break 2021 deal volume records," Chief Financial Officer Sharon Yeshaya told Reuters in a phone interview on Wednesday. The IPO pipeline, in particular, shows a lot of activity coming from financial sponsors, she added.
CEO Pick told analysts Morgan Stanley's third-quarter profit beat market expectations with record revenue, led by a 44% rise in investment banking revenue and sharp growth in equities trading.
Pick said the bank reviewed potential acquisitions recently, but decided that it would be better to build up the businesses internally.
The wealth management business reached $8.9 trillion in assets under management, closer to the long-standing goal of $10 trillion, and reached a pre-tax margin of 30.3%.
A string of large deals pushed global mergers and acquisitions activity past the $3 trillion mark this year. A resilient U.S. economy, optimism around interest-rate cuts and lighter regulations under the Trump administration have spurred businesses to do deals or tap capital markets.
"We had very strong results in the investment banking, and we're number one again in the equities business, an area we have been investing," Yeshaya said, adding the bank is seeing better macroeconomic conditions.
"We have higher expectations now for GDP than when we were sitting at the end of the second quarter," the CFO said, adding companies are seeing lower debt costs. Markets are hovering near record highs and the U.S. Federal Reserve resumed its rate-cutting cycle in September.
"This is a great quarter for MS with beats across the board, and we expect the reaction to be supportive," Keith Horowitz, an analyst at Citigroup, wrote in a note.
The bank's profit surged to $4.6 billion, or $2.80 per share, for the three months ended September 30, beating expectations of $2.10 per share, according to estimates compiled by LSEG. Total quarterly revenue was a record $18.2 billion, surpassing expectations of $16.7 billion.
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