Morgan Stanleys Earnings Beat Wasn't Just Massive, It Was a Friggin Statement (Shares Still Soaring)

We’ve heard it, we’ve seen it, but what does Morgan Stanley’s Q3 earnings nuke actually mean? Well simply put, Wall Street is losing its collective mind due to the fact that one of their own obliterated analyst expectations with a 56% jump in investment banking fees, which helped total profits catapult 32% to a cool $3.2 billion.

(Source: Reuters) 

This is bigly simply because Wall Street’s bread and butter (IPOs and Merger & Acquisitions) have experienced what many are calling a two year drought. So it’s not shocking to see Wall Street hyped that Morgan Stanley took in $1.4 billion in fees. 

Meanwhile, Morgan Stanley’s trading division wasn’t exactly slacking either, racking up a 13% boost in revenue, mostly thanks to equities. Translation: The bank’s net revenue soared 16% to $15.4B, blowing past expectations like they were standing still.

(Source: Giphy) 

But, but, but… it’s not just Morgan Stanley partying like they just sold $100 million in Credit Default Swaps (circa 2004-2007) - the whole dang Street is riding this dealmaking high, with JPMorgan up 4.75% over the past five days, Goldman up 4.62%, and Bank of America up 5.89%. However, for Morgan Stanley, they’re riding it faster as their stock is up 8.35% this week (contribution to its 27% YTD gains) and leaving their rivals somewhat choking in the dust.

Now with that said, given the drought of new acquisitions and IPOs over the past few years, what’s suddenly fueling this frenzy? Well, you can thank J-Poww & Co. You see, after months of questionable behavior,the Fed finally cut interest rates by 50 basis points, and Wall Street’s been inhaling that news like it’s the last line of coke at a hedge fund Christmas party. Lower rates mean more companies are knocking on MS’s door, desperate to strike deals. And spoiler: Morgan Stanley’s investment bankers aren’t saying no.

Ted Pick, Morgan Stanley’s new CEO (aka the guy who took over for James Gorman), summed up the quarter with this corporate gem: “The firm reported a strong third quarter in a constructive environment across our global footprint.” Translation: We’re printing money and the market’s handing us the keys to the friggin vault.

(Source: Kiplinger) 

Additionally, while everyone’s high-fiving over investment banking, Morgan Stanley’s wealth management division is out here quietly printing cash too. Revenues jumped 13.5% year-over-year, hitting $7.3 billion. 

Oh, and they hoovered up $64 billion in net new assets in Q3 alone—a nearly 80% jump from last year. In other words, Main Street’s money is starting to pour back into this bull market, and MS is making sure they get their cut. (You’re welcome, MS) 

(Source: Giphy) 

What’s even more mind-boggling is that this is all happening during Ted Pick’s rookie season. Since he took over, shares have skyrocketed nearly 50%, absolutely torching the S&P 500. So even though Gorman may be stepping down as executive chairman at the end of the year, it definitely looks like Pick’s running the show like he’s been doing it his whole life. 

(Source: New York Post) 

Which means, with Pick at the helm and the Fed in their corner, Morgan Stanley’s sitting pretty. Their investment banking division is set for a multi-year explosion, especially as those juicy fees keep rolling in. And with their wealth management unit gunning for $10 trillion in assets, MS has got the long-term game on lock.

So in the end, it’s clear Wall Street is back, and Morgan Stanley is leading the charge. And while you can do what you will with this information, I’d definitely keep an eye on the financial sector going forward. You know, because they control the whole market anyway, amirite? 

In the meantime, stay safe and stay frosty, friends! Until next time…

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Stocks.News does not hold positions in companies mentioned in the article.