Morgan Stanley tops analysts’ revenue estimates by $1 billion on stronger-than-expected trading

Morgan Stanley beat analysts’ estimates for third-quarter revenue and profit, fueled by better-than-expected results from the firm’s Wall Street trading operations.

The bank said Thursday in a release that profit jumped 25% from a year earlier to $2.72 billion, or $1.66 per share, exceeding the $1.28 estimate of analysts surveyed by Refinitiv. It generated revenue of $11.7 billion, 16% higher than a year earlier and a billion dollars more than the estimate.

Morgan Stanley, which has been Wall Street’s most aggressive acquirer with $20 billion in takeovers this year, appeared to be firing on all cylinders. The firm’s traders led the outperformance, producing $400 million more in revenue than expected by analysts, mostly driven by bond trading desks.

But the bank also topped estimates in its wealth management and investment management divisions, each producing more than $200 million more in revenue than expected.

“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 in the release.

The bank’s fixed income trading operations had the highest third-quarter revenue in a decade, helping the firm’s total revenue so far this year hit a post financial crisis record, CFO Jon Pruzan told analysts Thursday on a call.

The firm is eager to restart share repurchases as early as the first quarter of 2021, Gorman said on the call, barring a U.S. economic collapse.

Shares of the company climbed 1.3%. Morgan Stanley shares are almost unchanged this year through Wednesday, outperforming the more than 30% decline of the KBW Bank Index.

Under Gorman, Morgan Stanley has emphasized its wealth management division, which benefits from rising markets as fees typically climb along with assets under management. He has doubled down on his push to diversify away from Morgan Stanley’s traditional strengths of trading and investment banking.

Last week he announced that his bank is acquiring Eaton Vance for $7 billion, adding heft and scale to the smallest of the bank’s three main businesses, investment management. In February, he announced the $13 billion takeover of discount brokerage E-Trade.

Analysts had high expectations for the firm’s trading operations after JPMorgan Chase and Goldman Sachs both beat estimates on better-than-expected markets revenue.

Morgan Stanley is the last of the six biggest U.S. banks to report third-quarter earnings. JPMorgan, Goldman Sachs and Citigroup beats analysts’ profit expectations as they set aside smaller loan-loss provisions. Bank of America and Wells Fargo disappointed as the companies struggled with the impact of lower interest rates.

Here’s how the company did:

Earnings: $1.66 per share, vs. $1.28 estimate of analysts surveyed by Refinitiv.

Revenue: $11.7 billion, vs $10.64 billion estimate.

Wealth management: $4.66 billion in revenue vs. $4.45 billion estimate from FactSet.

Investment management: $1.06 billion revenue vs. $856 million estimate.

Trading: Equities revenue of $2.26 billion vs $2.19 billion estimate, fixed Income revenue of $1.92 billion vs $1.59 billion estimate.