Morgan Stanley reported a better-than-expected quarterly profit on Thursday, as its investment banking business benefited from record levels of capital market activity and helped offset a drop in fixed income underwriting revenue.
The Wall Street bank said its net income applicable to common shareholders rose to $3.4 billion in the second quarter ended June 30 from $3.05 billion a year earlier. On a per-share basis, however, the bank's profit fell to $1.85 from $1.96.
Analysts on average were expecting the bank to report a profit of $1.65 per share, according to IBES data from Refinitiv.
Net revenue rose to $14.8 billion in the quarter, compared with $13.7 billion a year earlier.
Equity trading for the bank ticked down slightly from the prior quarter but was up overall from the year-earlier quarter. Bond trading revenue fell to almost half of what it was a year earlier.
Trading revenue at Wall Street banks have struggled with tough comparisons to the year-ago quarter when the COVID-19 pandemic first hit, causing wild volatility in the markets on which banks have capitalized.
Net revenue of its institutional securities division, which houses the bank's largest reporting lines – sales and trading and investment banking – fell nearly 14% to $7.09 billion in the quarter.
Investment banking revenue rose 16% to $2.38 billion, largely driven by gains from advising on deals and equity underwriting.
Morgan Stanley's benefited from a surge in deal-making activity in the first half of the year that smashed all-time records, with over 28,000 deals totaling volumes of over $2.82 trillion being announced between January and June, according to data from Refinitiv.
The bank, which advised on 216 deals in the first six months of the year, ranked third in the global M&A league tables during the quarter, behind Goldman Sachs Group Inc and JPMorgan Chase & Co, according to Refinitiv.
League tables rank financial services firms based on the amount of M&A fees they generate.
Morgan Stanley shares were down 1.8% in pre-market trade.
Reporting by Sohini Podder in Bengaluru and Elizabeth Dilts Marshall in New York; Editing by Anil D'Silva.