Morgan Stanley 2Q profit tops estimates, helped by trading

The five big Wall Street banks – excluding Wells Fargo, which does not have a large investment banking business – reported total net earnings of $US24.1 billion in the quarter, up $US6.7 billion from the same quarter past year.

At least 19 teams managing some $3.8 billion in assets left the firm in the second quarter, according to InvestmentNews’ Advisers on the Move database.

Overall, the firm earned $1.8 billion in profits, or 85 cents a share, down from $1.9 billion a year earlier.

Revenue rose to $9.6 billion from $8.52 billion a year ago.

Profits jumped at the bank’s institutional investment division, which includes its investment bank, and its stock, bond and commodities trading desks.

Morgan Stanley’s trading revenue gained 32%, from where it stood a year ago, to $3.5 billion. Second-quarter results also compare to the consensus estimates for adjusted EPS of $0.74 on revenue of $9.1 billion.

As of this writing, shares of Morgan Stanley were up 2.9% at $41.40 per share in premarket trading.

Morgan Stanley chief executive James Gorman has been focusing on equities trading and – particularly – wealth management as profit drivers for the No. 6 United States bank by assets as stricter regulations and capital requirements make it more hard to trade bonds.

Trading revenue drove the quarter’s performance, notable for a firm that has de-emphasized trading and put many of its chips on wealth management.

“We’re very comfortable with the business we have and the size of the business”, Mr. Gorman said on the call.

Morgan Stanley is the latest big bank to report quarterly earnings. The company had revenue of $9.56 billion for the quarter. Non-compensation expenses increased 5 percent to $2.61 billion, reflecting higher volume driven expenses and professional services costs, principally consulting fees.

Earnings were also helped by a one-off tax benefit of $609m.

Institutional Securities (IS): Pre-tax income from continuing operations was $1.62 million, up 69% from the prior-year quarter.

Exelixis, Inc. (NASDAQ: EXEL) shares shot up 45 percent to $5.66 after the company announced positive top-line results from METEOR in which the study met the primary endpoint of significantly improving progress-free survival.

On average, 25 analysts polled by Thomson Reuters expected the company to report earnings of $0.74 per share for the quarter.

For the future, Pruzan said, the bank is working on digital cash management innovations to attract more customers to add to its $140bn cache of deposits.